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Rio says Olympics threatened by oil reform

By Stuart Grudgings

RIO DE JANEIRO (Reuters) - A proposed cut to Rio de Janeiro's share of Brazil's oil revenues has provoked a furious reaction in the beach-side city, with officials saying the change would jeopardize its ability to host the World Cup and the Olympic Games.

"The reduction in revenues from oil exploration would leave the state of Rio de Janeiro without the conditions to complete the works needed for the 2016 Games," Carlos Arthur Nuzman said in a statement.

The approval of the amendment last week forcing Rio to share its oil riches with other states could cost the state about 7 billion reais ($4 billion) a year, officials say. State officials say the amendment would mean a cut of about 80 percent in Rio's share of future oil royalties.

State Governor Sergio Cabral cried in front of cameras last week, saying the amendment would "break" Rio and that people could forget the World Cup in 2014 and the Olympics if the reform passed in its current form.

Officials have put up a huge banner protesting the change on Rio's iconic Christ the Redeemer statue and are organizing protests on Wednesday, giving public workers the afternoon off to participate.

The oil bills still have to be approved by the country's Senate, and President Luiz Inacio Lula da Silva -- who played a major role in Rio's successful Olympic bid -- has the right to veto any item.

The bills are aimed at giving the government more control over massive, newly discovered oil reserves off Rio's coast, and Lula has promoted them as key to reducing social inequality and pushing Brazil's economy to developed status.

The amendment approved last Wednesday would force the three largest oil-producing states -- Rio de Janeiro, Espirito Santo and Sao Paulo -- to share more royalties from new fields with other states.

(Additional reporting by Rodrigo Viga Gaier in Rio and Marcelo Teixeira in Sao Paulo; editing by Bill Trott)