Feb. 15 (Bloomberg) -- Venezuelan President Hugo Chavez has seized on a legal battle between the state oil company and Exxon Mobil Corp. to drum up backing for his campaign against the U.S. and President George W. Bush.

Oil and Energy Minister Rafael Ramirez called the dispute an ``economic war'' with the U.S. and urged Venezuelans to march in the streets to protest court orders that freeze more than $12 billion of Petroleos de Venezuela SA's assets. Hundreds of oil workers and Chavez supporters held a vigil at the company's headquarters near downtown Caracas last night.

``We're not going to be blackmailed,'' said President of the National Assembly Celia Flores, who joined demonstrators in front of the legislature yesterday. ``They're attacking us because we have the biggest petroleum reserves in the world.''

Chavez is seeking to use the action by the world's most profitable company to galvanize support among poor Venezuelans who are facing food shortages and crime, said Caracas-based pollster Luis Vicente Leon. Though Chavez has frequently accused the U.S. of trying to sabotage his plans to institute what he calls ``21st-century socialism,'' this time he has a tangible example of a clash between U.S. and Venezuelan interests.

``Exxon freezing assets isn't an abstract concept; this is concrete,'' said Leon, who is president of polling company Datanalisis. ``Nobody is going to like that these assets were frozen. He's going to exploit this to the maximum.''

Exxon and Petroleos are in dispute over how much compensation the Irving, Texas-based company should receive for an oil venture that was nationalized last May.

`Imperial Manipulation'

``This is an imperial manipulation with the fingers of the U.S.,'' said Jose Sandrori, a Petroleos employee, at last night's vigil. He wore a red t-shirt with the Exxon Mobil logo covered with a circle and a slash. ``We need to defend the country against the U.S.''

Chavez, 53, has used money from Petroleos, which generates 90 percent of Venezuela's foreign exchange and 50 percent of government revenue, to fund food, housing, education and health programs. Having first taken office in early 1999, he was re- elected in 2000 and 2006.

Chavez's approval rating fell to less than 50 percent in January from 55 percent in December, when voters rejected his plans for constitutional changes that would have enabled him to stay in office indefinitely, Leon said. His current term expires in 2013.

`Destroying Petroleum Industry'

Venezuelan opposition leaders, including Manuel Rosales, the governor of Zulia state who ran against Chavez in 2006, said Chavez was irresponsible in escalating the conflict with Exxon.

``We regret and reject the way that Chavez and Rafael Ramirez have been managing, squandering and destroying our petroleum industry,'' Rosales said in Feb. 12 remarks broadcast by Globovision.

Venezuelan oil output has fallen 24 percent since peaking 10 years ago, based on data compiled by Bloomberg. Foreign direct investment was a negative $2.75 billion in the first three quarters last year, and inflation is running at the fastest pace in Latin America.

This week's anti-foreigner sentiment also targeted the U.K., where a court granted Exxon's request to freeze $12 billion of Petroleos assets. Dozens of demonstrators marched on the British Embassy in Caracas, accusing the U.K. of teaming up against Chavez.

U.K. Draws Ire, Too

``This march is to express our rejection of the British court's order,'' said Gustavo Hernandez, a lawmaker in Chavez's ruling coalition, during the Feb. 13 protest, in comments broadcast by Globovision. ``This wasn't a judicial decision, it's political, with the aim of financially cutting off Venezuela.''

Courts in the Netherlands, the Netherlands Antilles and the U.S. also granted Exxon requests for asset freezes.

The U.S. said it wasn't involved in Exxon's actions.

``We fully support the efforts of Exxon Mobil to get a just and fair compensation package for their assets according to the standards of international law,'' said State Department spokesman Sean McCormack on Feb. 13. ``It is something that has to be litigated between Venezuela and Exxon Mobil.''

Chavez has threatened to cut Venezuelan oil exports to the U.S. Venezuela is the country's fourth-biggest supplier of foreign crude.

``Listen to me, Mr. Bush, Mr. Danger,'' Chavez said during his weekly television broadcast Feb. 10. ``If the economic war continues against Venezuela, the price of oil will reach $200. Venezuela will take up the economic war and more than one country is inclined to join us.''

Taking Control

Petroleos last year took control of four joint ventures in Venezuela's Faja del Orinoco region, which can extract 600,000 barrels of oil a day.

Companies including Chevron Corp. of the U.S., BP Plc of the U.K., France's Total SA and Norway's Statoil ASA signed agreements giving Petroleos a majority stake in the projects. Exxon and Houston-based ConocoPhillips decided to pull out of the country and sought arbitration from a branch of the World Bank on the amount of compensation.

While antagonizing the U.S. may provide short-term political benefits, Chavez runs the risk that his nationalist rhetoric will eventually backfire, said Gunter Heiland, who helps manage $11 billion in emerging market debt, including Venezuelan bonds, at JPMorgan Asset Management in New York.

``The biggest risk is Chavez himself,'' he said. ``If there was no fear of nationalizations Venezuela would have stronger economic prospects.''

To contact the reporter on this story: Matthew Walter in Caracas at mwalter4@bloomberg.net.

Last Updated: February 15, 2008 09:52 EST