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Oil, politics and Venezuela - Many are wondering how far Chávez will go***President Hugo Chavez lashes out at oil companies, causing alarm bells to ring among foreign investors - .......''The thinking at the time, and I shared it, was that you watched what Chávez actually did rather than listen to what he said,'' said Alex Kazan, an analyst with Bear Sterns, an investment bank. But now, he added, Chávez is backing his rhetoric with actions.

Among his latest actions: an announcement that PDVSA would start paying foreign oil companies in Venezuelan currency, not just U.S. dollars. That means oil firms will be subject to Venezuela's stringent foreign exchange controls, inserting a further element of risk in their business.

.........Only in February, Ali Moshiri, ChevronTexaco's top man for Latin America, told aides to Sen. Richard Lugar, a powerful Indiana Republican who suggested that the United States should reduce its oil dependence on Venezuela, that the U.S. energy relations with Venezuela ''had to be separated from political relations,'' one staffer recalled.

But Exxon Mobil has been critical of the new Venezuelan measures.

''Any time a government begins to exhibit characteristics of not wanting to honor contracts, that's going to cause you a lot of pause with respect to your enthusiasm for putting more money into that particular location,'' Roy Tillerson, the firm's president, told analysts in March.

This week the firm told the Associated Press that ''arbitration remains an option'' if Venezuela does not respect its original contract in its Cerro Negro heavy crude project, although the company would continue to press for a friendly solution.

Many are wondering how far Chávez will go.

Asked if Chávez could simply nationalize the foreign oil companies' assets in Venezuelan assets -- in effect seize the property -- Matthew Simmons, who runs a Houston investment bank specializing in energy, said he had no doubts.

''Oh yes,'' he said. ``In front of our eyes.''***

Using oil to spread revolution - CAFTA "a national-security vote" slows Chavista expansionism ***.............Fears that Venezuela would profit from its rejection was one reason why the Bush administration lobbied so hard for the Central American Free Trade Agreement (CAFTA), narrowly passed by the House of Representatives on July 27th (see article). Donald Rumsfeld, the defence secretary, had called this “a national-security vote”.

All the same, Mr Chávez's successes are fragile ones. For one thing, it is hard to see what tangible benefits Venezuelans derive from this diplomacy. Mr Chávez has alienated both of his country's main trading partners, the United States and Colombia. Oil revenues are increasingly being spent without democratic scrutiny. A once-professional diplomatic service has been turned into a branch of the revolution, its dissidents either purged or neutralised. And although the alliance with Cuba has brought new social programmes, their cost and long-term benefits are hard to determine. Despite the oil boom, unemployment officially stands at 11%.

There are also limits to the region's tolerance of chavista expansionism. Only Cuba has signed up for ALBA. The richer Caribbean countries are unenthusiastic about Petrocaribe. Petrosur and Petroandina feature much rhetoric and little action. Cuba apart, no other country shares Mr Chávez's distaste for representative democracy, or his disdain for regional bodies such as the Inter-American Commission on Human Rights.

In a setback for Mr Chávez, on July 27th the Inter-American Development Bank, the region's largest official lender, chose as its new president Luis Alberto Moreno, Colombia's ambassador to Washington who was discreetly backed by Mr Bush. Mr Moreno easily defeated candidates from Brazil and Venezuela.

Argentine officials have welcomed imports of fuel from Venezuela, and its help in making contacts with China, but they are cooling towards Mr Chávez. Were evidence to emerge of his hand in Bolivia's turmoil, South America would become even warier. Should Lula's troubles deny him a second term, Brazil is likely to move to the centre-right, shifting the regional balance. The death of Mr Castro, who is 78 and frail, would be a body blow to Mr Chávez. So, of course, would a fall in oil prices.

A Summit of the Americas, involving 34 countries (all except Cuba), in Argentina in November should be a pointer to the prevailing diplomatic winds. The United States wants to stop the meeting becoming a platform for Mr Chávez. But if Mr Bush turns up empty-handed (CAFTA apart), Latin Americans will continue to pay court to that generous neighbour in Caracas.***