Posts Tagged ‘Oil’


Goldman Backs Oil, Copper, Gold, Maintains `Overweight’ Commodities Call

Commodities demand from emerging markets and limited growth in supplies will help to support prices toward the end of the year, according to Goldman Sachs Group Inc., which backed oil, gold, copper, zinc and platinum.
The bank reiterated an “overweight” recommendation on commodities, analysts led by Allison Nathan and Jeffrey Currie wrote in a report. Goldman pared its 12-month forecast for the S&P GSCI Enhanced Total Returns Index to a 19 percent gain from 21.6 after recent gains in agricultural commodities and metals.
Commodities last week had the worst weekly performance in six after the Federal Reserve said the recovery is weakening and European industrial output fell, stoking concern that there may be a double-dip recession. Reports also showed China’s retail sales and new lending grew in July at a slower pace than June.
“We are not overly optimistic about commodities prices in the second half,” Ni Xiaolei, a trader at Donghai Futures Co., said from Jiangsu today. “‘We saw a very sharp ascent in commodity prices last month, which will be hard to sustain as global macroeconomic data emerges weaker than expected.’’
Goldman’s commodity ‘‘overweight’’ call was maintained even as the bank has been paring forecasts for U.S. and Japanese economic growth for next year. Ed McKelvey, Goldman’s senior U.S. economist in New York, has also said that the chance the U.S. may tumble back into recession is as high as 30 percent.
Gold, Crude
Gold, which surged to a record $1,265.30 an ounce in June amid concern sovereign-debt levels in Europe may be excessive, traded at $1,29.60 at 2:11 p.m. in Singapore, 11 percent higher this year. Goldman forecast a rise to $1,260 in three months and to $1,300 in six. New York crude futures were at $75.86 a barrel, 4.4 percent lower over 2010. Goldman’s report put them at $92 a barrel in three months.
‘‘The current softness in economic data, combined with increasingly mixed signals from the underlying commodity markets, is likely to continue to generate choppy commodity-price action in the near term,” the Goldman analysts wrote in the Aug. 13 report. Still, “high and rising emerging-market demand levels against limited supply growth in key commodities are likely to increasingly tighten balances,” they wrote.
Japan’s economy expanded at an annualized 0.4 percent in the three months to June 30, the Cabinet Office said today. That’s the slowest pace in three quarters. U.S. industrial production figures are due for release tomorrow, the same day as data on investor confidence in Germany.
Chinese Demand
Commodity prices may advance into the end of the year on evidence of increased oil demand in China, a decline in crude stockpiles in Europe and the U.S., and further falls in metals inventories, the report said.
“We expect upside to be greatest for crude oil, copper, zinc, platinum and gold,” it said. “Improved data will likely be required to sustain rising prices.”
Goldman Sachs last week backed gold to resume a rally and climb to a record $1,300 an ounce within six months on renewed investor interest. The precious metal, which has risen for nine years to last year, may also climb in 2011, the report said.
A ban on wheat exports by Russia helped to drive futures to $8.68 a bushel earlier this month, the highest price in almost two years. The country is battling reduced grains production amid the worst drought in at least 50 years.
‘Sharp Gains’
“Commodity returns rose over the past month led by sharp gains in the agricultural complex owing to weather-related supply shocks in wheat,” according to the Goldman report.
Zinc, trading today at $2,080 a metric ton, has fallen 19 percent this year, making it the worst performer on the London Metal Exchange. Goldman’s analysts forecast that the metal may climb to $2,121 a ton in six months, according to the report.
Copper rose 1.3 percent to $7,246.50 a metric ton, paring this year’s loss to 1.7 percent, while platinum gained 0.8 percent to $1,535.75 an ounce, 5 percent stronger this year. Goldman forecast copper at $7,925 a ton in six months.
Japan will grow 1.4 percent in 2011, compared with an earlier forecast of 1.7 percent, Goldman’s Tokyo-based senior economist Chiwoong Lee said in a report dated Aug. 7. The week before that Goldman lowered its projection for U.S. growth for the same year to 1.9 percent from 2.5 percent.
To contact the reporter on this story: Glenys Sim in Singapore at Gsim4@bloomberg.net

Goldman Backs Oil, Copper, Gold, Maintains `Overweight’ Commodities Call – Bloomberg

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Hedge Funds Cut Bets on Rising Gas by 23% as Prices Fall: Energy Markets

Hedge funds slashed their bets on rising natural gas to the lowest level this year as prices fell, a sign the fuel may repeat last year’s 19 percent August slide during a so-far quiet hurricane season in the Gulf of Mexico.
Hedge funds and other large speculators cut their bullish bets by 23 percent in the week ended Aug. 10, the Commodity Futures Trading Commission reported. Natural Gas has declined 14 percent this month, dropping to $4.228 per million British thermal units today on the New York Mercantile Exchange.
Investors retreated from gas markets this year as prices declined 22 percent amid forecasts that stockpiles will be near record highs by the end of October. Demand for the fuel will be slow to recover as consumer confidence hovers near an eight- month low.
“Last year, we saw prices go significantly below $4,” said Andy Lipow, president of consulting firm Lipow Oil Associates LLC in Houston. “There’s a significant amount of supply out there and the overall economy is really having trouble recovering and growing. The increases in demand for natural gas are going to be slower than people expect.”
Net-long positions in futures and options combined in four natural-gas contracts decreased by 28,719 futures equivalents, or 23 percent, to 94,058 in the week ended Aug. 10, the CFTC data showed.
Whether hedge funds and other large speculators will profit from their short bets remains to be seen, Lipow said.
“We’ve seen funds be big winners and big losers in the natural gas markets,” Lipow said.
Gas futures last year dropped to $2.508 per million Btu on Sept. 3, the lowest price in more than seven years.
Vulnerable Positions
The increase in short positions leaves hedge funds vulnerable to sharp moves higher in prices that would probably accompany the threat of a hurricane heading toward the Gulf of Mexico, said Teri Viswanath, director of commodities research at Credit Suisse Securities USA in Houston.
“We’re right around the corner from the heaviest portion of the hurricane season,” Viswanath said. “Given that possibility, is the market getting ripe for a short squeeze? I think it is.”
The U.S. on Aug. 5 reduced its forecast for the 2010 Atlantic hurricane season to 14 to 20 named storms, down from 14 to 23, because of less activity than expected in the first two months of the season.
Eight to 12 of those storms are expected to become hurricanes, according to Gerry Bell, the lead seasonal hurricane forecaster for the U.S. Climate Prediction Center in Camp Springs, Maryland.
Reduced Gulf Output
The sluggish economy, combined with rising production and inventories, will continue to weigh on gas, Lipow said. The bullish impact of any hurricane will be muted since the Gulf of Mexico accounts for 10 percent of U.S. gas production, down from 17 percent in 2005.
Consumer spending, which makes up 70 percent of the world’s largest economy, may not pick up in the absence of a recovery in the labor market, according to the Federal Reserve. Fed policy makers last week made their first attempt to shore up a recovery they said was likely to be “more modest” than earlier anticipated.
Natural gas inventories rose 37 billion cubic feet to 2.985 trillion in the week ended Aug. 6, the Energy Department reported Aug. 12. U.S. gas stockpiles at the end of October may reach 3.752 trillion cubic feet, the department said in an outlook on Aug. 10. Supplies touched a record 3.84 trillion cubic feet in November 2009.
Price Pressure
“Pressure is likely to continue on the natural gas prices,” Lipow said. “Supply disruptions are minimal and we’re seeing the forecast for storms decline.”
The Atlantic hurricane season so far has had less of an impact than expected on gas production, the department said in the outlook last week. Hurricane Alex and Tropical Storm Bonnie this year reduced production by 8 billion cubic feet, less than the 20 billion the government had expected, the report showed.
The funds’ “view of the market is bearish,” said Tim Evans, an energy analyst at City Futures Perspective in New York. “It’s a flow of selling that has weighed on prices, and we’ve got to get through that before prices can rise.”
The measure of net longs includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swaps, Nymex Henry Hub Penultimate Swaps, and ICE Henry Hub Swaps. Henry Hub in Erath, Louisiana, is the delivery point for the Nymex futures, a benchmark price for the fuel.

To contact the reporter on this story: Asjylyn Loder in New York at aloder@bloomberg.net


It’s Obama’s White House, but it’s still Bush’s world

By Julian E. Zelizer – Washington Post 
Sunday, August 15, 2010; B01
When conservatives brand President Obama a socialist or a foreigner, his aides laugh it off. When critics disparage him as arrogant or aloof, they roll their eyes. But if liberals dare compare Obama to his predecessor in the Oval Office, the gloves come off.

“I hear these people saying he’s like George Bush,” White House press secretary Robert Gibbs told the Hill newspaper last week. “Those people ought to be drug-tested. I mean, it’s crazy.” Gibbs went on to deride such critics as the “professional left,” who will be content only “when we have Canadian health care and we’ve eliminated the Pentagon.”

Even though Gibbs later semi-apologized, saying he had spoken “inartfully,” it’s not hard to see why the comparison stings. As the midterm elections approach, Democrats have made George W. Bush a focus of their fall campaign. Speaking at a Texas fundraiser Monday, Obama asked: “The policies that crashed the economy, that undercut the middle class, that mortgaged our future — do we really want to go back to that, or do we keep moving our country forward?” Their message is clear: Republicans still embody the Bush agenda, and only with a Democratic White House and Congress will the nation be able to truly break from the past.

The president is correct in part. Just look at the health-care overhaul, Wall Street reform and the new emphasis on diplomacy in American foreign policy to see the difference that one election can make. Yet the break between Bush and Obama should not be exaggerated. Dismantling the past is extraordinarily difficult. In a host of arenas, Obama is holding on to the Bush administration’s policies and practices, even some that he decried during his presidential campaign and vowed to undo. From the wars we fight to the oil we drill for, we’re still living in the Bush era — like it or not.

First, consider the strengthening of presidential power. Every president since Richard Nixon has fought to restore the authority of the executive branch that was diminished as a result of Watergate. No chief executive was as successful as Bush, especially since he had the help of Vice President Dick Cheney, who had dedicated much of his career to criticizing the 1970s reforms that he thought had emasculated the White House. Bush relied on signing statements and executive orders to implement initiatives such as warrantless wiretapping without having to get approval from Congress.

Obama has not done much to reverse the trend. While he has worked harder to court Congress, allowing legislators to craft the details of the health-care legislation, for example, he has not stepped back from Bush’s robust use of executive power. He has relied on it to strengthen environmental programs and agencies that had been weakened since the 1980s. On national security, the pattern is more striking. Obama’s Justice Department has turned to Bush’s sweeping interpretation of the “state secrets” privilege to battle lawsuits involving the rendition and torture of terrorism suspects, and the president has defended the right of the government to conduct intrusive domestic wiretapping programs.

The second enduring legacy of the Bush presidency is the sprawling counterterrorism infrastructure created after Sept. 11, 2001. The Bush administration vastly strengthened the government’s ability to fight terrorist networks by collecting information, tracking and closing down financial and nonprofit organizations, and interrogating detainees. Although Obama was a critic of this program on the campaign trail, much of it remains in place — most notably, the detention facility at Guantanamo Bay, Cuba.

Early in the Obama presidency, Jack Goldsmith, a former lawyer for the Bush administration who had become a vocal critic of its counterterrorism policies, criticized Cheney for exaggerating the differences between the two White Houses. “The new administration,” Goldsmith wrote in the New Republic, “has copied most of the Bush program, has expanded some of it, and has narrowed only a bit.”

And in a blistering report on the administration’s national security record released last month, the American Civil Liberties Union warned of the “very real danger that the Obama administration will enshrine permanently within the law policies and practices that were widely considered extreme and unlawful during the Bush administration. There is a real danger, in other words, that the Obama administration will preside over the creation of a ‘new normal.’ “

The report praised Obama’s decisions to release the Bush administration’s “torture memos” and to outlaw secret CIA prisons overseas, as well as his prohibition of torture, but criticized the administration for, among other things, failing to eliminate military commission trials and targeted killings of terrorism suspects. ACLU Director Anthony Romero declared himself “disgusted” with the president’s policies.
Nor, in a practical sense, has the Obama administration distanced itself from the Bush administration’s third legacy, its wars for regime change. After the 2001 attacks, Bush defended a vision of foreign policy that sought to remove terrorist-friendly governments from power and rebuild their countries’ civilian and security institutions. These principles underpinned the wars in Afghanistan and Iraq.

To the frustration of many liberals, Obama has not changed course. While following through with Bush’s withdrawal schedule for Iraq, Obama has expanded Bush’s mission in Afghanistan by sending 30,000 more troops into the conflict. He is now relying on Gen. David H. Petraeus, who Bush used to clean up the problems in Iraq, to strengthen the counterinsurgency effort in Afghanistan. And Obama’s withdrawal dates remain fuzzy. At the end of this month, 50,000 U.S troops will still be in Iraq, while the July 2011 deadline for leaving Afghanistan remains far from solid (in fact, many administration officials backed off that date almost as soon as it was announced).

The Bush administration also rejected strong regulatory oversight of offshore oil drilling — a fourth critical legacy. In keeping with their long-held position that oil companies should be free from government restrictions in order to help end American dependence on foreign oil, Bush officials allowed agencies responsible for oversight to be weakened, staffing them with administrators who were skeptical of climate change and other scientific arguments about the environment.

Although many Democrats initially decried Bush’s deregulatory policies on offshore drilling after the BP oil spill in the gulf, it soon became clear that blame also rested with the Obama administration. In a series of penetrating articles for Rolling Stone, Tim Dickinson revealed how the Obama White House had not done much to repair the broken Minerals Management Service and had been willing to trade support for offshore drilling in exchange for votes on climate-change legislation. Ignoring the advice of scientific experts, the administration authorized an aggressive round of drilling in the gulf without adequate environmental review.

After the spill, the Obama administration did impose a moratorium on drilling and stuck with it despite enormous political fallout; when a federal judge struck down the first ban, Obama imposed another. Yet the moratorium has been far from airtight, with loopholes allowing several kinds of drilling to continue.
Fiscal policy is the final area where Bush’s legacy still looms. The tax cuts of 2001 and 2003 provided substantial tax relief for middle- and upper-income Americans, with the benefits weighted toward the wealthiest citizens. Building on Ronald Reagan’s supply-side economics, the Bush administration pushed for big cuts based on the notion that they would propel economic growth. Moreover, during the financial meltdown in the fall of 2008, the administration proposed the Troubled Assets Relief Program — with Democratic support — which offered a massive bailout to the nation’s financial sector.

These policies remain intact. Obama, as a senator and presidential candidate, helped push the TARP through Congress, and as president he extended and defended the bailout. On the Bush tax cuts, which are set to expire this year, the verdict is still out. Here, Obama and the Democrats have made an aggressive push to overturn part of the Bush legacy: They have rallied support to allow the tax cuts for the wealthiest Americans to expire — in order to reduce the deficits they helped create — while extending the cuts for Americans earning less than $250,000 a year. It’s not clear whether they will succeed; after all, many Democrats are nervous about being tagged as members of the party that raises taxes.

Almost since before he took office, Bush was written off by many as an intellectual and policy lightweight, an accidental commander in chief. Nonetheless, it soon became clear that his would be a very serious presidency — one with long-term consequences for the nation and the world, far beyond his two terms in office.

Obama, who won the presidency on a platform of change, is now seeking to recycle that anti-Bush magic for the midterm vote. Yet, he is learning the hard way that it is easier to campaign against the Texan’s legacy than to actually govern against it. It is Bush who, despite avoiding the post-presidential limelight (at least until his memoir is published in November), has continued setting the terms of the debate, so much so that his successor and opponents must adopt many of his ideas, however reluctantly.
We may live in the age of Obama, as many call it, but it’s still Bush’s world.

Julian E. Zelizer is a professor of history and public affairs at Princeton University. He is the editor of the essay collection “The Presidency of George W. Bush: A First Historical Assessment,” forthcoming this fall, and the author of the forthcoming “Jimmy Carter.”

It’s Obama’s White House, but it’s still Bush’s world

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The MasterBlog


Top five bottlenecks in the Gulf oil spill response

Local officials complain about lack of urgency in the federal Gulf oil spill response. Here are five reasons that the government seems to be dragging its heels.

Temp Headline Image
Workers skim a large patch of weathered oil by hand near the boat ramp at Ken Combs Pier in Gulfport, Miss. The Gulf oil spill became the largest ever in the Gulf of Mexico on Thursday, based on the highest of the federal government’s estimates.
(Amanda McCoy/The Sun Herald/AP)

By Patrik Jonsson, Staff writer
posted July 1, 2010 at 7:46 pm EDT
Atlanta —
With each oily wave hitting marshes and beaches from the Gulf oil spill, desperation grows along the already stained Gulf Coast.
In part, the magnitude of the spill has simply overwhelmed the ability of the White House and BP to completely contain it. But it is clear that bureaucratic red tape – echoing the post-Katrina federal response five years ago – has bogged down clean-up efforts as a host of agencies – OSHA, EPA, Coast Guard, Army Corps of Engineers and others – weigh in on most decisions.
Meanwhile, as November elections approach, the oil spill has a political dimension as both parties begin to use the massive oil slick from the Deepwater Horizon accident to bolster their prospects. Democrats will point out Republican ties to Big Oil, and Republicans will chide what they’ll call a lackadaiscal response by the White House.
IN PICTURES: The Gulf oil spill’s impact on nature
If the Macondo well is capped, oil cleanup is ramped up, and no hurricanes hit the slick, the oil spill crisis is likely to eventually abate. But the impression many Gulf Coast residents have so far is of a Keystone Kops response, where mundane regulations and misplaced priorities stand in the way of protecting local livelihoods and the Gulf’s natural environment.
“The cleanup effort is drowning in the proverbial sea of red tape,” writes Gulf Coast native Winston Groom, the author of “Forrest Gump,” in the Weekly Standard.
Here are the top five bottlenecks impeding the Gulf oil spill cleanup so far:
Enough life vests? The Coast Guard has not eased any of its safety regulations and will likely continue to refuse to do so. A Louisiana effort involving 16 oil-sucking barges was shut down for nearly a day on June 18 by the Coast Guard, which wanted to make sure there were enough life vests and fire extinguishers on board.
“The Coast Guard is not going to compromise safety … that’s our No. 1 priority,” Coast Guard spokesman Robert Brassel told The Daily Caller. Louisiana Gov. Bobby Jindal called it “frustrating.”
The Jones Act. It’s unclear to what extent the Jones Act, a 1920 protectionist law that mandates only US vessels and crews operate within the US three-mile maritime border, has really affected the ability to move foreign oil skimmers into the spill theater.
At issue in the law is both availability and proximity of US based skimming vessels. Several nations have said their offers of help have been rebuffed at least in part by US officials citing the Jones Act. This week, Obama sent out a call for more nations to join the clean-up response, but the President has not publicly addressed the legal and practical issues around US law and the foreign fleets ready to help.
“We want all the skimming vessels in the world deployed,” Plaquemines Parish President Billy Nungesser tells the Times-Picayune newspaper in New Orleans.
(Factcheck.org says, “In reality, the Jones Act has yet to be an issue in the response efforts…. So far, offers from six foreign countries or entities have been accepted and only one offer has been rejected. Fifteen foreign-flag vessels are working on the cleanup, and none required a waiver.”)
EPA says no, then yes. Three days after the accident, the Dutch government offered advanced skimming equipment capable of sucking up oiled water, separating out most of the oil, and returning the cleaner water to the Gulf. But citing discharge regulations that demand that 99.9985 percent of the returned water is oil-free, the EPA initially turned down the offer. A month into the crisis, the EPA backed off those regulations, and the Dutch equipment was airlifted to the Gulf.
‘Ever hear of Radio Shack?’ In a recent fly-over of a spill area near Perdido Bay, BP official Doug Suttles expressed amazement that spotter plane pilots couldn’t communicate directly with skimming boats on the surface to direct them to oil patches. “We need to get the skimmers to the oil,” Suttles said. Local officials in Escambia County, Fla., have been asking for weeks for plane-to-ship communications, to little avail.
“Haven’t they ever heard of Radio Shack?” writes Mr. Groom.
Who’s in charge here? President Obama has said “the buck stops” with him. But the actual incident response command structure is a Gordian Knot for local officials requesting help and resources. Frustrated by red tape, some officials have been warned they’ll be arrested if they take matters into their own hands. The lack of a clear command structure has hampered the ability to move resources like booms and skimmers quickly, especially in a still-growing spill that’s at the whim of the Gulf’s ever-changing tides, currents and winds.
While most of the criticism has been heaped on federal agencies and the Obama administration, questions are being raised about the extent to which the four Gulf state governors (all Republicans) are responding too – specifically, on deployment of National Guard troops under their command.
In a recent investigative report, CBS News found that Louisiana’s Gov. Jindal had deployed just 1,053 of the 6,000 troops available to him. “Alabama has deployed 432 troops of 3,000 available,” according to CBS. “Even fewer have been deployed in Florida – 97 troops out of 2,500 – and Mississippi – 58 troops out of 6,000.”
Jindal told CBS that the White House had instructed state officials that “Coast Guard and BP had to authorize individual tasks” for National Guard units.
But Coast Guard Adm. Thad Allen, the national incident commander in charge of the government’s response to the spill, disputed that. “There is nothing standing in the governor’s way from utilizing more National Guard troops,” Allen told CBS.
“Whether it’s simple confusion or the infusion of politics into the spill, the fact remains thousands of helping hands remain waiting to be used,” concluded CBS.
IN PICTURES: The Gulf oil spill’s impact on nature
Related:
Gulf oil spill: The story so far
Jones Act: Maritime politics strain Gulf oil spill cleanup
After Gulf swimmers report illness, questions about opening a beach

Top five bottlenecks in the Gulf oil spill response – CSMonitor.com


A lake of leaks reflects problems that stretch to the Orinoco

As the world watched BP battle with the devastating effects of the oil spill in the Gulf of Mexico, another problem with leaking crude nearby has managed to escape much attention.

Venezuela’s state oil company, Petróleos de Venezuela (PDVSA), has been trying to play down a chronic problem of leakages from thousands of miles of pipelines that criss-cross Lake Maracaibo, a large brackish lake connected to the Caribbean.

Critics argue that the extensive oil slicks that have appeared on the lake in recent months are a direct result of PDVSA’s negligence since the expropriation last year of 76 oil service companies that worked on the lake. Mismanagement, a problem that has tainted the economic performance of President Hugo Chávez’s government as a whole, has had a disastrous impact on Venezuela’s oil output over the last few years and is likely to hobble production for years to come.

The US Energy Information Administration estimates that Venezuela’s crude oil production averaged 2.2m barrels a day in 2009, about 190,000 b/d lower than in 2008 and down from 3.2m b/d in 1997, before Mr Chávez came to power.

PDVSA, which disputes those numbers, has made a concerted drive to attract foreign investment into the oil-rich Orinoco Belt in order to boost production. In February it signed contracts with foreign oil companies for projects that could add 2.1m b/d to output and bring some $80bn (£51bn, €61bn) in investment from Chinese and Russian companies as well as majors such as Italy’s ENI, Chevron of the US and Spain’s Repsol.

Although this represented a vote of confidence in Venezuela just three years after a wave of nationalisations in the Orinoco, experts estimate that it could take at least three or four years for sagging output to recover. Efficient co-ordination of the projects, technical requirements and capital commitments are all barriers.

One of the pitfalls is whether PDVSA, which is keeping a 60 per cent stake in the projects, allows its minority partners a fair degree of operational control. Given its own patchy management record, experts argue that PDVSA must allow partners to become more integral players in its joint ventures. PDVSA’s partners are not involved in the sale of their output, for which PDVSA instead compensates them at the end of each year. Companies privately complain that PDVSA is not paying them enough to cover running costs and reinvest in expanding production.

With oil revenues providing about half of government expenditure, Mr Chávez may still face several lean years ahead.

FT.com

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The MasterBlog


venezuela in the news this week… we’ll see what comes of it…

this is the latest one from the Financial Times.
(Note: Highlights in bold and italics, MasterBlog)

Venezuela: Bolivarian bravado

By John Paul Rathbone and Benedict Mander

Published: August 5 2010 23:20 | Last updated: August 5 2010 23:20

Hugo Chávez

The giant Pepsi globe that once loomed above Plaza Venezuela in the traffic-clogged heart of Caracas had long been a landmark of the South American capital’s skyline. Now it is gone, dismantled piece by piece in June.

Much like the demolition of a statue of Christopher Columbus in the same square six years earlier, its removal was a crude symbol of President Hugo Chávez’s self-appointed role as the region’s anti-US, anti-capitalist and anti-imperialist standard-bearer.

It was also a reminder of faded hopes that relations would improve either with the US under President Barack Obama, following the mutual antagonism of the George W. Bush era; or with America’s closest ally in the region, neighbouring Colombia. If anything, Mr Chávez has raised the volume of his nationalist-Marxist rhetoric as his problems have grown both at home and abroad.

In July, when Colombian leaders again accused Venezuela of sheltering Marxist guerrillas intent on destabilising their country, and were confident enough of their case to present it to the Organization of American States, Mr Chávez promptly called it an act of US-inspired “aggression” and broke off relations with Bogotá. Havana, which receives subsidised Venezuelan oil in return for medical services, lent Caracas rhetorical support: “We strive for peace and harmony,” said President Raúl Castro. “But … let no one have the least doubt on which side Cuba will stand.’’

Meanwhile, with the country in recession, red-hued government propaganda in multiple media hails Mr Chávez’s “Bolivarian revolution”. The president has taken to expounding how it is “bad to be rich” – though one graffito snipes back from a grimy Caracas wall: “If it’s bad to be rich, it’s worse to be poor.”

All this might otherwise be ignored as the bitter internal politics of a volatile tropical republic were it not for Venezuela’s strategic importance and fears that Mr Chávez might consolidate his grip on power at legislative elections next month.

“Elections are of great importance for Chávez. They give him legitimacy both at home and abroad – they give him an air of respectability,” says Teodoro Petkoff, a garrulous former leftist guerrilla who now edits the Caracas-based newspaper Tal Cual.

A clear victory for Mr Chávez’s United Socialist party of Venezuela at the September 26 polls would be likely to herald further radicalisation of his socialist project, ease the way for his election to a third six-year term in 2012 and thus boost worries elsewhere about regional tensions.

Watching the results most closely will be neighbours in the Andes – a regional tinderbox, given the prevalence of clashing ideologies, well-equipped troops and armed guerrilla and paramilitary groups – and Cuba, as Venezuela’s closest ideological ally.

A further geopolitical consideration stems from Venezuela’s role as transshipment point for what is said to be more than half the cocaine shipped across the Atlantic to Europe every year. The country’s trafficking situation is deteriorating, the UN warns in its latest World Drugs Report.

Also watching the election closely will be those energy importers who ogle the country’s vast crude oil reserves, the largest outside the Middle East. As those reserves are easily accessible and use proved technologies, BP’s deep-water oil spill in the Gulf of Mexico has heightened their strategic value still further. That is as true for the US, which remains Venezuela’s biggest single oil market, as for rising energy users such as China, which recently curried favour as well as securing future oil supplies with a $20bn soft loan to Caracas.

With term limits abolished following a referendum last year, Mr Chávez has frequently expressed a wish to remain in office until 2021 – the 200th anniversary of independence from Spain – to see through his revolution. Yet, after 11 years in power, the extent to which he has succeeded in instilling in voters a mindset compatible with what he calls “21st century socialism” is debatable. (For example, he has condemned a widespread fondness for whiskey and Hummers.)

The government has therefore been working to boost its chances of maintaining in September the two-thirds majority necessary to push legislation through the National Assembly.

Changes to the electoral system this year mean rural areas will return more deputies than before, hindering the metropolitan-based opposition. State-owned media can meanwhile drench the country in pro-government propaganda. (While newspapers such as Mr Petkoff’s are highly critical, private sector broadcasters have been largely cowed into submission.)

Most unsettling of all is the possibility that Mr Chávez’s party might lose the vote yet still maintain effective control. In 2008, for example, the president res­ponded to the election of an opposition candidate as Caracas mayor by inventing a more senior post and ap­pointing a candidate of his choosing.

Another possibility, much discussed in the capital, is that he could rule by decree during the 100 days between the elections and the new deputies taking up their seats, changing irrevocably the legal landscape to his liking. A recent 40 per cent pay rise ensures the army’s loyalty.

“Chávez will not leave power voluntarily,” says Diego Arria, a leading opposition figure and former governor of Caracas. “This is a president whose motto is: ‘fatherland, socialism or death’. When they say death they mean us, not themselves.”

Such drastic outcomes may never come to pass. Despite the recession, crumbling public services, a series of damaging scandals and rampant violent crime, Mr Chávez still commands the support of about two in every five Venezuelans – roughly the same ap­proval rating as Mr Obama in the US.

In large part, this is due to his emotional bond with the poor, who in 2008 made up 28 per cent of the population, according to the UN. “Even with hunger and unemployment, I’m sticking with Chávez,” runs one refrain popular in the capital’s slums.

Gregory Wilpert, editor of pro-Chávez website Venezuelanalysis.com, emphasises that many have benefited from the government-run social programmes. “The process of devolving local governance to communities via the communal councils and other forms of participation also gives many people a real feeling of being a part of the political process,” he adds. Critics say such councils usurp the power of elected municipal governments.

. . .

Either way, to gain a decisive victory, Mr Chávez will need to win over undecided voters – the ni-nis, or neither-nors – who account for about one in three of the electorate, according to polls.

In 2006, when he was re-elected at the peak of both his popularity and the oil price boom, that problem was partly solved by throwing money around. The trouble for “chavistas” today is that there is less to spend. This year, for example, while the rest of the region is expected to grow by 5.2 per cent, Venezuela’s economy is forecast to shrink by 3 per cent, the UN Economic Commission for Latin America estimates. Inflation, meanwhile, is running at about 30 per cent.

Paradoxically, because oil prices are hovering around $80 a barrel, a healthy level historically, government finances are not in perilous shape. Rather, the main cause of the continuing recession is mismanagement – the biggest rock on which Mr Chávez’s revolution has floundered.

PDVSA, the state-owned oil company that is the dynamo of the economy, has been leached to fund social projects with cash that otherwise would have been used for much-needed investment. The non-oil economy has been hobbled too.

Capital flight has been propelled by the nationalisation drive Mr Chávez has launched in a range of sectors, including energy, finance and telecommunications. Attempts to prevent such flight have made matters worse. The rationing of foreign exchange has made importing harder, fuelling scarcity, inflation and a flourishing black market – dollars sell for about four times the cheapest official rate.

The multinationals that once made the country their regional base, attracted by its relative stability and large internal market, have upped sticks. A web of regulations has tightened around those private companies that have remained – most publicly at Polar, the food and beverage company that is an emblem of Venezuelan popular culture, which Mr Chávez has threatened to nationalise against union wishes. Private investment has slumped amid the deteriorating business climate. As for nationalised companies, the state has been unable to pick up the slack.

Since nationalisation in 2008, production in the cement sector has fallen 20 per cent, and in the steel sector by as much as 80 per cent, according to Caracas-based consultancy Ecoanalítica. Most embarrassing of all were the 100,000 tonnes of food found recently rotting in the warehouses of state-run food distribution network PDVAL. Mr Chávez blamed “US-backed fascist oligarchs”.

The opposition has failed to capitalise on such problems. One reason is that much of the electorate remains distrustful following early at­tempts to unseat the president including a botched coup in 2002 and a national strike that paralysed the economy.

. A final factor is that many of its candidates are drawn from two discredited parties, Democratic Action and the Social Christians, which once dominated the country’s politics.

Dissidents from Mr Chávez’s party and former personal allies pose a potential threat. But some of the most prominent opponents have been hounded out of the country or imprisoned. General Raúl Baduel, a former close friend who called the president a “traitor” has been controversially jailed for corruption.

. . .

All this has devalued Mr Chávez’s reputation abroad. He still enjoys occasional celebrity support, from Argentine footballer Diego Maradona and Hollywood film producer Oliver Stone, for example. Oil also ensures Caracas secures the odd multibillion-dollar deal – most notably an arms agreement with Moscow, after the US stopped selling weapons to Venezuela in 2006. Caracas and Havana remain locked in a symbiotic embrace. But the president’s vision retains little credence with the region’s leftwing, and many of the area’s leaders and diplomats are embarrassed by his virulent rhetoric and off-colour jokes.

Mr Chávez has thus failed to bring closer to reality the Latin American union he espouses in evocations of his 19th century independence hero, Simón Bolívar. Sometimes, as when he closed the frontier with Colombia, he has worked against it.

Yet his command of Venezuela – its economy, army and institutions, including the judiciary – has never been stronger. There is therefore every chance that Mr Chávez, whose political style tends towards confrontation rather than negotiation, will endure. ¡Venceremos! – “we will conquer” – as the former tank commander is fond of saying.

venezuela

see related post from the same FT piece:

FT.com / Comment / Analysis – Venezuela: Bolivarian bravado

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The MasterBlog


>London must get itself up to speed
Tyler Brûlé – FT.com

the city’s asphalt has seen the arrival of even more tyres in the form of growling, purring and humming vehicles from all over the Gulf. Maseratis, Rollers, Bentleys, Aston-Martins and pimped-out Porsche Cayennes have been sent to London to escape the blistering sunshine of Manama and Doha. My favourite vehicle was a pinky-mauve Rolls-Royce spotted in front of the Berkeley Hotel – complete with pink palm licence plates and an equally tasteful interior to match.

 If shopping is indeed one of the biggest draws for visitors from the Gulf then London’s going to have to work fast and hard to ensure it holds on to the substantial spend racked up on cards from Jeddah, Sharjah and Muscat. In the city’s West End, Saudis spend on average £1,678 per visit while the Emiratis aren’t too far behind with their £1,224 per person contribution to the local economy

read the whole article here:

FT.com / Columnists / Tyler – London must get itself up to speed

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The MasterLiving Blog





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