washingtontimes.com By Tim Lemke THE WASHINGTON TIMES

 The United States must lessen its dependency on Middle Eastern oil and expand its trade with non-OPEC nations, officials and analysts said yesterday as the nation headed into war with Iraq. 
 Sen. Conrad Burns, Montana Republican and chairman of the Senate Appropriations interior subcommittee, said the United States should turn to Russia, other former Soviet republics and West Africa for oil, and insisted that the country's reliance on oil from "rogue" nations such as Iran and Iraq threatens its security.
 "The attack on [September 11] by Islamic extremists should have been a wake-up call to the nation that our vital security interests are threatened by our increased dependence on Middle East oil imports," Mr. Burns said. "I am sorry to say that our nation still slumbers."
 The price of a barrel of crude oil fell nearly $2 yesterday to $29.88. Prices had been as high as $37 earlier this week, but began tumbling after President Bush said Monday that a war with Iraq was nearly certain.
 Mr. Burns made his comments in a speech at the Heritage Foundation, along with Roger Robinson, an energy consultant and chairman of the William J. Casey Institute, and Ariel Cohen, a research fellow at the Heritage Foundation. 
 The Energy Information Administration estimates that the region around the Caspian Sea <ampersand/>#8212; bounded by Russia, Azerbaijan, Iran, Turkmenistan and Kazakhstan <ampersand/>#8212; contains about 10 billion barrels of oil in proven reserves, and produces about 1.3 million barrels per day.
 Analysts said imports from that region can increase, particularly after the completion of the Baku-Tbilisi-Cehan pipeline that will stretch 1,038 miles from Azerbaijan to a Mediterranean seaport off Turkey. 
 Completion of the pipeline is scheduled for 2005.
 Increasing output from countries outside the Middle East would not only improve U.S. security, but also boost energy flow to populous nations such as China and India, Mr. Robinson said. 
 The panel said political changes in many nations would lead to privatization of oil, and therefore, greater production. 
 Mr. Cohen, who has written extensively on the issue of America's need to diversify its sources of oil, said toppling Saddam Hussein in Iraq will lead to increased energy supplies. 
 "I envision an Iraq with a government that allows for private property, that allows privatization, that allows investment," said Mr. Cohen, who estimated that Iraqi oil output would increase threefold under a democratic regime. 
 Mr. Cohen also said a new government in Venezuela, a member of the Organization of the Petroleum Exporting Countries experiencing political instability, would better serve the United States. The United States gets about 10 percent of its oil from Venezuela.

www.sfgate.com Wednesday, March 19, 2003
(03-19) 21:41 PST (AP) -- JORGE RUEDA Associated Press Writer

CARACAS, Venezuela (AP) -- Venezuela insists it will be a reliable wartime supplier of oil to the United States despite sometimes testy relations and a slow recovery from a two-month oil industry strike.

"We are and will continue to be the most secure supplier of oil to the United States," Vice President Jose Vicente Rangel said this week.

His pledge came despite Washington's recent criticism of President Hugo Chavez for arresting strike leaders and obstructing efforts to hold early elections. Chavez told Washington to keep out of Venezuelan affairs.

Others question how soon Chavez's government can stabilize exports after firing nearly half of the state owned oil monopoly's 40,000 people.

Some customers complain they've had trouble contracting tanker shipments with new personnel. The government isn't releasing export figures. Pre-strike exports averaged 2.5 million barrels a day -- including 1.5 million barrels a day to the United States.

"For the first time in our history, shipping crude to the United States in time of war isn't guaranteed because of Venezuela's internal crisis," argued Alberto Quiros Corradi, a former president of Shell de Venezuela.

U.S. Energy Secretary Spencer Abraham has said it could take at least two months before Venezuelan exports stabilize. While its crude quality is lower than many Middle Eastern grades, Venezuela can ship quickly to the United States compared to 40-day tanker shipments from the Middle East.

Market analysts disagree whether war in Iraq will increase or depress prices, disrupt Middle East production or affect low U.S. inventories. Venezuela traditionally has banked on price rises to boost its oil-dependent economy.

Venezuela's opposition, including nearly all oil workers, went on strike Dec. 4 to protest Chavez's handling of the economy and alleged rights abuses and to demand early elections.

Chavez, a former army officer who led a failed coup bid in 1992, was elected president in 1998 and re-elected in 2000 to a six-year term.

The strike failed. Chavez's government claims it has already surpassed its OPEC production quota of 2.8 million barrels a day and can push it to 4 million barrels by April if a protracted war increases prices.

Fired oil executives say production is closer to 2.4 million barrels. Some analysts, meanwhile, said at an OPEC meeting last week they doubted Venezuela's production recovered so quickly after a low of 150,000 barrels during the strike.

Roger Diwan, managing director of markets at Washington-based PFC Energy, estimates Venezuela is exporting 1.8 million barrels a day and producing 2.4 million barrels a day.

"They've done a good job. They've surprised a lot of people," Diwan said. "I never thought they would get up to this level."

Venezuela's ties with Washington have centered on oil since 1914, when the first rig tapped what proved to be the largest reserves outside the Middle East.

Developed in large part with American capital, the oil industry met U.S. needs in both World Wars, the 1973 Arab oil embargo and the 1991 Persian Gulf War. It sided with U.S. interests despite being a founding member of the Organization of Petroleum Exporting Countries and nationalizing the oil industry in 1976.

Chavez, for his part, has been uncharacteristically quiet about the Iraqi crisis. He has concentrated on consolidating control after the nationwide strike, which cost Venezuela at least $6 billion.

In 2000, Chavez irritated the United States by becoming the first head of state to visit Iraq after the 1991 Persian Gulf War. He offered Saddam Hussein his support for ending U.N. sanctions against Iraq.

Oil is key to Chavez's presidency, generating 80 percent of Venezuela's export earnings and a third of its $100 billion gross domestic product. Venezuela's economy is seen contracting by at least 15 percent in 2003, and a wartime spike in oil prices could provide relief.

A price crash will hurt: Venezuela loses $1 billion per year for each $1 drop in the barrel price of oil.

12:00 2003-03-19

On the verge of an armed conflict in Middle East, the South American country will play a decisive role to stabilize the oil market

Venezuela, the fifth largest world's oil exporter, will play a strategic role if finally Washington decides to attack Iraq. The South American nation is now prepared to pump over its official quota, after general strike cracked one month ago.

Venezuelan Vice President Jose Vicente Rangel said on Tuesday that the country was currently producing 3.1 million barrels of oil per day (bpd). Speaking to reporters during a visit to Brazil, Rangel said Venezuela's oil industry was returning to normal after the stoppage started Dec. 2 by foes of President Hugo Chavez.

This is of very much interest for Washington as Venezuela is the main US oil supplier and the crisis with Iraq could make prices go haywire. This week, US officials admitted that the country could sell its strategic reserves to keep the prices stable. However, if Venezuela comes back to its pre-strike levels it would not be necessary.

Rangel said since Saturday, Venezuela stopped importing fuel and has returned to refining petrol for export. "We are already producing the petrol that the country consumes, since Saturday we are not importing petrol and products are already being refined for export," Rangel said. According to Venezuelan officials, the OPEC has allowed Caracas to pump over the traditional quota of 2.82 million barrels a day. The country has installed capacity for 4 millions bpd and says now is in 3.1.

However, dissident former employees of state oil firm Petroleos de Venezuela (PDVSA), thousands of whom were fired by Chavez for their participation in the strike, say the government has only been able to restore oil production to 2.4 million bpd.

Despite the controversy on figures, it is clear that Washington will try to restore good relations with Venezuela, at least during wartime. With the above in mind, Caracas is now of strategic interest for USA, as Bush has found an unexpected crucial allied in Chavez. Venezuela's oil production is of most importance to keep markets calmed while his Army leads the military adventure in Iraq.

Hernan Etchaleco PRAVDA.Ru Argentina

www.iht.com Neela Banerjee The New York Times Wednesday, March 19, 2003   Saudi Arabia has amassed a reserve of nearly 50 million barrels of oil that it plans to use to compensate for possible disruptions of Iraqi oil exports if war erupts, according to a senior Saudi official and industry experts who have been told about the supply buildup. "We have about 50 million barrels, most of it in the country," said the Saudi official, who spoke on the condition of anonymity. "We can tap into it immediately once there is a shortfall." The Saudi stockpile has been built up over the last three months as oil prices have climbed near their highest levels in years. Calls have increased from various political quarters for the Bush administration to release oil from the U.S. Strategic Petroleum Reserve, which holds 600 million barrels of oil. So far, the administration has said that it will let the Organization of the Petroleum Exporting Countries try to make up for any disruptions before tapping the reserve. OPEC is led in effect by Saudi Arabia, the only country with spare production capacity that can be called on in case of supply disruptions. "We will make sure there is enough oil in the market," the Saudi oil minister, Ali Naimi, said in a statement. "We have plenty of spare capacity." Industry analysts said Saudi Arabia probably felt compelled to increase production to back up assertions it has long made that it can take care of problems that buffet oil markets. "It is in the Saudis' interest to produce oil and store some of it away, and the cumulative effect of that is a substantial reserve," said Lawrence Goldstein, president of the Petroleum Industry Research Foundation. "The Saudis know that sustained high prices weaken economic activity, decrease demand and encourage non-OPEC production. They want to see a predictable, stable oil supply." Iraq has been exporting about 1.5 million barrels a day. The cushion the Saudis have built into their system could make up for about a month of disruption of those exports, although Saudi Arabia does not plan to draw down all 50 million barrels, the Saudi official said. "The United States consumes about 1 million barrels a day of Iraqi crude," said Yasser Elguindi, a managing director at Medley Global Advisers, a New York consulting firm. "So I don't think it's by accident that the Saudis have these numbers." A representative of the Saudi Ministry of Petroleum and Mineral Resources declined to comment on the reserve. The Saudi official said that he had told members of Congress about the oil pool and that "the U.S. government is certainly aware of this." "Our oil people have been talking to the National Security Council," he added. But he said Saudi Arabia had taken this step on its own, without arm-twisting by the White House. "You look around and make plans based on different scenarios," he said. "What if there is a war? So you increase capacity. But how do you tap into reserves immediately? You want to make sure that if there are disruptions, the oil markets are covered. The administration didn't say, 'Gee, guys, can you do this for us?'" A White House spokesman declined to comment on Monday night. Saudi Arabia is producing about 9 million barrels a day, the official said, or about 1.5 million more than its OPEC quota. The Saudis have about 1.5 million barrels of additional production capacity that they can bring on in less than several weeks, if the need arises, he said. Independent experts have estimated that Saudi Arabia is producing 9.2 million to 9.5 million barrels a day, with an additional 1 million barrels that can be called upon. The Saudis have stored nearly all their reserve within their borders, the official said, rather than in installations they have in the Caribbean, Europe and the Far East. Saudi Arabia increased production when a general strike in Venezuela reduced exports from there to a trickle. Prices fall sharply on war speculation Oil prices plunged Tuesday as expectations grew that a war in Iraq would be won swiftly and without a significant cutback in Gulf oil supplies on world markets, Agence France-Presse reported from London. The price of Brent crude oil for May delivery plunged by about $3 per barrel, or more than 10 percent, to as low as $26.40 before finishing at $27.25 on the International Petroleum Exchange in London. Light sweet crude for April delivery shed $3.33 to $31.60 in late trading in New York. "The market is collapsing because people feel it's going to be a very quick war," said Robert Laughlin, a trader at GNI. Oil prices tumbled after President George W. Bush gave Saddam Hussein 48 hours to leave Iraq or face attack. But some analysts warned that the sharp decline might not be justified given uncertainties ahead. "There are still many issues unresolved with regard to oil supply, and we still don't know if Saddam has plans to try to damage Iraq's oil fields," said Tony Machacek, a broker at Prudential Bache.

www.miami.com Posted on Tue, Mar. 18, 2003
BY MARIKA LYNCH mlynch@herald.com

CARACAS - As war in Iraq appears closer, Venezuela says its production of crude oil has nearly recovered from a crippling two-month strike.

By June, this important U.S. supplier expects to be able to surpass its former output to pump 3.4 million barrels of crude a day, officials said.

But Venezuela, according to analysts, fired oil workers and opposition members, is still behind and unlikely to recover fully before year's end.

' `I don't think so.' That's the general reaction,'' said George Beraneck, manager of market analysis for Washington-based consulting firm PFC Energy.

After surveying U.S. importers and other sources, Beraneck believes that Venezuela is producing about two million barrels a day, not the three million its government says. Though not the target, he said, that number is far beyond what he would have predicted a month ago.

''They're doing a nice job, considering what they're working with,'' Beraneck said.

Venezuela accounts for about one out of every seven barrels of oil imported to the United States daily. The strike is one of several reasons that U.S. and world oil reserves have been low over the last year, causing prices to rise.

The future of world oil prices is uncertain, analysts said, above all because of a possible war in the Middle East.

Venezuela's oil industry collapsed in December, when employees at state-owned Petróleos de Venezuela, angry about changes in the company under the administration of President Hugo Chávez, walked off the job.

By the height of the strike, 16,000 employees had walked out and production had shrunk to 200,000 barrels a day, costing Venezuela $6 billion. The country had to import fuel to keep vehicles moving, and drivers waited for days at gas stations.

The strike, which failed to oust Chávez or to get early elections called, was strongest in the oil sector, though businesses around the country shut down. Because oil is Venezuela's primary source for foreign exchange, the country had to impose currency controls and ration dollars, which it hasn't sold in over a month.

The government, meanwhile, fired the striking workers and is moving to replace them with outside employees. In addition, seven oil executives, charged with sabotage, have gone into hiding. On Monday, an appeals court, citing procedural violations, struck down those charges, the executives' lawyer told reporters.

In January, President Chávez pledged a rebound by the oil industry and said crude production would be back to three million barrels a day by mid-February. On Saturday, state oil company chief Alí Rodríguez said that Venezuela had all but stopped importing gasoline, that crude production had nearly reached prestrike levels and that the company must now concentrate on stabilizing production.

Rafael Ramírez, minister of energy and mines, echoed his statements.

''We've maintained, intact, our production capacity,'' Ramírez said at a weekend oil conference.

In June, OPEC members are to gather to review the world oil situation. If the group agrees, Venezuela will surpass its limit to pump 3.4 million barrels of crude a day, Ramírez said.

But industry sources and former workers consider that level physically impossible. They note that many employees, including most top executives, have left, taking years of experience with them. And pumping crude, they say, isn't as simple as turning on a faucet; once off, it takes time for a well to be pumped again.