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Inside the Upcoming OPEC Summit in Caracas
West Braces for First Meeting of OPEC National Leaders since 1975
by Adrian Van Eck

Editor's Note: This commentary was provided by our friend and favorite Fed Watcher, Adrian Van Eck. As you are about to find out, Mr. Van Eck's analytical skills are notable. In this article, which is a summation of much more detailed treatment available to his subscribers, he employs these skills in a telling assessment of the upcoming OPEC summit in Caracas. The result is a "de-briefing" that is likely to greatly advance your knowledge of the forces at work in today's world economy as they relate to that most vital of substances -- crude oil. In the process, you will receive a proper introduction to an interesting, and potentially dangerous fellow -- one Mr. Hugo Chavez, President of Venezuela. We highly recommend Adrian Van Eck's Money-Forecast Letter -- which has been on our monthly reading list for over a decade. Through it you will acquire on a monthly basis a deeper understanding of the issues and motivating events behind the morning headlines. [Please see the Special Offer for USAGOLD / Centennial clientele detailed at the end.] By the way, Mr. Van Eck is bullish on gold.

We don't want you to be shocked later in this letter when you reach our conclusion. So we will give it to you here. Right up front. Then we will spell out piece by piece how we arrived at this conclusion. And later we will tell what in our opinion it will mean to inflation in America . . . to corporate earnings over the next year or so . . . to unemployment and the rate of foreclosures and bankruptcies. . . and then we will tell what we think it will do to the U.S. dollar and to interest rates. . . (again speaking only of the next year or so).

To begin with, we believe events have already started in motion that will drive the price of crude oil in America up to $40 a barrel. It could happen sooner rather than later. And unlike 1990, when a big oil price-spike was caused by a military invasion of Kuwait that America was able to reverse out, this time the price gains will happen for reasons that we will not be able to do anything about, in the short run. And they will likely stick.

$40 Oil Is Not An Unrealistic Fantasy. It Happened Before -- 20 Years Ago!

. . . Today Oil is coming off a tripling once more, this time from $10 to $30. And in a moment we will discuss with you the evidence. . . now spread across the public record but ignored by an America in Denial. . .that OPEC has the power to more than double the price again. Because of a bold Global trip by the Castro-Clone President of Venezuela, OPEC nations are just now coming into the realization that they have this power. What's more, they are gathering the courage to do so. That could carry Oil up to $60 if they have the guts.

So we think we are being moderate, even conservative when we project and predict $40 per barrel Oil for 2001.

. . . . Two years ago, the poor people of Venezuela -- which is to say 80% of that South American Nation's population -- joined together to elect a radical leftist candidate for President. His name is Hugo Chavez. He is a young former paratrooper who failed in 1992 in a military coup attempt, and spent two years in prison as a result. But in 1998 he stepped forward as the leader of a revolutionary new political Party, promising to take his Nation's Oil wealth away from the 5% who were rich and give it to the 80% who live in poverty. His upset victory shocked that nation's traditional governing class. But what followed was even more alarming. It quickly became obvious that he was not only a close friend but a disciple of Fidel Castro who was openly advising him not to make the mistake he made in Cuba 40 years ago, and admit that he is a communist. So instead Chavez called himself a "Social Revolutionary." He demanded and got a national referendum that he won overwhelmingly, allowing him to fire the Supreme Court and the elected Congress, and rule by decree. . .

At 46, President Chavez of Venezuela Is Now In Complete Control of The Richest Oil Fields In South America.

The U.S. State Department seems unable to grasp this reality, referring to Venezuela as having a democratically-elected government. Too bad they are ignoring the convictions of Thomas Jefferson, appointed as America's first Secretary of State by George Washington in 1789. Jefferson proclaimed that "An elected despotism is not what we in America fought to achieve." He used that yardstick to refuse to recognize Nations ruled by despots such as Chavez. And it would be nice if the State Department, led by a Secretary who lost two grand-parents in Hitler's death camps had enough historical gumption to note that Hitler was himself democratically and legally elected as Chancellor in 1933, and promptly turned the German Parliament into an appointed gang of cheerleaders who would lustily applaud his speeches and approve everything he demanded. Venezuela used to be described as a Lake of Oil owned by the Rockefellers. Its importance was recognized by Ronald Reagan when he dispatched American troops to root out a Castro-imposed communist dictatorship on the nearby island of Granada. That island, where Castro's army was busy building a long military runway, would have given Castro control over the sea routes carrying Oil tankers out of nearby Venezuela. Castro is a clever fellow. He has apparently forsaken the idea of direct military conquest of his neighbors.

And So Hugo Chavez Set Out to Expand His Radical Populist Aims To Every Nation Now Pumping Oil.

. . . . Within hours of his smashing popular election victory at home, Chavez stunned The United States by announcing he was leaving on a 9-day tour of the 10 other OPEC member-nations. Venezuela was one of the founders of OPEC in Baghdad decades ago. Chavez announced that as the leader of OPEC this year, by virtue of a regular rotation, he was calling for the first meeting of OPEC heads of State since 1975, and would invite all the other heads of OPEC states to come to Venezuela for a summit meeting on September 27-29.

The purpose of the summit, he made clear, was to forge a strong bond between OPEC leaders and enforce a strict policy that will keep the price of Oil high . . . Anointing himself as "Chavez of Arabia" and stating that "We, the smal, poor nations, undeveloped of the Third World have no alternative but to unite, whatever our geographic location," he headed right for Jeddah, Saudi Arabia . . . the Saudis were remarkably hospitable . . . Kuwait's Emir Sheikh Jaber al-Ahmad al-Sabbah met with Hugo Chavez at Kuwait City, issued support for his determination to keep the price of Oil at "Fair" levels, and promised to attend his OPEC Summit . . . And then came the boldest stroke of all. Chavez drove across the Iraqi border to meet with Saddam Hussein . . . [T]he statement was made that Iraq supports what he is doing. . .The next day, Chavez flew to Indonesia. . . [another OPEC country that] has suffered terrible economic reverses in the past few years, as its currency collapsed under the weight of short-selling by American hedge funds, wiping out 40 years of economic progress and most of the Nation's middle class along with it. Chaos and near anarchy resulted . . .The Indonesian president said he will be in Venezuela late in September of the OPEC Summit . . . .

Wall Street and Washington are still either ignorant of what is going on or are in VERY deep denial. In the second part of this Emergency Forecast next month, we will deal with implications for American inflation, corporate profits, U.S. unemployment, Money Supply and interest rates. Do not miss our October Letter.

by Adrian Van Eck
September 2000

Copyright © 2000. All rights reserved. The above is reprinted by USAGOLD with the permission of Money-Forecast Letter and Adrian Van Eck. Any further reproduction is strictly prohibited. To subscribe, please write:

The Financial Research Center, Inc.
300 Woodland Street
P.O. Box 8006
Holliston, MA 01746-8006

Special Offer: Subscription fee is $200 US, however, FRC is offering USAGOLD readers a special trial subscription that includes the above-referenced September issue free of charge plus two succeeding issues for $20. Please indicate that you were referred by Centennial Precious Metals. FRC will include as part of the trial subscription one free issue of Mr. Van Eck's weekly Money and Forecast Hotline by e-mail. To receive this offer, e-mail your request to JonVanEck@aol.com, call or write to the address above. Major credit cards accepted.

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