CHRISTOPHER TOOTHAKER, Associated Press Writer Friday, January 10, 2003

(01-10) 00:16 PST CARACAS, Venezuela (AP) --

Opponents of President Hugo Chavez accused the embattled leader of promoting political violence on Thursday after opposition-led marches in several cities were attacked by government supporters.

"It's the leader of the country who is provoking this violence," said Carlos Ortega, president of the Confederation of Venezuelan Workers, the nation's largest and most powerful trade union.

Government supporters attacked anti-Chavez marches in Caracas and outside oil facilities around the country, the latest incidents of political violence in this crisis-stricken South American country of 24 million.

"Chavistas," as the president's backers are called, attacked a rally outside a refinery in Cardon, 270 miles east of Caracas, wounding a 40-year-old worker and a 28-year-old demonstrator, said Luis Arends, a civil defense worker.

In Caracas, gunmen fired several shots and threw tear gas at an opposition rally. No one was hurt, and the rally resumed. There were no arrests.

Chavez supporters armed with machetes and sticks also prevented a demonstration at an oil facility in central Carabobo state, Globovision television reported. A minor clash occurred at a plant in Barinas state.

Chavez, a leftist former paratroop commander who was elected in 1998 and re-elected two years later, denies he is fomenting escalating violence. Chavez opponents claim the president's fiery rhetoric incites violent reactions from his most radical backers.

In January 2002, four supporters of Chavez' ruling party were slain in western Zulia state. Nineteen died last year on April 11, when rival marches clashed in downtown Caracas. The bloodshed spurred a coup and Chavez' brief ouster. Loyalists in the military returned him to power on April 14.

Three more citizens were killed, presumably by a lone gunman, at an opposition rallying point on Nov. 6 and two government supporters died of gunshot wounds at a street march last Friday.

Thursday's aggressions occurred as thousands of Venezuelan bank workers stayed home to support a nationwide strike seeking new presidential elections, further weakening the currency as analysts speculate that Chavez' government is running out of money.

The nationwide strike begun Dec. 2 has shut thousands of businesses and brought Venezuela's vital oil industry -- a top U.S. supplier and once the world's fifth-largest exporter -- to a virtual halt. Gasoline has been imported.

Amid fears of a banking crisis, Venezuelans bought U.S. dollars and sent the bolivar currency to a record low of 1,593 to the dollar -- 5 percent weaker than Wednesday and down 12 percent for the year.

Analysts speculated Chavez's government may have to devalue the bolivar to balance its budget. Most government income is in dollars and a weaker bolivar would increase its domestic spending power.

Spokesmen at three of Venezuela's largest banks -- Banco de Venezuela, Banco Provincial and Banesco -- said 80 percent of the country's nearly 60,000 bank employees stayed home Thursday.

Jose Torres, president of the opposition-aligned Fetrabanca workers union, urged employees to provide only minimal services -- such as processing payments for medical emergencies -- Thursday and Friday.

But Luis Boris, secretary general of the pro-government bank workers union Sutrabanca, accused bank owners of closing doors without consulting workers.

A nonbinding referendum on Chavez's rule is scheduled for Feb. 2. Chavez insists the constitution only requires him to respect a possible recall referendum in August, the midpoint of his six-year term.

Strike organizers -- including leaders of the nation's largest trade union, its business chamber and the state-run oil company -- claim their protest is as strong as ever. Many factories, industrial parks and supermarkets remained closed.

But there were signs many are tiring of the strike. There was more traffic on streets and sidewalks and in shops, restaurants and markets.

Efforts by Chavez to jump-start operations at Petroleos de Venezuela S.A., the state oil company, have been partially successful.

Crude output is estimated at about 400,000 barrels a day, compared with the pre-strike level of 3 million barrels. Exports, normally 2.5 million barrels a day, are at 500,000 barrels a day.

Energy Minister Rafael Ramirez claimed the company will produce 1.5 million barrels a day by next week and will reach full capacity next month. Dissident oil workers doubt production can reach those levels so soon.

U.S. Plan Seeks To End Conflict By Karen DeYoung Washington Post Staff Writer Friday, January 10, 2003; Page A01 www.washingtonpost.com

Increasingly concerned about an oil shortage as a possible war with Iraq approaches, the Bush administration has overcome its reluctance to become involved in Venezuela's escalating political conflict and is preparing a major initiative it hopes will lead to a breakthrough in deadlocked talks between the government and opposition there, according to U.S. and foreign diplomatic sources.

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, that 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 initiative is expected to be rolled out within the next week. Its immediate goal would be an end to an opposition-organized strike, in its second month, that has paralyzed the Venezuelan economy and stopped all petroleum exports, including the 1.5 million barrels a day to the United States, about 15 percent of U.S. oil imports.

The administration also hopes to head off a budding Venezuela initiative by Brazil's new left-leaning government that it and many others in the region believe would be counterproductive, sources said. Brazil would be part of the new group, along with the United States, Mexico, Chile and possibly Spain, and a representative of U.N. Secretary General Kofi Annan.

Secretary of State Colin L. 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. Beyond outright resignation, which Chavez has rejected, the Venezuelan constitution offers two alternatives: a constitutional amendment, agreed by the legislature and approved by popular vote, for early elections; or a referendum on whether the president should stay in office, which could not be held until halfway through his term, in August. If Chavez lost, he would be replaced by his vice president and new elections -- in which Chavez could not run -- would have to be held in 30 days.

Chavez has expressed confidence he would win any new vote, and has said he would agree to the latter option. But the opposition believes August is too far off, and in any case it doesn't trust Chavez to follow through. A senior State Department official said that the administration 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 each side would have confidence in and adhere to an agreement guaranteed by the powerful new "group of friends."

Powell said in an interview Wednesday that he was working "to try to get some movement in Venezuela." But he declined to characterize his efforts beyond saying, "We're just trying to put a little more ooomph behind what Gaviria is doing."

The administration has treated the Venezuelan situation gingerly since last spring, when it was accused of reviving a long history of U.S. meddling in the region during an aborted coup attempt against Chavez. Since then, despite opposition assumptions of support, it has rigidly limited itself in public -- and largely in private -- to supporting the OAS effort, according to informed sources.

Although it basically agrees with opposition charges that Chavez, a populist former military officer, has threatened democracy and the economy and has moved the country too far to the left, the administration's concern about wider fallout from the upheaval there has overtaken its worries about Chavez's politics.

"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.

The official also said that as the strike continues and expands, widespread violence will become more likely. The official said there is concern that the situation "slips the leash" from controlled protest to violent chaos, he said. The longer it goes on, the harder it will be to put Venezuela back together, he said.

But it has been the success of the oil strike, and the recent firings and structural changes, that have changed U.S. direction, said a foreign diplomat involved in the situation. As far as the Americans are concerned, the diplomat said, the situation 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."

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

It was at Lula's inauguration last month that Chavez announced he favored an international diplomatic effort to resolve the Venezuelan conflict, to include countries in Latin America, Europe and the Organization of Petroleum Exporting Countries, or OPEC, which Venezuela helped found more than four decades ago.

Lula appeared to agree. But much of Latin America and Gaviria consider it an attempt by Chavez to stack the deck with sympathizers and undercut the OAS. The United States immediately rejected the idea.

"We don't think there needs to be some separate group of friends formed," said State Department spokesman Richard Boucher, noting that the OAS was "uniquely positioned and equipped to address Venezuela's crisis of democracy."

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 said, 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.

The U.S. initiative, sources said, is designed to add muscle to Gaviria's mediation rather than undermine it. In a brief interview yesterday by telephone from Caracas, Gaviria said he thought the idea of a "group of friends . . . is good" as long as it works within the OAS framework.

But the initiative has potential problems because of convoluted regional relationships.

Both the Bush and Lula administrations recognize their bilateral ties could be problematic and are eager not to antagonize each other. Brazil and Mexico, Latin America's two largest countries, are competitors for regional leadership. Cuba, one of the countries closest to Chavez, receives highly preferentially priced oil from his government, as do many smaller island governments in the Caribbean. All fear a solution that results in Chavez's removal might threaten those deals; together, they make up a major OAS voting bloc.

© 2003 The Washington Post Company

  El mayor de la Fuerza Aérea Venezolana Juan Díaz Castillo, hasta hace dos meses piloto del avión presidencial de su país, acusó hoy en Miami al mandatario de esa nación, Hugo Chávez, de financiar a la red terrorista Al Qaida.

Durante una conferencia de prensa en la Fundación Panamericana Pro Democracia en Miami (EEUU), Díaz Castillo agregó que el programa de intercambio de petróleo por educación entre La Habana y Caracas incluye el "adoctrinamiento" de jóvenes venezolanos en Cuba y el envío de instructores en ideología comunista cubanos a Venezuela.

Asimismo, dijo que el Gobierno de Chávez "ha mantenido una relación muy estrecha con la guerrilla colombiana, dándole soporte financiero y facilidades para su operaciones en territorio de Venezuela".

Según el militar, después de los atentados terroristas del 11 de septiembre de 2001, fue "comisionado para organizar, coordinar y ejecutar una operación encubierta que consistía en entregar recursos financieros, específicamente un millón de dólares, al gobierno talibán para que asistiera a la organización terrorista Al Qaida".

Díaz Castillo, que llegó esta semana a EEUU para pedir asilo político, dijo que Chávez admira a esa organización terrorista y a su líder, Osama bin Laden, y que su trabajo "tenía como fin último ayudar a Al Qaida, pero debía lucir como que se le estaba brindando ayuda humanitaria al pueblo afgano".

Según Díaz Castillo, en la operación estaban involucrados Diosdado Cabello, vicepresidente en aquel momento; José Vicente Rangel, ministro de Defensa; y el ministro de Exterior, coronel Luis Alfonso Dávila, aunque no pudo dar ninguna prueba de ello más que su testimonio.

Cabello, según Díaz Castillo, decidió enviar "el millón de dólares en efectivo a través del embajador de la India, Walter Márquez" quien, según el mayor venezolano, recibió el dinero.

Según Díaz Castillo, las autoridades talibanes de Afganistán reconocieron durante un programa televisivo haber recibido ayuda humanitaria procedente de Venezuela valorada en 100.000 dólares.

"El resto del dinero -dijo- fue directamente a Al Qaida, es decir, 900.000 dólares".

El militar venezolano dijo también que como piloto de transporte de la Fuerza Aérea "he visto como el Gobierno de Hugo Chávez ha organizado, armado y entrenado a grupos civiles a fin de administrar violencia a través de ellos." Esta idea, agregó, "fue transmitida a Hugo Chávez por (el presidente cubano) Fidel Castro".

"Estos grupos han sido enviados en aviones Hércules C-130 a Cuba para su entrenamiento militar y su adoctrinamiento ideológico," dijo Díaz Castillo, y aseguró que el 25 de octubre renunció como piloto del avión presidencial por diferencias con las políticas de Chávez.

Añadió que a él se le asignó la organización y coordinación de todos los vuelos entre Venezuela y Cuba, país al que, dijo, se ha enviado a unos 3.000 venezolanos desde que Chávez está en el poder.

El militar, que pedirá asilo político en EEUU porque, según él, su "vida y su libertad corren peligro" en Venezuela, opinó que Chávez, "quien efectivamente fue elegido de manera democrática, hoy no ejerce su mandato de forma legítima y legal, ya que a diario comete violaciones a la Constitución".

De todas formas, Díaz Castillo, que definió al Gobierno de Chávez como un "régimen de tipo dictatorial castro-comunista", se mostró contrario a un golpe de estado para lograr su destitución.

El militar dijo que aún no ha hablado con las autoridades estadounidenses, pero añadió que "estamos realmente interesados en hacer llevar esto hasta las últimas consecuencias, para que se averigûe y se tenga en cuenta cuál es el peligro real que representa Hugo Chávez" para Venezuela y el resto del mundo.

EFE 04 de Enero, 2003

www.mmorning.com

Venezuela’s opposition pledged last week to pursue its crippling strike, but eased up on a demand that President Hugo Chavez step down now, saying instead he must quit if he loses a February referendum. Although the request was not new and Chavez had rejected it in the past, the Christmas Day statement came as a surprise after weeks of increasingly militant demands by opponents of the government. Last month, opposition leaders collected the signatures needed to call the referendum, but have since hardened their position as the strike launched early in December tightened its chokehold on the vital oil sector.  

  They said the protest action clearly demonstrated a majority of Venezuelans wanted Chavez to resign, and indicated they would end the strike if the leftist-populist president recognized the outcome of a referendum planned for February 2.

“Accept that if you lose it you should call general elections within no more than 30 days. And we, who have confronted you with a general civic strike, will get the country moving”, said strike leader Carlos Ortega.

The government has insisted the referendum, called by electoral authorities, was not binding, and raised doubts about the availability of funds to finance it.

“I would not quit even if I lost it by 99.9 percent”, Chavez declared last month. But he has pointed out that the Constitution obliges him to quit if requested to do so, at the earliest in August, by more than the 3.8 million voters -- 57 percent of the electorate -- who elected him to a six-year-term in 2000.

The opposition’s initiative broke a Christmas Day lull, which the strike leaders said would help anti-Chavez forces recharge batteries in advance of new street protests.

Private television stations openly siding with the opposition had also offered a respite, airing Christmas-oriented programs rather than the non-stop coverage of the anti-Chavez movement they had provided since the strike started.

The conservative business and labor leaders leading the strike announced a massive rally would be held in Caracas in the coming days, hinting the march could head for the presidential palace in defiance of the government.

The authorities warned that security forces would not allow demonstrators near the palace, where 19 people were gunned down during protests in April that culminated hours later in the brief ouster of Chavez.

Chavez, who triumphantly returned to power 47 hours after he was deposed, has accused the strike leaders of attempting another coup, and has described them as saboteurs for choking the oil industry, the lifeline of the South American country.

He has deployed troops to take over from the strikers installations and vessels of the Petroleos de Venezuela (PDVSA) state oil company, and said this had helped restart the idled sector.

PDVSA President Ali Rodriguez Rodriguez said he expected shipments to be back to normal next month. He added that at the moment output remained down to about 700,000 barrels a day, and that exports this month amounted to only two million barrels. Venezuela usually produces 2.5 million barrels of oil, most of which is exported to the United States. In November it produced more than three million barrels a day.

In an interview published in the New York Times, Rodriguez explained that he had suspended several striking oil executives and that the government was preparing criminal prosecution against some strike leaders he claimed were responsible for 1.3 billion dollars’ in damage done to the economy.

The strike has severely hurt the economy, causing losses estimated at several billion dollars and threatening to trigger an acute recession next year, according to analysts.

“The figure we are are looking at could be around five billion dollars”, said Miguel Perez Abad, president of the federation of small and medium-sized industries (Fedeindustria), who included oil sector losses in his estimate.

Interior Minister Diosdado Cabello, put losses in the oil sector at 40 million dollars a day.

Perez Abad said the government might be forced to devalue the currency by 35 percent to 40 percent to finance public spending, and noted that interest rates also would be adjusted upward, leading to inflation.

“If this continues, we could have a truly critical situation at a national level, a deep crisis that could affect not only the productive sector but also the financial system.

“The increases in bankruptcy rates will be very high and probably speculative attacks on the currency too and we could have acute recession”.

Economist Pedro Palma agreed that Venezuela’s economic panorama would be tough as a result of the strike.

“Definitely this strike will mean a more acute economic slowdown than we had expected”, mused Palma, who estimated the cost of the strike so far at 2.2 billion dollars.

This year’s economic downturn, forecast at six percent, should be of seven percent, and could be as high as nine percent this quarter, he said. “This is truly dramatic.

“2003 will be a difficult year. That was being to be the case even before this situation: we will see a public sector with less income from the oil industry. It will take time for the industry to restart. “It will be a year of reconstruction... full of uncertainy, which will be reflected negatively in the economy”.

If the political situation settled down, he said, the slowdown in 2003 would not be as dramatic as this year, though “it won’t be a year of high growth or significant economic expansion”, Palma suggested.

US STRATEGIC RESERVE Some major American oil refiners have indicated that they had spoken to the Bush Administration about using US strategic petroleum reserves as the Venezuela general strike began to squeeze supply.

Two refiners, which usually rely heavily on Venezuelan oil, said they had contacted the Department of Energy (DoE) about the possibility of tapping the strategic petroleum reserve (SPR). The government has said it is keeping the reserves of oil, much of it stored in salt caverns along the Texas and Louisiana coastlines, locked up for now.

“DoE continues to monitor the situation in Venezuela and its possible impact on US markets. Currently, lending or exchanging oil from the SPR is not an active consideration”, it said in a statement.

The US strategic petroleum reserve is at a 25-year high of 598.7 million barrels. US President George Bush announced in November 2001 plans to build the reserve to full capacity: 700 million barrels.

But major refiners are being caught short by the unexpected duration of the turmoil in Venezuela.

Oil giant ExxonMobil said recently it had not contacted the government about use of the strategic reserves.

“We are certainly seeking alternate sources of crude oil”, said ExxonMobil spokeswoman Betsy Eaton. “We are very confident that we are going to be able to supply our customers”. A spokeswoman for ConocoPhillips declined to comment.

The United States usually imports about 11.3 million barrels per day, of which 1.4 million barrels come from Venezuela, said Robert Ebel, an analyst for the Center for Strategic and International Studies.

In an initial response, the government had stopped its program of adding to the strategic petroleum reserve, which left an extra 100,000 barrels a day for the market, he said, adding, “I do not see an immediate need to actually start withdrawing oil from the strategic oil reserve.

“If the situation continues in Venezuela and if there would happen to be military intervention in Iraq fairly soon, that would take, let’s say, two million barrels per day off the marketplace. Then I think you would see some action”.

By Andy Webb-Vidal in Caracas Published: January 9 2003 4:00 | Last Updated: January 9 2003 4:00

Venezuela will be forced to default on payments due to state oil company bondholders or on its domestic debt with private banks in the next few weeks if the government is unable to restart crippled oil production, bankers and oil industry officials said yesterday.

A five-week-old strike by opposition-aligned workers at Petróleos de Venezuela (PDVSA), who are putting pressure on President Hugo Chávez to resign or call early elections, has cut daily output from 3.1m barrels to about 300,000 barrels.

Employees loyal to the government have so far made minimal progress in restarting oil production, resulting in a collapse in export revenue. PDVSA sells its oil at between 30 and 45 days' credit, and executives at the company say cashflow has now dried up.

PDVSA has external debt of about $4bn (€3.8bn), and its next interest payment, of $150m, is due in February. The company could service the debt using money normally held in a $600m rotating fund held offshore, although it is not known whether the cash is still available.

"If I were the finance minister or treasurer of PDVSA, I would be negotiating right now [on] how to not go into default," said Luis Pacheco, until two months ago corporate planning vice-president of PDVSA. Senior PDVSA officials were due to meet US investment bankers in New York yesterday.

PDVSA has so far lost at least $2bn in unrecoverable earnings as a result of the ongoing strike, in turn severing the source of about half of government revenue.

However, analysts say there is no immediate risk that Venezuela, which holds about $11bn in international reserves, will default on its sovereign foreign debt.

The current fiscal liquidity crunch could nonetheless lead to the government defaulting on its domestic debt with private banks, a central bank official said.

Venezuela's domestic debt has trebled in size over the past three years, and totals about $6bn, accounting for an average of 40 per cent of banks' assets.

Local subsidiaries owned by Spain's BBVA and BSCH, which together account for more than half of the banking sector, and the domestically-owned Banco Mercantil, are the most exposed.

Private banks are already expected to see a sharp deterioration in the quality of their loan portfolios in the weeks ahead, given that many private companies are seeking to renegotiate their credits after remaining shut during the peak sales month of December.

Oscar García, president of Banco Venezolano de Crédito, said the banks' domestic debt levels are close to saturation point, rendering it highly unlikely that the government will be able to borrow to cover its immediate spending requirements.

"The possibility of default is very serious," said Mr García. "The government is practically insolvent, as it doesn't have a source of revenue because of the cessation of income from PDVSA, and the banks cannot buy more debt."

Venezuelan banks, which have become the most profitable in Latin America under the Chávez government, despite an economic slowdown, are expected to shut today as employees begin a two-day strike in sympathy with the oil workers.

Concern over the economy and the banking system prompted a run on deposits and a surge in demand for dollars yesterday, driving the bolívar currency down by 15 per cent to 1,646 to the dollar.