9:29 PM Apr 24, 1996

ORGANISATION OF PETROLEUM EXPORTING COUNTRIES (OPEC) "REDEFINE ITS ROLE IN

Energy Minister Erwin Arrieta.

The proposal will respond to accusations that Venezuela, which in the past scrupulously complied with OPEC production quotas, is the biggest violator today of that scheme - allegations that are flatly denied by Venezuelan authorities.

The "abandoned" principles that Caracas wants the Organisation to take up again "point out that OPEC was not created as a cartel, but rather as an entity designed to regulate the flow of the strategic resource for the world's industrial development," said Arrieta.

That principle "got off course in the 1970s, when external factors transformed the Organisation," said Arrieta. He emphatically stressed, however, that "the abandoning of OPEC by Venezuela," as some local leaders are demanding, "is not being proposed."

Arrieta has said oil was used as "a mechanism of confrontation" in the 1970s and 1980s, while energy should instead be "a tool for cooperation" between producers and consumers.

Venezuela is discreetly attempting to affirm its privileged position as the main supplier of oil to the United States. With that goal in mind, it has pushed for understandings on "hemispheric energy security" to be included in negotiations for a Free Trade Area of the Americas.

The OPEC quota system can be an obstacle for Venezuela when it comes to ensuring or capturing U.S. clients. But on the other hand, the system keeps the market from being swamped, with the resultant overall drop in prices.

Venezuela will state its position on Thursday when OPEC's highest-level authorities - president Ammar Makhloufi, Algeria's oil minister, and general secretary Rilwanu Lukman, a former Nigerian oil minister - visit Caracas.

The OPEC officials and the group's 12 members - Venezuela is the only Latin American country - will hold a round of meetings previous to the Organisation's ministerial-level conference, to be held June 5 in Vienna.

OPEC will study the impact of Iraq's possible return to the market after U.N. sanctions are lifted. But Arrieta said the conference "will review the whole scenario, not only immediately relevant questions."

The proposed "rewiew" corresponds to pressures within OPEC calling for the quota system to be abandoned, and movements within Venezuela advocating that the country leave the Organisation. And in both settings, it is marked by years of frustration over failing to achieve the reference price of 21 dollars a barrel for light crude oil.

While its production potential hovered around 2.5 million barrels - until early this decade - Venezuela was satisfied with its quota of 2,359,000 barrels a day, or 9.62 percent of the OPEC total of 24,520,000 barrels a day.

But now the country can extract three million barrels a day. And the State-owned oil company, 'Petroleos de Venezuela' (PDVSA) is entering into associations with transnationals in order to reach a production capacity of up to five million barrels a day within the next 10 years.

Even refineries owned abroad by the PDVSA need more crude oil than Venezuela can supply, and purchase up to 700,000 barrels a day to be able to function at full capacity.

Furthermore, Venezuela is experiencing financial and fiscal difficulties, its foreign debt totals 37 billion dollars and demands more than four billion dollars a year in servicing, and its 22 million inhabitants are getting poorer and poorer - even though PDVSA is the world's second largest oil company, following Saudi Arabia's ARAMCO.

Venezuela is not the only OPEC member to experience such problems. Even Saudi Arabia, which produces 8.2 million barrels a day, has a seven billion dollar deficit in its 50 billion dollar budget, after having spent 120 billion dollars in foreign currency during the Gulf War.

A severe structural adjustment programme was implemented this month in the South American country, meaning a tightening of the collective belt, with inflation predicted to reach 100 percent for 1996. That is a tough blow for Venezuelans, 80 percent of whom live below the poverty line, and who long for their "Saudi" past, a product of the 1970s oil boom.

Well-known political figures are calling for the privatisation of the oil industry, which was nationalised in 1976, and a rupture with OPEC, which they see as an obstacle for selling more oil and obtaining the much needed currency.

Social democrat Claudio Fermin, who ran against President Rafael Caldera in the 1993 elections, proposed "an immediate increase in oil production," because the ensuing conflicts with OPEC would be less serious "than the suffering of the Venezuelan people."

Andres Sosa, who headed PDVSA during the administration of social democrat and staunch OPEC defender Carlos Andres Perez (1989-93), has also called for the country to leave the Organisation. So has Luis Machado, who from 1979 to 1994 served as minister for the Development of Intelligence.

However, their arguments have failed to take into account the fact that if Venezuela and other producers put out a greater offer on the market, prices will tend to drop, and the inflow of currency will suffer.

Meanwhile, members of the business community and liberal economists are advocating the privatisation of PDVSA. One of them, Miguel Rodriguez, who served as Planning Minister under Perez, has offered a compromise in the interests of consensus, stressing that "remaining in OPEC has more advantages."

Rodriguez said the placement of stocks on the world market, with the State maintaining hold of PDVSA property, would mean State coffers could take in 30 billion dollars, which could "clean up" a large part of the country's foreign debt.

Rodriguez has also recommended the sale of 20 percent of PDVSA.

Ministers opposed to privatisation predominate in Caldera's cabinet, although they favour associations between PDVSA and private capital for new projects. These include Finance Minister Luis Matos, a social democrat, and Planning Minister Teodoro Petkoff, a socialist leader.

Breaking off with OPEC, which Arrieta called "the most important organisation that has emerged this century in defence of the interests of the South," would face fierce ideological and political opposition in this country, which has a multi-party democracy, in contrast with other OPEC members.

For decades, OPEC accompanied nationalist sentiments in Venezuela. Its leadership professes an almost reverential respect for Juan Pablo