Fears emerge over $700bn rescue
By Francesco Guerrera, Henny Sender and Michael Mackenzie in New York and Krishna Guha, James Politi and Daniel Dombey in Washington
Published: September 22 2008 20:05 | Last updated: September 23 2008 01:38
The dollar buckled, stocks tumbled and the price of oil jumped on Monday as the $700bn (£376bn) US government bail-out plan for the financial sector made slow progress in Washington and once-mighty Wall Street names turned to Japan to safeguard their future.
Meanwhile, the Federal Reserve threw open the doors to investment in the US banking industry by private equity firms, sovereign wealth funds and corporate investors – in the hope that this would direct much-needed capital to US banks.
The US central bank said it would raise the maximum stake a minority investor could take in a bank holding company from 25 per cent to 33 per cent in some instances and lift the ban on board representation for minority investors.
Morgan Stanley said earlier it would sell a stake of 10-20 per cent to the Mitsubishi UFJ Financial Group (MUFG) in a deal worth up to $9bn. The news came just hours after Nomura, Japan’s largest broker, confirmed it was buying Lehman Brothers’ operations in Asia and was in exclusive talks to secure parts of its business in Europe.
Investors fretted about the pace of negotiations over the plan for a $700bn government fund to buy toxic assets from banks, while also worrying that even if the fund is set up, it may not succeed in turning around the credit crisis.
Until Monday, the US dollar had held up surprisingly well in the face of the past week’s turmoil on Wall Street. But it finally fell back in the face of concern over the cost of the bail-out and the fragile state of the US banking system, sending the price of commodities priced in the US currency soaring.
The dollar lost 2 per cent against a basket of major currencies, with the euro rising 2.6 per cent to above $1.48. Near-term crude oil futures prices jumped more than $25 a barrel during the day – the largest one-day rise in dollars terms ever – as investors were forced to cover positions before the expiry of benchmark contracts.
The S&P 500 dropped 3.8 per cent, giving back nearly all the gains registered on Friday, the first full day of trading after Treasury Secretary Hank Paulson revealed his bail-out idea during a dramatic Capitol Hill meeting. In London, the FTSE 100 fell 1.4 per cent.
President George W. Bush called on Congress to “keep the rescue bill focused on solving the crisis in our financial markets”. People close to the talks said they were not moving as quickly towards resolution as some had hoped, but remained on track.
Senior Democrats in the House and Senate circulated proposals involving tighter oversight, various proposals to allow or require the government to take stakes in companies taking part in the scheme, allow bankruptcy judges to write down mortgages and curb executive pay at banks selling assets to the government fund. Mr Paulson is resisting making pay or the transfer of equity to the government a precondition for selling assets to the fund, arguing this would ensure that only banks on the brink of failure take part.
The Group of Seven industrialised nations said its members “strongly welcome the extraordinary actions taken by the US”. However, other nations said they saw no immediate need to create their own funds to buy distressed assets. On Sunday, Morgan Stanley and Goldman Sachs gave up on attempts to remain as the only two standalone investment banks and became “bank holding” companies to gain expanded access to bank deposits and permanent access to Federal Reserve liquidity support.
Analysts said the speed with which Morgan Stanley turned to Asia for a capital lifeline underscored how quickly the world’s wealth was moving from the US.
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The Short View: Money markets test
By John Authers, Investment Editor
Published: September 22 2008 19:58 | Last updated: September 22 2008 19:58
The price of oil has risen 20 per cent in the past five days and barely anyone noticed. That is because oil’s upheaval is little more than a residual of the financial crisis.
Attempts to resolve the crisis hinge on the Paulson plan to risk $700bn of US public money in a bail-out of toxic securities held by banks.
The equity sell-off on Monday showed doubts about the plan on three levels.
First, is it a good idea? Pundits on left and right balk at the huge commitment of taxpayers’ money to support Wall Street institutions. The government does not get a stake in return; the populace gets nothing other than the avoidance of a meltdown.
Second, will it happen? Those doubts have entered the political process. Members of Congress and two presidential candidates have difficult calls to make in the next two weeks.
Third, will it work? In the long run, an increase in the US government’s indebtedness on this scale will mean huge issuance of Treasury bonds, which will raise bond yields and the mortgage rates payable by consumers. Both are already rebounding. That would harm house prices and toxic mortgage-backed bonds.
Beyond bond yields, mortgage rates and short-term money market rates, the key variable may be the dollar. So far it has fallen. This is a reasonable response to the huge rise in the US deficit.
But if this move is as deflationary as some fear, in the longer term other central banks will cut rates, money will flow to the relative safety of the US and the dollar will rise.
The inverse relationship between oil and the dollar is one of the few financial constants to have survived the past few weeks. Oil has risen as the dollar has fallen. If oil keeps rising, it will squeeze life out of the US economy – and out of the Paulson plan.
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The Short View: Oil and dollar
By John Authers, Investment Editor
Published: September 22 2008 22:02 | Last updated: September 22 2008 22:02
By late morning in New York on Monday, the price of oil had climbed by 20 per cent in barely five days and scarcely anyone had noticed. Then it went into overdrive, hitting $130 at one point before settling at $120.92. Last Tuesday, it traded at $90.51 – a swing of 44 per cent from bottom to top.
This had little to do with the supply of and demand for oil and everything to do with the fallout from the “Paulson plan” – the proposal to risk $700bn of US public money in a bail-out of toxic securities held by banks.
Oil rose as doubts surfaced about the plan.
First, is it a good idea? Pundits on the left and right have balked at the huge commitment of taxpayers’ money to support Wall Street institutions. The government does not get a stake in return and the populace gets nothing, other than the avoidance of a meltdown.
Second, will it happen? Those doubts have entered the political process. Members of Congress – and the two presidential candidates – have difficult calls to make in the next two weeks.
Third, will it work? In the long run, the rise in the US government’s indebtedness will mean huge issuance of Treasury bonds, which will raise bond yields and the mortgage rates payable by consumers. Both are already rebounding. That would harm house prices and toxic mortgage-backed bonds.
A key variable is the dollar. So far, it has fallen in response to the possible huge rise in the US deficit. The markets seem to have gone a step further and assumed that this step will be be inflationary and cause financial assets to lose value.
In that situation, the thing to do was to head for real assets, led by oil, although other commodities, led by silver, also had a strong day. Unfortunately for the Paulson plan, the inverse relationship between oil and the dollar is one of the few financial constants to have survived the past few days.
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Darling pledges crackdown on City bonuses
By George Parker in Manchester
Published: September 22 2008 11:39 | Last updated: September 22 2008 13:46
Alistair Darling, chancellor, on Monday promised a crackdown on City bonuses, tougher financial regulation and the early publication of banking legislation, telling the Labour conference: “The financial system will never be the same again.”
Mr Darling also heralded a tough pre-Budget report to instil “discipline in public finances” but his message to the party gathered in Manchester remained cautiously optimistic about the economic outlook.
The speech was warmly received by delegates but Mr Darling’s aides insisted his strong words about financial excess did not open up a “class war on the City”. The aide said: “Alistair values very highly the role of the financial services sector.”
Mr Darling antagonised Gordon Brown earlier this month when he suggested Britain was facing possibly the most difficult economic circumstances for 60 years, but on Monday the chancellor said recent events had proved him right.
“The economic challenges we have faced in recent months – and recent days – are unprecedented in decades,” he said. “These are very uncertain times.
“But one thing I am certain about is that we have the right prime minister, the right team and the right policies to help the country through.”
Mr Darling said he would introduce banking legislation “in a fortnight” when the Commons returns, giving the Bank of England power to intervene in a failing bank and increase protection for savers if a bank goes under.
The chancellor rammed home a theme of this conference that Labour – with its belief in the role of the state – was better equipped than the Conservatives to tame the wilder excesses of the City. “We believe there is a role for government,” he said.
He lampooned George Osborne, shadow chancellor, for arguing that the root of the recent problems did not lie in the financial markets.
Mr Darling and Mr Brown will be pressing other countries to join efforts to make credit ratings agencies more transparent and to improve cooperation between regulators.
He said: “It’s not a question of light-touch regulation against heavy-handed regulation. It’s about effective regulation.”
The chancellor also urged the Financial Services Authority to take action on “the culture of huge bonuses” in the City.
“It’s essential that bonuses don’t result in people being encouraged to take on more and more risk without understanding the damage that might be done, not just to their bank, but to the rest of us in the wider economy.”
He said this was not “pandering to the unions” but protecting families and businesses which would have to foot the bill of the banking crisis through more expensive loans.
Although he has ruled out tax rises in the short-term to plug the hole in public finances, Mr Darling said: “Discipline in public finances is essential. In the medium term governments everywhere have to live within their means.”
But Mr Darling insisted the outlook was brightening, with oil and food prices starting to come down and inflation showing signs of peaking. Ministers hope that could leave open the prospect of lower interest rates.
“Britain is strong, our economy is sound,” he said. “Times are hard but we must keep thins in perspective,” he said. “We should have confidence in ourselves and confidence in the future.”
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Saudi Arabia seeks to ride out storm
By Abeer Allam in Riyadh
Published: September 22 2008 15:34 | Last updated: September 22 2008 15:34
Amid the gunsmoke it is difficult to tell but analysts and officials in Riyadh argue that the global economic turmoil will have only minimal effects on Saudi Arabia’s economy. They cite the country’s conservative fiscal stance, overseas assets and plentiful oil revenue which they believe will provide insulation from the global financial turmoil.
“The current crisis will have no impact on Saudi banks because of our cautious loan regulations,” Hamad al-Sayari, the governor of Saudi Arabian Monetary Agency, told a pan-Arab satellite channel last week. “Saudi banks are mainly interested in the local economy and do not depend upon foreign activities, which is why they are in a very good position today.”
Perhaps Mr Sayari protests too much. In the first place, the Saudi riyal is pegged to the US dollar. If the dollar weakens so does the riyal – and inflation is imported. And Saudi stockmarket investors were certainly spooked by the events of last week.
The country’s Tadawul All-Shares Index has rebounded after dropping to its lowest close since July 2007, on fears of the impact of the collapse of Lehman Brothers.
“Nothing justifies the market decline except people frightened by the news,” says Beshr Bakheet, head of Bakheet Investment Group in Saudi Arabia. “We do not have direct links to the US market and exposure in the banking system is limited.”
Although the index has dropped by a third this year, analysts say the performance does not reflect economic fundamentals, but rather the fact that retail investors make more than 90 per cent of the market and often respond irrationally to news flow.
In a move intended to support the index, the Capital Market Authority (CMA) last month decided to open the market to non-resident foreigners by authorising Saudi brokers to sell stock swaps. International investment funds had long sought the access to the growing Saudi market, particularly amid the regional economic boom triggered by oil’s dramatic rise.
“I do not think there is a close correlation between the economy and the market,” said Tim Gray, chief executive of HSBC investment Bank in Riyadh. “Local investors are increasingly focusing on corporate fundamentals and this will be encouraged by the CMA’s recent moves to open the market to direct foreign participation.”
The Saudi Tadawul is the largest securities market in the Gulf. However, traders and analysts suggest that the retail traders create market volatility which might be alleviated by more funds and institutional investors. Such speculative investment is widely attributed to causing a dramatic drop in 2006, when the market lost $500bn in value and dropped from its peak of $834bn.
“There is adequate liquidity in the market, it is completely different from 2006,” Mr Gray said. “Back in early 2006, we had dramatic circumstances, with no liquidity – many offers but no bidders. The situation is nothing like this today.”
Saudi Arabia has traditionally been less disposed to foreign investment compared with neighbouring countries.
However, since 2002, the kingdom has moved to liberalise its capital markets as it prepared for accession to the World Trade Organization, a process which was completed in 2005. Among its other recent reforms, the CMA has insisted on public disclosure of shareholder stakes in listed Saudi companies which exceed 5 per cent.
International Monetary Fund chief Dominique Strauss-Kahn said in a meeting with the Gulf Co-operation Council central bank governors in Jeddah last week said that the region’s banking and financial sectors had proven ”quite resilient” to the crisis.
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UAE central bank pumps in liquidity
By Simeon Kerr in Dubai and Robin Wigglesworth in Abu Dhabi
Published: September 22 2008 14:07 | Last updated: September 22 2008 23:46
The United Arab Emirates central bank said on Monday it would pump as much as Dh50bn (€9.3bn, £7.4bn, $13.6bn) into the banking sector as the oil-rich Gulf state moved to lubricate its local interbank market.
The Abu Dhabi-based institution set up the emergency fund to battle a credit crunch in the UAE, which has deepened since the collapse of investment bank Lehman Brothers last week. It mirrors similar attempts by other central banks to ease liquidity problems and stem a slide towards apparent financial meltdown.
“The central bank has decided to set up a facility amounting to Dh50bn for banks operating in the UAE, to be used by these banks if so needed,” it said, without elaborating further.
As lines of credit to global banks dried up last week, local institutions have found it harder to raise funds internationally. As a result local funding costs have risen, leading to concerns of a domestic liquidity drought.
Sharp lending growth, which is up as much as 57 per cent in the 12 months to the end of June, has not been matched by growth in deposits. There is also increasing concern about banks’ exposure to an over-inflated real estate market.
Intervention has not been confined to the UAE. Kuwait’s sovereign wealth fund interceded last week to stem sharp falls in the country’s equity market. The Kuwaiti central bank said on Monday it was willing, if required, to pump money into its banking system, but added that overall the banking system was sound.
Central bank officials in Abu Dhabi said the UAE’s actions could be copied elsewhere in the Gulf, especially given the long-term uncertainty around credit markets. “Money is going around in a circle and if the problem is here it will move elsewhere. What is worse is that we won’t know the extent of the problem until a few months’ time,” a central bank official said on Monday.
The UAE central bank “is basically telling the markets they won’t let the liquidity situation deteriorate too much”, said Marios Maratheftis, head of research at Standard Chartered, Dubai.
While the central bank wants to restrict credit growth to try and curb inflation, it does not want the economy to grind to a halt, imperilling growth. “It is a Goldilocks story: they don’t want it too hot, and not too cold either,” Mr Maratheftis said.
Eibor, the three-month Emirates interbank offered rate, remained little changed on Monday at 3.61 per cent, 161 basis points above the 2 per cent benchmark rate. The UAE pegs its currency to the dollar, which obliges the central bank to follow interest rates set by the US Federal Reserve.
The injection did not affect money market rates immediately because of market inefficiencies, according to Mr Maratheftis. But the “significant” sum being made available, the equivalent of about 5.6 per cent of the UAE credit market, ran the risk of stoking inflation, he said.
A lack of liquidity had been detected in August as significant deposits of international money abandoned the UAE.
Investors had moved into the dirham, betting that the central bank would de-peg from a weakening dollar or revalue the currency to damp inflation.
Many traders reversed those bets once the dollar started to strengthen over the summer, while financial contagion prompted many others to liquidate their holdings in the UAE and some other Gulf states.
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Banks risk severe correction due to big realty exposure
By Simeon Kerr and Andrew England, Financial Times
Published: September 19, 2008, 23:42
London: When a western banker was carrying out due diligence on a UAE bank this year, his conversation with the chief risk officer was somewhat unsettling.
"This market isn't going down - it's a one-way trade. Real estate and equity here is a once-in-a-century opportunity," the risk officer told the team of financiers from one of the world's more conservative banks.
Such an uncharacteristically bullish tenor prompted the banker to quip that the bank should promote the risk officer to head of sales.
The exuberant real estate markets of Dubai, and now Abu Dhabi, have replaced oil as the driver behind the boomtown mentalities in the business hub and capital of the UAE these days.
But the rapid speed with which an investment-grade asset such as Lehman Brothers can be destroyed has highlighted the uncertainties in global finance.
And bankers in the Gulf, previously thought of as isolated from global econ-omic turmoil, are discovering how insulated the region really is as foreign money flies out, sending weakening markets into freefall and prompting a mini-credit crunch in the UAE's interbank market. That has turned eyes back on to the banking sector and is reviving fears that the region's banks are overexposed to the country's overheating property sector.
A long summer, followed by Ramadan, is leaving many real estate watchers in the dark about the sector's health. Talk of a slowing market is compounded with better rental terms at some of the city's developments. And property stocks have taken a particular beating over the summer.
The UAE Central Bank, officials say, is keeping even closer tabs on banks' exposure to real estate.
The central bank requires banks to limit property exposure to 20 per cent of customer deposits, but with the construction industry not included in that category, the rules provide leeway to raise exposure further.
Recession-proof
"Given the repercussions of the shocking global economic and finance situation, the prime question is: are the Gulf banks recession-proof?" says Mardig Haladjian, general manager of Moody's, the ratings agency, in Cyprus.
Analysts have been warning of a potential downside correction during the next two years as supply catches up with demand, especially in the oversupplied apartment segment.
Anecdotal evidence among real estate brokers indicates that it could come sooner because the market for large plots in some developments has seized up. Landlords are starting to ease payment terms and even drop prices.
But a clearer view on the outlook for Dubai's real estate market will not emerge until the Cityscape conference in Dubai early next month, which often sets the tone for market activity in real estate.
"There has to be a correction, which should be welcomed," says Philipp Lotter, a corporate debt analyst with Moody's in Dubai. "And the correction could be imminent."
Few analysts predict a real estate collapse, given the continuing flow of expatriates into the emirate and the government's ability to steer the market towards a soft landing.
"Remember, the two largest Dubai developers have large government ownership," says Yousuf Khan, an analyst who covers Gulf banks for Fitch Ratings in Dubai. "If there are pressures on the property market then they could try to manage supply."
And five years of surging liquidity have given most UAE banks sturdy balance sheets.
A harder-than-expected landing, however, could put several lenders in trouble.
"We do feel that some banks have over-extended themselves in some areas for too long, such as lending almost 100 per cent of the value to purchase property," says Haladjian.
Those with higher exposure to real estate and construction will expose themselves to a severe fin-ancial correction in an economic downturn, he says, and monoline lenders are particularly at risk.
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Qatari royal buys stake in Kaupthing
By Robert Anderson in Stockholm
Published: September 22 2008 17:30 | Last updated: September 22 2008 17:30
A member of Qatar’s royal family has bought a 5 per cent stake in Kaupthing Bank, the largest of the Icelandic banks under fire from international investors and rating agencies.
Sheikh Mohammed Bin Khalifa Al-Thani has become Kaupthing’s third-largest shareholder by buying 37.1m Kaupthing shares in the open market for $285m following a year-long push by the bank to market itself to Middle Eastern investors.
Icelandic bank share prices have been under pressure because the island’s economy overheated and then slowed down abruptly, while investors grew increasingly worried about the sector’s fast international expansion at a time when credit conditions were tightening.
Sheikh Mohammed paid Isk690 ($7.49) for each share, at the end of last year they had been worth Isk880. Over this period Kaupthing’s shares have lost almost half their value because as well as falling 16 per cent from a low base, the Icelandic currency has dropped almost 30 per cent.
Danish banking bail-out
Denmark’s central bank has been forced to bail out Ebh bank, the country’s sixth-largest, as small banks struggle to remain liquid while their real estate loans go bad and funding conditions tighten.
The central bank and a group of banks have provided unspecified liquidity to Ebh so that it can continue in operation while it seeks to dispose of subsidiaries ahead of a sale of the bank itself.
Ebh announced on Monday that it had realised the need for further loan provisions and that consequently it expected to make no profit this year.
It dismissed Finn Strier, managing director, and appointed Jens Nielsen as his replacement.
Last month, the central bank took over Roskilde Bank after a preliminary audit showed that it was insolvent after expanding aggressively into real estate lending.
On Monday, Kaupthing’s shares closed up 2.9 per cent to Isk53.
Sheikh Mohammed’s investment is the first sign that some big investors believe that the banks have been oversold.
“Kaupthing has performed well in the current market turbulence and has proven it can change and adapt to a new reality in banking,” Sheikh Mohammed said in a statement.
Kaupthing has tried to adapt by halting lending growth, cancelling acquisitions and making disposals and by diversifying its revenues and funding, particularly by attracting deposits through internet bank accounts.
The Icelandic bank welcomed Sheikh Mohammed’s investment, which it believes will strengthen the bank’s shareholder base and open up business opportunities in the Middle East.
The bank was already instrumental in Sheikh Mohammed’s acquisition of a 12.6 per cent stake in the island’s Alfesca food company in June.
“It’s important for us to have financially strong and liquid investors in the shareholder group,” Hredar Mar Sigurdsson, chief executive, told the Financial Times.
He also confirmed that the bank still intended to denominate its shares in euros from January to encourage foreign investors, despite reservations from the island’s central bank. Diversifying Kaupthing’s shareholder base will improve share liquidity and stability.
About 75 per cent of Kaupthing’s shares are still held by domestic investors – with Exista, a financial group, holding 25 per cent.
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UN watchdog probe of Syria inconclusive
VIENNA, Sept 22 - A UN watchdog has found nothing so far to substantiate U.S. intelligence suggesting Syria had almost built a covert nuclear reactor before Israel bombed the site last year, the agency’s chief said on Monday.
Syria has denied hiding nuclear activity from the International Atomic Energy Agency and said the targeted site was a disused military building. It granted IAEA investigators access to the remote desert site at al-Kibar in June.
”Samples taken from the site are still being analysed and evaluated by the agency but so far we have found no indications of any nuclear material,” IAEA Director Mohamed ElBaradei told a meeting of the agency’s 35-nation board of governors.
He said the IAEA had asked Syria for access to documentation and other locations to verify the intelligence.
”Syria has not yet responded to this request but has indicated that any further developments would depend on the results of the samples taken during the first visit.”
Partial results of environmental swipe samples showed no traces of carbon or maraging steel, an especially strong alloy of the metal, that would have indicated a graphite nuclear reactor, diplomats familiar with the inquiry told Reuters.
They said more comprehensive results from laboratories in several countries would not be available for another few weeks.
The United States said its intelligence indicates the alleged reactor was built with North Korean expertise and was designed to make plutonium for nuclear weapons.
Satellite pictures indicated Syria swiftly bulldozed the area, removed debris and erected a new building in a possible cover-up, US nuclear analysts say.
Some diplomats versed in the issue said inspectors believe Syria might have buried rubble -- possibly key evidence -- from the bombed target under a slab of concrete, while others said it appeared debris was removed to an unknown location.
Diplomats said ahead of the IAEA meeting that Syria had not dealt with IAEA requests to revisit al-Kibar and examine three military sites seen as interlinked, arguing such exposure would endanger its national security.
U.S. intelligence indicated the reactor had not begun to process material before Israel’s attack, so there would have been no radioactive material to detect.
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Saudi Arabia urged to end discrimination
By Abeer Allam in Riyadh
Published: September 23 2008 02:21 | Last updated: September 23 2008 02:21
Human Rights Watch urged the Saudi government on Monday to end what it called the “systematic discrimination” against the Ismaili religious minority in the country.
The New York-based rights group described the Ismaili, an offshoot of Shia Islam, as “second-class” citizens in the kingdom. It called on the Sunni Muslim Saudi government to establish a national committee to end employment, education and religious discrimination in the kingdom.
“The Saudi government preaches religious tolerance abroad, but it has consistently penalised its Ismaili citizens for their religious beliefs,” said Joe Stork, deputy Middle East director at Human Rights Watch.
In July 2008 King Abdullah opened an interfaith conference in Spain initiated by Saudi Arabia and attended by Muslim, Jewish, Christian, Hindu and Buddhist religious leaders.
“State-sponsored and officially tolerated discrimination against the Ismailis of Najran seriously threatens their identity and denies them basic rights. The authorities are shutting them out from education, government employment and professions,” Mr Stork said.
HRW said as many as 1m Ismailis live in Najran province on the south-west border where Saudi meets Yemen. Saudi Arabia took over Najran from Yemen in 1934.
The HRW report said: “Saudi authorities at the highest levels continue to propagate hate speech against this religious minority.’’
In April 2007 the Council of Senior Religious Scholars, which is responsible for the official interpretation of Islamic faith, described Ismailis as “corrupt infidels, debauched atheists”. Other Saudi officials did not rebut or disown those statements, the group said.
The report said that in April 2000 hundreds of Ismailis were arrested and tortured after clashes with the authorities triggered by the arrest of a cleric accused of sorcery. Others were dismissed from government positions, while 17 remain in prison.
Saudi Arabia, the birthplace of Islam, follows Wahhabism, a strict interpretation of Sunni Islam.
According to the report judges in Saudi Islamic courts “routinely discriminate against Ismailis”. It referred to a decision in March 2006 in which a Saudi judge annulled the marriage of an Ismaili man to a Sunni woman on grounds that he lacked religious qualification. Another judge refused to allow an Ismaili lawyer to represent a Sunni client.
“The measure of Saudi religious tolerance [should] be its practice at home, not only what it preaches abroad,” Mr Stork said.
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Russia-Venezuela moves stir cold war ghosts
By Benedict Mander in Caracas and Daniel Dombey in Washington
Published: September 22 2008 22:56 | Last updated: September 22 2008 22:56
A Russian military fleet set off from its Arctic Sea port of Severomorsk on Monday, bound for military exercises off Venezuela in mid-November that would mark the first such Russian action in the region since the end of the cold war.
Coming just days after supersonic, nuclear-capable Tu-160 bombers streaked home to Russia after a flying visit to Venezuela, the move evokes images of the time when Latin America was a prime theatre of US-Soviet rivalry, from the 1962 Cuban missile crisis to the 1980s civil wars in Nicaragua and El Salvador.
As Washington criticises Russia for seeking to extend its sphere of influence in neighbouring countries, the Kremlin has sought to embarrass the US by deepening ties with a part of the world the US has traditionally seen as its backyard.
US officials have reacted with thinly veiled scorn to the moves, feigning surprise that Russia had ships that could travel so far. They depict the recent military co-operation between Venezuela and Russia as a crude response to Washington’s support for Georgia, and as a gambit that has symbolic, rather than practical, effect.
“This isn’t the cold war. There is no immediate threat to US security,” said Johanna Mendelson Forman, a security analyst at the Center for Strategic and International Studies.
But she added that countries such as Venezuela had taken the opportunity to boost their regional influence in recent years while US attention has been focused on the Middle East. “It’s going to be an opportunity for the new occupant of the White House to rethink what we’ve been doing in the region, and rebuild our legitimacy, a lot of which has been squandered,” she said.
Hugo Chávez, Venezuela’s president, who is visiting Russia this week to discuss co-operation across a broad range of issues including energy and arms deals, says Venezuela’s military partnership with Russia is aimed at preparing against possible “threats” from the US.
Buoyed by wealth earned from high oil prices, Venezuela has spent over $4bn (€2.7bn, £2.2bn) on Russian equipment since 2005, representing a significant chunk of a global international arms trade worth more than $40bn a year.
Caracas has bought fighter aircraft, helicopters and 100,000 Kalashnikov assault rifles, while Russia is also planning to sell anti-aircraft systems, armoured personnel carriers and fighter jets, according to Sergei Chemezov, the head of Russian Technologies, a venture capital fund.
“Chávez has been well received in Russia because he is making extremely good arms purchases,” says Rocío San Miguel, an analyst in Caracas who runs Citizen Control, a non-governmental organisation that monitors Venezuela’s armed forces.
But Ms San Miguel says the silence of Venezuela’s neighbours on the exercises is a sign of their discomfort at Mr Chávez’s combative stance. “It’s one thing to buy arms but it’s quite another thing to use this to import cold-war tensions to the region,” she says.
Even so, analysts point out that Russia’s core interests remain closer to home.
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Putin calls for greater guarantees of bank deposits
22.09.2008, 15.32
MOSCOW, September 22 (Itar-Tass) -- Russian Prime Minister Vladimir Putin has called for increasing the guarantees of insured deposits in the banks. He issued instructions to the government ministries concerned and the Central Bank to look into this possibility at a meeting of the Cabinet’ s presidium on Monday.
Putin also said banks with high credit ratings would be allowed to contest the right to have loose federal treasury funds placed on their deposit accounts.
Earlier on Monday there was the first such auction, but a more 330 billion rubles of the 600 billion rubles offered were claimed.
The prime minister said this looked a good sign to him, because supply was well above demand for this resource and there was no shortage in sight.
The demand for REPO loans offered by the CBR was also on the decline, which was a sure sign the Central Bank was offering far more money than was in real demand on the market.
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Russian, Venezuelan oil, gas companies may create consortium - Sechin
22.09.2008, 15.06
MOSCOW, September 22 (Itar-Tass) -- Russian and Venezuelan oil and gas companies may create a consortium to produce hydrocarbons in Latin America, First Deputy Prime Minister Igor Sechin said on Monday, as he briefed the Cabinet’s presidium on the results of his last week’s working trip, which took him to Cuba, Venezuela and Nicaragua.
“With the participation of oil companies a consortium may be created for operations in Venezuela and other countries of that region,” he said.
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Finance Ministry to auction 3-month loan of 600 bln rubles on Sept 22
21.09.2008, 19.15
MOSCOW, September 21 (Itar-Tass) -- The Russian Finance Ministry will auction a three-month loan of 600 billion rubles to 28 banks on September 22, a ministry source told Itar-Tass on Sunday.
The loan will have the minimal annual interest of 8.75%.
The ministry has decided to offer any banks, which meet its standards, to apply for the loan. The decision was coordinated with the Central Bank, the source said. Previously, that possibility was given to only three largest banks of Russia: Sberbank, VTB and Gazprombank.
“ This time another 25 banks, which meet the criteria of the federal government resolution on placing federal budgetary funds on bank deposits, will have the opportunity,” the source said.
There will be two more auctions offering loans with a small period next week.
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Russia, France agree on cooperation in space, energy, ecology
21.09.2008, 00.22
SOCHI, September 21 (Itar-Tass) -- Russia and France on Saturday signed a number of bilateral agreements to develop cooperation in various areas. The signing was a result of the meeting of the Russian-French commission on bilateral cooperation on the head of government level.
The economy ministers of the two countries signed a frame agreement between the Russian and French governments to promote the implementation of the projects related to the Kyoto protocol. An agreement was signed on the foreign ministerial level on development of youth exchanges. The education ministries signed a joint statement on strategic partnership in the area of education, scientific research and innovations.
The commission meeting also resulted in signing of a memorandum on cooperation in the field of energy efficiency and renewable energy sources. Russia and France also agreed to cooperate on the level of associations of businessmen.
The signed contract between Roskosmos and Arianspace for purchasing ten Soyuz ST rockets is believed to be the most concrete agreement reached at the meeting. The first launch is planned for 2009 from the cosmodrome of Kourou, French Guiana. The cost of the project is 300-400 million dollars. It is planned to launch three-four Soyuz-ST rockets a year beginning 2010.
France is among Russia's main foreign trade partners. The trade turnover between the two countries is steadily growing. It amounted to 16.4 billion dollars in 2007, increasing 2.8 times in the past five years.
The Russian-French commission on bilateral cooperation on the head of government level is the main coordinating body determining a strategy and guidelines to develop relations between the countries in trade, economic, scientific, technical, social, cultural and other areas. It was established on the Russian and French presidents' initiative in 1996.
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Russia can ruin Ukrainian economy in one instant
22.09.2008 Source: Pravda.Ru URL: http://english.pravda.ru/business/companies/106417-russia_ukraine-0
A chill out of relations between Russia and Ukraine may lead to a trade war between the two brotherly nations. Russia will obviously suffer losses as a result of a possible war, although Ukraine will have to face much bigger problems at this point.
Ukraine’s Investgazeta magazine wrote that Russia may eventually pull out from a free trade agreement with Ukraine. The export of the Ukrainian tube rolling, machine-building and defense industries will face a very serious danger at this point. Hundreds of Ukrainian enterprises will suffer multi-million losses, for the production of many of them will become a lot less competitive on the Russian market. Other companies will fail to redirect their export shipments within a short period of time. To crown it all, many Ukrainian companies will not be able to reach other European markets because of the fact that their products would be noncompetitive there.
Four Ukrainian meat-packing factories were forced to shut down their production in 2006, when Russia introduced an embargo on shipments of Ukraine’s meat and milk products in 2006.
Andrei Blinov, an expert of the Ukrainian Institute for Russia, said that Ukraine may also raise the question of anti-dumping investigations against Russian goods and restrict the shipments of metallurgic and chemical products from Russia, for example.
The expert added, however, that Ukraine had fewer opportunities for such a response to the Kremlin.
“Russia mainly delivers raw materials to Ukraine, and this raw material is categorized as critical, i.e. extremely important for the Ukrainian industry,” the expert said.
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UFOs invade Russian skies
22.09.2008 Source: Pravda.Ru URL: http://english.pravda.ru/science/mysteries/106416-ufo-0
Residents of a small town of Verkhnaya Salda (Upper Salda) in Russia’s Ural region are concerned about the invasion of unidentified flying objects. Several people saw ball-like objects slowly moving across the sky above the settlement on one and the same day.
Dmitry Volobuyev, the director of the monitoring station of the regional association of ufologists, said that a local sky surfer, Yevgeny Mamin, was the person who got the closest to the mysterious objects.
The man was flying his hang-glider, when he saw a luminous bright-yellow ball. The ball was not producing any noise whatsoever. Mamin ascended a little at the height of 100 meters. The object was hanging in the air on the same level with his glider and was moving slowly.
Another local resident, Svetlana Berezkina, was going home with her daughter at the same time, at about 11:00 p.m. They both described the UFO as a small yellow ball, which was moving slowly. They both could see that the object was staying not too high above the ground. The object was not illuminating the dark sky, although it was producing light itself. It was not producing roaring sounds like those that can be heard from other aircraft.
Residents of the village of Veloba, which is situated near Verkhnaya Salda, saw a yellow spot pictured against the background of cloudless blue sky. The spot appeared on the pictures, which people took during the same period.
Dmitry Volobuyev was invited to Salda to investigate the incident. The specialist was provided with photographs of the UFO as well as with a cell phone video.
“When I watched the cell phone video, I recollected other similar incidents and asked the people if someone in their settlement was having a wedding that day. The people said that they indeed had a wedding in the town. It turned out that the newlyweds had launched a balloon with a candle in the air that night. The people took the balloon for an UFO. I have seen many of such incidents before,” the ufologist said.
“As for the photograph, we have not made a conclusion yet. However, the spot on the photo looks like a bug or a bumblebee that flew close to the object-glass. One can even see that the oblong body has little wings. Since the large insect was moving fast, the photographer might have not noticed it during the moment when the picture was taken,” the disappointed ufologist said.
Novy Region
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U.S. plays down Russia's planned Arctic marking
14:42 | 19/ 09/ 2008
WASHINGTON, September 19 (RIA Novosti) - The U.S. State Department said on Friday that if Russia passes a new law defining its Arctic boundaries, this will have purely domestic consequences and no international legal significance.
"Arctic nations use different criteria for defining the portions of their territory considered to be part of their Arctic regions. The definitions are generally for the purpose of internal administration and have no standing in international law," the statement said.
Russian President Dmitry Medvedev said on Thursday that his country's competitiveness on global markets depended on Arctic resources and stressed the need to adopt a law establishing the frontiers of Russia's Arctic zone.
"We need a firm normative-legal base regulating Russia's activity in the Arctic. First of all the federal law on the southern boundary of Russia's arctic zone should be completed and adopted," he said.
Under international law, the five Arctic Circle countries - the U.S., Canada, Denmark, Norway and Russia - each currently have a 322-kilometer (200-mile) economic zone in the Arctic Ocean.
The U.S. statement also said: "the Russian Federation is within its rights to delineate an extended continental shelf so long as the outer limits are consistent with international law as supported by sound scientific data."
Russia has undertaken two Arctic expeditions - to the Mendeleyev underwater chain in 2005 and to the Lomonosov ridge last summer - to back up its claims to the region.
The area is believed to contain vast oil and gas reserves and other mineral riches, likely to become accessible in future decades due to man-made global warming.
Russia earlier said it would submit documentary evidence to the UN of the external boundaries of the Russian Federation's territorial shelf in 2009.
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Russia to set new border line in the Arctic
12:17 | 22/ 09/ 2008
MOSCOW. (RIA Novosti political commentator Maxim Krans) - Recent discussions about national geopolitical concerns and spheres of interest have predictably reached the issue of Russia's northern border.
President Dmitry Medvedev set the task of formalizing Russia's right to a considerable part of the Arctic shelf at the September 17 meeting of the country's Security Council.
This will "turn the Arctic into Russia's resource base of the 21st century," he said at the meeting held to discuss protection of Russia's national interests in the Arctic.
According to experts, that part of the Arctic Ocean, which Russia has always considered as part of its national territory, contains about 25% of the world's shelf hydrocarbon resources. Huge offshore deposits of natural gas have been discovered in the Barents and Kara seas.
Russia reels in one-sixth of its fishing output there, and the region also has the Northern Sea Route, the shortest way from Europe to America and Asia, including for the transportation of oil and gas from Arctic deposits. That region and the adjacent northern territories have enough resources to maintain humankind for decades.
It is therefore not surprising that many countries have laid claim to its wealth.
Russia has always considered the vast triangle of 1.2 million square kilometers between the North Pole at its top and Russia's shoreline between the Kola Peninsula and Chukotka at its bottom as its own.
But the UN Convention on the Law of the Sea, which was adopted in December 1982 and came into force in November 1996, ruled that the five Arctic Circle countries - the U.S., Canada, Denmark, Norway and Russia - will each have a 322-kilometer (200-mile) economic zone in the Arctic Ocean.
To regain its loss, Russia needs to prove that its continental shelf, or more precisely the Lomonosov Ridge, is the direct continuation of the Siberian continental crust. Several Russian expeditions have been sent there to prove the point in the last two years.
A Russian flag was planted on the seabed during an expedition to the North Pole organized in August 2007 at the initiative of Artur Chilingarov, a Russian lawmaker who headed the symbolic dive beneath the North Pole last August. The mission did not provide any additional scientific arguments in favor of Russia's claim, but it has increased interest in the Arctic shelf's resources and sparked off numerous international discussions.
These expeditions also encouraged the interest of other claimants in the Arctic pie.
Canada has long laid claim to the North Pole and the resource-rich Lomonosov Ridge that lies beneath. Denmark says the disputed ridge - a 1,500-km (932-mile) undersea mountain range that runs past the pole between Siberia and North America - is a geological extension of the northern coast of Greenland.
The United States, Norway and other countries have also joined the fray. Everyone wants a piece of the Arctic pie, the larger the better.
Protecting its right to the ridge is a matter of principle for Russia, for he who gets the bulk of the Arctic shelf hydrocarbon resources will play the dominant role in the world for the next several decades.
However, the political aspect of developing undersea territories is no less important than the economic reasons, as Deputy Prime Minister Sergei Ivanov said at a meeting of Russia's Naval Board last April.
"Legalization of Russia's right to its continental shelf will increase the national territory," he said.
The political and defense aspects of the problem were also discussed at the meeting of Russia's Security Council held on September 12 at Russia's northernmost border station on Franz-Josef Land.
The meeting later continued in Moscow, where President Medvedev said: "This region is of strategic importance for the country. ...We must reliably ensure Russia's national interests in the Arctic for a long term."
To do this, the country should focus on the development of its Arctic territories and the economic revival of the Extreme North, which has been regarded as a useless burden on the budget since the 1980s. The government only sent there what meager funds had been left after all other regions and sectors received their due. As a result, its infrastructure has become dilapidated, depreciation of equipment has reached a critical point, and standards of living are inadmissibly low - with the exception of a few "oases" prospering on hydrocarbon revenues.
Left without the financial assistance of the state, Russia's fleet, including icebreakers, has degenerated so much that foreign shipping companies may soon take over control of the Northern Sea Route. Many countries have already expressed their intention to do so.
The northern territories and the Northern Sea Route are crucial for Russia's expansion in the Arctic. The country must revive them, and do it soon, or forget about developing the Arctic resources.
During the Security Council meeting, President Medvedev instructed the government to draft the fundamentals of Russian state policy in the Arctic by December 1.
Security Council Secretary Nikolai Patrushev said the policy would also include delineating the country's new northern border.
Marking borders on a map is easily done, but getting international recognition for them is quite another matter.
Russia may have a chance to do so only after it files a new claim to the UN Commission on the Limits of the Continental Shelf.
Was it this procedure that Medvedev had in mind when he set the task of protecting "Russia's national interests in the region"?
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The U.S. has no option but to use Russia's Soyuz craft
16:00 | 22/ 09/ 2008
MOSCOW. (Yury Zaitsev for RIA Novosti) - After 2010, the United States will likely be unable to deliver its astronauts to the International Space Station (ISS) on its own. For several years Russia's Soyuz craft will remain the only vehicle available to do that, and the U.S. may find it hard to do without Russian cooperation.
During Senate hearings on Wednesday, September 17, William Burns, Under Secretary of State for Political Affairs, said the U.S. is depending on Russia for its ISS flights and that the Bush administration was in support of a Congressional amendment to exempt Russia's Soyuz vehicles from existing sanctions.
On Tuesday, September 23, the U.S. Congress will consider an amendment, supported by President George W. Bush, allowing the National Aeronautics and Space Administration (NASA) to buy Russian Soyuz spacecraft and launch services.
The Iran Nonproliferation Act of 2000 had banned the purchase of Russian space technologies. The act said the ban would be in effect as long as Russia cooperated with Iran in nuclear technologies.
Following the Columbia shuttle disaster, Russia's Soyuz and Progress spacecraft remained the only means of delivering crew and cargo to the ISS. The Russian Space Agency (Roscosmos) bluntly said NASA should contribute to flight costs.
The American space agency in turn offered to deliver one Russian cosmonaut to the station if Russia agreed to include one American astronaut in a Soyuz crew to make team rotation easier. But the plan ran into difficulties over shuttle service resumption dates. Additionally, the shuttles' reliability is increasingly in question.
In September-November 2005, the Congress amended, and George W. Bush approved, the Nonproliferation Act concerning purchases of Russian spacecraft. The act was not scrapped, however, but put on hold. NASA was cleared to purchase Russia's ISS services through January 1, 2012.
In December 2005, Russia signed a $43.8 million contract with the U.S. to return the U.S. commander of the 12th expedition (ISS-12) from the ISS in April 2006, to launch and return his fellow citizen, flight engineer of the 13th expedition (ISS-13), send American cargo on Russian Progress and Soyuz vehicles to the station early in 2006, and also book a slot on the Soyuz rescue ship for an American member of the ISS-13 in case of an emergency landing.
In October 2006, NASA and Russia concluded another agreement, worth $160 million, to deliver ISS-14, ISS-16 and ISS-18 astronauts to the station on three Soyuz vehicles during 2006-2008. The agreement also stipulated the delivery to the station in 2007-2008 of American cargo with a total weight equivalent to the payload of two Progress ships.
Finally, in April of last year, NASA signed a $719 million contract with Roscosmos for the rotation of crew members of the ISS American segment, use of the Russian rescue ship, and delivery of cargo to the station during 2009-2011.
The contract proved the largest ever in the history of cooperation between the two countries. Previously, the financial record was a $473 million Russian-American agreement for seven long-duration expeditions of NASA astronauts to the Mir station and nine shuttle dockings with it in the course of four years.
Under the 2007 contract, Russia is to deliver to and return from the station a total of 15 American astronauts: six in 2009, six in 2010 and three in 2011. Russian ships will also deliver and return 6 tons of American payload. NASA has likewise bought an option to deliver to the ISS a 1.4 ton payload on a Russian docking and cargo module. Its launch on a shuttle vehicle is scheduled for 2010. NASA has further booked an additional slot on the station's permanent crew for a six-month term in 2009. It will be offered to the administration's overseas partners in the project.
All members of the ISS American segment in 2009-2011 and an extra crew member in 2009 will be arriving at the station on Russian Soyuz spacecraft. No complete American crews are planned for these vehicles. Ship commanders will be Russian cosmonauts.
In January 2004, George W. Bush announced the Constellation program providing for the development of a new manned space vehicle called the Crew Exploration Vehicle (CEV) (which in 2006 was renamed Orion) for flights to the ISS, the Moon and Mars. It was said that the Space Shuttle fleet and system would be decommissioned after 2010. In the intervening period, NASA planned to use Russian Soyuz vehicles.
But events in South Ossetia soured relations between Russia and the United States. American politicians began voicing doubts, quite unreasonably, that the agreement with Russia on additional slots on Soyuz craft would remain in effect.
Bill Nelson, a Florida Senator, was the first to express such fears on August 14. Later, he was echoed by several more high-ranking officials, who feared that after 2010, with the shuttles dropping out of service, American astronauts would have no access to the ISS. NASA's problem would linger as long as until 2015. A new "enabling" document under present circumstances was, in their view, unlikely.
They suggested that work on the new American launch vehicle Ares-1 and the manned craft Orion be accelerated and measures taken to extend shuttle service until new space transport systems became operational.
The Orion, meanwhile, is experiencing both technical and financial difficulties. Its first test flight scheduled for 2013 has been pushed back to 2014.
NASA administrator Michael Griffin has described extending the service life of the hopelessly outdated shuttles, costing an additional $4 billion, as a jihad. Hence, he believes, the first and most obvious likelihood is that there will be no American astronauts or cosmonauts from U.S. or international partners on the space station after December 31, 2011. Only Russians will be there, he said.
The American concern has not a leg to stand on: Russia has always been noted for the scrupulous observance of its commitments. It never broke them even during the Cold War. Still, it will not give free rides to the Americans. The problem needs to be solved before 2009: Russian ships have a two-year production cycle.
Russia does not yet believe that the Americans can quit a multi-billion dollar project and let down their European, Canadian and Japanese partners. What's more, Griffin said the ISS's life could be extended beyond the established deadline of 2015. He said the U.S. was committed to building and using the station for most of the next decade. He added that the ISS held the main niche in U.S. space policy over the coming years and that medical and biological research on it would contribute to future Moon and Mars expeditions.
The ISS situation is not a dead-end one, and solutions will be found, if only because both sides are interested.
If worst comes to worst, Russia and the European Space Agency could together run the ISS without American participation. Aside from Russia's facilities for transporting astronauts and supplies to the station, the European Automated Transfer Vehicle - Advanced Return Vehicle (ATV-ARV) system could chip in. Russia and the ESA are also working jointly on a manned transport system expected to be developed by 2015.
According to Vladimir Solovyov, flight director for the Russian segment, ISS systems are already capable of supporting a six-member crew, and in the future with new Russian modules, of bringing it to 10-member strength.
Yury Zaitsev is an analyst at the Russian Academy of Sciences' Institute of Space Research.
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Russia, Cuba to implement joint space programs
15:34 | 22/ 09/ 2008
MOSCOW. (Andrei Kislyakov for RIA Novosti) - There is every reason to say that Russia has started reasserting its global position. This includes big-time politics and efforts to expand scientific and military-technical cooperation with other countries, including Cuba, the Soviet Union's main Latin American ally.
It is hard to overestimate the importance of Latin America, and Cuba in particular, for Russia. Commenting on the results of Security Council Secretary Nikolai Patrushev's August 2008 visit to Cuba, Andrei Klimov, deputy chairman of the foreign affairs committee of the State Duma, said Russia, as a major power, needed to maintain its economic and security presence in Cuba.
In mid-September, Moscow and Havana negotiated joint space projects. Anatoly Perminov, director of the Federal Space Agency (Roscosmos), said the sides had discussed the possibility of setting up a Cuban space center with Russian assistance.
Perminov said both countries had discussed the implementation of agreements reached by the Russian-Cuban inter-governmental commission two months ago. "This primarily concerns the drafting of a cooperation agreement on civilian space programs, another agreement on the Global Navigation Satellite System and navigation support on Cuban territory," Perminov said.
The proposed Cuban space center will process data received from Russian remote-sensing and navigation satellites. We also plan to jointly use orbital telecommunications networks, Perminov said.
Cuba, which at one time implemented an ambitious space program, retains the required infrastructure for resuming large-scale space research.
Several dozen Cuban agencies, including the R&D Institute of Geophysics and Astronomy, the Institute of Meteorology and the Fundamental Technical Research Institute of the Cuban Academy of Sciences, were involved in the national space program.
In the mid-1960s, Moscow and Havana launched a space-physics project, obtaining new data on the upper ionosphere with the help of Soviet satellites. A tracking station, built near Santiago de Cuba in 1967, made it possible to observe high-orbit Soviet scientific satellites.
Cuba, an insular state, has to expand orbital telecommunications networks linking it with the rest of the world. In 1973, the Caribe space-communications station was completed 40 km from Havana, becoming part of the InterSputnik network that comprised the socialist bloc's telecommunications satellites.
Soviet weather and remote-sensing satellites facilitated Cuban agricultural programs.
Both countries also worked closely in manned space missions. Cuban specialists helped assess crew compatibility and the adaptation of cosmonauts to work-and-rest routines aboard orbital stations.
In September 1980, Arnaldo Tamayo Mendez became the first Cuban cosmonaut and the first person from a country in the Western Hemisphere other than the United States to travel into Earth orbit, spending about eight days aboard the Soviet Salyut-6 station.
The Cuban space-research experience, plus up-to-date Russian technical achievements, will help both countries implement advanced space programs.
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Australia, Peru, Vietnam want to join trans-Pacific free trade deal
AFP
By P.ameswaran AFP - 26 minutes ago
NEW YORK (AFP) - Australia, Peru and Vietnam have expressed interest in joining a budding Asia-Pacific tariff-busting plan which received a boost Monday with the participation of the United States, officials said.
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On the sidelines of the UN General Assembly in New York, US Trade Representative Susan Schwab announced the launching of negotiations for the United States to join a free trade agreement now confined to Singapore, New Zealand, Chile and Brunei.
The "Comprehensive Trans-Pacific Strategic Economic Partnership" agreement, the first trade pact involving a group of Pacific Rim countries, has a broad objective of tearing down trade barriers among participants within a decade.
The first round of negotiations for participation of the United States, which has already joined discussions to free up investment and financial services among the five, will be held early next year in Singapore.
"While the United States is the first additional country to seek to join the four original members of the (agreement), we are confident that other countries in the region will ultimately embrace the benefits of participation," Schwab told a news conference, with ministers from the four countries beside her.
"This high-standard regional agreement will enhance the competitiveness of the countries that are part of it and help promote and facilitate trade and investment among them, increasing their economic growth and development," she said.
She did not name the countries which had shown interest in joining the five nations but officials said they were Australia, Peru and Vietnam.
"I think Australia has shown considerable interest, Peru as well and there could be one or two other countries," Singapore Foreign Minister George Yeo said.
"I know Vietnam is studying it very closely but they are aware that their economy is at a lower level and they would need certain phasing in accommodations," he said. "But I am hopeful other countries will also come around."
The US decision to join the agreement will give impetus to a long-term initiative within the 21-member Asia-Pacific Economic Cooperation (APEC) forum to forge a Free Trade Agreement of the Asia Pacific, officials said.
Aside from the United States, Australia, Singapore, Chile, New Zealand, Brunei, Vietnam and Peru, APEC consists of economies such China, Russia, Japan, Canada and other key Southeast Asian economies.
Economies in the APEC group, which has a loose objective of achieving free trade and investment in the Pacific Rim by 2020, account for nearly half of world trade.
Yeo indicated that some APEC members could even join the trans-Pacific agreement before the APEC summit in Peru in November, thus enabling them to participate with the five in the Singapore negotiations.
Under the agreement, tariffs on all trade products are eliminated within 12 years, with tariffs on 90 percent of trade in goods among the parties eliminated immediately, a Singapore government statement said.
New Zealand Trade Minister Phil Goff hailed the US participation in the agreement as significant, saying it was the "most powerful and the largest economy in the world and gives the partnership critical mass and momentum to move forward."
He signaled that frustrations following continuous failure to hammer out a World Trade Organization deal to free up global commerce would draw greater support for the agreement.
"Given the frustrations that we have sometimes found in international trade negotiations, this is a negotiation from countries that want to make good progress and move forward and other countries starting in the APEC region will look at this agreement and believe that this is something that they cannot afford to remain outside," Goff said.
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China, India not strong enough to drive revival: experts
AFP
By Peter Harmsen AFP - Tuesday, September 23 04:11 am
BEIJING (AFP) - The global financial hurricane has swayed China and India only slightly, but the emerging Asian giants are not yet strong enough to drive a revival in world economic momentum, analysts say.
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For all the talk of Asia as a new locomotive of growth, recent turmoil has only underlined the United States' status as overwhelmingly the most important player.
"The United States is still the largest economy. If it's in trouble, it'll drag down the rest of the world," said Sherman Chan, a Sydney-based analyst with Moody's Economy.com.
"I don't think India and China will be able to save the rest of the world just yet," she told AFP.
While the United States accounts for roughly a quarter of global gross domestic product, China and India combined contribute less than eight percent if measured by official exchange rates.
"This is a once-in-a-century kind of event, a seismic event, we still don't know exactly what will be the repercussions," said Amitabh Chakraborty, the New Delhi-based head of equity research at Religare Securities.
"Certainly India is not in a position in any way yet to offset these kinds of global problems."
China has 1.8 trillion dollars in forex reserves and people like Mei Xinyu, an economist at a government-linked think-tank, believes the "crisis is a good opportunity for buying cheap assets."
But he also warned China has much to consider before its plunges in, from estimating the real value of US institutions to the risk that Washington will restrict management and voting rights.
China has already been burned, with seven listed banks announcing bond holdings of 721 million dollars in bankrupt US investment bank Lehman Brothers as of Monday, according to Securities Daily this week.
India's stock market has also been hurt by the liquidity crunch with the benchmark Sensex index 31.01 percent down this year as risk-averse foreign funds repatriate their investments, hitting emerging markets.
However, for a situation in the developed economies that some observers are calling the worst crisis since the 1930s, the two Asian nations have come off relatively lightly.
China's growth may have slowed, but it remains in double digits, reaching 10.1 percent in the second quarter.
Its trade surplus of 152 billion dollars in the first eight months of the year was down by a mild 6.2 percent compared with the same period a year ago, while the 2007 surplus was the biggest ever.
"Emerging economies like China are not completely decoupled from the United States," said Li Wei, a Shanghai-based economist with Standard Chartered.
"But they are indeed more capable of weathering the US financial crisis via internal growth momentum."
For now India, too, looks unlikely to take a beating outside of its fickle financial sector.
"The key impact from the latest financial turmoil will be on risk appetite and on capital inflows into emerging markets, including India," said Rajiv Malik, a Singapore-based analyst at Macquarie Securities.
"Foreign direct investment is unlikely to suffer but portfolio flows and private equity will likely be hit. Lower capital inflows will increase pressure on the Indian rupee to weaken."
In China, the net result of the global near-collapse is for authorities to become more cautious about financial reform, experts said.
"China's exposure to the ongoing credit crunch is still limited, given the closed nature of the country's financial markets," said Jing Ulrich, an economist with JP Morgan.
"However, the sudden downfall of several prominent global institutions has authorities concerned about ripple effects and is prompting a reassessment of the pace of China's financial sector reforms."
She argued the turmoil in the US financial markets was likely to cause a setback for China's plans to introduce more complex financial instruments and services.
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Argentina's Kirchner announces bank offer to pay off debt holders
AFP
AFP - Tuesday, September 23 02:52 am
NEW YORK (AFP) - Argentine President Cristina Fernandez de Kirchner has announced that she received a "more than interesting offer" from three banks to pay off defaulted Argentine government bonds.
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Argentina "received ... a proposal from three very important international banks," Kirchner said Monday at a meeting of the Council on Foreign Relations in New York, an event on the sidelines of the United Nations General Assembly meeting.
Kirchner said the proposal focuses on paying back the holders of defaulted Argentine bonds that did not participate in a major 2005 restructuring of Argentina's debt, all "in conditions much more favorable to Argentina than were the conditions of the swap in 2005."
Kirchner gave few details on the offers and did not name the banks, but said the proposal, if approved, could allow Argentina to pay off all pending foreign debt.
Argentina's economy was in a tailspin when it halted payments on billions of dollars of the country's debt in late 2001.
In 2005 then-president Nestor Kirchner (2003-2007) convinced 76 percent of Argentina's creditors holding defaulted bonds to settle and be paid back at less than a third of the paper value of the debt.
However nearly 24 percent of the bond holders rejected that proposal and took their case to court to demand payment.
The bank offer Kirchner announced would mainly affect this group.
The second part of the proposal from the banks is related to paying off guaranteed loans negotiated in 2001, Kirchner said.
The immediate reaction was a nearly five percent jump in the Argentine stock market. Stocks in Argentina ended up 1.67 percent for the day.
"It is an interesting decision, because this unrecognized debt was a problem and was a brake on the flow of financial investment," economist Alfredo Garcia with the University of Buenos Aires told AFP.
A new arrangement to pay off the holdout creditors would require approval from Argentina's legislature.
On September 2 Argentina announced it will pay off its 6.7-billion-dollar debt to the Paris Club of international creditors, as the South American country slowly regains its footing following the disastrous economic crash of 2001.
Last year, Argentina reimbursed a 9.5 billion dollar debt to the International Monetary Fund, after the dramatic 2001 default that triggered the worst economic crisis in the country's history, which plunged more than half the population into poverty.
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Japan's MUFG buying 20 percent of Morgan Stanley
AFP
AFP - Tuesday, September 23 01:29 am
TOKYO (AFP) - Japanese megabank Mitsubishi UFJ Financial Group Inc. will buy 20 percent of ailing US banking giant Morgan Stanley in a deal worth up to 8.5 billion dollars, the two companies said.
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Japan's largest bank said the deal would likely total between 400 to 900 billion yen (3.75 billion to 8.5 billion dollars).
MUFG will also send at least one executive to sit on Morgan Stanley's executive board, subject to approval by regulatory authorities.
Morgan Stanley has been looking for help through a tie-up with another bank as part of a major realignment on Wall Street, which has been hit hard by the subprime loan crisis.
The announcement came hours after Morgan Stanley and Goldman Sachs said they were both agreeing to become holding companies, submitting themselves to more regulation to be part of a massive US government bailout.
Morgan Stanley said in a statement that MUFG's stake in the company would eventually rise to 20 percent.
"This strategic alliance with Mitsubishi UFJ can put Morgan Stanley in an even stronger position as we look to realise the opportunities we see in the rapidly changing financial marketplace," John J. Mack, Morgan Stanley's chairman and chief executive officer, said in the statement.
"We would look forward to working closely with them to strengthen both of our businesses," he said.
Earlier reports said Morgan Stanley was in talks with Wachovia Corporation and Chinese sovereign wealth fund China Investment Corporation (CIC).
MUFG was born through a merger in 2005 to become the world's largest bank in asset terms.
Japanese banks, which recently recovered from their own crisis of bad loans, have been less hard hit by the subprime loan crisis than their peers in North American and Europe.
Top Japanese brokerage group Nomura Holdings confirmed late Monday that it had won a deal to buy all Asian operations of collapsed US investment firm Lehman Brothers.
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Citigroup eyes growing bad debt in Mexico
Reuters
Reuters - Monday, September 22 10:47 pm
MEXICO CITY (Reuters) - Growing bad debt could threaten Mexico's banks unless they change criteria for lending, Citigroup's head of Latin American operations said in an interview published on Monday.
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Lax rules and insufficient studies on giving out credit cards are behind increasing low-quality debt in Mexico's banking system, Manuel Medina Mora told the Reforma newspaper.
"We are at a very good time to correct it," Medina Mora said in the interview.
"It is everyone's responsibility to look after the banking system or we will be taking a step -- not right now but in the future -- toward a system that is not so stable," Medina Mora said.
Global credit markets have tightened and banks have had to write off billions of dollars as a result of investments in U.S. subprime mortgages and the collapse of the U.S. housing market.
Mexico does not have a subprime mortgage lending industry, but banks, anxious to maintain fast growth, in recent years have increased offers of pre-approved credit cards and consumer loans.
"Some financial players relaxed their credit requirements," Medina Mora said in the interview. "There were some banks and financial institutions that would give you a credit card if you already had one, without further study or analysis."
According to studies by Citigroup's Banamex unit, Mexico's second-largest bank, non-performing credit card debt among the country's top six players was 16.2 percent, more than double the official central bank figure of 6.6 percent.
The difference is because the official figures discount the non-performing debt that is covered by bank provisions.
Overall Mexican non-performing bank loans, including bank subsidiaries, stood at 2.82 percent of total credit in June, up from 2.35 percent a year before, according the Mexico's banking commission.
Mexico's central bank warned for the first time last week that the country's banking system may have been "marginally" affected by global financial turmoil.
Mexico's banking system was devastated in the 1990s, when an economic crisis sent interest rates soaring, which led to widespread defaults on mortgages and other loans.
The government bailed out the banks by buying billions of dollars of their shoddy loans, the cost of which still burdens taxpayers.
Foreign players Citigroup, BBVA, Santander, HSBC and Scotiabank went on to acquire much of what remained of the banking industry and since then have invested heavily to strengthen the system.
"Mexico is not a major player in this crisis. In fact, it's one of the first crises in which Mexico has been very well positioned," Finance Minister Agustin Carstens said at an event on Monday.
Ignacio Deschamps, chairman and chief executive of BBVA-Bancomer, BBVA's Mexico subsidiary, said in an interview with the El Financiero newspaper that increased arrears at his bank were "acceptable and inside forecast parameters."
"It is natural that arrears are out of step because first your credit portfolio grows, but many measures are being taken to control non-performing loans, and despite this the banking system is in a solid and decisive position," Deschamps said.
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三菱ＵＦＪ、モルガンに出資 金融の世界再編、日本勢参入
世界的な金融再編劇に日本の金融機関も相次ぎ加わる。三菱ＵＦＪフィナンシャル・グループは22日、米証券大手モルガン・スタンレーの第三者割当増資に応じ、最大20％出資して筆頭株主になると発表した。出資額は9000億円規模と、海外金融機関を対象にしたＭ＆Ａ（合併・買収）では過去最大となる見通し。野村ホールディングスも同日、経営破綻した米リーマン・ブラザーズのアジア部門の買収で基本合意した。
モルガンが巨額増資によって生き残りを目指す方針を固めたことで、今後は米証券最大手ゴールドマン・サックスの対応に焦点が移る。大手邦銀では三井住友フィナンシャルグループがゴールドマンと歴史的に親密な関係にあり、両社の対応に注目が集まりそうだ。(07:00)
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野村、米リーマンのアジア部門買収で合意 欧州は最終調整
野村ホールディングスは22日、米リーマン・ブラザーズとの間で、日本を含むリーマンのアジア太平洋部門の買収で基本合意したと発表した。買収金額は 200億円強。高度なノウハウや豊富な人材を中心にリーマンのアジア事業を引き継ぎ、海外市場で攻勢をかける。野村はリーマンの欧州地域での事業買収でも合意に向けて最終調整に入った。
買収の対象は日本や中国、インド、オーストラリアなどで展開するリーマンのアジア事業。業務内容は株式売買やＭ＆Ａ（合併・買収）助言を担う投資銀行部門など。同事業の買収を巡っては野村のほか英銀大手のバークレイズや同スタンダード・チャータードが名乗りを上げていたが、野村が2社を上回る買収価格を提示し、落札した。(07:00)
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外銀、なお資金調達難 金利、国内勢より0.4％高く
米政府が不良債権の買い取りを柱とする金融対策を打ち出したが、市場ではなお警戒感が根強い。金融機関などが資金をやり取りする短期市場では22日、外資系金融機関が国内勢より0.4％ほど高い金利での調達を強いられた。資金調達が難しくなった金融機関向けに日銀が設けている補完貸付制度の利用額も1年半ぶりの水準に急増した。
銀行が日々の資金繰りを調整するコール市場で、日銀が市場調節の対象とする無担保翌日物の取引は異常な状態が続いた。同日は多くの外資系金融機関が日銀の誘導目標（0.5％）を上回る0.6―0.7％で資金を調達した。「思うように資金が取れなかった」（外国銀行）といい、一部では0.9％で取引が成立した。
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「中国製」の取引や検査見直し 食品大手や商社
有害物質メラミンに汚染された中国製牛乳が丸大食品の商品に混入した恐れが出ている問題で、食品や商社大手が中国企業との取引や検査を見直す。江崎グリコは今月から原料調達先を豪州などに切り替えたほか、日清食品は現地で使う牛乳を中国以外から調達する方針。サントリーや森永乳業はメラミンを検査対象に加える方向だ。日本企業は中国製ギョーザ事件を機に生産監視強化などを進めてきたが、食品使用を想定しない物質の混入問題で食の安全対策は新たな局面を迎えた。
メラミン混入が確認された中国企業22社との取引が確認できた食品大手は江崎グリコと日清食品。江崎グリコは現地1社から、中国向けビスケット類用の粉乳を調達していた。対象粉乳は中国での回収対象ではないが、中国企業との取引を中止して乳原料すべてを豪州やニュージーランド製に切り替えた。(12: 08)
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後発医薬品、世界最大手が日本進出 イスラエルのテバ・ファーマ
特許切れ成分を使った後発医薬品で世界最大手のテバ・ファーマスーティカル・インダストリーズ（イスラエル）が日本市場に本格参入する。近く中堅製薬会社の興和と開発・販売の合弁会社を設立する。新薬に比べ価格の安い後発薬は医療費削減の流れを受けて4、5年後に国内で1兆円超の市場規模となる見通し。豊富な品種を持つテバの参入で需要増に弾みがつきそうだ。成長市場を巡り、国内の製薬再編が加速する可能性もある。
テバと興和は合弁会社の出資比率や幹部人事などで最終調整を進めており、月内に合意する見通し。早ければ2010年にもテバの製品を日本で販売するとみられる。(07:00)
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マリアナ諸島西方の太平洋 親ウナギの捕獲に成功
水産庁と水産総合研究センターは22日、東京から南に約2400キロのマリアナ諸島西方の太平洋で、日本や東アジア沿岸から産卵に来たとみられる親ウナギの捕獲に成功したと発表した。
成熟したウナギが海洋で捕獲されるのは世界で初めて。謎の多いウナギの生態解明につながるほか、同庁は「養殖に使われ、激減しているウナギの稚魚（シラスウナギ）の大量生産技術の開発にも貢献できる」としている。
同庁は今年6月と8月の2回にわたり、同海域でウナギの産卵生態調査を実施。トロール網を使い、水深200メートルから350メートルの海域で計5匹を捕獲した。〔共同〕(07:00)
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汚染米：給食３２７万食に ２１都府県 島田化学工ルート
でんぷん製造業「島田化学工業」（新潟県長岡市）から転売された汚染米が原料に使われた可能性があるだし巻き卵やオムレツなどが、全国２１都府県で計３２７万８８００食以上に使われていたことが、毎日新聞のまとめで分かった。三笠フーズ（大阪市北区）による汚染米は、２４都府県で酒造会社や病院・施設に流通していたが、島田化学工業分はほとんどが小中学校で使用されていた。
同工業は、農水省から工業用「のり」に使う契約でカビの生えた事故米を購入していたが、実際は食用の米粉でんぷんに加工していた。この米粉でんぷんは主に「すぐる食品」（東京都目黒区）に販売され、「手づくり厚焼玉子」「だし巻き玉子」「プレーン半月オムレツ」などを製品化する際につなぎなどとして使用した可能性があるという。
１９日に愛知県の幼稚園・小中高校で約４５万食が給食として出されたことが判明したが、２０日に千葉、２１日に三重、兵庫、富山、福島でも使用が分かり、計約６０万４８３０食が給食として出されていた。２２日には、各自治体の教育委員会が次々と混入の事実を発表。毎日新聞で集計した結果、１９都府県で計約２６７万４０００食にも上った。一部自治体は島田化学工業の名前を明らかにしていないものの、ほとんどが同工業からすぐる食品を通じたルートとみられる。
２２日判明分で、最も多かったのは愛知県岡崎市。汚染米が混入した疑いのある卵焼きが０３～０７年の５年間に、市内の幼稚園３園と小学校５０校、中学校１９校で提供されていた。同様に大阪府でも約５０万食、山梨県でも約３０万食が出されていた。東京都ではあきる野市で１万食が確認されたが、すぐる食品から製品を買っていた卸業者によると、東京都内でも別に納入実績があるという。
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新型インフルエンザ：１人マスク２５枚「各家庭で備蓄を」－－厚労省が呼び掛け
◇ただしガーゼは不向き
厚生労働省の専門家会議は２２日、新型インフルエンザに備え、一般家庭でも市販のマスクを１人２０～２５枚程度備蓄しておくのが望ましいとする「新型インフルエンザ流行時のマスク使用の考え方」をまとめた。近く厚労省のホームページなどで公表し、国民に対応を呼び掛ける。【清水健二、関東晋慈】
専門家会議が備蓄を勧めるのは「プリーツ型」と「立体型」と呼ばれるマスクで、いずれも繊維を化学的に結合させた不織布（ふしょくふ）で作られている。使い捨てが原則で、発症した場合はウイルスをまき散らさないように１日１枚で計７～１０枚（発症期間を７～１０日と想定）、健康な場合も、やむを得ず週２回外出するとして８週間分の１６枚程度が必要としている。薬局やコンビニエンスストアで、数枚入りで販売している。
ただし、飛散したウイルスを完全に吸い込まずに済むわけではなく、厚労省は「患者の２メートル以内に近付かず、人込みの多い場所に行かないといった予防策が大事」と指摘する。
市販品には、ほかに綿織物を重ねたガーゼマスクがあるが、新型インフルエンザの予防用としてはフィルターの性能が十分ではないという。また高い密着性のある産業用の「Ｎ９５マスク」も、長時間の着用は息苦しく日常生活に適さないとして、推奨していない。
◇患者数に応じて発生段階分類へ
また同会議は２２日、発生段階を患者数に応じて４段階に分類することを決めた。現行の行動計画は世界保健機関が発表するウイルスの状態や国際的な拡大状況を表した「フェーズ」で分類しているが、国内状況に限定した新分類を定め、対応策をとりやすくする。
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三浦元社長の身柄移送支持 ロス事件でサイパン最高裁
2008年9月23日16時33分
ロス疑惑銃撃事件で、サイパン最高裁は三浦和義元社長が申し立てた人身保護請求の上訴を退け、ロサンゼルスへの身柄移送を支持する決定をした。
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製造７年以内の家電、原則再流通 環境・経産省が指針
2008年9月23日2時18分
環境省と経済産業省は２２日、家電リサイクル法の対象となるテレビや冷蔵庫などの使用済み家電について、回収された製品が製造後７年以内の場合、原則として中古品として流通させることを大手量販店などの小売業者に求める指針をまとめた。
省エネ性能や動作確認することなど一定条件を満たせば、分解して資源や部品を回収するリサイクル（再生利用）よりリユース（再使用）の方が、資源やエネルギーの消費など環境負荷を抑えられる可能性が高いと判断した。
現状では、消費者は買い替え時に小売業者にリサイクル料金を一律で支払う例が多いが、製品がリユースできるものなら支払わなくてもいいケースが増えるとみられる。
指針では、逆にテレビとエアコンは製造後１５年以上、冷蔵庫と洗濯機は１０年以上たっていれば、原則としてリサイクルすべきだとして、家電リサイクル法に基づいてメーカーに引き渡すことを業者に求める。その間の製造年なら業者が個別に判断することになるという。
また両省は、家電リサイクル法の対象に液晶テレビや乾燥機などを追加するのは、来年４月１日からとする方針を明らかにした。
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シンガポール政府投資公社、対日投資全体の11％に 年次報告書
【シンガポール＝野間潔】外貨準備などを運用するシンガポール政府投資公社（ＧＩＣ）は23日、1981年の設立以来初めて、年次報告書を公表した。2008年3月期の過去20年間の利回りは名目の米ドル換算で年7.8％。地域別の投資では資産の40％を北米、35％を欧州、23％をアジアで運用しており、日本への投資は全体の11％だった。
政府系投資会社（ＳＷＦ）には投資目的や運用実態が不明確との批判が高まっており、ＧＩＣはこうした国際世論に対応した。ただ運用資産の規模については「1000億米ドルを大きく超える」としか明らかにしていない。 (13:47)
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