VENEZUELA THE OIL FACTOR
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”.