www.guardian.co.uk Saturday January 25, 2003 6:10 AM

CARACAS, Venezuela (AP) - An earthquake with a preliminary magnitude of 4.8 jolted the capital and the coast of Venezuela Friday night, but no injuries or major damage were reported.

The tremor hit at about 10:12 p.m. EST and was centered near the eastern coastal town of Higuerote, about 112 miles east of Caracas, Herbert Rendon of the Venezuelan Foundation of Seismological Investigations told Globovision television.

The quake rattled Caracas and the northern coastal state of Vargas.

www.knoxnews.com By CHRISTOPHER TOOTHAKER, Associated Press January 25, 2003

CARACAS, Venezuela - Oil production is slowly picking up in Venezuela, a sign President Hugo Chavez may be gaining in his efforts to break a nearly 2-month-old strike.

But Chavez still has a long way to go to overcome the strike's devastating effects on the economy, already in recession when the walkout began Dec. 2 with the goal of ousting his left-wing, populist regime.

Dissident executives at the state oil monopoly Petroleos de Venezuela S.A. said production was 855,000 barrels of crude on Friday, up from 812,000 barrels a day earlier. State oil company President Ali Rodriguez insists crude production has surpassed 1 million barrels per day.

Venezuela, the world's fifth-largest oil exporter and a major U.S. supplier, produced 3 million barrels a day before the strike. At one point in December, production slipped to as low as 150,000 barrels per day.

It remains to be seen whether exports, averaging around 450,000 barrels a day, will follow suit. If oil isn't shipped, inventories pile up and no space remains for freshly produced oil.

Many tanker pilots returned to their jobs this week, but foreign shippers remain reluctant to use Venezuelan ports because regular docking and support personnel haven't abandoned the strike.

Ed Sillierre, vice president of risk management at Energy Merchant LLC in New York, called the decision by pilots "the first chink in the armor."

Persuading pilots to return to work was "a very smart strategic move on Chavez's part. It really drove the stake into the heart of the opposition movement," Sillierre said.

"Can he ride this thing out? Now I would say yes," he added.

The state oil monopoly employs about 40,000 people. Rodriguez told the state news agency Venpres on Thursday that most oil workers and half the company's administrators have abandoned the strike. But Fedepetrol, the largest oil workers union, insisted 17,000 of its 20,000 workers haven't returned to work.

Chavez may be making headway in his push to revive oil production, but that doesn't mean domestic fuel shortages will return to normal anytime soon. Venezuela only refines a fraction of its crude oil for domestic consumption, and the few refineries used for that purpose are still far from full capacity.

"Domestic consumption will be an issue for a long time," Sillierre said. If the strike were to end immediately, "Venezuela would be importing gasoline easily through March, quite possibly into the summer," he said.

Chavez must also face the effects of damage already done to the nation's oil-dependent economy. Almost half of Venezuela's income, 80 percent of export earnings and roughly a third of the country's $100 billion gross domestic product come from oil exports.

The government has acknowledged losing more than $4 billion in income so far.

Finance Minister Tobias Nobrega announced a $1.5 billion cut this week in Venezuela's $25 billion budget. Cash-strapped opposition governors and mayors claim they may not be able to pay public employees at the end of the month.

The Santander Central Hispano investment bank has warned that Venezuela's economy could contract as much as 40 percent in the first quarter of 2003 if the crisis isn't resolved soon. The economy shrank by an estimated 8 percent in 2002. Unemployment is 17 percent and inflation is 30 percent.

www.nytimes.com By JAMES DAO and JUAN FORERO

WASHINGTON, Jan. 24 — Secretary of State Colin L. Powell strongly urged the Venezuelan government and its opposition today to accept one of the two proposals offered by former President Jimmy Carter to end the 54-day-old strike that has filled Venezuela's streets with protesters, shut down businesses and paralyzed its oil industry.

As diplomats in Washington and officials in Caracas reported progress toward ending the impasse, several leaders of the opposition movement said they were prepared to begin negotiating on one of Mr. Carter's proposals — a referendum on President Hugo Chávez's rule.

The opposition's willingness to discuss the August referendum took some officials by surprise. Leaders of the opposition had said recently that they considered August too late. Some officials viewed this softening of their position as an indication that the opposition believes that its strike is losing steam.

In Washington today, the Venezuelan foreign minister, Roy Chaderton, also told reporters he believed the government had begun to break the strike at the state-owned oil company, asserting that oil production is expected to surpass a million barrels a day in the near future. Oil industry analysts have said the government exaggerated oil production during the strike.

Diplomacy to end the impasse moved to the headquarters of the Organization of American States in Washington today, as a new group calling itself the Friends of the Secretary General held its first meeting. The group, which consists of the United States, Mexico, Chile, Brazil, Spain and Portugal, is intended to help César Gaviria, the secretary general of the Organization of American States, broker an agreement.

After a two-hour meeting, the Brazilian foreign minister, Celso Amorim, who was appointed coordinator, said he sensed a willingness on both sides to discuss Mr. Carter's proposals.

"I am more hopeful today than I was yesterday," Mr. Amorim said. "There is a beginning of an interest in the proposals."

In a statement to the friends group, Mr. Powell called Mr. Carter's proposals "the best path for Venezuelans."

"They offer a way out of the current impasse, and it is our job as the Friends of the Secretary General group to urge both sides to agree to one of them," he said.

Mr. Carter offered two proposals on Monday in Caracas. One would be the adoption of a constitutional amendment that would cut the president's term to four years from six, ending Mr. Chávez's term this year and leading to new elections. The second, one Mr. Chávez has publicly said he would support, would lead to a recall referendum in August that would ask people whether Mr. Chávez should be removed from office.

The opposition has long opposed the second proposal, saying August is too far off. But now, with Mr. Chávez's government slowly reactivating the once-moribund oil industry and many Venezuelans questioning the effectiveness of the strike, anti-Chávez leaders say they are open to Mr. Carter's proposals.

What has made the referendum idea more palatable, they say, is that it calls on the government to guarantee that the vote would take place no later than Aug. 19, while offering other assurances.

"With these proposals, we are disposed to negotiating," said Carlos Fernández, leader of the country's most influential business group.

There are still stumbling blocks, though. Opposition leaders said they expected the oil workers and executives who shut down the state oil company, Petróleos de Venezuela, not to be fired or punished. Though the Carter proposal says workers exercising their "labor rights" should not be punished, analysts believe it is unlikely that Mr. Chávez will let top dissident oil executives have their jobs back.

In Washington, Mr. Chaderton refused to say whether the government would offer the workers amnesty. Instead, he complained bitterly about violence by the strikers and the harsh criticism of the Chávez government that dominates many newspapers and television stations.

In a meeting with reporters here, Mr. Chaderton was defiant, saying the Chávez government believed it should serve out its full term, scheduled to last until 2006, and had no plans to assist the opposition in either amending the constitution or scheduling an August referendum.

But he suggested that the government would not block a referendum, if the opposition collects the required signatures on petitions.

The shift in the opposition movement came after several leaders in the organization privately criticized those who insisted on continuing with a strike that has made life miserable for countless Venezuelans. The strongest proponents of the strike include Carlos Ortega, the labor leader, some big businessmen and owners of the steadfastly anti-Chávez media, said several members of the Democratic Coordinator, the leading opposition organization.

"They did not see the strike as an instrument for pressuring, but rather as a goal in and of itself," said Armando Díaz, general secretary of the left-wing Red Flag party and a member of the Coordinator. "We told them, `No government will ever fall because of a general strike.' "

A high-ranking member of the Coordinator said that earlier this month, opposition leaders realized that a February nonbinding referendum on Mr. Chávez's rule would most likely not happen. "So Carter's coming here was welcomed," said the official, who asked to remain anonymous. "Even though it is the same as Chávez's proposal, it was positive because it came from Carter. That means there is hope."

Venezuela's President Reasserts Hard Line Against Strikers  (January 17, 2003)

sg.biz.yahoo.com Saturday January 25, 7:35 AM By Stephen Parker Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Venezuela's oil production has climbed to nearly 1 million barrels a day, with oil exports reaching roughly half that amount as the country's general strike continues, Fitch Ratings analysts said Friday.

The strike, which began Dec. 2, throttled back the major oil producer's output and exports during much of the last two months. While the government has restored oil production to roughly 900,000 to 920,000 b/d, the lack of foreign oil tankers has impeded exports - now seen at roughly 500,000 b/d - as serious safety and insurance issues linger, Fitch analysts said in a conference call.

Venezuela's troubles have reverberated throughout the world, with international oil companies losing production revenue and U.S. refiners seeing profits curbed by higher crude costs. Even after the conflict is resolved, Venezuela will face a raft of challenges in rebuilding its oil industry, analysts and consultants said.

"The crisis in Venezuela has created one of the largest shocks in the history of the oil market, exceeding the anticipated disruption resulting from a war with Iraq," Goldman Sachs analysts said in a report this week. "So far, the outage in Venezuela has cost the market nearly 110 million barrels."

The top 10 international oil companies with operations in Venezuela are losing a combined $6.7 million a day in net revenue because of the strike, the Wood Mackenzie energy consultancy estimated this week.

Among those companies hardest hit are TotalFinaElf (TFE), which is losing around $1.4 million a day; ConocoPhillips (COP), with losses of about $1 million a day; ENI SpA (E), losing $870,000 a day; ExxonMobil (XOM), losing $770,000 a day; and ChevronTexaco Corp. (CVX), losing $640,000 a day, Wood Mackenzie said.

Many U.S. refiners - particularly those on the East and Gulf coasts - have also seen refining profit margins shrink as heavy crude supplies are limited and oil prices soar on the shortfall, Fitch analyst Bryan Caviness said.

"Venezuela will continue to put a strain on refiners," Caviness said, citing the 45-day transit time for increased Saudi oil exports to reach U.S. shores.

The additional Middle Eastern supplies include lighter- and medium-grade crudes, which don't have the same economic advantages as heavier Venezuelan crude, Caviness said.

With U.S. crude inventories at critically low levels, Goldman Sachs said refiners are faced with a dilemma. They'll have to cut production beyond the normal season decline, which could cause problems in the gasoline market this summer, or they'll likely need a release of national Strategic Petroleum Reserves oil to avoid stock-outs, shortages and price spikes.

Venezuelan President Hugo Chavez's government and opposition leaders have agreed the country's oil production is rising, but they differ widely on the amount.

As reported, dissident staff of Petroleos de Venezuela, or PdVSA, estimated Friday that crude oil output had risen to 855,000 b/d, mainly due to an increase in the eastern part of the country.

Chavez said Sunday he expected output to reach about 2 million b/d by the end of this month.

"There's significant disinformation and misinformation taking place in Venezuela," Fitch analyst Alejandro Bertuol said. "Most oil-related activities remain hindered."

Even as Venezuela gradually increases its production, the massive U.S. military buildup in the Middle East is seen helping to keep oil prices above $30/bbl, Caviness said.

Oil prices closed $1.03 higher at $33.28/bbl Friday on the New York Mercantile Exchange. Traders and analysts said the rally was sparked by fears that a war with Iraq could substantially disrupt Persian Gulf oil exports, and supported by continuing unrest in Venezula.

Once Venezuela's strike is over, reactivating wells and bringing output back to levels approaching the roughly 2.6 million b/d produced in the final months of 2002 will present many challenges. Venezuela is likely to struggle as its hydrocarbon industry experiences a loss of highly trained workers, Bertuol said.

The situation could be a boon for foreign oil-services companies, however, as they're likely to find remedial work opportunities in Venezuela, said Fitch analyst Patrick McGeever.

Even so, the International Energy Agency, which coordinates use of the industrialized world's strategic oil reserves, estimates Venezuela may have permanently lost 400,000 b/d of production capacity because of the strike. The IEA also warned this month that Venezuela's oil production would take months to come back on stream and faces a "period of decline."

In the short term, PdVSA performance and reliability will remain casualties of the political crisis, Fitch analysts said.

"Systemic roots of the current political crisis will make it difficult to recover market confidence," Bertuol said.

Over the medium term, Venezuela is expected to remain an important player in the global oil market, but the strike will result in major spending reductions, particularly for Venezuelan natural gas and petrochemicals projects, Fitch analysts said.

-By Stephen Parker, Dow Jones Newswires; 201-938-4426; stephen.parker@dowjones.com

www.adn.com Organization of American States By KEN GUGGENHEIM, Associated Press

WASHINGTON (January 24, 4:15 p.m. AST) - Officials from the United States and five other countries urged Venezuelans to stop political violence and inflammatory rhetoric as a new diplomatic effort began Friday to end a violent strike that has crippled oil production in the world's fifth-largest oil exporter.

The newly formed "Friends of Venezuela" group also agreed to send high-level representatives to a meeting in Caracas next week to help find ways to break the political impasse.

The opposition called the strike almost two months ago to press demands that President Hugo Chavez resign or call early elections. Opponents say Chavez's leftist policies have undermined business in Venezuela; Chavez's supporters say the opposition wants to bring down a democratically elected president who enjoys strong support among the nation's many poor.

"The problem of Venezuela is a problem of great urgency that requires therefore that we act immediately," Brazilian Foreign Minister Celso Amorim, who chaired the meeting, told reporters afterward.

In a sign of U.S. interest in a diplomatic resolution, Secretary of State Colin Powell attended the start of the closed-door meeting at the Organization of American States that also included officials from Mexico, Chile, Spain and Portugal.

Powell said the diplomats should work with two proposals made by former President Carter. One proposal is for a recall vote on Chavez to be held in August. The other would be to amend the Venezuelan constitution to allow early elections this summer.

"The Carter proposals represent the best path available to the Venezuelans. They provide the badly needed basis on which both sides can bridge their differences on the immediate issues," Powell said, in a text released by the State Department.

Venezuela's foreign minister, Roy Chaderton, told reporters his country was open to proposals that follow the country's constitution. He also agreed that both sides need to lower the tone of the political rhetoric but said: "We do need guarantees also, because we have a very violent and irrational opposition."

Chaderton said he would like to see the Friends group expanded eventually to include other friendly nations. Amorim said a possible expansion was not discussed at the meeting.

Miguel Diaz, of the Center for Strategic and International Studies, said the talks at the OAS were critical.

"If this doesn't pan out, I think Venezuela is left to its own devices," he said. "I'm not sure the Venezuelans themselves will be able to find their way through this crisis without major bloodshed."

The United States has approached the latest Venezuelan turmoil gingerly. The Bush administration has little regard for Chavez, who has visited Iraqi President Saddam Hussein and is a close friend of Cuban President Fidel Castro. But after stressing the importance of democracy to the region, it doesn't want to be seen as undermining a constitutionally elected government.

The administration received sharp criticism for appearing to support a coup attempt in April. It has said it opposes any change in Venezuela outside the constitution.

Chaderton said he viewed the United States as "a good friend."

Michael Shifter of the Inter-American Dialogue research group said the April coup has caused the United States to take "more of a hands-off posture" to Venezuela.

"That's not an answer because the chaos is continuing," he said. "The United States is one of the few actors that could positively affect the outcome of this."

While the United States is seen as being able to influence Venezuela's opposition leaders, Brazil's new government, led by leftist President Luiz Inacio Lula da Silva, is seen as potentially influential with Chavez.