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Venezuelan Protests Rock Oil Markets - 2002-04-11

Amid growing anti-government protests, talks began Thursday between the Venezuelan government and striking workers at the state-run oil company to try to end a work stoppage now into its third day. The walkout has cut oil exports by Latin America's largest oil producer and sent shivers through world oil markets, already nervous about the impact of Iraq's decision to halt oil exports for a month.

Sources within Venezuela's PDVSA oil company say Vice President Jorge Kamkoff and other members of the firm's government appointed board of directors are offering to resign if this would bring this work stoppage to an end.

Employees are angry over what they say is interference by President Hugo Chavez in the management of the company, charging he has stacked the firm's board of directors with unqualified political appointees. The strike has affected industry across Latin America's fourth largest economy and caused a sharp drop in Venezuela's crude exports.

"As of last night, the strike was widely effective," said Lawrence Goldstein, an analyst at New York's Petroleum Industry Research Foundation.

"Probably half or more of Venezuelan exports have been impacted," he added. "Under the assumption that the strike in Venezuela is protracted and goes on, it could have very important consequences to the oil market and potentially to slowing down the growth in the U.S. economy. Venezuela supplies a small but very important amount of gasoline to the United States and we're moving into the peak season for gasoline, and U.S. refiners do not have sufficient capacity to meet peak gasoline demand. We're very dependent at the margin on gasoline imports and Venezuela is an important source for those imports."

Analysts say an extended strike risks damaging a Venezuelan economy heavily dependent on 2.5 million barrels of daily crude exports. The Venezuelan government says it is willing to negotiate. But as the strike stretched into its third day, witnesses say about a hundred thousand opponents of President Hugo Chavez turned out in the streets of Caracas Thursday demanding the president resign.

President Chavez has put the military on a state of alert.