UK rates fall to 53-year low

UK rates fall to 53-year low

By Chris Giles, Economics Editor

Published: November 6 2008 12:01 | Last updated: November 6 2008 22:00

Interest rates were cut to their lowest level in 53 years on Thursday with clear indications of more cuts to come, as the International Monetary Fund forecast that the British economy would suffer a downturn next year on a par with the early 1990s recession.

The Bank of England surprised everyone by cutting its official rate by 1.5 percentage points to 3 per cent; a cut three times larger than any seen since the Bank’s monetary policy committee was established in 1997.

An important part of the Bank of England’s explanation led investors to expect at least another percentage point cut in rates to 2 per cent by April, a rate not seen since the emergency monetary policy conditions of the second world war. Urging banks to pass on the full rate cut, Yvette Cooper, chief secretary to the Treasury, said that having sought government assistance, “it is important that the banks do their bit to support the economy now”.

The Bank’s dramatic decision was followed by a half a percentage point cut by the European Central Bank.

Jean-Claude Trichet, ECB president, hinted at further cuts to its main interest rate. He would not “exclude” a further reduction in December. There were also rates cuts of a three-quarter percentage point in the Czech Republic, and 0.5 percentage points by Denmark and Switzerland.

The rate cuts helped drive down the markets by fuelling traders’ expectations that the weakness in the global economy would affect corporate profits. The FTSE 100 closed down 5.7 per cent at 4,272. German and French equity values both fell more than 6 per cent, while in New York the S&P 500 index was down 5 per cent.

The Bank of England Monetary Policy Committee explained its decision to cut rates far more than expected by saying there was evidence of a “severe contraction” in the economy during coming months, and such a dramatic extinction of inflationary pressure that “at prevailing market interest rates, [there is] a substantial risk of undershooting the inflation target”. Traders and most economists took that to mean further rate cuts to come.

Ross Walker of the Royal Bank of Scotland said: “Given that the financial market assumptions for interest rates embedded in the MPC’s forecast had been for a low in bank rate of 2½ per cent to 2¾ per cent, the ‘substantial risks’ suggest the MPC is braced for having to lower bank rate to 1 to 1½ per cent territory”.

Business groups welcomed the Bank’s boldness. Richard Lambert, head of the CBI employers’ organisation, said: “This cut should help to ease conditions in the credit markets, and allow banks to pass the benefits on to their customers.”

George Osborne, shadow chancellor, said it was a “shot in the arm for the economy but it shows how sick the patient is”.

The IMF agreed the outlook for the British economy was bleak. It forecast the rich world’s economies would shrink by 0.3 per cent next year, the first contraction since the second world war, but it forecast a much deeper decline in UK output of 1.3 per cent.

The Fund recommended that the US, Europe and China should raise public spending and cut taxes.

Downing St on Thursday hinted at possible tax cuts to provide a fiscal stimulus in order to support the deep interest rate cuts.Gordon Brown’s spokesman said a “mainstream view” was developing across Europe “to use fiscal policy in tandem with monetary policy to stimulate growth”.

Additional reporting by George Parker

COUNTDOWN

Dire data that persuaded the Bank to act

●On October 24, the Office for National Statistics said the economy contracted by 0.5 per cent between July and September, in the worst decline in output since 1990.

●Manufacturing output fell by 0.8 per cent in September, according to ONS figures this week. The service sector reported the steepest declines in business activity, new work and employment history for at least 12 years, according to the latest Purchasing Managers’ Index.

●Sales on the UK high street fell for a seventh consecutive month in October, according to last week’s CBI Distributive Trades Survey. The CBI Industrial Trends Survey reported the sharpest single quarter fall in manufacturing confidence for 28 years.

●Consumer confidence weakened in October, according to a survey by GfK NOP, although Nationwide, the building society, reported that the interest rate cut and government support for the banking system had boosted its consumer confidence index.

●Nationwide last week reported a 14.6 per cent fall in house prices over the last year. But mortgage approvals have edged up from August’s record lows.

●Bank of England data released this week showed a further deterioration in corporate liquidity, as deposits held by the non-financial sector, adjusted for the recent bank nationalisations, fell for the third consecutive quarter.

●Unemployment rose to the highest level in almost two years in September, according to ONS data released on October 15.

●Commodity prices have fallen sharply since mid-summer, with oil prices down by more than a half. A sharp retreat in inflation expectations in September was recorded by the YouGov/Citigroup survey on 27 October.

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The Short View: Rate cut omens

Published: November 6 2008 20:37 | Last updated: November 6 2008 20:37

All other things being equal, when a central bank cuts interest rates, it damages its home country’s currency. With rates lower, there is less incentive to leave money in that currency. It should also be great for stocks, as companies can borrow more cheaply.

But all other things are far from equal. And so it was that a cut of 1.5 percentage points by the Bank of England, the biggest in its history as an independent institution, bringing British rates below those of the eurozone for the first time since the euro was created, helped to push sterling up.

Meanwhile the FTSE 100, which should have partied as though Christmas had come early, sold off severely.

As for the European Central Bank, it cut rates by “only” half a percentage point, and the euro badly underperformed sterling. Several other central banks in Europe also cut. This had little effect on stock markets across the continent, all of which fell about as much as the FTSE.

How to explain this? Take a look at what the banks said about inflation. The ECB sees a “further alleviation of upside risks to price stability at the policy-relevant medium-term horizon, even though they have not disappeared completely”. It also cautions that discipline must be maintained.

This is a very different world from the BoE, where in a UK economy that has suffered stubbornly entrenched inflation expectations, “the risks to inflation have shifted decisively to the downside”. That is the way the forex market sees the world – so it gave a vote of confidence in the UK economy, but not the eurozone.

What of stocks? After a 20 per cent rally, when many hoped the stars were aligned for a rally through to Christmas, such drastic actions came as a nasty reminder that the economic outlook remains very bleak, and prompted speculation that the BoE knows something the market does not. So people sold.

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Lenders snub calls to cut rates

By Elaine Moore and George Parker

Published: November 6 2008 21:50 | Last updated: November 6 2008 21:50

All but two UK banks snubbed government calls to pass on Thursday’s dramatic interest rate cuts to new customers and more than 20 lenders withdrew deals that would have slashed borrowers’ monthly mortgage repayments.

The withdrawals mean that most of the UK’s biggest lenders have stopped offering any tracker mortgages, which automatically move up and down in line with the base rate, and brokers fear the rest could disappear by the weekend. “By the end of today there will be very few trackers left on the market,” said Ray Boulger, senior technical manager at John Charcol.

When banks launch their new tracker deals, perhaps next week, they are expected to increase the margin they charge above the base rate and may continue to charge hefty arrangement fees to offset rate cuts.

Lloyds TSB and Abbey were the only two lenders to say they would pass on the full rate cut in their standard variable rates.

Others are refusing to follow suit in spite of mounting political pressure for the government to use the 100 per cent taxpayer stake in Northern Rock and its expected future stakes in RBS, Lloyds TSB and HBOS to force lenders to pass on Bank of England rate cuts in full

“I think it’s essential that the banks do pass on the benefit of lower interest rates to people and to businesses,” Chancellor Alistair Darling said.

Michael Coogan, director general of the Council of Mortgage Lenders, said: “Lenders understand the political context but every decision has to be taken on an individual basis. There used to be an unwritten rule that base rates and mortgage rates followed the same path. But following the credit crunch, that no longer really applies.”

Existing borrowers with variable mortgages will benefit from Thursday’s cut, with a £100,000 repayment mortgage over 25 years saving about £85 a month.

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UK ‘faces worst of global recession’

By Alan Beattie in Washington

Published: November 6 2008 15:31 | Last updated: November 6 2008 22:14

The UK will suffer most as the financial crisis causes the world’s rich economies to shrink for the first time since the second world war, according to the International Monetary Fund.

Sharply revising down growth forecasts it made just a month ago, the IMF said the financial crisis had proved to be deeper and broader than expected, affecting growth across the developing world as well as rich economies.

The IMF predicted global growth to slow to 2.2 per cent next year, down from its previous estimate of 3 per cent, with the rich world economies contracting by 0.3 per cent, as against its former projection of a 0.5 per cent increase. The UK saw by far the sharpest downward revision and the worst projected recession in the rich world, the 2009 forecast being cut 1.2 percentage points to a fall of 1.3 per cent.

The fund stressed that because trend output growth in the rich world had slowed over recent decades, the projected downturn was not unprecedented. In terms of undershooting potential, it was comparable to the recessions in 1975 and 1982. But the IMF warned: “Financial conditions are likely to remain tight for a longer period and be more impervious to policy measures than previously expected.”

Olivier Blanchard, the IMF’s chief economist, called for fiscal policy to boost economic growth, to complement recent cuts in interest rates. “Global fiscal expansion is very much needed at this point,” he said. Nations representing about half the world’s economy including the US, European countries and China all had room to increase spending or cut taxes, the fund said.

The IMF’s economists have carved out a role for themselves as the gloom-mongers of the global economy, but even they have been taken aback by just how badly things have gone.

The IMF admitted on Thursday that there had been a few signals of hope over the past week and that attempts to arrest the slump in confidence were beginning to have some effect. But Thursday’s revisions in its forecasts came across the board.

Three themes dominated the worsening of sentiment since the fund released its last forecasts at its annual meeting in October. First, the financial crisis has continued to deepen in the rich world, with highly indebted economies like the UK particularly vulnerable. Second, commodity prices have fallen, which has hurt oil exporters like Russia and countries in sub-Saharan Africa dependent on selling raw materials abroad. Finally, a general souring of sentiment has hit all emerging markets, particularly those dependent on foreign investors to finance current account deficits.

The mood changes so quickly in global equity and bond markets, and hence affects so rapidly the outlook for countries dependent on external financing, that almost any firm forecast risks being reversed rapidly.

Until a day or two ago, investor sentiment surrounding the developing world had actually been improving rapidly for a week. Emerging market government bonds had experienced their biggest rally since 2001. A key measure of risk, JP Morgan’s so-called “EMBI+” index, showed the extra returns demanded by investors for holding emerging market assets reducing from 8.6 percentage points in late October to below 6 percentage points.

But as the fund itself warns, much of the developing world remains acutely sensitive to the rich economies. A string of bad economic data over the past couple of days in the US and Europe sent equity and government bond prices in emerging markets lower again.

Some of the recovery in confidence over the past couple of weeks, market participants say, appeared due to the IMF itself. By announcing a new rapid-lending facility for crisis-hit countries, in association with the US Federal Reserve granting new currency swap lines to Brazil, South Korea, Mexico and Singapore, the fund had reassured some investors that it stood ready to head off any seriously destabilising slides in sentiment.

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Gulf plans £100m fund to invest in football

By Robin Wigglesworth and Simeon Kerr in Dubai

Published: November 7 2008 03:07 | Last updated: November 7 2008 03:07

The Gulf’s flirtation with the world’s most popular sport took a new turn on Thursday when the region’s largest lender by assets said it would launch a £100m fund to invest in football talent.

Dubai-based Emirates NBD has teamed up with Hero Investments, a UK-based fund manager, to invest in players’ registration and image rights, hoping to capitalise on what it says is a $20bn (€16bn, £13bn) industry.

“The idea is to find young talent. The point at which the fund makes money is the point at which the player is transferred to another club, hopefully at a higher price,” said Nicholas Hely-Hutchinson, a partner at Hero Investments.

“We will try and retain a carry [fee] as that player gets transferred again, again and again.”

Deon Vernooy, head of asset management at a subsidiary of Emirates NBD, thinks football-mad regional investors will like the contribution to the game’s development offered by the fund .

He says Emirates NBD, which has invested $20m in the fund, will co-invest with clubs in players emerging from the Glenn Hoddle coaching academy, in which the fund has an equity stake.

The fund also formed a partnership with Dubai’s Al Ahli club, pledging to put two players into the academy run by Mr Hoddle, the former England football coach. It also plans to form partnerships with other clubs as part of its aim to target talented players from South America to Asia.

Dubai has seen football as a way to promote the country to a global audience. This year a group in Abu Dhabi, the capital of the United Arab Emirates, bought Manchester City, the English Premiership side, and Dubai International Capital narrowly failed to buy Liverpool FC. Zabeel Investments, another Dubai group, pulled out of a deal to buy Charlton, an English lower league club.

But Phil Carling, head of global football at Octagon Worldwide, a sports consultancy, warned that the fund could run into difficulties if it wants to own the economic rights of footballers.

Media Sports Investments was embroiled in controversy over its ownership of the economic rights of Javier Mascherano and Carlos Tevez, the Argentine footballers. While Liverpool bought Mascherano from MSI, Tevez is still technically on loan from the sports group to Manchester United.

“The English Premier League takes a dim view of it and aren’t far from banning it, and Fifa and Uefa [the international football federations] aren’t happy about it either,” said Mr Carling, a former commercial director of Arsenal, another English club.

Still, the rewards could be lucrative. Mascherano repor-tedly cost Liverpool £18.6m ($30m), and Tevez is said to be worth £30m should Manchester United wish to make the deal permanent. “If you can pick up a player cheaply at 14 that will eventually be worth £30m, you can make a lot of money,” said Mr Carling.

David Davies, former executive director of the English Football Association, who, along with Alan Hansen, a TV pundit, sits on the fund’s advisory board, expected most deals to involve clubs outside the UK.

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Middle East investors eye Europe

By Roger Blitz and George Parker in London

Published: November 6 2008 23:35 | Last updated: November 6 2008 23:35

Middle Eastern countries are set to pour billions of dollars into investments in British companies, according to the financier who helped arrange Abu Dhabi’s £3.5bn investment in Barclays .

Amanda Staveley told the Financial Times that investment opportunities were emerging for the Middle East to become “a much more integral part of the global financial community”.

Ms Staveley’s PCP Capital Partners arranged Sheikh Mansour Bin Zayed Al Nahyan’s acquisition of a 16 per cent stake in Barclays last week. In September, it put together the deal for the sheikh’s £210m purchase of Manchester City Football Club.

A number of further deals were being prepared, said people close to Ms Staveley, a Yorkshire-born financier who has spent several years nurturing contacts in the Middle East.

Although she declined to discuss prospective deals, Ms Staveley said the shipping market presented one opportunity. “The dry bulk market has just fallen away massively,” she said. “For PCP, we feel there is a real opportunity. In that area, there will be a few key survivors who will do extremely well and that will add immense strategic benefit.”

Ms Staveley, whose firm made £40m out of commissions from the Barclays deal, added that more deals for top-price football clubs would be coming out of the Middle East because of the profile football had in the region and because it is “the key provider of digital content on media platforms worldwide”.

Interest may also be revived in Trillium, the outsourcing arm of property group Land Securities. A £1.1bn bid from a consortium of investors from the region, fronted by PCP, appeared to have run into the sand after Land Securities entered into exclusive talks last month with Telereal, owned by the William Pears Group. But Ms Staveley said Trillium remained “strategically important” for the Middle East.

She described the Barclays deal as “a massive tick in the box for UK plc”, but declined to comment on whether she believed that Gordon Brown had played a role in pushing the deal along.

The UK prime minister has sought investment in Britain by sovereign wealth funds, including those in the Gulf and China. He visited Beijing and Shanghai in January to drum up business and recently returned from a four-day tour of the Gulf region.

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Obama through a foreign lens

By John Lloyd

Published: November 6 2008 23:42 | Last updated: November 6 2008 23:42

The rest of the world had voted for Obama long before Tuesday. That widely publicised fact meant television channels round the world struggled to maintain balance and to give due and objective weight to Senator John McCain and his running mate, Alaskan governor Sarah Palin. The struggle was patently tougher in some countries than in others: Christine Ockrent, for years the best-known presenter of serious news programmes on French channels, said: “For us, Palin was an amazing phenomenon. What was she about? What were the values of middle America – which we French know very little about. But then, of course, she made such a fool of herself, so balance was difficult.”

Ockrent thinks, however, that, in general, balance was maintained and that Senator McCain’s courage and tenacity were adequately mirrored; the same claim is made by Helen Boaden, the BBC’s director of news. She conceded that the excitement over the possibility of a first black US president was a huge factor in the coverage and that there had been many internal debates about how much weight to give the issue, how far it had diluted a focus on the factors that would make the best president and the policies the two men were espousing. “I think we did very well on balance and fairness but, though I don’t think we did badly on the policies, I think we did less well. We could have done more on that.”

A Palestinian man watches election coverage at a shop in Gaza
For Niklas Ekdal, a leading political commentator in Sweden who spent much of Tuesday night and Wednesday morning in the studios of public broadcaster SVT, the narrative of race and the White House did pose a problem. “It wasn’t so much so at first, especially when Obama was up against Hillary [Clinton], but it became more and more the dominant theme. And, in a way, it’s contradictory – Obama is the first post-ethnic president-to-be and he didn’t play the race card. But still, that angle, coming along at the end, tended to overtake everything else. It just seemed inevitable – and it’s still the major theme of the TV coverage and in the newspapers.”

For Canadian political philosopher John Ralston Saul – who knows the inside of the Canadian “White House”, as husband of Adrienne Clarkson, former governor general – the coverage was not so much dominated by race as by the contest. “That is all you get on coverage of elections anywhere now. It was the same in our elections (Canada re-elected a Conservative government last month). But, on race, we’re not as exercised as other countries. There are many more minorities in positions of power than in most other countries (Clarkson is Chinese-Canadian). Something of that kind happening here would not have occasioned the same huge interest; I guess we felt glad the Americans had finally crossed that political barrier.”

In Israel, says Tamar Hermann, dean of academic studies at the country’s Open University, McCain began the campaign far more popular than Obama, a fact reflected in the media coverage. “But, as time went on, the Israeli media, television and many newspapers began to reflect the media consensus elsewhere in the world and turned more and more towards Obama. And, when Sarah Palin was chosen, that confirmed it. She was regarded as a joke, basically. I think this did mean a change in opinion.”

The Obama effect is larger than his victory and race: commentators everywhere immediately related his triumph to their own particular domestic situation. Ralston Saul’s characterisation of Canada’s insouciance about race is unusual; in France, says Christine Ockrent, “the Obama victory immediately played into our debate on the lack of minority representation in our parties: they are all very bad at that. The three women from minorities whom Sarkozy made into ministers did not come up through the party structure; he chose them. So since Tuesday there have been insistent questions on TV: why are the French parties so hermetically sealed to minorities?”

Nick Robinson, BBC political editor, believes the British television audience wanted to test how their politicians placed themselves in relation to Obama. “There were half a million viewers of Prime Minister’s Question Time on Wednesday – many more than before. And they saw what the Brown message was – ‘I know Senator Obama and, Mr Cameron, you are no Senator Obama’. And for Cameron – the message is change.”

For Sweden, says Ekdal, the issue is a breast-beating one. “If Obama is a post-ethnic politician, we are not a post-immigrant state. Part of what you saw on television was a country trying to get to grips with a post-ethnic world. We have less experience of a multicultural society than the US or the UK – though now minorities make up between 10 per cent and 15 per cent of the population, and became so quite rapidly. We have one minister from a minority – Nyamko Sabuni (the immigration minister, a former refugee from the Congo). But the debate is new to us, and this has spurred it a lot.”

For Ralston Saul, now touring his country promoting a new book, A Fair Country, he was able to reflect, as he watched the results come in, on his own prescience. In a panel discussion in Chicago in 2001, where he had been in a minority of one arguing the benign effects of taxation to a hostile audience, he was joined by a handsome young black man who, arriving late, turned the audience round with a persuasive speech. “I said then: this man will go far, he could be in the White House. And then he was on TV this week as US president-elect.”


This article is part of an FT series on television round the world. For earlier pieces, visit www.ft.com/arts/tv

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Andorra open to foreign takeovers

By Mark Mulligan in Madrid

Published: November 7 2008 02:14 | Last updated: November 7 2008 02:14

Andorra, the tiny Pyrenees principality, will on Friday open its borders to foreign takeovers as part of efforts to modernise the economy and shake off its image as a shady financial centre.

Under legislation passed in April, foreign investors will be allowed to control 100 per cent of companies in 200 designated sectors, while controls will be eased in core activities such as construction, tourism and retailing. Foreigners will be allowed to own 49 per cent of the capital in companies in these sectors, compared with 33 per cent at the moment.

Friday’s reforms follow the creation this year of companies’ register, to which local businesses will have to file regular accounts using international standards. There are also plans to introduce corporate tax of between 5 and 10 per cent, and value-added tax of 4 per cent.

At present, there are no direct taxes on companies and individuals in Andorra, making it a popular base for the wealthy from countries such as Spain, Portugal, France and the UK.

The changes are part of an effort to restructure the tiny economy, which relies on tourists – mainly skiers – for about 60 per cent of its E2.5bn gross domestic product. Global turbulence is expected to hit tourism hard, and Andorra has also seen a sharp downturn in construction activity, which accounts for about 10 per cent of GDP.

Juli Minoves, economic development minister, on Thursday described them as “important reforms, introduced at moment when they are most needed”.

However, the changes are also aimed at improving relations with Spain – which slaps a punitive 25 per cent tax on services provided by Andorran companies – and with the Organisation for Economic Co-operation and Development, which has Andorra on its list of un-co-operative tax havens.

This classification has taken on sinister connotations since the 2001 terrorist attacks in the US, as the hunt for al-Qaeda put secretive tax havens under the spotlight as possible sanctuaries for financiers of terrorist groups.

This, added to a series of financial scandals, has increased the pressure from the US and European Union on micro-countries such as Andorra and Liechtenstein for more transparent banking and taxation.

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French state takes one-third stake in shipyard
Thu Nov 6, 2008 2:51pm EST

PARIS, Nov 6 (Reuters) - The French state said on Thursday it is taking a one-third stake in a civil and naval shipyard that had become owned by a South Korean firm.

In a statement, the office of President Nicolas Sarkozy said France would own 33.34 percent of the Chantiers d'Atlantique yards in the west of France through a capital increase of 110 million euros ($141.8 million).

France said on June 12 that it wanted to prevent a loss of jobs to Asia with a plan to buy up to a third of the French shipbuilding group, saying its national interests were at stake.

STX Europe, a unit of South Korea's STX (067250.KS: Quote, Profile, Research, Stock Buzz) which acquired control of Norway's Aker Yards, will see its stake drop to 50.01 percent from 75 percent.

Industrial group Alstom (ALSO.PA: Quote, Profile, Research, Stock Buzz), which had been forced to sell the shipyard assets as part of European Union conditions to a state-backed recovery plan several years ago, will have a lower state of 16.65 percent instead of 25 percent.

The French state could inject another 83.3 million into the yard in 2012, depending on the financial performance.

Sarkozy's office said that when a French strategic investment fund is created, the state would transfer the stake to this fund.

Unions have warned of the collapse of France's last civil shipyard, whose vessels include the 1930s floating palace Normandie, once the world's largest and fastest cruiseliner. The yard also has a hand in military shipbuilding.

France has not yet decided whether to build a second aircraft carrier and may need the yard's deep docks to do so.

($1=.7759 Euro) (Reporting by Marcel Michelson, editing by Richard Chang)

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ECB hawks signal policy shift

By Ralph Atkins in Frankfurt

Published: November 5 2008 16:48 | Last updated: November 6 2008 09:57

The European Central Bank will act decisively to support eurozone economic growth in the face of a sharp contraction and signs that inflation could even turn negative, two of its most hawkish policymakers have indicated.

Comments by Axel Weber, Germany’s Bundesbank president, and Jürgen Stark, an ECB executive board member, clear the way for a substantial loosening in ECB interest rate policy.

The ECB’s main interest rate is widely expected to be cut by half a percentage point to 3.25 per cent on Thursday, although financial markets see a chance of a cut to 3 per cent.

The Bank of England is also expected to slash its main rate.

Mr Weber and Mr Stark are seen as the most hardline inflation-fighters at the ECB. But since the collapse of Lehman Brothers investment bank in the middle of September, eurozone growth prospects have deteriorated sharply and inflation fears have all but disappeared. This has allowed them to back a significant switch in ECB strategy.

In a speech in Berlin late on Tuesday, Mr Weber dropped his usual warnings about inflation risks. But he underlined the point that central banks “influence the real economy and stabilise it when it faces a systemic risk”.

Separately, Mr Stark told Financial Times Deutschland in an interview published on Wednesday that lower ECB interest rates would show “we are prepared, in this situation, to use all the instruments that we have available – and the central instrument is interest rate policy when our mandate allows it”.

Since the start of the financial crisis last year, the ECB has focused on expanding aggressively its emergency liquidity operations in financial markets.

“Now it is as if they feel they can’t do any more on that front,” said Julian Callow at Barclays Capital, “and they are prepared to use the main interest rate weapon to stabilise things.”

With oil prices falling, Mr Stark said eurozone annual inflation rates might at some point fall into “negative territory” for one or two months.

However, he did not see deflation – a general fall in price levels that hits the real economy – as a threat.

Contraction in the eurozone economy has gathered pace. October’s revised purchasing managers’ indices for the region, published on Wednesday, showed the steepest monthly fall in private sector output since the euro was launched in 1999.

At 43.6 per cent, the Markit composite purchasing managers’ index, covering manufacturing and services, was even lower than the 44.6 per cent originally reported, and down from 46.9 in September. A figure below 50 indicates contraction.

Holger Schmieding, chief European economist at Bank of America, argued that deflation would become a threat only if a recession lasted two years.

He expected the beneficial effects of lower ECB interest rates to feed through by the second half of next year, helping to revive growth prospects.

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Financial crisis ‘may threaten food output’
Foreign Staff

Sapa-DPA

ROME — The financial crisis could threaten many countries’ farming sectors, undoing this year’s record world cereal production, a United Nations agency reported yesterday .

World cereal production was expected to set a new record this year thanks to high prices before October and favourable weather conditions, which boosted planting, the Food and Agriculture Organisation (FAO) said in the latest issue of its Food Outlook report.

Its forecast for cereal output this year stands at 2,24-billion tons (including milled rice), 5,3% up from last year .

Among the major cereals, the most significant production expansion was forecast for wheat, up 11% from last year. Production of coarse grains was also forecast to surpass last year’s record by at least 3% , while rice production is expected to exceed the “already excellent results” achieved last year by more than 2% , the FAO said.

However, this year’s record cereal harvest and the recent fall in food prices should not create a false sense of security, said Concepcion Calpe, one of the report’s main authors.

“For example, if the current price volatility and liquidity conditions prevail in 2008-09, plantings and output could be affected to such an extent that a new price surge might take place in 2009-10, unleashing even more severe food crises than those experienced.

“The financial crisis of the last few months has amplified downward price movements, contributed to (tightening) credit markets, and introduced greater uncertainty about next year’s prospects, so that many producers are adopting very conservative planting decisions.”

The report stresses that most of the recovery in cereal production took place in developed countries, where farmers were in a better position to respond to high prices.

However, developing countries were largely limited in their capacity to respond to high prices, and remain the most vulnerable to volatile markets.

The sharp 2007-08 rise in food prices has increased the number of undernourished people in the world to an estimated 923-million.

Lower international commodity prices have not yet translated into lower domestic food prices in most low- income countries.

“There is a real risk that … people will have to reduce their food intake and the number of hungry could rise further,” Calpe said.

World agriculture is facing serious long-term challenges, including land and water constraints, low investments in rural infrastructure and agricultural research, expensive agricultural inputs relative to the initial price charged by farmers, and little adaptation to climate change.

The FAO estimates that to feed a projected world population of more than 9-billion by 2050 , food production must nearly double.

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Debt fears hit Las Vegas Sands

By Matthew Garrahan in Los Angeles

Published: November 6 2008 19:29 | Last updated: November 6 2008 19:29

Las Vegas Sands shares fell more than 30 per cent on Thursday after the casino operator warned that it risked defaulting on its debt, raising doubts about its ability to continue operating as a going concern.

The stark warning signals the severity of the downturn affecting the global gaming industry, which is suffering from falling spending at its two main centres, Las Vegas and Macao.

The group, owner of The Venetian and The Palazzo in Las Vegas, as well as The Sands in Macao, is struggling to meet its debt obligations. It recently raised $475m in convertible senior stock notes from Sheldon Adelson, its largest shareholder, after earnings declined below the amount necessary to maintain debt covenants.

The company said in a regulatory filing that it was continuing to look for new capital, partly because the poor earnings outlook means it is likely to breach covenants again. “If our Las Vegas earnings ... do not increase sufficiently ... we will need to obtain significant additional capital,” it said.

Mr Adelson, one of America’s richest men, represents the company’s best hope of salvation but there is no guarantee that he will rescue the ailing casino operator. “If he does not [participate], the company may have a very difficult time getting the financing completed given its debt load, and the stock could decline significantly,” said Celeste Mellet Brown of Morgan Stanley in a research note.

Failure to raise new capital would trigger a series of defaults, raising a “substantial doubt about our ability to continue as a going concern”, the group said.

The company’s plight is a far cry from its heady position a couple of years ago when it led the development of Macao. Las Vegas Sands has also been one of the most prolific developers on the Las Vegas Strip, expanding The Venetian and adding thousands of luxurious new rooms and conference facilities to its burgeoning empire in the gaming capital.

But the shine has come off Las Vegas. Although visitors continue to flock to the city, they are spending less while convention business has trailed off. MGM Mirage, Las Vegas Sands’ biggest competitor, recently reported a sharp fall in revenue per available room, the key industry indicator, and also reported falling takings at table games and slot machines.

Las Vegas Sands shares closed down 32.68 per cent at $7.85.

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Historic pottery maker goes into administration

Reuters

One of Britain's most venerable pottery makers, Royal Worcester & Spode, fell victim to the financial crisis and went into administration on Thursday, business services firm PricewaterhouseCoopers said.
The porcelain and fine china maker, which traces its roots back to 1751, owns plants in Stoke and Worcester, in central England, and employs 388 people in Britain.

PricewaterhouseCoopers, appointed administrator of the company, said it would review all options and immediately seek a buyer for the business.

Matthew Hammond, a partner of PricewaterhouseCoopers, said Royal Worcester & Spode had been restructuring in recent years by cutting costs, outsourcing production and selling property to reduce debt.

"However, the inability to complete the proposed sale of a site of strategic importance in Stoke and the effect of the current economic downturn on sales has led to the decision by the directors of Royal Worcester & Spode Ltd to place the company into administration," he said in a statement.

The company's U.S. trading subsidiary, The Royal China and Porcelain Companies Inc, is not affected by the move and the company's products will remain on sale in shops.

The news was announced on the same day that the Bank of England slashed interest rates 1.5 percentage point to 3 percent, the lowest in more than half a century, in an attempt to stop Britain sliding into a deep recession.

The British economy shrank for the first time in 16 years in the third quarter and most economists expect further contraction through next year.

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Struggling US automakers ask Washington for more help

AFP

Leaders of the struggling US auto industry were in Washington Thursday asking for even more help from the government as they battle to staunch the hemorrhaging of their balance sheets.

Congress recently authorized 25 billion dollars in loan guarantees to help US automakers develop more fuel efficient vehicles in order to meet upcoming regulations.

Ford, GM and Chrysler are now asking for another massive infusion of low-cost loans, but this time without any strings attached.

"It is essential that we preserve our manufacturing and technology base in this country," said Democratic House Speaker Nancy Pelosi in a statement.

"Today, the Democratic leadership discussed how to protect hundreds of thousands of workers and retirees, safeguard the interests of American taxpayers, and use cutting-edge technology to transform blue-collar jobs to green-collar jobs for generations to come."

She had told the Wall Street Journal Thursday she was open to providing additional assistance to the automakers as soon as next month, but insisted said the assistance should be tied to improving the competitiveness of the Detroit Three.

"I don't think you'll see much interest" in helping the industry, if aid goes toward "doing things the old way," Pelosi said.

Executives from General Motors, Ford Motor and Chrysler as well as the president of the United Auto Workers union also asked Pelosi to speed up the delivery of the loan guarantees during the meeting Thursday.

To press the case, the automakers planned to go over all the actions they've taken in the last two years to speed up the development of cleaner and more efficient vehicles," GM spokesman Greg Martin said.

"Right now, it all comes to a stop if they can't get help for the industry to get through this period," Martin told AFP.

The meeting came a day before GM and Ford were set to report significant third quarter losses and days after US auto sales sank to their lowest levels in 25 years.

The Detroit Three have already undertaken several massive restructuring programs in response to a steady loss of market share to Asian competitors.

That loss accelerated in recent years as high fuel prices shifted demand away from the gasoline-guzzling trucks and sport utility vehicles which had propped up their profits.

Then the credit crunch hit and auto sales plummeted as even consumers with good credit found it hard to get loans, as did the automakers whose credit ratings have fallen deeply into junk status amid bankruptcy fears.

General Motors has lost nearly 70 billion dollars from 2005 through the first half of this year while Ford's losses since 2006 topped 24 billion over the same period.

Chrysler is privately owned but like Ford and GM has been losing billions and laying off large chunks of its workforce.

The current cash burn poses a real threat to the survival of the automakers, said Dave Cole, chairman of the Center For Automotive Research.

"The likelihood of one or two of the Detroit Three manufacturers ending operations is very real," Cole said.

"To permit any of the Detroit Three manufacturers to collapse would scar the US economy further at a time when it can ill afford another blow."

Cole said a bailout would cost the government less than what it would spend on paying the unemployment benefits of the tens of thousands of workers who could lose their jobs.

"As policymakers consider their positions on assistance to the auto industry, they must decide, is an ounce of prevention indeed worth a pound of cure," Cole said.

But it's still unclear how much help the automakers will get and what form it will take, said Laurie Felax-Harbour of the Harbour-Felax Group.

"I expect they will do something," she said. "But everybody is wondering what the plan is going to be," she said.

It is likely that any bailout would kill a potential merger of GM and Chrysler, she said.

Both the UAW and the senior senator from Michigan have openly opposed the merger which could result in the loss of an estimated 30,000 to 35,000 jobs at Chrysler and an untold number at General Motors.

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Lehman and Bear survivors may get best bonuses

Reuters Joseph A. Giannone

Bear Stearns and Lehman Brothers executives that survived the collapses of their firms and found new jobs should get bigger bonuses than their peers at Goldman Sachs Group Inc , a compensation consultant said on Thursday.

It is no surprise by now that the global credit crisis, together with regulatory pressure and consolidation among the biggest U.S. banks, will lead to smaller 2008 bonuses for Wall Street bankers, traders and money managers.

Compensation and executive recruiting firm Options Group estimates the average bonus worldwide will fall by almost half this year, a period when tens of thousands of employees have been fired. Options Group estimated 50,000 to 60,000 more jobs will be cut over the course of the bear market, according to a report to be published next week.

Individual payouts will vary widely, depending on location, business line and firm. Suddenly Bear and Lehman Brothers Holdings Inc executives who were recruited by other firms may enjoy an advantage over their counterparts at firms that survived the credit crunch.

"The fact is that retained professionals received guarantees from JPMorgan Chase, Nomura (Holdings Inc)

and Barclays to stick around through the end of 2008," Options Group wrote. "In the case of Lehman Europe and Asia, Nomura attempted to convince these professional to stay through 2009 as well with additional cash guarantees."

Similarly, brokers at Merrill Lynch & Co Inc will fare better than their firm, which fled into the arms of Bank of America Corp . Merrill brokers have been offered up to 100 percent of their annual commissions from last year as retention bonuses.

Of course the collapse of Bear, which was forced into a fire sale with JPMorgan Chase & Co and Lehman, where a bulk of the business was acquired by Barclays out of bankruptcy, has also been painful. More than 40 percent of these firms' employees lost jobs and have not reemerged at other banks.

Industrywide, payouts will fall for the second straight year after soaring for four years. The deepest cuts will hurt employees in the hardest hit businesses, such as structured finance and mortgage-backed securities.

Other businesses will see relatively strong payouts. Commodities sales and trading bonuses will fall 25 percent to 30 percent, while foreign exchange traders may slip 15 percent.

Options Group based its projections on surveys of Wall Street employees and from company results.

In a separate report, compensation consultant Johnson Associates projected that bonuses for Wall Street's chief executives and top executives -- whose compensation must be disclosed to shareholders -- will tumble 60 percent to 70 percent.

But Johnson sees the average bonus falling by just 20 percent.

While payouts are coming down, Congress and state officials such as New York Attorney General Andrew Cuomo may find they still look pretty healthy.

Executives in the businesses that created collateralized debt obligations, which generated so much of the $500 billion (320 billion pounds) in global bank writedowns this year and contributed to the market's meltdown, would see their bonus fall by 50 percent to 60 percent -- to $750,000.

Senior investment bankers who were not engaged in trading would see their bonus fall as much as 50 percent to about $1 million.

The most successful money makers are still expected to bring home the bacon. The Wall Street Journal earlier on Thursday reported the head of Phibro commodities trading, a unit of Citigroup Inc , is set to receive a $125 million bonus.

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Chrysler cash drains away as crisis deepens

Reuters Poornima Gupta and Kevin Krolicki

Chrysler is rapidly burning through cash and being driven to prepare for a possible break-up if it can't clinch a merger with General Motors or get government funding needed to ride out the economic crisis, people with knowledge of the situation said.

Without new funding or a wrenching restructuring, executives have raised concern about the automaker's ability to finance its operations from existing cash beyond the first half of 2009, said the sources, who were not authorized to discuss Chrysler's performance.

Chrysler has had to pay out over $100 million (64 million pounds) a month to support strained suppliers on top of a total $200 million support to sales through dealers in August and September as it suspended vehicle lease financing, the sources said.

The $11.7 billion the struggling automaker said it had as of end-June has seen a substantial decline because of the company's deteriorating performance marked by a 35 percent slide in October sales and increasing cash incentives, they said.

Chrysler and its owner Cerberus Capital Management LP declined to comment.

Cerberus and GM had agreed last month on the broad terms of a merger of Chrysler's loss-making auto operations and those of its crosstown rival but the deal foundered when the Bush administration rebuffed a request for some $10 billion to support it, sources have said.

That setback has put the focus on winning support for a broader federal rescue package for GM, Chrysler, Ford Motor Co and their suppliers that the industry argues would save jobs and protect benefits for retirees.

But Chrysler has been forced to consider a more drastic set of backup plans that could include selling off key business lines -- including Jeep, considered its most valuable brand. It may also outsource its finance and human resources, sources said.

As a step towards that hard-landing scenario, the automaker is moving to split up its replacement parts business based on brand so that its Chrysler, Jeep and Dodge operations could be completely separate, one source briefed on that plan said.

That could make it easier to sell off an individual brand.

LOBBYING WASHINGTON

Chrysler Chief Executive Bob Nardelli joined GM CEO Rick Wagoner and Ford CEO Alan Mulally on Thursday in meetings with U.S. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reed.

The three automakers lobbied the Democratic lawmakers -- who increased their power in Tuesday's election that also saw Barack Obama elected president -- for up to $50 billion in federal aid, sources said.

The push for aid has been accompanied by increasingly dire warnings from industry executives and their political allies about the cost of inaction and the risk of a failure that would cost tens of thousands of manufacturing jobs.

Chrysler does not release financial information.

While executives, including Vice Chairman and President Tom LaSorda, once touted that lack of disclosure as a strength, the same lack of transparency could now complicate the automaker's efforts to seek aid under a federal rescue package.

In addition, analysts have said Chrysler's ownership by Cerberus poses a political problem as a federal rescue could be criticized as a bailout for a secretive Wall Street firm known for its political contacts.

Cerberus is chaired by former Bush administration Treasury Secretary John Snow and its board includes Dan Quayle, who was vice president under former president George H.W. Bush.

Both GM and Ford are expected to post deep quarterly losses on Friday and announce further urgent steps to cut costs and conserve cash in the face of a plunge in auto sales to their lowest in around a quarter of a century.

GM's president for North America Troy Clarke said late on Wednesday the government and industry faced a critical "100-day" window to secure financing and restructure.

The sharp decline in U.S. auto sales that began in the summer and has since accelerated has hit Chrysler particularly hard.

A pending asset sale is unlikely to be enough to save the day. Though Chrysler is pushing to complete a sale of its Viper sports car line this year, that is likely to bring in $80 million or less, said a person familiar with the brand's valuation.

U.S. sales of the Chrysler, Jeep and Dodge brands were down almost 26 percent this year through October, and Chrysler's market share has slipped to just 11 percent in October, putting it in an almost dead-heat with Honda Motor Co for the No. 4 spot in the U.S. market.

Under Cerberus, Chrysler's captive finance arm, Chrysler Financial, moved quickly to suspend lease financing in August when resale values of its SUV and truck-heavy line-up plunged and threatened deep losses.

But Chrysler was forced to increase cash incentives by $2,000 per vehicle to offset the sudden move to drop leasing. That cost some $200 million in August and September, the automaker told dealers in late September.

"The lifeboat is coming. We just have to keep rowing," Chrysler Vice Chairman Jim Press said in a briefing for dealers that also discussed the automaker's lobbying for government support, according to a person who heard the remarks.

Separately, LaSorda told dealers at the same late September event that Chrysler, which depends on the U.S. market for some 90 percent of its sales, was pressing ahead with alliances and believed it was close to a deal for the Russian market.

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Construction of 800-km pipeline completed on Sakhalin

06.11.2008, 11.13





YUZHNO-SAKHALINSK, November 6 (Itar-Tass) - The construction of an 800-kilometre oil and gas pipeline by the Sakhalin Energy Company (SEC) (the operator of the Sakhalin-2 project) has been completed.

The filling of the pipeline with oil and gas began on Thursday. In about one month's time, oil will be supplied from the offshore shelf deposits in the Sea of Okhotsk to the Prigorodnoye (suburban) port in Sakhalin's south.

The shipment of oil by the first huge tanker from the harbour is planned for the end of 2008, Marina Makarova, SEC manager in charge of the operation of the oil and gas pipeline, told journalists at a briefing on Thursday.

An oil shipment terminal and a plant for the liquefaction of natural gas have been built at Prigorodnoye. Ocean-going tankers will begin to call there to take hydrocarbon fuel on board for export.

Previously the SEC was producing oil only within an ice-free period and was shipping oil from the Vityaz (knight) oil-extraction facility located at the Piltun-Astokh deposit off the north-eastern coast of Sakhalin.

The Molikpak offshore platform has been operating there since 1999. This platform alone is busy filling the pipeline transportation system with oil and gas so far. The offshore platforms LUN-A and PA-B will join in the pumping at the end of the outgoing year. The annual production of oil by the SEC is expected to amount to about ten million tonnes.

There are two operating oil pipelines on Sakhalin as of now. One of them, 220 km long, belongs to the American Exxon Neftegaz Ltd Company. It runs from the Chaivo oilfield in the Sea of Okhotsk to De-Kastri port on the shore of Khabarovsk Territory. Annual production of oil at Chaivo amounts to 12 million tonnes. The SEC's 800-km-long pipeline also runs to the Prigorodnoye port from the Piltun-Astokh and Lun oilfields in the Sea of Okhotsk.

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LUKoil, De Beers to register diamond joint venture in 2008

13:30 | 07/ 11/ 2008

Print version

ST. PETERSBURG, November 7 (RIA Novosti) - LUKoil and diamond giant De Beers will register a diamond producing JV in north Russia's Arkhangelsk Region later this year, the head of Russia's largest independent oil producer said on Friday.

"We have obtained approval from a commission headed by the prime minister for access to strategic projects and resources," Vagit Alekperov said.

The businessman said the joint venture would be registered in Arkhangelsk, with its operating offices to be located in Moscow and St. Petersburg.

Earlier reports said the Russian government had allowed De Beers to buy a 49.99% stake in Arkhangelskgeoldobycha, a regional diamond producer owned by LUKoil. The crude producer also holds the license for the Verkhotinskaya diamond field northwest of Arkhangelsk, where the Grib kimberlite pipe, which is thought to contain over $5 billion worth of diamonds, was discovered there in early 1996.

De Beers produces and markets some 40% of the global supply of rough diamonds.

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RusAl to develop bauxite, aluminum project in Venezuela

21:55 | 06/ 11/ 2008

Print version

CARACAS, November 6 (RIA Novosti) - Russian aluminum giant RusAl plans to develop a project to produce aluminum in Venezuela, a Russian deputy prime minister said on Thursday.

"RusAl is set to develop a project for the production of bauxites and aluminum with a Venezuelan company," Igor Sechin said at the opening of a bilateral intergovernmental commission meeting.

Sechin is leading a delegation of around 60 businessmen for the Russian-Venezuelan intergovernmental commission meetings on Thursday and Friday.

United Company RusAl was established in March 2007 through a merger of Russian aluminum giants RusAl and SUAL and Swiss Glencore's alumina assets. It exports products to 70 countries.

Venezuelan President Hugo Chavez said earlier that Sechin's visit would pave the way for the arrival of Russian President Dmitry Medvedev in Venezuela.

Russian presidential spokeswoman Natalya Timakova said earlier that Medvedev could stop off in some Latin American countries as part of his trip to Lima, Peru for the APEC summit on November 22-23.

Sechin said that during Medvedev's visit, Russia and Venezuela are expected to sign a number of bilateral agreements including on the establishment of a joint development bank, as well as in the fields of air transportation, mutual protection of financial investments and the peaceful use of nuclear energy, among others.

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Russia, Italy sign packet of cooperation agreements
20:11 | 06/ 11/ 2008

Print version

MOSCOW, November 6 (RIA Novosti) - Russia and Italy signed a number of bilateral cooperation documents on Thursday, including in the nuclear sphere.

The package was signed after a regular round of Russian-Italian intergovernmental talks attended by Russian President Dmitry Medvedev and Italian Prime Minister Silvio Berlusconi.

The Russian state-run nuclear corporation Rosatom and Italy's economics ministry signed a declaration of intent which will see a working group established to design third- and fourth-generation nuclear reactors. Rosatom head Sergei Kiriyenko said work could start next year.

Russian car producer Sollers and Fiat agreed to launch a new Fiat model. The new model is planned to be produced by the Fiat-Sollers joint venture in the Republic of Tatarstan under a deal signed in June. Production of the first car - Fiat Linea - will start in early 2009.

Sollers already rolls out the Fiat Albea, Dolbo as well as the Ducato models.

Russia's state Technology Corporation and Italy's Pirelli closed a deal to build a tire plant in the Volga region city of Togliatti, an automotive industry center. And the corporation also signed a cooperation agreement with electronics company Finmeccanica.

Russian Railways signed agreements with Finmeccanica and Rusenergosbyt, a Russian electricity retailer, where Russian utility company ESN and Italy's Enel power supplier are major shareholders.

"The parties agreed to prepare and sign within two months a 15-year contract for Rusenergosbyt to supply electricity to Russian Railways," the railroad monopoly said.

Russia's largest independent crude producer LUKoil also signed a deal with energy company ERG to set up a joint venture.

Russia's Unified Energy System and Enel signed a memorandum of cooperation in the energy sector.

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Russia buys Oman's share in Caspian Pipeline Consortium

20:01 | 06/ 11/ 2008

Print version

CARACAS, November 6 (RIA Novosti) - Russia has bought out Oman's share in the Caspian Pipeline Consortium, and the deal is expected to be closed within the next two weeks, the head of the Transneft pipeline operator said Thursday.

"We have bought out Oman's share - the entire 7%. Now only the technical details remain," Nikolai Tokarev said, adding that documents from Oman should be received and the legal procedures completed.

Another buyer for Oman's share was Kazakhstan, which holds 19% in the CPC. Russia's share is now 31% Russian business daily Kommersant said on Wednesday.

Russian Prime Minister Vladimir Putin first hinted that a deal might go ahead at a meeting with Kazakh President Nursultan Nazarbayev last Thursday.

In an interview with Kommersant, a source in Transneft, the operator of the Caspian Pipeline Consortium (CPC), confirmed that the deal had been completed, but did not disclose any details.

Oman agreed to sell its stake in the project early this year, Kommersant said. The country had sent relevant offers to Russia and Kazakhstan. Hungary's MOL was also a potential bidder.

Russia agreed to buy the entire 7% stake for $700 million, the price offered by the Hungarians.

However, a Kommersant source close to the deal said the final price was around $350 million - half the starting price.

The CPC, designed to carry Kazakh and Russian crude to a terminal on the Black Sea, was commissioned in October 2001. Its capacity currently stands at around 30 million metric tons of oil per year and is expected to double by 2012.

Mikhail Barkov, Transneft's vice president, said in late September he was not ruling out the possibility that the international consortium could be forced to close down.

He said the agreements on privileged tariffs for the consortium were set to expire at the end of 2008, putting into question the pipeline's future existence.

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The Russian-Japanese territorial dispute: four islands divided by two?
12:31 | 07/ 11/ 2008

Print version

MOSCOW. (RIA Novosti foreign news commentator Ivan Zakharchenko) - The protracted Russian-Japanese dispute on the national affiliation of the South Kurile archipelago proves that mathematical equations cannot always be used for solving political problems.

On November 5, Russian Foreign Minister Sergei Lavrov negotiated with his Japanese counterpart Hirofumi Nakasone in Tokyo. The talks merely highlighted both countries' desire to try and solve this territorial issue. Russia and Japan will not be able to sign a peace treaty to formally end World War II, unless they solve this territorial dispute.

Lavrov and Nakasone made optimistic statements at their concluding news conference in Tokyo that was preceded by Lavrov's visit to Hokkaido Island bordering on the South Kurile archipelago in connection with the 150th anniversary of opening the first Russian consulate in Hakodate and the establishment of a Russian center there.

"We will continue to negotiate the solution of the peace-treaty problem and will facilitate stronger bilateral ties, trust and mutual understanding between our peoples," Lavrov told a joint news conference on the results of his talks with Nakasone. He said this was the right way to solve the Russian-Japanese border-demarcation problem.

Nakasone advocated the kind of progress in the peace-treaty talks that would correspond to the level of Russian-Japanese relations in economic and other areas.

Moscow's stand on the issue is as follows. The South Kurile Islands were incorporated into the Soviet Union after World War II; and Russia, in turn, became the U.S.S.R.'s legal successor. Consequently, it is impossible to doubt Russian sovereignty over the islands, which was formalized in accordance with international law.

Nonetheless, Moscow is prepared to search for a mutually acceptable solution to the persisting border issue.

Russia and Japan have repeatedly referred to previous agreements including the 1956 joint declaration stating expressly that Japan would receive two islands, namely Shikotan and Habomai, if a bilateral peace treaty were signed.

This implies the archipelago's equal division. Moscow believes this would close the issue. However, Tokyo does not want to renounce its claims to the remaining two islands and has no intention of dividing four by two.

The Japanese side refers to the 1855 Shimoda commercial and border-demarcation treaty that drew the border between the islands of Etorofu and Uruppu, now part of Russia's Sakhalin Region. Everything north of this line was Russian and everything south Japanese, including the four disputed islands - Etorofu, Kunashiri, Shikotan and the Habomai Rocks.

Under the San Francisco Peace Treaty, signed in September 1951 by Japan and 48 nations, members of the anti-Hitler coalition, Tokyo ceded all rights and claims to the entire Kurile archipelago and south Sakhalin. However, the Soviet delegation did not sign the document, calling it a separate agreement between the U.S. and Japanese governments.

In 1955, Tokyo took advantage of Moscow's refusal to sign the treaty and demanded the entire Kurile archipelago and south Sakhalin back. Subsequent two-year Soviet-Japanese talks made it possible to merge both sides' positions. Tokyo then limited its claims to Habomai, Shikotan, Kunashiri and Etorofu.

Japan believes that the 1956 declaration provides an interim, rather than final, solution to the territorial problem and will sign a bilateral peace treaty only if Russia cedes all four islands.

Lavrov told Japanese journalists prior to his latest visit to Japan that any issues should be settled on the basis of compromise, and that Japan was reluctant to divide the four disputed islands by two. Tokyo also believes that a compromise is essential; but the implications are unclear.

Program of socio-economic development for the Kurile Islands

Anyone flying over the South Kuriles can see houses damaged by the 1994 earthquake. The ruins appear gloomy and desolate. The island chain is in dire need of socio-economic development for the sake of local residents and for Russia's prestige.

The local desolation prompted Tokyo to think that Moscow was ready to cede the islands because it was not making improvements. In effect, failure to resolve insular socio-economic problems would slow down the solution of the bilateral territorial problem.

In June 2007, Lavrov visited the South Kurile Islands enroute to South Korea, reacting with dismay to official Japanese criticism of his move.

The Russian Government has now started implementing the draft federal target program on the socio-economic development of the Kurile Islands (Sakhalin Region) for 2007-2015. The national Economic Development Ministry predicts that the successful implementation of the program will swell the local population by 50% to 28,000-30,000 by 2015, and that industrial output will soar by another 50%.

There are plans to accomplish the following four inter-linked objectives for development. First of all, the local transport infrastructure, primarily airports, seaports and roads, will be expanded. It is intended to expand the regional road network and freight turnover by 100% through 2015 and to fully reconstruct all airports and seaports.

Second, electricity costs must be reduced. At present, one kilowatt of electricity costs 300% more than on Sakhalin Island. There are plans to build geothermal power plants that will reduce the cost of resources by 30-50% and will also expand their production by 30%.

Could Russia and Japan jointly develop the South Kuriles?

In 2007, Lavrov proposed that Russia and Japan jointly develop the archipelago and said Russian legislation provided favorable conditions for this. He said Moscow was ready to discuss ways of amending such legislation if Tokyo considered it insufficiently reliable for doing business in the Kuriles.

Japan did not react to this proposal in any way because of its implied recognition of Russia's right to the four disputed islands, which the Japanese regard as "illegally occupied". A Japanese diplomat said Tokyo would never agree to implement economic projects under Russian legislation as long as the territorial dispute remained unresolved.

Only one objective has been accomplished so far. In the early 1990s, Moscow opened a visa-free corridor to Japanese citizens wishing to visit the South Kurile Islands, while Tokyo allows Sakhalin residents to come to Japan.

In this way, the Japanese who do not have to apply for visas get the feeling that they are visiting their home territories.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

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Russia, Belarus and Ukraine offer arms to Qaddafi
16:31 | 06/ 11/ 2008

Print version

MOSCOW. (RIA Novosti commentator Andrei Murtazin) - Russia is unlikely to get what it wants from Libya.

Before Muammar Qaddafi came to Moscow, analysts thought he would sign military contracts worth between $2 billion and $4.5 billion with Russia. However, while the Kremlin staff was busy searching for a place to build a Bedouin tent for Qaddafi, the "son of the desert" was thinking about his bargaining tactic in Russia, Belarus and Ukraine.

Russians view the three countries as fraternal, but Qaddafi sees them as the "Slavic bazaar" where they compete against each other.

The colonel's itinerary was carefully plotted, from Russia to Belarus and to Ukraine, because in Moscow the Libyan leader saw the full range of Russian military items for sale, such as the Ka-52 Alligator helicopter, the Su-35 multirole fighter, the T-90 tank, and the latest version of the S-300 air defense system.

Even the Russian army lacks most of these novel systems, which definitely are not cheap. Russia has other cheaper, simpler arms for sale. It inherited them from the Soviet Union, just as Belarus and Ukraine did.

I was a military translator in Libya in the mid-1980s and I know that the Libyan army had Soviet arms made in the 1960s and early 1970s. They proved highly effective during war games and as well as in wars. Qaddafi was fighting a war in Chad at that time, which Libya did not advertize.

Belarusian President Alexander Lukashenko and Ukrainian President Viktor Yushchenko offered Qaddafi Soviet-made weapons.

Two factors - the price and the buyer's feeling about the seller - are crucial at a bazaar where sellers offer similar goods. Qaddafi is an experienced politician with a personality comparable to those of Russia's Vladimir Zhirinovsky and Belarusian President Lukashenko.

It is therefore not surprising that during their visit to Minsk the leaders of Russia and Belarus spoke about their countries' similar positions and the need to build a multipolar world.

Muammar Qaddafi recalled that it was Belarus that "extended a hand of friendship" to Libya when international sanctions were imposed on it.

Qaddafi first met with Lukashenko in 2000, when the Belarusian president was in Libya on an official visit during which the two leaders created the groundwork for bilateral relations. Qaddafi told Lukashenko he was always welcome in Libya, and the Belarusian leader promised to come to Tripoli again.

The colonel knows Russian President Dmitry Medvedev very little, but Vladimir Putin, then Russian president, visited Libya in April 2008 to remove the main obstacle hindering the development of bilateral relations. He wrote off Libya's $4.5 billion debt to the former Soviet Union in return for its pledge to sign new contracts with Russia.

In Moscow, Putin not only attended Medvedev's talks with Qaddafi but also accompanied him to the concert of Mireille Mathieu in the Kremlin Palace where he introduced the high Libyan guest to the famous French singer in a surprise move.

Qaddafi was received in Kiev without much pomp, which was logical given the political situation in Ukraine. But President Yushchenko said at a news conference after their meeting that current bilateral military technical cooperation was not up to its potential.

Analysts are worried that no official statements on the signing of Russian-Libyan documents were made in Moscow, while Belarus has signed agreements. However, this does not mean that Medvedev, Putin, Lukashenko and Yushchenko have not agreed with Qaddafi on military matters. I rather think they have but decided not to comment on their achievements, for understandable reasons.

It is still not clear if Russia will have a naval base in Benghazi, Libya. According to the business daily Kommersant, Qaddafi discussed the issue with Medvedev.

A group of warships from Russia's Northern Fleet led by the Pyotr Veliky missile cruiser recently called at Tripoli, and the Neustrashimy destroyer stopped at the port on its way to Somalia.

The newspaper writes that Qaddafi thinks Russia's military presence would protect Libya from possible attacks by the United States, which is not willing to embrace the colonel despite numerous conciliation gestures.

Russia apparently has at least three advantages over Belarus and Ukraine.

First, it offers brand-new high-tech arms that are better than many foreign analogues.

Second, the three Slavic countries may agree what to sell to Qaddafi and at what price, despite the numerous political differences between them, especially between Russia and Ukraine over Ukrainian arms deliveries to Georgia.

And third, Russia may still decide to establish a naval base at Benghazi, because it will cost a lot and Libya needs the money. But can Russia do it in conditions of the global financial crisis, when its international reserves are decreasing by day and the once full flow of petrodollars is dwindling into a small creek?

Which of the three Slavic brothers will the Libyan leader choose? From whom will he buy more arms? We will know the answer only when more warships, aircraft and tanks marked "Made in USSR" are sent to Tripoli under the watchful eye of space-based monitoring systems.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

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定額給付金、１人１万2000円で最終調整　高齢者と18歳以下加算

　自民、公明両党は7日、追加経済対策に盛り込んだ総額2兆円規模の定額給付金について、1人あたり1万2000円を支給する方向で最終調整に入った。65歳以上の高齢者と18歳以下の子どものいる世帯には1人あたり8000円を上乗せする方針だ。

　自民党の園田博之政調会長代理と公明党の山口那津男政調会長が同日、国会内での会談で合意した。与党は65歳以上と15歳以下に加算する案を検討していたが、「高校生がいる世帯にも配慮すべきだ」とする公明党の主張を受け入れる方向となった。加算金を8000円に抑制することで、総額は2兆円以内となる見通しだ。夫婦と18歳以下の子ども2人の4人家族の場合、支給額は合計6万4000円になる。

　支給方法については、世帯の代表者が地方自治体に申請する方式を想定している。所得制限に関しては今年度内の実施を優先し、法改正を伴わない方法を採ることで一致した。総務省や地方自治体の意見を踏まえて来週前半までに具体案を取りまとめる。現時点では2000万円前後以上の高額所得者を支給対象から外す案が出ている。(21:05)

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首相、出先機関の職員「丁寧な扱いを」

　麻生太郎首相は7日の閣議後の閣僚懇談会で、国の出先機関について、廃止や地方へ大幅に業務移譲する方針を示したことに関し「各閣僚が指導して方針を実行してほしい。地方団体に移行する職員やあふれてしまう職員については丁寧な扱いが大事だ」と指示した。主要な出先機関の縮小に当たり、職員の身分保障に十分配慮するよう求めたものだ。(16:29)

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対馬が買収の危機！防衛省はゲリラ戦も想定

超党派議連総会では防衛省の対応に不満も
韓国資本が周辺土地を買収している対馬の航空自衛隊基地。沖に見えるのは釜山の夜景（クリックで拡大）
韓国資本が周辺土地を買収している対馬の航空自衛隊基地。沖に見えるのは釜山の夜景（クリックで拡大）

　日本海に浮かぶ国境の島・対馬（長崎県）が危ない。自衛隊基地周辺の不動産が韓国資本に続々と買収されているのだ。合法的な領土収奪を疑わせる事態に、危機を抱く超党派の国会議員らは６日午後、新たな法整備を見据えた現地視察を決定。防衛省も同島の重要性を認識し、敵上陸部隊とのゲリラ戦も想定していることを明らかにした。

　東京・永田町の衆院議員会館で開かれた超党派の「日本の領土を守るために行動する議員連盟」総会。産経新聞の宮本雅史編集委員らによって、対馬の海上、航空自衛隊基地に隣接する不動産が、韓国資本によって買い占められている実態が明らかにされた。

　対馬は「古事記」や「日本書紀」にも登場する日本固有の領土だが、韓国の与野党国会議員５０人が今年７月、返還要求決議案を発議。同時期に、韓国の退役軍人が島に乗り込み、「竹島も対馬も韓国領土だ」と抗議行動を起こすなど、不穏な空気が流れている。

　同島は南北８２キロ、東西１８キロ。リアス式海岸が多く、海岸線は９１５キロに及ぶ。ここを海上保安庁の高速艇２隻と巡視船６隻、陸上、海上、航空の自衛隊員約７００人で守っている。ただ、自衛隊は航空機も艦船も保有していない。

　総会では、韓国資本が島民名義で税金まで肩代わりして不動産取得している問題や、その隠された政治的背景なども指摘。出席議員から「対馬の防衛はどうなっているのか。戦後６０年、平和が続いたため、防衛省の対応が甘い。財産どころか、島民の生命も守れないのではないか」という厳しい意見も出された。

　これに対し、防衛省の担当者は「日本の島々の中で、陸海空すべての自衛隊を置いているのは沖縄と対馬だけ。国境の島の重要性は認識している」といい、あえて敵を特定しないまま「地形的（＝海岸に断崖絶壁が多い）に大きな（敵の）部隊は上陸できない。ゲリラ的戦いになるだろう。けもの道など、地域の情勢に熟知した部隊を配置している。必要なら、本土からも部隊を集中して守る」と言い切った。

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フォード：２四半期連続の赤字　人件費削減とリストラ発表

　【ワシントン斉藤信宏】米自動車大手フォード・モーターが７日発表した０８年７～９月期決算は、最終損失が１億２９００万ドル（約１２５億円）と、２四半期連続の赤字となった。ただ、赤字幅は４～６月期の８６億６７００万ドルから大幅に縮小した。急激な販売減少に加えて、退職者向けの医療保険費用に関連して２３億ドルの損失を計上したことなどが響いた。前年同期は３億８０００万ドルの赤字だった。売上高は前年同期比２２％減の３２１億ドルだった。

　フォードは同時に、人件費をこれまでの削減に加えて、１０％削減するなどのリストラ策を発表した。

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ホンダ：体重が軽くなったような効果　歩行支援装置を試作

　ホンダは７日、体重が１～２割軽くなったような効果を生む歩行支援装置の試作機を開発したと発表した。「階段の上り下りや中腰での作業が特に楽になる」という。

　足に似た２本のモーター付きフレームと靴、また下に挟む座席で構成。ひざを曲げるほど強い力で座席を持ち上げ、足腰の負担を軽くする。重さは約６．５キロ。

　発売時期は未定だが、近く狭山工場（埼玉県狭山市）の車両組み立てラインに試験的に導入し、効果を検証する。将来的には高齢者や障害者も利用できるよう改良したい考え。【宮島寛】

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コレステロール：適正値は　動脈硬化学会と脂質栄養学会が論争
　◇動脈硬化学会「下げれば心筋梗塞減」／脂質栄養学会「高い方が長生きする」

　適正なコレステロール値をめぐり、診断基準を作った日本動脈硬化学会と、基準に批判的な日本脂質栄養学会が９月、大阪市で公開討論会を開催した。動脈硬化学会代表は「値を下げれば心筋梗塞（こうそく）にかかりにくい」と主張し、脂質栄養学会代表は「値が高い方が長生き」と強調した。決着しなかったが、糖尿病などを発症していない女性は基準を多少超えても投薬の必要性は薄いことでは一致した。【野田武、高木昭午】

　公開討論会は、脂質栄養学会の呼びかけで実現した。

　動脈硬化学会から参加した寺本民生・帝京大教授（内科）はまず、国内で３０歳以上の男女約９０００人を８０年から１７年余り追跡した調査（ＮＩＰＰＯＮ　ＤＡＴＡ）を示した。

　８０年当時の総コレステロール値が血液１デシリットル中１６０～１８０ミリグラム（ＬＤＬコレステロール換算で約８８～１０６ミリグラム）だった人を基準にすると、２２０～２４０ミリグラム（同１４３～１６２ミリグラム）の人は心筋梗塞での死亡率が１・６７倍高かった。

　また、欧米の研究チームがＬＤＬ１１５～１８７ミリグラムだった約９万人のデータを分析すると、ＬＤＬを薬で下げたグループは薬なしのグループより死亡率が１２％低かったことも紹介した。

　寺本教授は毎日新聞の取材に対し「ＬＤＬを下げると心筋梗塞の発症率は減るが、これ以下は発症しないとの境はない」と説明。ＬＤＬ１４０ミリグラム以上などを「脂質異常症」とした根拠は、データではなく専門家の合意によると語った。また、診断基準は病気と健康の境でなく、脂質異常症は病気以前の「未病」と説明。治療法は性別や年齢、糖尿病など他の要因を考えて決めるべきだと強調した。

　　　＊

　一方、脂質栄養学会から参加した大櫛陽一・東海大教授（医療統計学）はＮＩＰＰＯＮ　ＤＡＴＡについて「がんなどすべての死因を合わせた死亡率をみると、統計的に意味を持って高いのはＬＤＬ換算で１８１ミリグラム以上と８８ミリグラム未満」と指摘。「１４０ミリグラム以上で心筋梗塞による死亡率１・６７倍」は統計的に偶然の範囲で、基準の根拠として不適切だと主張した。

　また神奈川県伊勢原市で健診を受けた４０歳以上の約２万６０００人を約８年間追跡した調査を示し「コレステロールが高い方が長生きした」と話した。調査では、ＬＤＬが１００ミリグラム以上の男性は死亡率が年間２～２・５％で、１４０ミリグラム以上も同様だった。１００ミリグラム未満の男性は死亡率が年３％を超え、女性も死亡率が高いのは１２０ミリグラム未満だった。

　さらに「欧米では女性はコレステロール低下薬は不要とされる」と訴えた。０４年の米医師会雑誌に、女性２万人余りを対象にした分析から、コレステロールを下げても、すべての死因を含めた死亡率は下がらないと結論づけた論文が掲載されているからだ。

　寺本教授も「ＬＤＬだけが高い女性は心筋梗塞のリスクが低く治療はあまり勧めない」と話す。その上で、「（糖尿病の手前にあたる）耐糖能異常があれば勧める。性別や年齢などを含む基準が望ましいが細かくて医師が使いにくいので一律にした」と理解を求めた。

＝＝＝＝＝＝＝＝＝＝＝＝＝＝

　■動脈硬化学会の診断基準

　「悪玉コレステロール」とされるＬＤＬコレステロールが血液１デシリットル中に１４０ミリグラム以上（総コレステロールで２２０ミリグラム以上）の場合などを「脂質異常症」とする。超えれば生活改善を勧め年齢（男４５歳、女５５歳以上）や喫煙、高血圧など他の問題次第で薬も必要としている。