Striking oil workers of Petroleos de Venezuela protest in Caracas www.forbes.com

WASHINGTON, January 10 (IslamOnline & News Agencies) - The Bush administration is preparing a major initiative in the Venezuelan crisis due to its increasing concerns about an oil shortage as a possible war with Iraq approaches.

The U.S. initiative is centered on the formation of a group of "Friends of Venezuela," trusted by one or both sides to the conflict, which would develop and guarantee a compromise proposal, based on early Venezuelan elections presented through an existing mediation effort by the Organization of American States, the Washington Post reported on Friday, January 10.

The U.S. hopes the initiative, expected to be announced "within the next week" will lead to a breakthrough in deadlocked talks between the government and opposition there, according to U.S. and foreign diplomatic sources, the Post said.

Venezuela stopped 1.5 million oil barrels sent daily to the U.S.

Venezuela has been wracked by 40 days of sometime violent strikes organized by labor and union leaders with the aim of forcing populist President Hugo Chavez out of office.

The strike has hit Venezuela's oil exports the hardest, with production dropping from around three million barrels before the strike to between 600,000 and 800,000 barrels a day now, according to the Chavez administration.

Venezuela has practically stopped all oil exports, including the 1.5 million barrels a day it regularly sent to the United States -- 15 percent of all U.S. oil imports.

"We were getting 1.5 million barrels of oil each day, and we're not getting it now," the senior State Department official said. Concerns have multiplied over the past week as Chavez moved to fire senior oil executives and restructure the state-owned oil enterprise, the official said.

It is the success of the oil strike that has prompted the United States to seek a role in the crisis, a foreign diplomat told the Post.

For Washington, the diplomat said, the situation in Venezuela moved "from a problem in an important country in Latin America to a very critical matter ... With the war in Iraq, it became a really strategic matter."

According to the sources, Brazil, Chile, Mexico, the United States, the United Nations and possibly Spain would develop and guarantee one or two possible formulas to solve the impasse in Venezuela: a constitutional amendment or a referendum.

Chavez refuses to resign and the Venezuelan constitution allows for a referendum on the president's continuance in office held half way through his term, in Chavez' case, in August. The opposition is pressing for one on February 2.

An unidentified senior U.S. State Department official told the Post that the United States could support either option, but wants something to be agreed to soon that would stop the strikes and street demonstrations.

The U.S. hope, sources said, is that both sides adhere to an agreement guaranteed by the new "group of friends."

Secretary of State Colin Powell, in an interview with the Post on Wednesday, January 8, said he was working on the Venezuelan crisis, but refused to provide details.

"We're just trying to put a little more oomph behind what (OAS Secretary General Cesar) Gaviria is doing," he said.

Powell has held discussions in the past few days with Mexican Foreign Minister Jorge Castaneda, as well as with Brazilian officials, Annan and OAS Secretary General Cesar Gaviria, who has been mediating talks in Caracas between the opposition and the Chavez government.

Those talks are stalled on the fundamental issue of whether, and how, Venezuelan President Hugo Chavez remains in power, AFP said.

Brazilian President Luis Inacio Lula da Silva has not yet agreed to the U.S. idea and is awaiting a meeting he has called for Wednesday, January 15, when regional leaders gather in Quito for the inauguration of the newly elected president of Ecuador.

Latin American sources said there is little desire to involve any government outside the hemisphere, except perhaps Spain.

At the same time, Latin American sources told the Washington Post, it is widely believed that any high-level intervention in the OAS effort that does not include the United States is unlikely to bring the opposition to agreement.

Reuters, 01.10.03, 8:28 AM ET

CARACAS, Venezuela, Jan 10 (Reuters) - Venezuela's central bank (BCV) said it would not hold its daily dollar auctions on Friday, the second day of a 48-hour bank stoppage called by banking workers.

The central bank also canceled auctions on Thursday, the first day of the strike.

Union leaders representing bank workers on Wednesday announced they would halt banking services Thursday and Friday in support of a five-week-old strike by foes of President Hugo Chavez.

"The Venezuelan central bank informs authorized exchange traders that today's dollar auctions will not take place," the BCV said in a note posted on its Web site. It offered no explanation.

The bolivar currency, as measured by the Central Bank's reference rate <VEBFIX=>, fell 5.3 percent against the dollar on Thursday to 1,594.75 bolivars. The BCV on Thursday sold dollars through its foreign exchange trading desk.

Many fear the country could descend into civil war By Stephen Cviic BBC regional analyst news.bbc.co.uk

There are signs that the United States is to become more involved in the search for a solution to the political crisis in Venezuela.

US-Venezuelan relations soured following a failed coup against Chavez

A report in the Washington Post newspaper says the Bush administration is to planning to throw its weight behind the formation of a group of countries to be called the Friends of Venezuela.

This grouping - to include the US, Brazil, Mexico and Chile - would develop a proposal for early elections and would back existing negotiations sponsored by the Organization of American States (OAS).

It comes as a month-long general strike called by opponents of President Hugo Chavez continues to bring chaos to Venezuela's crucial oil industry.

Strained relations

The US had been reluctant to get too involved in Venezuela's political turmoil.

Lula: Interested in becoming a "Friend of Venezuela"?

In April last year the Bush administration had its fingers burned when it appeared to accept a short-lived coup against President Hugo Chavez.

The coup failed, and relations between Mr Chavez and Washington - which were uncomfortable even at the best of times - never recovered.

But Venezuela is becoming hard to ignore.

It is the largest foreign oil supplier to the US, and the bitter hostility between government and opposition supporters has had some commentators talking about a civil war.

On Thursday US State Department spokesman Richard Boucher said his boss, US Secretary of State Colin Powell, had been in close contact with foreign ministers from various Latin American countries.

'Jockeying for position'

Now, the Washington Post newspaper is reporting that the US will soon announce a diplomatic initiative based on the formation of a group to be called the Friends of Venezuela.

In fact, the idea of such grouping has already been mentioned.

Brazil's new president, Luiz Inacio Lula da Silva, is known to be interested in the idea.

What is not clear is the level of co-ordination between the various countries.

Brazil's left-wing government is sympathetic to Mr Chavez.

The US would probably like to have somebody else in charge.

At the very least, there will be some jockeying for position between the two regional giants over who is driving the

www.smh.com.au January 11 2003

Thousands of bank employees went on strike yesterday to support a national work stoppage that has dried up income in the world's fifth-largest oil exporter while seeking to oust President Hugo Chavez.

Jose Torres, president of the Fetrabanca workers union, claimed 80 per cent of the country's nearly 60,000 bank employees were participating in the two-day strike. He urged workers to provide only minimal services, such as such as processing payments for medical emergencies.

Spokeswomen for three of Venezuela's four largest banks - Banco Provincial, Banco de Venezuela and Banesco - said at least 80 per cent of their branches in the country were closed. Officials at the second biggest, Banco Mercantile, were not available for comment.

An official with the Venezuelan Bank Association, who spoke on condition of anonymity, said 70 per cent of branches nationwide were closed. The association represents all of Venezuela's private banks.

But many branches opened in downtown Caracas, and people began lining up at automatic teller machines many of which were stocked with cash despite union threats to shut them down.

Those banks that were not shuttered only opened for three hours as they have since December 9 in a management decision to support the national strike against Chavez.

The Central Bank suspended its dollar auctions Thursday after the local bolivar currency plunged to a record low against the dollar Wednesday. The Central Bank has been auctioning $US45 million a day since Wednesday.

Chavez has threatened to nationalise private banks. In Caracas, thousands of people line up each morning outside banks splattered with graffiti reading "I want my money!" and "Banker thieves!"

Demand for dollars soared on speculation that Chavez's government, facing a fiscal crisis because of dwindling oil and tax revenues, would devalue the bolivar to balance its budget. Nervous depositors wanted dollars before the banks closed, not knowing what the bolivar would be worth when banks reopen next week.

The bank strike underscored the intransigence of both sides, despite international pleas for them to join the Organization of American States in negotiating a solution to the 5-week-old national work stoppage.

The bolivar plunged by as much as 13 per cent before its official close at 1,510 bolivars per dollar, down 6 per cent, said the Central Bank, which uses an average of all the day's trading prices. Previously the lowest close was 1,492 per dollar on September 15.

Before Thursday, the bolivar's value had fallen by more than 45 per cent since Chavez abandoned exchange controls last year to curb capital flight. Venezuela spent $US6 billion in 2001 to support the bolivar.

The government, meanwhile, tried to raise money by offering 40.5 billion bolivars in government bonds, worth $US29 million at that point. There were no takers.

Strike leaders are calling for a February 2 nonbinding referendum on Chavez's rule and want him to schedule elections in 30 days if he loses the referendum.

Chavez insists the constitution only requires him to respect a possible recall referendum next August, the midpoint of his six-year term.

The strike briefly sent international oil prices above $US30. The state oil company is gradually resuming production but still operating well below normal. Crude output is estimated at about 400,000 barrels a day, compared to the pre-strike level of 3 million barrels a day. Exports, normally 2.5 million barrels a day, are at 500,000 barrels a day.

Chavez has managed to somewhat stabilize domestic gasoline supplies through imports. Caracas streets were jammed with traffic, and many businesses were open. However, international franchises, large malls and many factories were closed, emptying industrial parks. Public schools have opened for the new year, but some private schools have delayed classes.

Energy Minister Rafael Ramirez has vowed to crush the strike by decentralising the oil monopoly, where 30,000 workers are on strike.

Chavez's government will cut jobs at the Caracas headquarters of the company, a hotbed of dissent where 7,000 are employed, Ramirez said. The government is systematically firing strikers throughout the giant corporation.

The strike has all but shut down Venezuela's oil industry, which contributes half of government income. Other revenue is down because thousands of businesses closed, affecting tax collection. The government has said it may cut its $US25 billion 2003 budget by 10 per cent.

www.abs-cbnnews.com

WASHINGTON - The Bush administration plans an initiative to form a group of nations to help end a strike in Venezuela that has crippled oil exports from the major oil supplier to the United States, The Washington Post reported on Friday.

The administration has generally taken a low-profile approach to the five-week strike but will unveil within a week the plan calling for the group to develop a proposal -- probably based on holding early elections -- to end the impasse in the world's No. 5 petroleum exporter.

The plan would be presented through the Organization of American States, which is mediating between leftist President Hugo Chavez and an opposition that wants him to resign, the paper reported, citing U.S. and foreign diplomatic sources.

A White House spokesman was not immediately available for comment on the report.

Washington lost credibility in Venezuela when it appeared to welcome a coup last year that briefly ousted Chavez.

But it hopes the plan will head off an initiative by left-leaning Brazil to form its own "group of friendly nations" to resolve the crisis that the United States believes would be counterproductive, the newspaper said..

The Bush administration, which had steered clear of the turmoil in the South American nation was prompted to get involved because of increasing concern about an oil shortage as it prepares for a possible war with Iraq, the Post said. Venezuela supplies about 13 percent of U.S. crude imports.

"We were getting 1.5 million barrels of oil each day and we're not getting it now," a senior State Department official told the newspaper. The official was quoted as saying that U.S. concerns had multiplied over the past week as Chavez moved to restructure the state-owned oil company.

According to the paper, the immediate aim of the U.S. initiative would be to end the strike that has battered Venezuela's economy, rattled global energy markets and stoked tensions in a divided nation.

Brazil would be part of the "Friends of Venezuela" group Washington will propose, the Post said. The other participants would be the United States, Mexico, Chile, possibly Spain and a representative of U.N. Secretary General Kofi Annan.

Venezuela's opposition, which draws on wide support from business, union and civic sectors, accuses Chavez of wanting to create a communist state and has vowed to continue their strike until he resigns or calls elections.

In the past few days, Secretary of State Colin Powell has held Venezuela talks with Mexico Foreign Minister Jorge Castaneda, Brazilian officials, Annan and OAS Secretary General Cesar Gaviria, the Post reported.

The newspaper said the talks stalled on the fundamental issue of whether, and how Chavez remains in power.