High Stakes: Chávez Plays the Oil Card

April 10, 2007
new york times

By SIMON ROMERO and CLIFFORD KRAUSS
CARACAS, Venezuela, April 9 — With President Hugo Chávez setting a May 1 deadline for an ambitious plan to wrest control of several major oil projects from American and European companies, a showdown is looming here over access to some of the most coveted energy resources outside the Middle East.

Moving beyond empty threats to cut off all oil exports to the United States, officials have recently stepped up the pressure on the oil companies operating here, warning that they might sell American refineries meant to process Venezuelan crude oil even as they seek new outlets in China and elsewhere around the world.

“Chávez is playing a game of chicken with the largest oil companies in the world,” said Pietro Pitts, an oil analyst who publishes LatinPetroleum, an industry magazine based here. “And for the moment he is winning.”

But this confrontation could easily end up with everyone losing.

The biggest energy companies could be squeezed out of the most promising oil patch in the Western Hemisphere. But Venezuela risks undermining the engine behind Mr. Chávez’s socialist-inspired revolution by hampering its ability to transform the nation’s newly valuable heavy oil into riches for years to come.

As Mr. Chávez asserts much greater control over Venezuela’s oil industry, his national oil company, Petróleos de Venezuela, is already showing signs of stress. Management has become increasingly politicized, and money for maintenance and development is being diverted to pay for a surge in public spending.

During the last several decades, control of global oil reserves has steadily passed from private companies to national oil companies like Petróleos de Venezuela. According to a new Rice University study, 77 percent of the world’s 1.148 trillion barrels of proven reserves is in the hands of the national companies; 14 of the top 20 oil-producing companies are state-controlled.

The implications are potentially stark for the United States, which imports 60 percent of its oil. State companies tend to be far less efficient and innovative, and far more politicized. No place captures the shift in power to nationalist governments like Venezuela.

“We are on a collision course with Chávez over oil,” said Michael J. Economides, an oil consultant in Houston who wrote an influential essay comparing Mr. Chávez’s populist appeal in Latin America with the pan-Arabism of Col. Muammar el-Qaddafi of Libya two decades ago. “Chávez poses a much bigger threat to America’s energy security than Saddam Hussein ever did.”

Consider the quandary facing Exxon Mobil after its chairman, Rex W. Tillerson, recently suggested that Exxon might be forced to abandon a major Venezuelan oil project because of its growing troubles with Mr. Chávez.

The energy world took notice. So did Mr. Chávez’s government.

Only a day later, Venezuelan agents raided Exxon’s offices here in the San Ignacio towers, a bastion for this country’s business elite. The government said that the raid was part of a tax investigation, but energy analysts said the exchange of threat and counterthreat was all too clear.

Politics and ideology are driving the confrontation here as Mr. Chávez seeks to limit American influence around the world, starting in Venezuela’s oil fields. Mr. Chávez views the Bush administration as a threat, in part because it indirectly supported a coup that briefly removed him from power five years ago. Yet the United States remains Venezuela’s largest customer.

Mr. Chávez recently decreed that Venezuela would take control of heavy oil fields in the Orinoco Belt, a region southeast of Caracas of so much potential that some experts say it could give the country more reserves than Saudi Arabia. The United States Geological Survey describes the area as the “largest single hydrocarbon accumulation in the world,” making it highly coveted despite Mr. Chávez’s erratic policies.

By setting a May 1 deadline for what some foreign oil executives consider an expropriation, the Venezuelan leader risks losing Exxon, ConocoPhillips and other companies, which are loath to put their employees and billions of dollars in assets under Venezuelan management.

A departure of expertise and investment could weaken an oil industry already unsettled by being transformed into Mr. Chávez’s most crucial tool for carrying out his reconfiguration of Venezuelan society.

Mr. Chávez has raised taxes on foreign oil companies and forced other oil ventures to come under his government’s control. And he has purged more than 17,000 employees from Petróleos de Venezuela after a debilitating strike about four years ago.

The talks have bogged down over how much the oil companies’ stakes in four big Orinoco projects are worth, whether Venezuela’s cash-short oil company would pay for the assets in oil instead of cash and, most important, who would manage the reduced operations of the foreign oil companies.

Still prevented from producing oil in places like Saudi Arabia and Mexico, the companies desperately want to hold on to their Venezuelan reserves. Companies like Exxon, whose Venezuelan assets were nationalized in the 1970s and returned to it in the 1990s, know the pitfalls of operating here and figure that Mr. Chávez will not be around forever.

With oil prices at high levels, oil-rich countries as varied as Angola, Norway and Russia are also waiting to see how the talks unfold. Governments in Kazakhstan and Nigeria are trying to negotiate better terms with foreign oil companies as well. But none are doing so with Mr. Chávez’s revolutionary flourish.

“It is a defining moment,” said Christopher Ruppel, a geopolitical risk analyst at John S. Herold Inc., the energy consulting firm.

Last week, Rafael Ramírez, Venezuela’s energy minister, sent a chilling signal to the oil companies, saying Venezuela might sell refineries in Texas and Louisiana that process crude from Exxon’s Venezuelan oil fields. Analysts say Venezuela could be setting the stage to produce much less oil in ventures with American oil companies for export to the United States.

The oil companies decline to talk publicly about the negotiations, but people in the industry say Exxon and ConocoPhillips, two of the largest American companies in Venezuela, are digging in their heels. The companies, however, lack a united front: Chevron is expected to accept Mr. Chávez’s terms, since it is also negotiating access to a large natural gas project in Venezuela.

“If the majors want to negotiate a settlement, they have to be able to let Chávez save face and look like he has won this with his people,” said Michael S. Goldberg, head of the international dispute resolution group at Baker Botts, a law firm in Houston that represents many of the major oil companies around the world.

For decades, Venezuela has been a leading supplier of oil to American refineries, a resilient economic relationship that remains intact despite deteriorating political ties. Venezuela is the fourth-largest supplier of oil to the United States, accounting for more than 10 percent of American oil imports.

Once Venezuela’s heavy oil is counted, its reserves may surpass those of Saudi Arabia or Canada, though the oil will be worthless without ventures to extract it. American oil producers are drawn here by Venezuela’s 80 billion barrels of proven oil reserves, among the largest outside the Middle East.

But Mr. Chávez is chipping away at those ties by forming ventures with state oil companies from China, Iran, India and Brazil. Venezuelan exports of oil and refined products to the United States fell 8.2 percent to a 12-year low in 2006 of about 1.3 million barrels a day, according to the Energy Information Administration.

Meanwhile, Mr. Chávez has accepted higher shipping costs to reach China, expanding exports tenfold to about 160,000 barrels a day since 2004.

“If the United States wants to diversify its oil supplies for reasons of national security, then Venezuela should be allowed to diversify its customer base for the same reason,” said Mazhar al-Shereidah, an Iraqi-born petroleum economist who is one of Venezuela’s leading energy experts.

But even under the best of circumstances, China’s retooling of its refineries to handle Venezuela’s sour, or high-sulfur, crude oil could take five to seven years. And it is not clear whether Mr. Chávez’s new foreign energy partners are prepared to invest heavily until they are confident they can trust him.

In a country where many facets of life are politicized, output levels are no exception. Venezuela says it produces 3.3 million barrels a day, but OPEC officials say production is closer to 2.5 million, 1 million barrels less than in 1999 when Mr. Chávez’s presidency began.

No one sees an immediate crisis at Petróleos de Venezuela. But its windfall from high oil prices masks the devilish complexity and rising costs of producing heavy oil.

Meanwhile, the company acknowledged last month that spending on “social development” almost doubled in 2006, to $13.3 billion, while its spending on exploration badly trailed its global peers. And Petróleos de Venezuela’s work force has ballooned to 89,450, up 29 percent since 2001 even as production declined.

Independent analysts are alarmed by a troubling increase in explosions and refining accidents during the last two years, which authorities brush off as sabotage. Mr. Ramírez, the energy minister, declined repeated requests for an interview.

With heavily subsidized domestic oil consumption surging, the government spends an estimated $9 billion to keep gasoline prices under 20 cents a gallon. Moreover, Mr. Chávez uses Petróleos de Venezuela to finance other nationalizations, like its $739 million purchase of an electric utility in Caracas from the AES Corporation.

Petróleos de Venezuela’s cash is said to be running short as Mr. Chávez uses its revenue to cement political alliances with Bolivia, Cuba and Nicaragua. The company has borrowed more than $11 billion since the start of the year, a rapid debt buildup that reflects a wager by Mr. Chávez that oil prices will remain high indefinitely.

Simon Romero reported from Caracas, Clifford Krauss from Houston.

Lavish Paydays and Info Graphics

click to enlarge
click to enlarge
click to enlarge
click to enlarge

Counselor To Gonzales Announces Resignation

Goodling Had Refused to Testify on Prosecutor Firings
By Dan Eggen
Washington Post Staff Writer
Saturday, April 7, 2007; A01

The senior counselor to Attorney General Alberto R. Gonzales submitted her resignation yesterday, becoming the third high-ranking Justice Department aide to quit in the aftermath of the firings of eight U.S. attorneys.

The departure of Monica M. Goodling, 33, comes two weeks after she first refused to answer questions from Congress about the firings, invoking her Fifth Amendment right against self-incrimination.

Goodling's resignation also comes amid signs of sinking morale in some U.S. attorney's offices. In Minneapolis, three top managers staged a revolt Thursday, choosing to demote themselves rather than work for the newly confirmed U.S. attorney there, who is a former Gonzales aide, officials said. The department was so alarmed that it sent a Washington-based Justice official to Minneapolis this week to try to talk the three out of their plans, officials said.

Democrats on the Senate Judiciary Committee also stepped up their demands yesterday for hundreds of pages of unreleased records related to the firings that the Justice Department has deemed too sensitive for release to Congress.

Gonzales, meanwhile, has largely disappeared from public view as he prepares for a crucial April 17 appearance before the committee to explain his role in the firings.

Seven prosecutors were dismissed in December and another was removed earlier as part of a plan set in motion by the White House to replace U.S. attorneys viewed as insufficiently loyal to President Bush or his policies. Gonzales has sought to minimize his role in the firings, but recently released documents and testimony show he was regularly briefed on the effort.

Goodling's departure follows the resignation last month of D. Kyle Sampson as Gonzales's chief of staff. Sampson went on to testify before the Judiciary Committee that Gonzales was more directly involved in the firings than he had acknowledged, and that the attorney general was aware of proposals to circumvent the Senate confirmation process for some U.S. attorneys.

The Justice official who carried out the firings, Michael A. Battle, also left the department last month. Battle and other department officials have said his departure was not connected to the dismissals.

"Attorney General Gonzales's hold on the department gets more tenuous each day," said Sen. Charles E. Schumer (N.Y.), who has been among the most vocal Capitol Hill Democrats calling for Gonzales's resignation.

Sampson and Goodling worked closely together on the firings, particularly in the case of an Arkansas prosecutor removed to make way for a former aide to presidential adviser Karl Rove. Both participated in briefings for Deputy Attorney General Paul J. McNulty and others prior to testimony before Congress that has since been shown to be inaccurate.

Goodling and her attorneys have cited McNulty's complaints about her role in those briefings as a key reason for her refusal to testify.

In a letter late yesterday to Sens. Patrick J. Leahy (D-Vt.) and Sheldon Whitehouse (D-R.I.), the Justice Department said Goodling's departure renders moot any concerns about conflicts between her and others who remain employed at Justice.

Acting Assistant Attorney General Richard A. Hertling also wrote that Gonzales and McNulty have "taken steps to ensure that no actual or apparent conflict of interest would arise" in connection with the prosecutor firings.

Another conflict erupted this week between Justice and Democrats over other records connected to the firings that have not been released to Congress. The committee is set to approve subpoenas Thursday demanding the release of those records, along with uncensored versions of previously released documents.

"We are trying to get to the truth," Leahy, Schumer and Sen. Dianne Feinstein (D-Calif.) wrote in a letter to Gonzales yesterday. "Documents should be provided without restrictions on disclosure so that they may be used to question witnesses -- including yourself -- on any issue that is an important part of our inquiry."

Throughout the week, Gonzales has been reaching out to lawmakers, predominantly House Republicans. Aides on Capitol Hill confirmed that the attorney general spoke with Rep. Chris Cannon (Utah), the top Republican on a Judiciary subcommittee, and to Rep. Roy Blunt (R-Mo.), the minority whip and a close ally of Christian conservatives, who in the past have not been outspoken in support of Gonzales.

The discontent in Minnesota centers on U.S. Attorney Rachel K. Paulose, 34, who previously worked for Gonzales and his deputy, McNulty. She is part of a wave of more than a dozen Bush administration insiders appointed as federal prosecutors over the past two years, according to government records.

Paulose said in a statement that "the management team supports the decision of the three to step down" and that "the community will benefit from their focus on prosecuting high-profile, sophisticated cases in the years to come."

"We have work to do," Paulose said. "The office remains focused on our law enforcement priorities and service to this community."

David Schultz, a law professor at Hamline University in St. Paul, Minn., said the Minneapolis U.S. attorney's office had been relatively free of discontent in recent administrations.

"You never really hear political rumblings out of that office, so it comes as some surprise to see three people step down like this all at once," Schultz said. "It raises the question of whether attorneys are starting to become uncomfortable about the politicization that seems to be going on at Justice."

Paulose replaced veteran prosecutor Thomas B. Heffelfinger, who served as U.S. attorney under both President Bush and President George H.W. Bush. Heffelfinger abruptly resigned early last year to enter private practice.

Heffelfinger has said that he does not know whether he was slated for removal. E-mails from Sampson indicate that two U.S. attorneys targeted for dismissal resigned in early 2006; Heffelfinger is one of two who quit during that time to enter private practice. Heffelfinger declined to comment yesterday.

Paulose has drawn complaints from taxpayer advocates for an allegedly lavish "investiture" ceremony held last month to commemorate her confirmation as U.S. attorney, although Justice officials say the cost to the department was only $225. Paulose has also gained attention for her aggressive efforts to obtain "righteous sentences" in child pornography cases.

Washingtonpost.com staff writer Paul Kane and Washington Post staff researcher Julie Tate contributed to this report.

I'm taking bets now on the Democratic ticket

I'll pick "Hillary in 2008" for the Democratic nomination. Just to warm things up, I'll bet somebody a whole dollar that Clinton rolls.

10 to 1 : I get the Clinton/Obama ticket to win it all and you get the field. I'll put down ten and you put down a hundred. Anyone want to take my ten bucks?

Who do I want to win? Al Gore. I don't think he's going to run. I hope he grabs an Oscar though.

Clinton Reminds New Hampshire, I’m With Bill

New York Times
February 13, 2007
Political Memo

By PATRICK HEALY
As she made her first outing to New Hampshire as a presidential candidate last weekend, Senator Hillary Rodham Clinton left her husband at home, yet she tried to tap his old political magic at nearly every turn.

Mrs. Clinton, Democrat of New York, mentioned Mr. Clinton at least eight times on Saturday — at one point talking about “Bill’s heart surgery” to illuminate her own travails with health care bureaucracy — and a few times on Sunday, most memorably when she said of Republicans, “Bill and I have beaten them before, and we will again.”

For the first time in her bid for the White House, Mrs. Clinton directly laid claim to the legacy and popularity of former President Bill Clinton — and did so in a crucial primary state where her husband showed his resiliency in 1992, when he finished second despite weeks of troubles.

“It helps her because we know Bill Clinton and we love Bill Clinton. We know him and his foibles. We know he loves his Dunkin’ Donuts; we know his love for burgers,” said State Representative Patricia M. McMahon, a longtime ally of both Clintons. “It shows that she’s human, too, and appreciates her husband and likes him as much as we do.”

This latest chapter in the Clinton political relationship is still a work in progress. Twice as a candidate for the Senate, and during her six-year term, Mrs. Clinton has kept a measure of professional distance from her husband, partly to keep the spotlight on “the politician in the family,” as he has called her. Where the two have appeared together — for example, at the funeral of Coretta Scott King last year — his skills as a speaker have overshadowed hers.

Now that Mrs. Clinton is a presidential candidate, however, her advisers say it would be folly to minimize Mr. Clinton’s role in her life: as a potential first gentleman, as her “full-time political counselor” (as she called him on Saturday) and as a source of emotional support.

Mr. Clinton is an asset in particular with his fan base, which was obvious as Mrs. Clinton drew smiles and laughter by recalling their White House days, “what Bill did” with the government in the 1990s (which she said she would try to replicate) and his famous tardiness, which, she noted with humor, she has endured with everyone else.

“The way she talked about him gave me a better feeling for her warmth,” said Karen Ryan of Concord, who attended a question-and-answer forum with the senator there on Saturday. “And the Clinton administration is a much better memory than the one we have now.”

Yet Mr. Clinton is also a potential liability because of the questions he provokes, as both a polarizing former president who could return to the White House and as a husband whose behavior in the Monica Lewinsky affair lingers in the some minds.

“It’s nice that she stayed with him, but as strong as she is, I think she should’ve dumped him after Monica,” said Karla Frasse, a dental assistant in Concord. “I want to see her in her own right and not really be reminded of the two of them together.”

Mr. Clinton stepped in for Mrs. Clinton on Sunday for the first time since she announced her candidacy, speaking at a breakfast of Westchester County Democrats in New York. It was not an official campaign event, though he did say that her huge re-election victory in November helped catapult her to New Hampshire. It was a reminder that Mr. Clinton will be a chief surrogate at fund-raisers and political events through November 2008, Mrs. Clinton’s advisers said.

There are no plans for Mr. Clinton to campaign on his own or to appear with his wife at events right now, though they will eventually campaign together, said Howard Wolfson, a senior campaign adviser.

Mr. Wolfson said that Mrs. Clinton’s references to her husband were not scripted, and that he did not know whether the couple had cooked up a Dunkin’ Donuts joke — in which she said, a few times, that Mr. Clinton had gained 20 pounds from his pit stops there, and that she would need voters’ help to keep off the pounds.

“I think it’s hard for her to think about New Hampshire without thinking about him,” Mr. Wolfson said.

Mr. Clinton finished second in the New Hampshire primary in February 1992 despite a winter of controversy over his draft record and other problems, and he declared himself “the comeback kid.”

Today he is exceptionally popular among Democrats in the state; in interviews this past weekend, several New Hampshire Democrats recalled their first conversations with him in 1992 as if they had just happened.

Mrs. Clinton’s informal references to “Bill” turned off a few Democrats, who said they found it distracting or informal. Yet political analysts said her casual references showed a certain assuredness, since many politicians, particularly women, are careful about saying or doing anything to suggest they are under the sway of their spouses.

“I think the way she was teasing about him, and not shying away from their years together, projected a nice confidence,” said Dante Scala, an associate professor of politics at Saint Anselm College in Manchester. “It helps engender early good will that can help build a candidacy.”

War supporters disdain a withdrawal, but what about winning?

At this point, it's kamikaze strategy in Iraq
Jonathan Chait
L A Times

February 11, 2007

THERE IS something genuinely bizarre about those remaining supporters of President Bush's strategy in Iraq. It is not just that they are wrong — being wrong happens to all of us from time to time. It's that they are completely detached from reality.

Their arguments have nothing to do with what is actually happening in Iraq. They aren't claiming that Bush's critics have a wrong impression of what's happening in Iraq. They just seem to have no interest in the subject themselves. Their arguments take place almost entirely at the level of abstraction.

If you follow the news in Iraq, the story has become depressingly familiar. Prime Minister Nouri Maliki is a creature of hard-line Shiite sectarians, and his government has been deeply infiltrated by Shiite militias. Everything he has done in his job has been toward the end of giving the Shiites an upper hand over the Sunnis.

Shiite militias have infiltrated the Iraqi army. We're equipping and training the bad guys. The Shiite militia members who haven't joined the army lay low when our troops patrol Baghdad, so that we fight the Sunnis and leave them standing. As Tom Lasseter of McClatchy Newspapers reported a week and a half ago, "The U.S. military drive to train and equip Iraq's security forces has unwittingly strengthened anti-American Shiite Muslim cleric Muqtada Sadr's Mahdi Army militia."

That's why Maliki supports the surge. To the extent it succeeds, the surge will do a faster and better job of driving Sunnis out of Baghdad. But why should we want to help him do that?

The critiques of Bush's strategy all flow from this interpretation of events. The administration's critics say that our current role has the unintended but unavoidable effect of furthering sectarian warfare. If we stop cooperating with one party to a civil war, we can't make things much worse. We might possibly make them better: If we're no longer doing the Shiites' fighting for them, perhaps they'll have to bargain with the Sunnis.

What do the administration's supporters say to this? Let's look at a brief survey. Sen. Joe Lieberman (I-Conn.), one of the most vocal supporters of Bush's strategy, has made two major statements on the war in 2007. In the first, a letter in January, he wrote that "withdrawing from the fight is not a sound, long-term policy for the national security of the United States. Withdrawing from the fight is a recipe for defeat." How did Lieberman envision us winning? What about the reports that our actions are simply fueling the civil war? His letter had nothing to say.

Since then, Lieberman delivered a speech on the war, and that was even worse. The entire point of it was that a Senate vote of no confidence in Bush would demoralize our allies and embolden the enemy. Nothing at all about how the Bush strategy could work.

OK, you say, so maybe Lieberman has nothing of substance. But he's a politician, and they craft their words for sound bites. So surely the intellectuals who support Bush must have something deeper, right?

Sadly, no. The Weekly Standard — Bush's strongest bastion of remaining support — has editorialized about the war for three consecutive issues. The first editorial asserted that "abandoning American efforts to control the violence in Iraq would lead to an increase in violence" but offered no evidence to support this claim. It did not mention Maliki's clear lack of interest in making peace with the Sunnis nor the infiltration of the Iraqi armed forces.

The next editorial, by Executive Editor Fred Barnes, consisted of an extended analogy to Vietnam. The closest Barnes came to a substantive point was pointing out that war opponents had denigrated the Vietnamese government too. Did this mean we're wrong to denigrate the Iraqi government today? Barnes did not say.

And the next editorial consisted entirely of attacking proponents of the anti-surge resolution as cowards. It didn't even bother to make a claim that we're winning, or we could still win, or withdrawing would make things worse.

So, there you have it, the case for supporting Bush: Trust the commander in chief, don't undermine the troops, withdrawal equals defeat. These aren't arguments to support Bush's strategy, they're generic pro-war arguments. Change a few details and these lines could support Napoleon's invasion of Russia or the Crusader occupation of Jerusalem or almost any war. Generic pro-war arguments may be trite, but that's what you turn to when you've given up on reality.

Putin Says U.S. Is Undermining Global Stability

February 11, 2007
New York Times

By THOM SHANKER and MARK LANDLER
MUNICH, Feb. 10 — President Vladimir V. Putin of Russia accused the United States on Saturday of provoking a new nuclear arms race by developing ballistic missile defenses, undermining international institutions and making the Middle East more unstable through its clumsy handling of the Iraq war.

In an address to an international security conference, Mr. Putin dropped all diplomatic gloss to recite a long list of complaints about American domination of global affairs, including many of the themes that have strained relations between the Kremlin and the United States during his seven-year administration. Among them were the expansion of NATO into the Baltics and the perception in Russia that the West has supported groups that have toppled other governments in Moscow’s former sphere of influence.

“The process of NATO expansion has nothing to do with modernization of the alliance,” Mr. Putin said. “We have the right to ask, against whom is this expansion directed.”

He said that the United States had turned the Organization for Security and Cooperation in Europe, which sends international monitors to elections in the former Soviet sphere, “into a vulgar instrument of insuring the foreign policy interests of one country.”

The comments were the sternest yet from Mr. Putin, who has long bristled over criticism from the United States and its European allies as he and his cadre of former Soviet intelligence officials have consolidated their hold on Russia’s government, energy reserves and arms-manufacturing and trading complexes.

Rubble from the Berlin Wall was “hauled away as souvenirs” to countries that praise openness and personal freedom, he said, but “now there are attempts to impose new dividing lines and rules, maybe virtual, but still dividing our mutual continent.”

The world, Mr. Putin said, is now unipolar: “One single center of power. One single center of force. One single center of decision making. This is the world of one master, one sovereign.”

With the German chancellor, Angela Merkel, the American defense secretary, Robert M. Gates, and a Congressional delegation sitting stone-faced, Mr. Putin warned that the power amassed by any nation that assumes this ultimate global role “destroys it from within. It has nothing in common with democracy, of course.”

“Today we are witnessing an almost uncontained hyper use of force in international relations — military force,” he said.

“Primarily the United States has overstepped its national borders, and in every area,” said Mr. Putin, who increasingly has tried to re-establish Russia’s once broad Soviet-era influence, using Russia’s natural resources as leverage and defending nations at odds with the United States, including Iran.

American military actions, which he termed “unilateral” and “illegitimate,” also “have not been able to resolve any matters at all,” and have created only more instability and danger. “They bring us to the abyss of one conflict after another,” he said. “Political solutions are becoming impossible.”

The comments irritated some European leaders and prompted sharp criticism from the Americans in attendance. Senator John McCain, the Arizona Republican widely expected to make a bid for the White House, made a rebuttal that began, “In today’s multipolar world, there is no place for needless confrontation.” He said that the United States won the cold war in partnership with powerful nations of Western Europe, and that “there are power centers on every continent today.”

Mr. McCain then hit back at Mr. Putin more directly. “Will Russia’s autocratic turn become more pronounced, its foreign policy more opposed to the principles of the Western democracies and its energy policy used as a tool of intimidation?” he asked. “Moscow must understand that it cannot enjoy a genuine partnership with the West so long as its actions, at home and abroad, conflict fundamentally with the core values of the Euro-Atlantic democracies.”

Russia has also faced criticism from the United States and other Western countries that believe it has used energy reserves and transport pipelines to reward friendly countries and to punish those seeking to distance themselves from Kremlin control. Some analysts saw the tone of the speech as evidence of how much oil and mineral revenues have strengthened Mr. Putin.

The occasion of the speech was the 43rd Munich Conference on Security Policy — an event begun deep in the cold war, when Germany was divided and hundreds of thousands of American troops were stationed in Western Europe as a bulwark against Communist Warsaw Pact forces.

Mr. Putin began with an apology for the tough talk to come. But during a lively question and answer period full of challenges and rebukes, the Russian president indicated that he relished provoking the international audience of legislators, government leaders, political analysts and human rights advocates.

“I love it,” Mr. Putin said as he reviewed a long list of questions. He has long enjoyed high and durable public approval ratings at home, in part for standing up to the West and for pursuing an assertive foreign policy with former Soviet states.

He did offer at least two significant and conciliatory statements to the United States.

President Bush “is a decent man, and one can do business with him,” he said. From their meetings and discussions, Mr. Putin said, he has heard the American president say, “I assume Russia and the United States will never be enemies, and I agree.”

And while Mr. Putin denied that Russia had assisted the Iranian military with significant arms transfers, he also criticized the government in Tehran for not cooperating more with the United Nations nuclear watchdog agency or responding to questions about its nuclear program.

Other American lawmakers offered measured criticism after the speech. “He’s done more to bring Europe and the U.S. together than any single event in the last several years,” said Senator Lindsey Graham, Republican of South Carolina. “It was seen as unnecessary bravado.”

Senator Joseph Lieberman, an independent from Connecticut, described the speech as “confrontational,” saying, “some of the rhetoric takes us back to the cold war.”

Iran’s top nuclear official, Ali Larijani, listened impassively from the back of the room. Mr. Larijani’s attendance at the conference had become a sideshow in itself. After accepting an invitation to speak on Sunday, he canceled, citing health reasons, after a tense meeting with the International Atomic Energy Agency in Vienna that concluded with a decision to freeze technical cooperation projects.

Mr. Putin joked that he worried the United States was “hiding extra warheads under the pillow” despite its treaties with Moscow to reduce strategic nuclear stockpiles. And he indicated obliquely that the new Russian ballistic missile, known as the Topol-M, was being developed at least in part in response to American efforts to field missile defenses.

He expressed alarm that an effective antimissile shield over the United States would upset a system of mutual fear that kept the nuclear peace throughout the cold war. “That means the balance will be upset, completely upset,” he said.

Addressing tensions between Europe and Russia over energy exports, Mr. Putin noted that 26 percent of Russian oil was extracted by foreign companies. While Russia is open to outside investment, he said, it has found its businessmen blocked from deals abroad.

The Kremlin has been criticized for attempting to impose registration and taxation laws that could restrict the work of foreign nongovernmental organizations with offices in Russia to aid democratization.

But Mr. Putin said his concerns about the work grew from the fact that they “are used as channels for funding, and those funds are provided by governments of other countries.” This flow of foreign money to assist opposition Russian political organizations, he said, is “hidden from our society. What is democratic about this? This is not about democracy. This is about one country influencing another.”

Mrs. Merkel, in her opening speech, struck a far more diplomatic tone than Mr. Putin, though she alluded to the tensions between Europe and Russia over energy shipments and the independence of Kosovo.

Addressing herself to Mr. Putin, who was sitting in the front row, Mrs. Merkel said, “In my talks with you, I have sensed that Russia is going to be a reliable and predictable partner.” But she added, “We need to speak frankly with each other. There’s no point in sweeping things under the carpet.”

Mrs. Merkel sharply criticized Russia’s recent shutdown of oil shipments to Belarus, which followed a dispute over the price of natural gas deliveries. She is pressing Russia to sign a charter with the European Union that governs energy, which Moscow has so far resisted.

Mrs. Merkel also alluded to another potential confrontation between Europe and Russia. The United Nations is weighing a proposal that would put Kosovo on the path to independence from Serbia, which Russia opposes because it fears that such a move could upset its own turbulent relations with ethnic groups in the Caucasus. Russia has crushed one separatist-minded people within its own borders, in Chechnya, but supports breakaway regions in Abkhazia and South Ossetia, both in Georgia.

“We’re going to come to the stage where we have to decide: does Serbia, does Kosovo want to move in the European direction?” Mrs. Merkel asked. “If that’s the route they choose, both will have to make compromises.”

C. J. Chivers contributed reporting from Moscow.