english.pravda.ru 10:25 2003-01-15 The crisis in the South American country may frustrate US plans in Iraq

As political temperature in Venezuela keeps on rising, the US Department of State decided to take the conflict very seriously and designed a new action plan to avoid a global oil crisis. The problem for Washington is that Venezuela's strike has mined the normal flow of crude to USA just weeks before the so-called attack on Iraq.

Venezuela's strike has contributed to an increase in U.S. gasoline prices by 5 cents per gallon in the past three weeks to an average $1.50 a gallon, according to the Lundberg Survey of 8,000 U.S. service stations. No one can predict which will be the impact on oil prices of a war against the regime of Saddam Hussein.

Citing scarce gasoline imports from Venezuela, the U.S. Energy Department said American motorists could pay up to $1.54 per gallon of gasoline this spring even if war is averted in Iraq.

"The market underestimated the tenacity of the Venezuelan strikers,'' said Phil Flynn, head of the energy trading desk at Alaron Trading Corp. on the Chicago Mercantile Exchange to the foreign press. "People are finally starting to wake up not just to the strike but also to Venezuela's importance as an U.S. supplier".

Therefore, an immediate resolution of the crisis in Venezuela is absolutely necessary to secure oil supplying in case the battles in the Middle East become long. Therefore, the US Department of State initiated talks with other powers amid the region to reinforce OAS mission in Caracas. Washington wants Brazil, Mexico and probably Argentina to be part of the "Friends of Venezuela" group, to conclude the mediation talks with a reasonable agreement between Chavez and the opposition. The sooner, the better for US interests.

By the way, the UN Secretary General, Kofi Annan, got also involved in the conflict on Tuesday. Annan offered his help to calm down the situation in Caracas. But he does not lose time: on Thursday, Annan will meet Chavez in New York during the turning over of Venezuela's leadership of the "Group of 77" developing nations to Morocco for 2003.

"I will be seeing President Hugo Chavez here on Thursday ... and I hope to be able to discuss with him the developments in Venezuela, and how one can intensify the mediation efforts, to calm the situation and return it to normality," Annan said to Reuters.

Venezuela already lost $4 billion due to the oil strike. How much can lose the oil depending US industry if solutions do not come soon?

Hernan Etchaleco PRAVDA.Ru Argentina

www.heraldtribune.com By CHRISTOPHER TOOTHAKER Associated Press Writer

A seven-week-old opposition strike against President Hugo Chavez dropped Venezuela's currency to a new low Wednesday and sent Venezuelans in the capital scrambling to banks to buy dollars.

Support for Chavez's adamant refusal to consider early elections showed signs of crumbling as three pro-Chavez lawmakers unveiled a plan for an early vote on his presidency.

The strike has slashed oil exports to a trickle, depriving the government of half its income. Venezuela's bolivar currency closed at 1,716 to the U.S. dollar, down 6 percent from Tuesday. In Caracas, hundreds of citizens waited in long lines at banks and exchange houses to buy dollars.

Trying to calm fears of an economic crash, the government denied speculation that it plans to devalue the bolivar so it can balance its $25 billion budget. Most government income is in dollars and a weaker bolivar would increase its domestic spending power. Venezuela has acknowledged the oil strike has cost $4 billion so far.

Venezuela's opposition launched the strike Dec. 2 to demand that Chavez resign or call early elections if he loses a Feb. 2 nonbinding referendum on his rule.

The National Elections Council is organizing the vote, but Chavez says he will ignore it, and ruling party lawmakers have challenged its legality in court. Venezuela's constitution allows citizens to petition for a binding referendum halfway through a six-year presidential term, or August. Opposition leaders fear Chavez will find a way to postpone it.

Chavez was elected in 1998 and re-elected in 2000.

Rafael Simon Jimenez, a pro-Chavez lawmaker who quit the leftist Podemos party, said he and two other legislators would introduce a measure as early as next week to amend the constitution. It would end Chavez's term later this year and allow general elections.

The proposal by Jimenez and Chavez supporters Guillermo Palacios and Luis Salas would leave opposition legislators just one vote shy of a simple majority needed to pass an amendment in the 165-seat Congress. Jimenez said he was looking for that vote. Elections are the only way to solve Venezuela's political crisis and end the 45-day-old strike, which has raised gasoline and oil prices abroad, Jimenez said.

"We don't see an elections as a break with Chavez. We see elections as a response to the country's crisis," Jimenez said. Legislator Freddy Lepage of the opposition Democratic Action party said Chavez was steadily losing support in Congress as the crisis deepened. "We still don't have the majority, but I'm confident we'll have it soon," he said.

Chavez enjoys the support of the military, which he purged of dissidents after a brief April coup. The government claims oil production is back up to 800,000 barrels a day, compared to a pre-strike level of 3 million barrels a day.

The U.S. Energy Department says American motorists could pay up to $1.54 per gallon of gasoline this spring even if war is averted in Iraq. Home heating oil prices rose 4.7 percent in December. Negotiations mediated by Cesar Gaviria, secretary general of the Organization of American States, were briefly suspended while the region's leaders attended the Wednesday inauguration of Ecuadorean President Lucio Gutierrez.

In Quito, Ecuador, Chavez lashed out at his opponents as "a subversive movement from the far right, a fascist movement backed by economic elites."

Chavez was to meet with U.N. Secretary General Kofi Annan in New York on Thursday before returning to Caracas. Some strike leaders, meanwhile, were in the United States pleading their case with U.S. government and business leaders.

Several nations voiced support for a so-called "Friends of Venezuela" proposal to strengthen the efforts of Gaviria, who has had little success in mediating talks since November.

"The solution must be democratic, constitutional, and, it seems, electoral," said Bolivian President Gonzalo Sanchez de Lozada. Former President Jimmy Carter arrived in Venezuela on Wednesday for a fishing trip with Venezuelan businessman Gustavo Cisneros. Carter, whose Atlanta, Georgia-based Carter Center also is trying to resolve Venezuela's crisis, said that he would meet with Gaviria and government and opposition leaders next week.

BUSINESS IN BRIEF www.washingtonpost.com Wednesday, January 15, 2003; Page E02 Venezuela's currency fell to a record low against the dollar, deepening investor concern about the country's ability to pay its debts as a nationwide strike entered its 44th day. The bolivar closed 3.9 percent lower, at 1,650 to a dollar. The bolivar has dropped 16 percent this month.

www.chron.com Jan. 15, 2003, 7:53AM Copyright 2003 Houston Chronicle News Services

NEW YORK -- Citgo Petroleum Corp., a U.S. refiner owned by Venezuela's state oil company, had its debt rating cut below investment grade Tuesday by Moody's Investors Service because of a strike that's slashed oil shipments from its parent.

The rating on $700 million of Citgo senior unsecured debt was lowered to Ba2, two levels below investment grade, from Baa2 and may be cut further, Moody's said in a written statement. The reduction means Tulsa-based Citgo may have to rely on lines of credit to finance its operations, the statement said.

The action also reflects concern that Petroleos de Venezuela, Citgo's owner, may have to rely on the refiner to pay off $500 million of debt due in August, Moody's said. Citgo spokesman Kent Young declined to comment.

Citgo, which operates six U.S. refineries, including two asphalt plants, gets about half its crude supplies under long-term contracts with Petroleos de Venezuela. Its refineries are operating at normal levels as Citgo buys crude on the spot market at higher cost to replace the lost supply from Venezuela, Moody's said.

The price of crude rose Tuesday as the disruptions in Venezuela and threats of a U.S. attack on Iraq signaled that supplies may be low in coming months.

Crude oil for February delivery rose 12 cents, or 0.3 percent, to $32.37 a barrel on the New York Mercantile Exchange. Oil is up 71 percent from a year ago.

Heating oil surged 0.78 cent to close at 89.16 cents a gallon. Gasoline dropped 0.74 cent to 89.16 cents a gallon.

Natural gas for February delivery fell 14.4 cents to close at $5.107 per thousand cubic feet. Lower heating demand earlier this month helped ease concerns over frigid weather settling into much of the East Coast.

In London, the February Brent crude contract rose 41 cents, or 1.4 percent, to $30.61 a barrel.

www.washingtonpost.com A pedestrian passes by graffiti that reads "Chavez won't leave," referring to Venezuelan President Hugo Chavez.

By Scott Wilson Washington Post Foreign Service Wednesday, January 15, 2003; Page A10

CARACAS, Venezuela, Jan. 14 -- The opposition movement seeking to push President Hugo Chavez from office has scaled back its demands for lifting a 44-day-old general strike while quietly signaling to some hard-hit Venezuelan businessmen that they should reopen their doors.

Since the strike began Dec. 2, a diverse opposition, emboldened by large street demonstrations and key industry support, has called on Chavez to resign or hold new elections within months as conditions for lifting the protest. Both demands have been ruled out by the twice-elected president. But the opposition has held firm since the oil industry, which provides the government with almost half of its $20 billion annual budget, joined the strike in its early days and gave Chavez's opponents their strongest weapon.

In recent weeks, however, Chavez has cobbled together a temporary supply system that has kept this country of 23 million in gasoline and food, albeit at enormous inconvenience to the public and a high financial cost to the government. Now confident he has bested his opponents, Chavez has little incentive to compromise and end a standoff that has thrown the third-largest U.S. oil supplier into political unrest, according to several of the president's adversaries and allies.

The hardening government position was reflected in comments today by Vice President Jose Vicente Rangel, who ruled out compromise proposals in a meeting with foreign reporters. This has prompted many businesses sympathetic to the opposition to question whether Chavez is suffering the greater financial hardship.

In response to mounting frustration, opposition negotiators have softened their position in talks being mediated by Cesar Gaviria, secretary general of the Organization of American States, in hopes ending the strike. Opposition negotiators have dropped their demand that Chavez resign before new elections can be held; they are now focusing on whether a nonbinding referendum scheduled for Feb. 2 could be used to set an early election date.

But the government has refused to give ground, and Rangel today dismissed the opposition as being led by "fascists" and "coup mongers." He said a nonbinding referendum, which must pass high-court review, was unconstitutional and that he would urge government supporters to boycott the vote. He also suggested that it would be hard to pay the roughly $30 million cost of holding the referendum, given economic damage done by the opposition strike.

"We do not recognize it," Rangel said of the referendum. "This strike is a fiction, an obsession by people who want to remove Chavez."

Those comments came as opposition marchers demonstrated in favor of the referendum, which would be the first official public sounding on Chavez's four-year-old administration. Meanwhile, government troops seized weapons and riot gear from Caracas police stations, prompting a fresh fight between the president and the opposition mayor for control of the 8,000-member force.

The mayor, Alfredo Peña, warned in response that he would pull patrols out of the city's most dangerous neighborhoods, where Chavez supporters live. Elected in 1998 on a platform to lift Venezuela's poor majority, Chavez has antagonized the economic elite and many of his middle-class supporters with his authoritarian style and a populist program that his opponents compare to Cuban-style communism.

U.S. diplomats arrived in Ecuador today to begin working with their counterparts from Latin America and Europe to form a "friends of Venezuela" advisory group. The delegation would join Gaviria at the negotiating table, and perhaps offer its own proposal to end the political crisis that has consumed the country for the past year.

The United States has taken a leading role in lobbying for the group, concerned about its oil supply as it prepares for a possible war with Iraq that could strain Middle East oil shipments. Before the strike, Venezuela supplied the United States with 1.5 million barrels of oil a day, about 15 percent of its imports. That has since slowed to a trickle.

But U.S. credibility here is suspect after the White House recognized the interim government that replaced Chavez in a short-lived military coup in April, and more recently endorsed early presidential elections to resolve the crisis even though they are not allowed by the constitution. Washington backed away from that position a few days later, endorsing a less specific "electoral solution" instead.

Chavez has embraced the "friends of Venezuela" proposal in the belief that foreign governments will endorse his legitimacy. But the idea is drawing criticism from opposition negotiators, who have already ruled out Brazil and Colombia as members because they border Venezuela.

"We think it's a mistake," said Rafael Alfonzo, an opposition negotiator. "There is enough on the table right now for a solution if the government wants one. This group is going to comprise equal parts for him and against him. For what? It's not going to change anything."

Despite the government's confidence, the strike has been punishing for a country whose $100 billion economy shrank 7 percent last year. Rafael Ramirez, the minister of energy and mines, announced that the oil strike alone has cost the country $ 4 billion. That includes $105 million that the government has spent to import gasoline, keeping most filling stations open but with lines lasting hours.

The cost to the private sector has also been severe. Opposition leaders have begun telling some businesses privately to do what they need to in order to save themselves while maintaining the public position that the strike is still in place.

"We feel that the right decision is not one that kills the private sector," said Alfonzo, the opposition negotiator who represents Fedecamaras, the national umbrella group of business organizations. "It's pretty much at the individual level now."

More and more businesses have opened in recent weeks, including the Italian restaurant Limoncello. Jose Ornelas, the managing partner, kept the restaurant closed from Dec. 2 until the day after Christmas while continuing to pay employee salaries. He said he lost $100,000.

Ornelas is part of a restaurant federation that belongs to Fedecamaras and that initially supported the strike. After three weeks, however, the restaurant association voted to allow members to reopen on Dec. 26. Ornelas said Fedecamaras approved the move, although it has not announced it.