www.forbes.com Reuters, 01.10.03, 2:21 PM ET

(Full text of press release provided by Fitch Ratings. ) NEW YORK, Jan 10 - Fitch Ratings has downgraded the senior unsecured debt rating of CITGO Petroleum Corporation to 'BB-' from 'BBB-'. Fitch has also lowered the rating on the senior notes of PDV America, Inc. to 'B-' from 'BB+'. CITGO is owned by PDV America, an indirect, wholly owned subsidiary of Petroleos de Venezuela S.A. (PDVSA), the state-owned oil company of Venezuela. CITGO and PDV America remain on Rating Watch Negative.

The downgrades reflect Fitch's heightened concerns with the financial flexibility of both CITGO and PDV America due to the general strike in Venezuela, which has severely disrupted the country's oil exports. Earlier today, Fitch downgraded the long-term foreign currency rating of Venezuela and PDVSA to 'CCC+' from 'B' and the short-term foreign currency (Venezuelan bolivar) rating of Venezuela to 'C' from 'B'.

As a result of the strike, CITGO has been forced to find alternate sources for much of the crude supplied by PDVSA. CITGO typically purchases approximately 50% of its crude needs from PDVSA under long-term contracts. CITGO has been successful acquiring alternate crudes and other feedstocks to maintain refinery operations. However, spot market terms have increased working capital requirements and given the lowered credit ratings of CITGO related entities, additional working capital requirements are possible.

Near term obligations as well as a rating trigger in the company's trade accounts receivable program could significantly reduce CITGO's liquidity. Unless CITGO achieves a waiver, Fitch's downgrade will result in termination of the accounts receivable program. In mid-December, CITGO entered into a new $520 million credit facility, split into a $260 million three-year facility and a $260 million 364-day revolver. Concerns over the situation in Venezuela, however, have limited CITGO's ability to enter the capital markets for a planned bond issuance in the fourth quarter of 2002.

The CITGO downgrade and the more severe downgrade to the senior notes of PDV America are also based on the deteriorating creditworthiness of PDVSA and Venezuela. The $500 million of senior notes mature in August 2003 and are supported by Mirror Notes issued by PDVSA and held by PDV America. The senior notes and Mirror Notes have identical terms and conditions such that the interest income PDV America receives from PDVSA on the mirror notes pays the interest on the senior notes. In an absence of a return to normal oil operations, Fitch has significant concerns with the ultimate parent's ability and willingness to pay the maturity of the notes. In 1998 and 2000, dividends from CITGO were ultimately used to pay the $250 million tranches that matured in each of those years. Given CITGO's current financial situation, CITGO is not expected to pay any dividends to PDVSA to support PDV America's senior notes.

The situation in Venezuela remains highly volatile. Although Fitch expects CITGO to maintain operations, further deterioration in CITGO's financial position or the ultimate shareholders credit quality could result in additional downgrades.

CITGO is one of the largest independent crude oil refiners in the United States with three modern, highly complex crude oil refineries and two asphalt refineries with a combined capacity of 756,000 barrels per day. The company also owns approximately 41% interest in LYONDELL-CITGO Refining L.P. (LCR), a limited liability company that owns and operates a 265,000-barrel per day (BPD) crude oil refinery in Houston, Texas. CITGO markets refined products through approximately 13,400 independently owned and operated retail sites.

www.alertnet.org Jan 2003 18:53

CARACAS, Venezuela, Jan 10 (Reuters) - Efforts by the Venezuelan government to break a crippling 40-day oil strike by selling crude through through the Internet may not boost shipments from the world's No. 5 exporter, U.S. refiners said on Friday.

The Venezuelan government, which relies on oil exports for half of revenues, is trying to sell oil through Miami-based Web site Pepex.net to overcome a personnel shortage caused by the shutdown by foes of President Hugo Chavez.

The strike has strong support among managers, executives and traders from state oil firm Petroleos de Venezuela (PDVSA) as well as field workers, tanker captains and dock crews.

But U.S. refiners, which normally purchase over half of Venezuela's crude exports, said that dangerous port conditions created by government replacement workers could still hinder them from loading tankers.

"They can't load, the same security problems are there," an official with a U.S. refiner said. Loadings by unqualified and uncertified staff creates insurance risks for firms.

International markets have been denied 80 percent of the 2.7 million barrels per day (bpd) of crude and products the OPEC nation shipped before the strike started on Dec. 2.

The United States usually buys 13 percent of its imported crude from Venezuela, and refiners dependent on certain grades from the South American nation have cut runs.

Striking PDVSA executives said on Friday they do not usually use a tender system such as the one being used on the Pepex Web site to sell crude.

Regular customers said it may be best to wait until PDVSA has officially brought operations back to normal and ports were secured before attempting to lift cargoes again.

"We won't load as long as the force majeure is in place," said one U.S. refiner that buys Venezuelan crude.

PDVSA declared force majeure, meaning it could not meet its contractual obligations, in early December. Some vessels chartered by PDVSA or its U.S. refining affiliate Citgo have loaded with cargoes to the United States and the Caribbean.

Oil production problems have also kept exports choked. The government has only been able to reestablish output to about 450,000 bpd according to one PDVSA official, compared with 3.1 million bpd in November.

Attempts to restart the 130,000 bpd domestic El Palito refiner damaged the vacuum unit, striking PDVSA workers said, and they claim oil has been spilled by tankers loading at the western Lake Maracaibo production areas.

cnews.canoe.ca

WASHINGTON (AP) -- The Bush administration is engaged with other nations in the hemisphere in talks to explore ways to end the five-week strike in Venezuela that has crippled oil exports, White House spokesman Ari Fleischer said Friday.

"We remain deeply concerned about the deteriorating situation in Venezuela," Fleisher said.

He said the administration was working with the Organization of American States and member nations to explore ways to peacefully end the standoff between the government of President Hugo Chavez and his opponents.

OAS Secretary General Cesar Gaviria has been quietly discussing options with other OAS states, including formation of a "Friends of Venezuela" group "to help the Venezuelans find a solution," Fleischer said.

The Washington Post reported in Friday editions that the United States was putting aside its reluctance to get involved in Venezuela's internal affairs and readying an initiative to form a group of nations to try to end the deadlock.

The initiative may be rolled out next week, the newspaper said. It said the proposal's immediate goal would be to end the opposition-organized strike.

The group would seek to develop a compromise calling for early Venezuelan elections and building on OAS mediation efforts already under way, the newspaper said.

"It's in the early stages," Fleischer said when asked about the news account and the U.S. role in seeking a breakthrough. "An electoral solution is the direction the United States sees."

The strike has paralyzed the Venezuelan economy and brought its vital oil industry -- a top U.S. supplier and once the world's fifth-largest exporter -- to a virtual halt.

news.bbc.co.uk Some banks have remained open despite the strike Friday, 10 January, 2003, 19:36 GMT

Venezuela's currency has recovered some lost ground, despite a second day of action by bank workers in support of the country's general strike.

The bolivar gained 5.3% against the US dollar to stand at 1,511 to US$1 on Friday, the country's central bank said.

The increase saw the bolivar regain much of the ground lost earlier this week when bank staff announced their strike in support of efforts to unseat Venezuela's president, Hugo Chavez.

The strike call prompted a rush for dollars by individuals and firms fearing that the government might, while banks were closed by industrial action, order a devaluation of the bolivar.

A devaluation would help the government balance budgets hit by a reduction, caused by the general strike, in tax and oil revenues.

But while leaders of finance unions proclaimed the success of the bank strike, many branches have remained open.

Strike 'to harden'

Some 80% of bank workers participated in the bank strike on Thursday, the union Fetrabanca said.

And Fetrabanca president Jose Elias Torres predicted that the strike would harden as non-striking workers followed the example of protesting colleagues.

"Some workers who went to work [on Thursday] because of a certain fear have committed to observing the strike [on Friday]," he said.

Many stores closed after shoppers were left unable to pay by credit or debit cards, the National Association of Supermarkets said.

But some observers reported that many Venezuelans were tiring of action, with an increase reported by agency Associated Press in levels of traffic and street commerce.

And the government has said that oil output, reduced by industrial action to 15% of pre-strike levels, will return to normal levels next month, a claim questioned by protesters.

reuters.com Fri January 10, 2003 02:41 PM ET By Pascal Fletcher

CARACAS, Venezuela (Reuters) - A grenade attack and bomb threats against foreign embassies in Caracas pulled the international community deeper into Venezuela's crisis on Friday as a 40-day-old opposition strike dragged down the country's oil-reliant economy.

A grenade exploded late Thursday at the residence of the ambassador from Algeria, which has offered to assist President Hugo Chavez in his fight to beat the strike.

The shutdown, now in its sixth week, has crippled oil output and exports in the world's No 5 petroleum exporter, jolting world markets and pushing up oil prices.

Venezuelan banks and supermarkets closed their doors for the second consecutive day on Friday in support of the grueling strike, called by opposition leaders to press the leftist Chavez to resign and call early elections.

Chavez refuses and has vowed to beat the strike, which has cut off millions of dollars of oil income.

Fitch Ratings lowered Venezuela's credit standing by two notches on Friday, downgrading its sovereign debt rating deeper into "junk bond" territory, to 'CCC-plus' from 'B'.

The blast at the Algerian ambassador's residence, which caused damage but no injuries, followed bomb threats Thursday against the German, Canadian and Australian embassies in Caracas.

No one claimed responsibility for the attack. But Algeria and other members of the Organization of Petroleum Exporting Countries (OPEC) have offered to help Venezuela counter the effects of the strike.

Chavez's government blamed the blast on hard-line "terrorist" political opponents supporting the strike. "This is the coup-mongering face of the Venezuelan opposition," Foreign Minister Roy Chaderton told Reuters.

EMBASSY SECURITY TIGHTENED

Government officials said security at foreign embassies would be increased. The grenade attack and threats may galvanize international efforts to resolve the crisis, which has disrupted Venezuelan oil shipments to clients as different as the United States and communist-ruled Cuba.

The United States and other members of the Organization of American States are studying the idea of creating a "Friends of Venezuela" group of nations to support current OAS efforts to broker a negotiated, electoral solution to Venezuela's conflict. Brazil has also been working on such an initiative.

"We remain deeply concerned about the deteriorating situation in Venezuela," White House spokesman Ari Fleischer told reporters in Washington.

The United States normally receives more than 13 percent of its crude oil imports from Venezuela.

Chaderton welcomed the idea of foreign support. "All this contributes to strengthening our democracy and the recognition of Venezuela's legitimate institutions," he said.

Chavez was elected in 1998 and survived a brief coup by military officers in April. He says his opponents are trying to topple him through the strike. His foes accuse him of ruling like a dictator and trying to implant Cuban-style communism.

In recent months, there have been grenade attacks against the offices of anti-Chavez union and business groups and media organizations critical of the president, which the opposition has blamed on the government.

Two people were killed in clashes a week ago involving anti- and pro-government demonstrators and troops and police.

Some foreign embassies, including those of the United States and Britain, have evacuated nonessential personnel and warned their nationals not to travel to Venezuela unless absolutely necessary.

Rangel said oil output and refining was recovering. But oil industry sources said government efforts to raise oil production have met with little success so far. They put production this week at about 450,000 barrels per day (bpd), compared with 3.1 bpd in November before the strike.