Shared desperation divides Venezuela''An armed massacre by the government or democratic elections.''

CARACAS, Venezuela -- Beneath Christmas decorations that hang listlessly in this sunny Caribbean capital, few people are celebrating this year. Signs of desperation are everywhere, from the long lines outside banks and gasoline stations to the graffiti that express a nation's anguish.

''Baby Jesus, don't bring us anything but take away Chavez with you,'' one graffiti writer wrote. Another, lampooning the traditional Spanish-language greeting ''Feliz Navidad'' (Merry Christmas), wrote, ''Feliz Chavidad.''

With President Hugo Chavez's hold on power apparently slipping, government forces prepared for a massive opposition march today to the presidential palace, Miraflores. The pro- and anti-Chavez forces have largely avoided each other so far. A protest at the palace would be the first major confrontation in the three-week-long standoff between the government and opposition forces who demand Chavez's resignation and early elections.

Opposition leader Rafael Alfonzo, a business executive involved in talks with the government, sees only two possible outcomes: ''An armed massacre by the government or democratic elections.''

Underlying the conflict are historic class divisions Chavez has exploited since he was elected president in 1998. He emphasized these divisions in six subsequent national elections and referendums. Recycling 1960s-era Marxist dogma that is out of style elsewhere in Latin America, Chavez galvanized Venezuelans in the squalid neighborhoods of Caracas and in the countryside to support his Cuban-style economic policies.

Venezuela's political crisis could lead to long-term political instability in a country that has been the world's No. 5 oil supplier. The country's crisis already is having an impact on global prices.

The opposition-led strikes that began Dec. 2 have virtually shut down the oil industry here, bringing about 70% of the country's economy to a standstill.

Venezuela exported nearly1.5 million barrels of crude oil a day to the USA in October, making Venezuela the fourth-largest supplier to the USA. The USA also imported about 250,000 barrels a day of gasoline until opposition-led strikes shut down Venezuelan refinery production. Overall production is down to less than 10% of pre-strike levels.

The petroleum reserves discovered in the 1920s helped generate development that equaled Japan's as recently as 20 years ago. Now, the peace and prosperity of those days is a vague memory.

Oil prices neared their highest level in two years Thursday, boosted in part by Venezuela's crisis. Crude oil rose 52 cents to $29.01 per barrel. U.S. crude futures climbed 46 cents to $30.90. That's up 25% from six weeks ago.

In Caracas, only two to three days of food supplies remain in grocery stores, and 70% of the country's gasoline storage facilities are empty. Chavez's order this week for the military to commandeer private ships, trucks and aircraft to smash the opposition-led bottleneck hasn't solved the problem of vanishing supplies. Venezuela's Supreme Court on Thursday ordered the temporary resumption of oil operations closed by the strike. But with opposition forces controlling the distribution channels, it was unclear how the order would get oil flowing again.

As long as the military is loyal, Chavez's political survival seems assured. But there are questions whether the armed forces will remain on the president's side. Dissident officers were among the coup plotters who unseated Chavez for three days last April. He was restored to power after supporters protested. The riots left 50 people dead and dozens injured.

A senior diplomat in Chavez's government says Venezuela faces a political dilemma: The opposition cannot govern, and the government cannot remain in power. Where that standoff leads is unclear. One of Chavez's military mentors, Gen. Raul Baduel, told the La Vanguardia newspaper of Spain this week, ''The intervention of the armed forces cannot be excluded if violence spreads.'' Baduel helped the president return to power in April.

''Mr. Chavez won't last long,'' says Barclays Capital market strategist Jose Barrionuevo. He warns the country is moving toward a possible default on its $25 billion foreign debt. Barrionuevo also says it appears the government may be illegally dipping into its cash reserves to buy emergency food, gas supplies -- and time. But he says that with the reserves dwindling, this strategy can't last long.

The White House supports the call for early elections. Chavez is barely half way through his six-year term. Secretary of State Colin Powell said Thursday that the United States had offered the Organization of American States ideas for resolving the conflict. He didn't provide details. The OAS has been mediating in Caracas.

Robert Gabchi, an adviser to Chavez, argues that because the Venezuelan leader has won every election and referendum so far, he is ''the most legitimate president in the history of Venezuela.'' Gabchi adds, ''The president has not the least inkling to resign.''

However, a Dec. 13 poll showed half of Venezuela's poor, Chavez's traditional base of support, now want him out of the presidential palace. But he still has solid backing from about 30% of the country's 24 million residents -- a formidable base from which he can prolong the conflict.

''If Chavez falls, Caracas burns,'' warns Geraldo Bautista, a supporter of the president.

* The president's supporters come from working-class neighborhoods. Uneducated youths gravitate toward his macho image: the young lieutenant colonel who led a failed coup in 1992 and re-emerged a few years later as a politician who delighted in berating Venezuela's oligarchic managerial class and their patrons in the USA.

Today, jaunty street toughs with pistols patrol the street in paramilitary groups they call ''Bolivarian Circles.'' They took their name from 19th-century leader Simon Bolivar, who liberated Venezuela from Spain. Bolivar also is one of Chavez's favorite role models. ''It's class war,'' said Diana Perez, 19, standing with friends on a street corner in a poor neighborhood on the west side of Caracas.

* The opposition is led by business executives, union leaders and provincial governors who have spent the past two weeks lodged in a fancy Caracas hotel where rooms cost $275 a day. Manning the opposition's barricades in city streets are well-dressed representatives of the middle class, who in recent years have become as desperate and radicalized as their working-class counterparts.

Gerver Torres, a former government-planning minister, points out the country's per capita income is half its level of 20 years ago. The poor have become poorer, and the middle class has been put ''on the road to extinction.''

Such social pressures have produced one of the highest homicide rates in the world: 20 murders per 100,000 people. By comparison, the murder rate in the USA was 5.6 murders per 100,000 in 2001, according to the Justice Department.

The slipping standard of living means hope of owning a home or car is evaporating. More than 40% of the population doesn't have access to a toilet.

As world oil prices rose, the country's economy, which is dependent on oil exports, contracted 6.4% in the first nine months of the year. Now, the situation is even worse. The opposition-led shutdown of the state oil company has reduced production 83% to 400,000 barrels a day and squeezed government finances, which depend on the oil company for 50% of revenue.

At the presidential palace, barbed-wire barricades signify the Chavez administration's uncertainty about its survival. With new signs the mostly peaceful protests could shift quickly into violence, there also are signs of concern at the opposition command center.

Eduardo Lapi Garcia, governor of Yaracuy Province, is the only one of six opposition leaders engaged in talks with the government. He says, ''We are giving them a clear message: Elections are the exit from this crisis.''

He adds, ''I don't think the government negotiators or the government understand the reality in the country.''

Thousands of people march in Caracas, Venezuela asking for early elections or President Hugo Chavez resignation, Friday, Dec 20, 2002. (AP Photo/Estaben Felix)

Oil workers, Chavez foes protest - Venezuelan leader insists opponents are elite minority *** Chavez's sympathizers, many in red berets like the one worn by the former paratrooper, staged a smaller march yesterday to rally support for the beleaguered president. Many were residents of the grim housing projects that cling to the mountains surrounding Caracas. Chavez, who swept to power in 1998 promising to end corruption and endemic poverty, has refused demands for a new election, saying the constitution bars him from calling a vote until August, when he will have completed half of his six-year term. He has sought to paint his opponents as an elite minority who object to his policies on behalf of the 80 percent of Venezuelans who are poor.

But Perez, who voted for Chavez before becoming increasingly alarmed by the president's leftist politics, said it was wrong to assume that all of the thousands of protesters were fighting to preserve their privileged status. ''Me, rich?'' he said with incredulity, gesturing to his worn tennis shoes and threadbare track pants. ''I make $150 a month if I'm lucky. I live in a working-class neighborhood. But that doesn't mean I want Venezuela to become like Cuba. There, everyone is poor.'' Chavez's opponents accuse him of trying to remake this conservative South American nation in the image of communist-run Cuba. They point to Chavez's close ties to President Fidel Castro of Cuba, his increasingly leftist rhetoric, and his creation of neighborhood watchdog groups modeled on Cuba's Committee for the Defense of the Revolution.

Chavez opponents accuse the groups - called Boliviariano Circles after the South American independence leader, Simon Bolivar - of inciting violence during protest rallies, including the bloody clashes in April that killed 19 people. Those deaths helped trigger an abortive 48-hour coup, after which Chavez resumed control. But the president's once sky-high popularity ratings have slumped to 25 percent, according to some newspaper surveys. Despite fears of more violence, the mood among anti-Chavez protesters yesterday was one of jubilation, with many participants equating their struggle with that of Eastern Europeans in the days before the fall of the Berlin Wall. ***

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