Sun, Aug 15, 2004 page11

• Oil market could suffer if Chavez loses referendum

  DILEMMA Analysts say if the Venezuelan president is forced to step down, the opposition will have a tough time working with the state-run oil company

  • AP
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  If President Hugo Chavez loses a bitterly contested weekend recall referendum on his rule, one of the biggest challenges for the opposition would be to stabilize labor relations within Venezuela's government-run oil company.

  An opposition government would have to work with Chavez loyalists currently running Petroleos de Venezuela, known as PDVSA, while appeasing almost 19,000 employees fired last year for participating in a crippling strike -- many of whom have poured their energies into the recall effort and are desperate to get their jobs back.

  The situation in the world's No. 5 oil exporter could further upset global markets, where prices are already soaring to record highs of more than US$46 a barrel.

  Industry experts have said disruption to Venezuelan oil production is unlikely if Chavez wins today's vote, which most analysts and pollsters say is too close to call. While street protests could erupt if opposition leaders allege fraud, Chavez loyalists tightly control PDVSA, making another damaging strike unlikely.

  The scenario of Chavez winning the referendum is "perhaps the best in terms of calming the market of fear of losing additional supply," said Roger Tissot, the head of markets and countries for Washington-based PFC Energy. "The oil markets will react positively."

  But Oil Minister Rafael Rami-rez, a staunch Chavez loyalist, fueled fears of unrest if Chavez were to lose, suggesting on Friday that PDVSA workers would rebel if they thought the opposition won through fraud.

  "There is no way that our public will accept -- including our oil workers -- a defeat of the `No,'" Ramirez told a news conference. "The only way that the `no' could lose would be through fraud."

  Citizens could vote "no" -- to keep Chavez in office -- or "yes" -- to recall him.

  Chavez, for his part, has repeatedly promised to abide by the outcome of a vote and urged followers to do the same. But Ramirez's comments underscored tensions at PDVSA, where the staff consists of government-friendly managers, military officers and an anti-Chavez minority that managed to hang on to their jobs.

  Fired oil workers argue they were sacked illegally and deserve their jobs back. If the opposition wins the election, partisan oil workers say they will not unfairly target Chavez supporters, but any employees accused of corruption or other crimes must go.

  Opposition leaders must "convince those who are running the company that their jobs are not going to be threatened because of their political affiliation," Tissot said. "They would basically have to depoliticize PDVSA, and that would be a challenge."

  Compounding tensions, Vene-zuela would be in political limbo for at least a month if Chavez were to lose the referendum. Vice President Jose Vicente Rangel would take power until new elections are held, and Chavez has already said he would seek re-election.

  "During those 30 days, I would say markets would be extremely nervous," Tissot said. "Demand has been very strong, and that's what makes markets nervous. Any barrel lost translates immediately into very high prices."

  Regardless of who wins yesterday's vote, PDVSA faces a dire need for investment in oil exploration and production, Tissot said.

  The industry has not fully recovered from last year's strike, which cost Venezuela an estimated US$7.5 billion and plunged the economy into a wrenching recession.

  Critics also say the firings cost the company crucial expertise and manpower, though Chavez insists they helped cut costs and trim a bloated bureaucracy.

  Chavez claims Venezuela is pumping more than 3 million barrels a day, equal to the amount produced before the strike.

  Oil industry insiders disagree, placing output at 2.5 million to 2.6 million barrels per day. Production will not fully recover without a massive investment, they say.
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