Venezuela's Chavez taps generals to fight 'oil war'

world.scmp.com Monday, January 20, 2003 VENEZUELA PASCAL FLETCHER of Reuters in Caracas

Updated at 10.57am: Venezuelan President Hugo Chavez overnight (HK time) named two loyal generals to top security jobs and said he was ''winning the war'' against opposition strikers who have crippled the country's vital oil industry for seven weeks.

The left-wing president, who has used troops to counter the strike, ruled out talks with opposition leaders who are trying to force him to resign and hold early elections.

Hardening his stance against the strikers, he repeated a threat to withdraw from peace talks with his foes being brokered by the Organization of American States. The talks have made little progress in more than two months.

''We are winning this oil war,'' Mr Chavez said, speaking on his weekly ''Hello President'' television and radio show.

The strike has slashed output in the world's number five petroleum exporter. It has also caused serious shortages of gasoline, cooking gas and some food items, sparking looting in some provincial towns and villages.

But Mr Chavez, a former paratrooper who was elected in 1998 and survived a coup last year, said his Government was making progress in restarting strike-bound oil fields and refineries.

Chavez named General Lucas Rincon, a former defence minister and ex-armed forces chief, as interior and justice minister and General Jorge Garcia Carneiro, as the new chief of the army - the most powerful branch of the armed forces.

Both generals are close allies of Mr Chavez, who has used the armed forces to take over strike-hit oil installations and, more recently, to raid food plants he accuses of deliberately hoarding goods to support the strike.

Since a short-lived coup against him in April, the president has purged his opponents from the military and is now doing the same in the strategic oil industry. Some 2,000 striking oil executives and employees have been fired.

In a move that drew howls of outrage from Mr Chavez's foes, National Guard troops on Friday broke into two private drinks manufacturing facilities. One was a local bottling affiliate of Coca-Cola and the other a storage plant belonging to Venezuela's biggest private company, Empresas Polar.

Mr Chavez overnight accused a US-controlled technology company, Intesa, of joining what he called a campaign of sabotage by the opposition strikers in thestate oil giant PDVSA.

Intesa, 60 per cent of which was owned by the US company Science Applications International Corporation (SAIC), had been responsible for running PDVSA's computer systems which Mr Chavez said were deliberately blocked and disrupted in the strike.

''The Intesa executives didn't want to co-operate... We'll have to rescind that contract... We're nationalising the brains of our oil industry,'' the president said.

Opposition leaders said Friday's (overnight Saturday, HK time) raids against the drinks firms were an attack on private property. They accuse Mr Chavez of trying to introduce Cuba-style communism in Venezuela.

Cuban President Fidel Castro overnight defended his friend and political ally Mr Chavez, praising him as a ''firm, good and intelligent man who is not going to abandon his people''.

Speaking in the eastern Cuban city of Santiago de Cuba, Castro said Mr Chavez's striking opponents were being defeated.

But the Venezuelan strikers on overnight vowed to continue their protest shutdown, extending it into an eighth week.

The strike at PDVSA has jolted world oil markets and cut off exports to the United States, which normally imports over 13 per cent of its oil from Venezuela.

Rejecting opposition reports that the strike-hit oil industry was still in the doldrums, Mr Chavez predicted that output could reach 2 million barrels per day (bpd) - two thirds of pre-strike levels - by the end of January.

He put current production at close to 1.2 million bpd. Striking PDVSA executives say output is around half of that.

Mr Chavez acknowledged that availability of gasoline was still ''critical,'' although he promised this would improve. Long lines formed outside gas stations across the country.

''We can't dialogue with terrorists,'' Mr Chavez said, adding his Government was considering quitting the talks with opposition negotiators chaired by OAS Secretary General Cesar Gaviria. The negotiations had been due to resume overnight on Tuesday.

Latin American leaders this week created a six-nation ''group of friends'' to support Mr Gaviria's efforts to solve Venezuela's political crisis. The group comprised the United States, Brazil, Chile, Mexico, Spain and Portugal.

But Chavez has said the group should be expanded to include nations such as China, Russia, Cuba and France.