Nippon Steel Said to Be Close to Setting Ore Price Benchmark

Nippon Steel Said to Be Close to Setting Ore Price Benchmark
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By Jesse Riseborough and Masumi Suga

May 21 (Bloomberg) -- Nippon Steel Corp., the world’s second-largest steelmaker, may be close to agreeing a 30 to 35 percent cut in iron ore contract prices with producers including Rio Tinto Group, said two people familiar with the talks.

A possible benchmark price is likely be agreed within weeks for the year started April 1, one of the people said, declining to be identified because the talks are confidential. Rio and Cia. Vale do Rio Doce, the world’s two biggest ore exporters, are in Tokyo for talks with mills this week, the other person said.

An agreement with Japanese mills would be the first contract price settlement in Asia this year and will end six years of gains to last year’s record. The global recession has curbed demand for steel, forcing producers to offer discounts.

“A benchmark settlement may be close with investor consensus anticipating -30 percent or -35 percent between Australia and Japan,” Citigroup Inc. analyst Alexander Hacking said in a May 19 report.

Rio rose 1.5 percent to A$66.33 at 12:57 p.m. Sydney time on the exchange.

Talks for a price settlement are nearing a conclusion, Vale’s Chief Executive Officer Roger Agnelli said May 18. Company spokesman Fernando Thompson declined to comment further in an-email.

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Mayfair Eviction Fight Pits Credit Suisse Against Investor
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By Simon Packard

May 20 (Bloomberg) -- Cevdet Caner, the man at the center of Germany’s biggest real estate insolvency in 15 years, is fighting eviction from his 20 million-pound ($31 million) London townhouse, complete with basement swimming pool.

His group of investment companies called Level One owes 1.5 billion euros ($2 billion) to creditors led by Credit Suisse Group AG, according to estimates by the German administrator. The two main holding companies defaulted and were placed under court administration in August, U.K. filings show, after the group bought 27,000 units of communist-era public housing in the former East Germany over three years, almost entirely with debt.

The battles with creditors are the legacy of the boom years, when banks expanded lending to real estate investors -- even those with limited experience like Caner. Lenders blame him for mismanagement and say about 50 million euros were channeled out of the Level One businesses while they failed to pay utility and tax bills, according to six people who have seen an audit of Level One’s finances. Caner, 35, said he faults the banks for a change of heart after pledging to loan him the money.

“Level One epitomizes all that went wrong in the real estate bubble,” said Christian Koehler-Ma, an administrator of more than 50 Level One companies in Germany. “On one side you have Caner -- a good salesman, charming and intelligent -- who was looking to make money.”

On the other side were the banks, which resold the loans to investors “so they didn’t think about what they were doing as thoroughly as they should have,” he said.

Hedge Fund District

Borrower defaults such as Level One’s and falling property values led banks, insurers and government-sponsored enterprises to write down the value of loans or mortgage investments by $391 billion since September 2007. That’s 27 percent of the total losses in the global financial crisis, data compiled by Bloomberg show.

Caner’s six-story townhouse in London’s Mayfair district, the location of choice for hedge funds, is one front in the war between him and banks that is being fought in courts in Luxembourg, Berlin and Jersey, the Channel Island off the coast of France. He said he spent about 5 million pounds of his own money to buy and renovate the century-old, six-bedroom house in a neighborhood where owners include the billionaire brothers David and Simon Reuben and property investor Simon Halabi.

The property has 11,500 square feet of space if the carriage house at the rear of the garden is included. Caner got planning consent in December to demolish and rebuild this separate building as a garage with a four-bedroom apartment upstairs and a sauna, gymnasium and solarium in the basement.

Mayfair Townhouse

Caner acquired the Mayfair property for 16 million pounds in July 2007, Land Registry records show. In September 2008, the U.K. administrator of Level One Residential (Jersey) Ltd. -- Zolfo Cooper LLP, a former unit of Kroll Inc. -- demanded repayment of about 1.26 million pounds used to purchase the house, according to a March 4 report to creditors from Zolfo Cooper obtained by Bloomberg News.

The company that acquired the property, registered in St. Helier, Jersey, was put in liquidation, a court filing published Jan. 28 shows. The house was valued at 20 million pounds when the real estate brokerage arm of New York-based auction house Sotheby’s tried to find buyers in December and then withdrew it pending a court repossession order, according to the receiver, Jon Gershinson, a partner at Allsop LLP in London.

Caner’s Mayfair townhouse illustrates the lifestyle he enjoyed as money flowed from Level One into Special Opportunity Holdings Ltd., a company owned by two of his private trusts, said four people with knowledge of Level One’s insolvency who declined to be identified because the information is confidential. Katharina Gebsattel, a Frankfurt-based spokeswoman for Credit Suisse, declined to comment.

‘Stupid War’

“It’s a stupid war to try and kill me business-wise and reputation-wise,” Caner said in the wood-paneled boardroom at the townhouse, which he uses as his London office. “I don’t want to lose my investment in this property.”

No company funds were misused, Caner said, citing the money and assets he injected to satisfy lenders and avert his group’s insolvency. The 50 million euros of fees charged to Level One helped pay for his 50-employee asset management team, he said, and the rest was reinvested in the business. It was a typical private-equity fee structure, according to Caner.

“There was no wrongdoing on my side,” he said.

Caner, an Austrian who is the youngest of seven children born to Turkish immigrants, said he began property investing in 2003 after reading that rental incomes easily covered the borrowing costs for buying buildings.

Ran Call Center

Previously he ran CLC AG, a call-center operator he started while at business school in his hometown of Linz, where for two years he was president of the Young Socialists. He gradually sold his CLC stake until the board ousted him in 2002 because of a disagreement over expansion plans, he said. Two years later, CLC filed for insolvency, and creditors got just 1.36 cents for each euro owed, Vienna court documents show.

From late 2004 through 2007, Level One spent 1.85 billion euros buying apartments -- mostly from former East German municipalities -- and 400 commercial properties in Germany, Caner said.

It was a strategy already pursued by larger private-equity firms, including Terra Firma Capital Partners Ltd. in London, and Blackstone Group LP and Fortress Investment Group LLC, both based in New York.

Many investors got stuck after betting mistakenly that homeownership in Germany would rise as it did in the U.K. and the Netherlands when affordable housing was sold by municipalities, said Philip Cropper, London-based managing director of Real Estate Finance at CB Richard Ellis Group Inc.

Lower Growth

In fact, the properties probably had generally lower growth potential because of their location, condition and higher tenant default rates, and their maintenance and management costs went over budget, said Tony Edgley, head of European corporate finance at property adviser Jones Lang LaSalle in London.

“The assumption that people would flock to buy rather than staying in low-cost rented accommodation also proved to be flawed,” he said.

Credit from foreign banks fueled the investment boom, with many of the loans repackaged into commercial mortgage-backed securities and sold to investors, said Bernd Knobloch, a member of the supervisory board of Hypo Real Estate Holding AG, a Munich-based commercial property lender.

Zurich-based Credit Suisse, ABN Amro Holding NV of Amsterdam and New York’s Bear Stearns Cos. financed 90 percent of Level One’s investments, said Koehler-Ma, the German administrator. Most of the rest of the money was raised privately or in the bond market. About 700 million euros of the loans were packaged in credit-backed securities, he said.

Banks Won’t Comment

Credit Suisse, which is owed about 300 million euros, according to Koehler-Ma, declined to comment. So did Royal Bank of Scotland Group Plc and JPMorgan Chase & Co., which now own ABN Amro and Bear Stearns, respectively.

“Level One was a reflection of the hype of the capital markets at the time, when investment bankers were trying to push their securitizations,” said Knobloch. “The lenders didn’t look after the quality of the loans because they didn’t care if they were good or bad.”

The wave of property purchases created a backlash against the free-market efforts of Gerhard Schroeder, chancellor from 1998 to 2005, to make Germany’s economy more competitive. In April 2005, Franz Muentefering, chairman of Schroeder’s ruling Social Democratic Party, compared the foreign investors to the biblical plague of locusts that had destroyed Egypt’s crops.

‘Locusts Get Eaten’

A Level One tenant in Leipzig, Rolf Hofmann, said he spent two weeks camping out in the shed in his nearby garden plot after the elevator in his building broke and his disabled wife couldn’t climb six flights of stairs to their apartment. It was repaired only after a story in the local newspaper, he said.

“Sometimes, even locusts get eaten,” Hofmann, a 69-year- old retired engineer, said of Caner’s situation.

Most tenants were unaware of their landlord’s difficulties in paying the bills and maintenance costs because the banks covered them, said Koehler-Ma, a Berlin-based partner of insolvency law firm Leonhardt Westhelle & Partner.

There were no issues in repaying the interest on mortgages on Level One’s properties in Germany, Caner said. Problems occurred because advisers such as lawyers and accountants got paid first, he said.

Private Jet

At the height of the boom, Caner said he spent 500 hours a year in his private jet, flying between London, Berlin and Linz, where his aides managed 200 companies registered in Germany, Jersey, Liechtenstein and Luxembourg.

Caner said he traces his undoing to a call in March 2007 from a member of Credit Suisse’s Special Situations team offering him a 109 million-euro bridge loan until Level One’s German residential assets were sold in an initial public offering. He agreed, a decision he says he rues to this day.

“It was my biggest mistake,” said Caner, who gained legal residency in Monaco in 2002. “I was too greedy and wanted to grow my portfolio faster.”

Credit Suisse sold part of the loan to five hedge funds -- New York-based Cyrus Capital Partners and EOS Partners Ltd., Hong Kong’s ADM Capital, Minneapolis-based Vaerde Partners and Camulos Capital LP of Stamford, Connecticut -- according to documents seen by Bloomberg. The bank, Switzerland’s second- largest by assets, and the hedge funds either declined to comment or didn’t return telephone calls.

In July 2007, four months after the bridge loan was granted, the planned IPO in Germany was suspended as European real estate stocks fell and credit markets began to freeze. A second IPO plan met a similar fate in late 2007.

New Capital

Caner said he put up new capital in May 2008, including his 85 million euros of equity in two property portfolios worth 400 million euros, to keep the bridge loan in place. He also offered his stake in a 5 million-euro house in Berlin two months later and injected 1.7 million euros in cash, he said.

Caner agreed to stop running Level One last July in return for getting additional working capital, he said. In August, the U.K. High Court placed under administration the two Jersey- registered holding companies through which Caner controlled the bulk of the Level One group, court records show.

The 1.5 billion-euro insolvency is the largest in German real estate history since developer Dr. Juergen Schneider AG collapsed in 1994 owing banks more than 6 billion deutsche marks (3 billion euros), Koehler-Ma said.

The current investment climate means Level One’s creditors “are of the opinion that a fire sale in a hurried fashion wouldn’t make sense,” he said.

Audit Report

The audit by Stephan Schilling, a partner of Dusseldorf- based accounting firm RoelfsPartner, which was hired by Credit Suisse, found that Level One paid about 50 million euros to a Jersey company controlled by two of Caner’s trusts, said six people familiar with the situation. Unpaid utility bills and property taxes accumulated, they said. RoelfsPartner spokeswoman Danielle Staudt-Gersdorf declined to comment.

Caner estimates he lost 200 million euros of investments in Level One and said he may sue Credit Suisse for damages, arguing that the bank’s claims should be subordinate to those of other creditors.

The Austrian says he wants to clear his name and return to investing in real estate.

“German real estate looks extremely interesting,” he said. “That’s why I have to fight to show that the wrongdoing was all on the other side. I know I’m right.”

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Signs of health suggest US banking crisis ending

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AFP Rob Lever

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Renewed signs of health among big US banks is sparking hope that the credit crisis is over, with the risks of a new financial meltdown diminishing. Skip related content
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Despite a still-fragile situation, some analysts point to easing interest rates, rising stock prices for major banks and the renewed ability of banking firms to raise new capital in the private sector.

This could lead to many banks repaying the US government by repurchasing the shares from capital injections.

"America's banking crisis is over," said Avery Shenfeld, senior economist at CIBC World Markets, in a recent note to clients.

Shenfeld said one major factor is the drop in the key Libor interest rate for lending between banks "to the point that indicates that the fear of failure has been shaken out of the system."

The conclusion of the "stress tests" of the system along with requirements that major banks raise modest amounts of new capital -- which they have been doing -- indicates the United States will not allow a failure that could lead to a major shock to the system, said Shenfeld.

"The US will not be left with an empty shell of a banking system, the way Japan was in the 1990s after its equity and real estate crash," he said.

Numerous banks have been able to raise fresh capital, including Bank of America, which issued some shares to reap roughly 13.47 billion dollars.

Citigroup, meanwhile, raised two billion dollars in bonds without a guarantee that had been offered by US authorities.

Treasury Secretary Timothy Geithner said Wednesday that he sees "important indications that our financial system is starting to heal."

Kent Engelke, chief economic strategist at Capitol Securities Management, said the easing of pressures on credit markets points to an end to the crisis that began nearly two years ago and intensified with the collapse of Lehman Brothers last September.

"I think it is safe to write the worst of the financial crisis has now passed," he said. "Another leg down is viewed as improbable by the credit markets."

Others remain skeptical, saying banks are averting calamity only because of massive government guarantees and other forms of aid.

Standard & Poor's said in a recent research note that banks "are far from a recovery, and the banking crisis has merely entered a new phase."

S&P analyst Tanya Azarchs argued that "there's nothing to say that this banking crisis can't go on for another three or four years."

S&P and others point out that banks have not even begun to purge their balance sheets of the so-called "toxic assets" linked to real estate. Some estimates indicate this could mean another trillion dollars or more among global banks.

"The financial system -- in spite of the massive policy backstop -- is severely damaged and the credit crunch will thus not ease very fast," says Nouriel Roubini, economist at New York University who has had a longstanding pessimistic view.

"Many financial institutions are still severely undercapitalized, in spite of stress tests that were not stressful enough, are saddled with bad loans and bad assets and are in risk retrenchment mode that leads to a persistent credit contraction."

Joe Weisenthal, editor at the financial website Clusterstock, said however that confidence appears to be building, as evidenced by the big amounts of capital pouring into Bank of America and others.

"The fact that (Bank of America) moved so much stock is a decent indicator of real money out there willing to come into banks," he said.

But Bob Eisenbeis, economist at Cumberland Advisors, said it is too soon to sound the all-clear signal, arguing that money is coming into banks largely because of the implicit promise by authorities to rescue any institution that gets into trouble.

"I think it's going to take a significant pickup in both profits and in stock prices before we'll be out of the crisis," he said.

"We won't be out of it until the government is out of it."

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Estonia, Swedbank sign 50-million-euro loan deal

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Recession-hit Estonia has signed a 50-million-euro loan deal with Swedish-based Swedbank, a key player in the Baltic state's financial market, the government said Wednesday. Skip related content
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"Estonia will borrow 782 million kroons (50 million euros, 69 million dollars) from Swedbank," finance ministry spokeswoman Piret Seeman told AFP.

Finance Minister Ivari Padar said in a statement that one of the aims of the deal was to increase the liquid assets of the state, which is trying to tackle a deep economic slump.

Estonia regained independence from the crumbling Soviet bloc in 1991 and later earned a reputation as a "tiger" in the European Union, which it joined in 2004.

But after years of stellar growth it plunged into recession last year as rampant inflation dented consumption and the global economic crisis battered exports of goods and services.

The economy in the country of 1.3 million people contracted by 3.6 percent last year and Estonian authorities forecast it could shrink by 15.3 percent this year.

Estonia earned a reputation for prudence, putting funds aside when the economy was growing, and has been reluctant to use up its nest-egg to bridge a budget gap.

"The reserves Estonia collected in the boom years have been partly the guarantee of the current credibility of Estonia, so using a loan we get on good terms in order to keep some money in the reserve fund is a very reasonable choice," Padar said.

According to the agreement, Swedbank will transfer the funds to the Estonian treasury at the beginning of June.

"The government gave the finance ministry the right to borrow 2.3 billion kroons during 2009. In light of the ongoing budget planning decisions and budget-cut talks, it is reasonable to borrow a smaller sum," Padar said.

The Estonian government has already slashed spending in the face of the crisis and is currently wrangling over further cuts, with the arguments raising the spectre of a collapse of the country's three-party coalition.

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Sting operation foils New York terror plot

By Harvey Morris in New York

Published: May 21 2009 06:33 | Last updated: May 21 2009 06:33

US authorities said Wednesday night they had arrested four men for planning a missile attack on planes at a military base in New York State and a bombing plot against a synagogue in New York City.

The detainees included the son of Afghan immigrants to the US, who was alleged to have said he was unhappy at deaths in Afghanistan and Pakistan caused by US forces and wanted to return to his homeland to do “something to America”.

The four, all with western-sounding names and Muslim aliases, were arrested after they tried to buy Stinger anti-aircraft missiles from a Federal Bureau of Investigation informant, according to court papers.

They are alleged to have planned the bombing of a synagogue in New York’s Bronx borough and a Stinger missile attack on a National Guard base outside the city.

The FBI said the four planned to use 30 pounds of plastic explosives in the synagogue bombing in the Riverdale district of the city after identifying possible Jewish targets.

The accused included James Cromitie – also known as Abdul Rahman – who was said to have spoken to the FBI informant about the prospect of dying a martyr in Afghanistan. Also named in the complaint by US prosecutors were David Williams (aka Daoud), Onta Williams (aka Hamza) and Laguerre Payen (aka Amin or Almondo).

The four were due to appear in court in White Plains, New York on Thursday.

Peter King, a New York Republican congressman, told CNN the suspects planned to undertake their attack on Wednesday using a car bomb outside the synagogue. “Tonight was the night the attacks were being carried out,” he said.

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Blow for Obama plan to close Guantánamo

By Andrew Ward and Demetri Sevastopulo in Washington

Published: May 21 2009 00:40 | Last updated: May 21 2009 00:40

Barack Obama will seek to wrestle back control of his counter-terrorism policy on Thursday after suffering a serious setback in his efforts to close the Guantánamo Bay prison.

In a speech, the US president will remake the case to shut the detention camp in Cuba – which became a symbol of George W. Bush’s “war on terror” – after the Senate voted 90-6 on Wednesday to stall the process.

Democrats sided with Republicans to block $80m in funding to close Guantánamo and backed a measure that would bar the Pentagon from bringing detainees to the US either for release or imprisonment.

The Senate vote, which followed similar action by the House last week, raised doubts about whether Mr Obama could fulfil his own pledge to close the camp by January. Besides growing unease among congressional Democrats, Mr Obama also faces dissent from inside his own administration.

Republicans were given fresh ammunition to attack the planned closure on Wednesday when Robert Mueller, the FBI director, voiced “concerns” about the prospect of detainees being brought to the US. On Tuesday, the Financial Times reported that the FBI had opposed a recommendation by Mr Obama’s Guantánamo task force to release two Chinese Uighurs in the US.

“The concerns we have about individuals who may support terrorism being in the US run from ... providing financing, radicalising others ... [to] the potential for individuals undertaking attacks in the US,” Mr Mueller told Congress.

The internal divisions were highlighted when Michele Flournoy, under-secretary of defence for policy, told reporters on Wednesday that the US needed to take some of the 240 detainees at Guantánamo to help convince allies to accept others.

“When we are asking allies to do their fair share in dealing with this challenge we have to do our fair share,” said Ms Flournoy.

Harry Reid, Senate majority leader, insisted that Democrats remained committed to closing the prison, but said the administration must provide more details before Congress would approve funding. “Let me be clear, Democrats will not move to close Guantánamo without a responsible plan to ensure Americans’ safety. And we will never allow a terrorist to be released into the United States,” he said.

The White House said it accepted the need for more details and vowed to work with Congress. Robert Gibbs, White House press secretary, said Mr Obama would “lay out the framework” on Thursday for shutting Guantánamo.

Some of the loudest Republican dissent has come from Dick Cheney, the former vice-president, who is due to make his own speech on national security in Washington on Thursday. The duelling speeches promise to add further fuel to a counter-terrorism policy debate that has temporarily dislodged the economy from the top of the US political agenda.

Republicans seized on the FT report that the task force had recommended releasing the Uighurs, who are no longer considered “enemy combatants”. Richard Shelby, an Alabama Republican senator, said: “If this is even being considered, the decision to release these terrorists into our country is both reckless and clearly contrary to the will of the American people.”

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IMF urges UK to control public finances

By Chris Giles, Economics Editor

Published: May 20 2009 16:14 | Last updated: May 20 2009 23:03

The International Monetary Fund urged the government on Wednesday to act faster once the economy was recovering to get the public finances under control by cutting public spending plans or raising taxes.

Warning that the “success of the current policy package hinges on the continued trust in the sustainability of the fiscal position”, IMF officials called for the government also to specify how it planned to limit public spending, to allocate any surprise tax revenue growth to deficit reduction and to build a broad public consensus for bringing the government books closer to balance.

“The focus of this adjustment profile should be to put public debt on a firmly downward path faster than envisaged in the 2009 Budget,” IMF officials said in a statement after their annual inspection of the UK economy.

They also favoured cutting spending plans rather than tax increases to improve the public finances, because the fund believes that evidence from Canada, Australia and Denmark shows lower public spending is the more durable policy.

The IMF team chose not to increase their forecast for economic growth, with it now sitting at the pessimistic end of economic forecasters. The IMF believed it was too soon after its World Economic Outlook was published last month and not enough has changed in the world for it to revise its forecast of a 4.1 per cent contraction this year, followed by a contraction of 0.4 per cent in 2010.

The UK Treasury notes that in contrast to the fund’s view that the “recovery is expected to be subdued and gradual,” City economists have begun to revise their forecasts for growth higher. The consensus forecasts, compiled by the Treasury on Wednesday, showed economists had become slightly more optimistic about 2010, the first time the year-ahead consensus forecast has risen for over a year.

Though both sides say the economic outlook is highly uncertain, the disagreement between the fund and Treasury rests on their contrasting analysis of household and bank finances.

The fund stressed the importance of stretched balance sheets for households and banks as the reason for concern about the likely speed of recovery, reflecting the Bank of England’s new emphasis on the same issue.

It said the banks’ weaknesses were likely to curtail their ability “to sustain credit provision at levels required for a robust economic recovery”.

Households “are likely to retrench spending to reduce debt and rebuild savings” in response to lower house prices and other asset values, the IMF said.

In contrast, the Treasury believes the effect of house prices on spending are exaggerated and it is encouraged by the recent rise in asset prices, which it thinks will improve bank balance sheets and help restore lending.

Weak evidence in recent weeks has supported the Treasury’s position with lending and deposits in banks recovering in the first quarter after a disastrous fourth quarter of last year.

To improve credit conditions further, the fund urged the authorities to strengthen banks’ balance sheets by encouraging them to raise fresh private capital, to “stand ready to provide further public support where needed,” and to promote restraint in banks’ dividend payments to preserve capital cushions.

The IMF was supportive of the general thrust of the Treasury’s rescue plan for banks although it noted the measures had to balance a number of conflicting objectives such as restoring confidence and limiting the extent of government involvement.

It also backed the Bank of England’s policy of quantitative easing – creating money and pumping it into the economy by buying assets – although fund officials joined widespread calls for the bank to extend its purchases of assets beyond predominantly government bonds.

The uncertainty over the success of quantitative easing “strengthens the case for further diversifying the Bank’s asset purchases”.

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Italy cancels minister’s Iran visit

By Guy Dinmore in Rome

Published: May 20 2009 17:47 | Last updated: May 20 2009 17:47

Italy on Wednesday cancelled at the last minute a flight to Iran by Franco Frattini, foreign minister, following strong objections from European capitals and Washington and a bid by Mahmoud Ahmadi-Nejad, Iran’s hardline president, to make election propaganda out of his visit.

Italy’s foreign ministry said it called off the two-day trip because Mr Ahmadi-Nejad, who is campaigning for re-election next month, wanted to meet Mr Frattini in the city of Semnan where the Iranian president had just announced the successful launch of a medium-range missile capable of hitting Israel.

The Italian delegation was about to leave Rome but had not boarded its plane when the decision was made to cancel, one person present told the FT.

Mr Frattini, who would have been the most senior European government official to visit Iran since Mr Ahmadi-Nejad was elected in 2005, expressed his regret over a “lost opportunity” to discuss Iran’s role in stabilising Afghanistan and Pakistan.

European allies had expressed dismay that Italy was about to break with EU policy of shunning high-level contacts with Iran over its nuclear programme.

Calls were made to Rome on Tuesday when it was learned that Mr Frattini would set off the next day. Diplomats said David Miliband, UK secretary of state, tried to telephone Mr Frattini on Tuesday evening but it was not clear if they spoke. The Obama administration also made its concerns known at a lower level.

Mr Frattini had been warned that Mr Ahmadi-Nejad would try to exploit his visit for his election campaign, diplomats said, calling the last minute cancellation – which followed a postponement in March – a serious embarrassment for Rome.

Italy, as head of the Group of Eight industrialised nations this year, said it wanted to engage Iran ahead of a ministerial meeting on Afghanistan and Pakistan it will host in Trieste next month, with the aim of bringing together Iran and the US for the first time.

Diplomats and commentators said they suspected Italy’s considerable oil and gas investments in Iran were also an important factor behind Mr Frattini’s mission.

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Lloyds warns EU may insist on disposals

By Adam Jones

Published: May 20 2009 12:18 | Last updated: May 20 2009 14:09

Lloyds Banking Group believes it might have to sell assets in order to win European Commission approval for aid from the UK government.

Investors looking to take part in a £4bn placing and open offer of Lloyds shares were on Wednesday given an outline of the concessions that might be offered to Brussels in a state aid approval request being drawn up by the Treasury with input from the bank.

In the prospectus for the placing and offer, Lloyds said it expected that the aid approval request would need to be underpinned by a commitment to cut the size of its balance sheet significantly and/or submit to restrictions on its behaviour, although it stressed that the situation was uncertain.

While it expected that any balance sheet shrinkage would be achieved by selling or otherwise exiting non-core businesses, it warned that it “could require the group to divest or exit core businesses”.

Any disposals or restrictions could have a “materially adverse” effect on the group, it added.

Analysts at Credit Suisse said: “It is difficult to know whether this is a serious issue given the bank must highlight even low probability risks in the context of an open offer.”

However, they argued that either way it highlighted how government involvement was a major consideration for Lloyds shareholders.

The British government recapitalised Lloyds last autumn and has also extended credit guarantees. In March, Lloyds announced that it wanted to take part in the government’s asset protection scheme, which insures banks against the worst of their potential losses.

The equity placing and offer is being carried out to raise money to redeem £4bn in preference shares held by the UK government and replace them with ordinary shares, with the aim of decreasing government involvement in the bank.

Lloyds said: “We are working closely with the government on this issue [European Commission approval]. We believe that the success of our company is in the interests of our shareholders but also the stability of the UK banking system as a whole. We are already working towards a situation where state aid is no longer required.”

Lloyds shares fell 26.6 per cent to 73.6p on Wednesday afternoon, reflecting the imminent dilution of the share capital by the placing and open offer.

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China deals bolster Brazil trade ties

By Jonathan Wheatley in São Paulo and Kathrin Hille in,Beijing

Published: May 20 2009 03:00 | Last updated: May 20 2009 03:00

China yesterday agreed to lift restrictions on imports of Brazilian chicken and to allow in more beef, further boosting the two countries' fast-growing trade partnership.

Beijing also said it would lend up to $10bn (€7.4bn, £6.5bn) to Petrobras, Brazil's government-controlled oil company, in exchange for guaranteed oil supplies over the next decade. Brazil will provide 200,000 barrels of oil a day to Sinopec, China's state oil company, for the next 10 years.

The agreements were signed during a two-day trip to Beijing by Luiz Inácio Lula da Silva, Brazil's president, who held two meetings with Hu Jintao, China's president, during his visit.

China overtook the US as Brazil's biggest trading partner during the first four months of this year, underlining increasingly close relations between two of the biggest emerging markets.

Brazilian officials told the Financial Times on Monday that the governors of the two countries' central banks would meet soon to discuss replacing the US dollar with the renminbi and the real in trade transactions.

Sergio Gabrielli, Petrobras chief executive, said the loan from the China Development Bank, with another $20bn in loans the company had obtained from other banks this year, would be used for its five-year, $174.4bn investment plan to extract reserves off Brazil's south coast.

Petrobras and Sinopec also signed a memorandum of understanding on exploration and the supply of equipment and services. However, Mr Gabrielli said it included no commitment to buy from China. He added that the companies were in discussions about a potential upstream equity investment by Sinopec in Petrobras.

Apart from the oil deals, the two sides signed agreements covering Brazilian port construction, biofuel exports to China and the joint launch of two satellites.

Brazil is the world's biggest exporter of chicken, selling 3.2m tonnes abroad in 2007, according to the country's chicken exporters' association. This compares with 2.5m tonnes from the US and 685,000 tonnes from the European Union.

Yesterday's accord allows 24 Brazilian exporters, the majority of its chicken industry, to sell to China with immediate effect.

The deal will be a boost to Brasil Foods, whose creation was announced yesterday in a merger between Perdigão and Sadia, two of Brazil's biggest exporters of chicken and processed meats.

Beijing also agreed to allow more imports of Brazilian beef. China recognises just four of Brazil's 27 states as being free of foot-and-mouth disease. However, the World Organisation for Animal Health, of which both countries are members, recognises 17 Brazilian states as being free of the disease.

China agreed to move quickly to allow exports from the additional 13 states.

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Lebanon’s fresh-faced dynasties

By Anna Fifield and Ferry Biedermann in Beirut

Published: May 20 2009 18:50 | Last updated: May 20 2009 18:50

Have you heard the one about how Lebanon’s aspiring politicians get around these days? They take the school bus.

The joke, which is doing the rounds in Beirut as Lebanon prepares for parliamentary elections, reflects the slew of fresh young faces that will contest the June 7 ballot. But, while the faces may be new, the names of those contesting a poll that will determine whether the balance of power remains tilted towards the west, or tips towards Iran and Syria, are not so fresh.

Lebanon has taken the art of political dynasty to a whole new level. The political scene remains dominated by clans, rather than parties. Young members of families such as the Gemayels, the Mouawads and the Tuenis – not to mention a returning Hariri – are entering the political fray this year. They all have one thing in common: family members assassinated in attacks blamed on, but denied by, Syria.

“Why are we here? Because they killed our parents. They killed our dream, the dream of a new country,” says Nayla Tueni, 26, whose father Gebran, an anti-Syrian member of parliament and editor of the influential An-Nahar newspaper, was killed in a car bomb in 2005.

“My father gave his life for the freedom of the country so I decided to continue and try to accomplish what he wanted,” says Ms Tueni, a fourth-generation journalist at An-Nahar – which was founded by her great-grandfather – who is running for an Orthodox Christian seat in Beirut.

These elections will be the most hotly contested in years, with 587 candidates running for 128 seats. Analysts say the poll is likely to produce a government broadly similar to the current national unity administration led by the pro-western March 14 bloc of Saad Hariri, above, a Sunni MP and son of the assassinated former prime minister, Rafiq Hariri.

But the balance of power could tip in favour of the opposition March 8 faction, led by Hizbollah, the armed Shia movement backed by Iran and Syria.

The prospect of moving closer to Syria – whose troops were forced out after Mr Hariri’s assassination in February 2005, ending their 30-year presence– has motivated many of the new generation of Christian politicians linked to March 14.

“It is important for me to stand up against any policies that can bring Lebanon into war again, or that can lead us back to following orders from Syria,” says Samy Gemayel, son of Amin, a former president. “Lebanese democracy is in danger because of Hizbollah and its allies,” says Mr Gemayel, 28, a Maronite who is running in the crucial Metn district.

He says he was motivated to run after his brother Pierre, then industry minister, was shot dead in 2006. Also running is Samy’s cousin, Nadim, 26, the son of Bashir Gemayel, another former president, assassinated in 1982.

Their grand­father, also Pierre Gemayel, founded the Phalange party.

Being part of one of Lebanon’s political dynasties is a risky business. All the candidates have security fit for heads of state, living in ­fortresses and travelling in convoys with AK47-toting bodyguards.

“We cannot live normal lives. In some ways, we are in a prison,” says Michel Mouawad, 37, whose father, Rene Mouawad, a former president, was killed in 1989. Mr Mouawad is seeking to take over the Maronite seat in the Zgharta district held by his mother, Nayla.

“We can’t communicate freely with the electorate and we can’t visit the villages,” says Mr Mouawad, who has not eaten out at a restaurant since Mr Tueni was killed.

“But the danger just gives us more and more will to continue because of the high price, all the blood, that has been paid. I think it is important for us to say that all of this was not for nothing,” he says.

The continuation of this list of familiar names highlights the tribal nature of much of Lebanese politics, partly undermining the candidates’ rhetoric about the promotion of democracy. It also alienates many voters.

“It’s not good – we need change,” says Fadi, a 33-year-old computer engineer in the Christian-dominated Ashrafiyeh area of Beirut, where Ms Tueni and Nadim Gemayel are running.

“It’s been this way for ­decades – we have been ­governed by the same families and we continue to have the same problems. We need new leaders,” Fadi says.

All the young candidates say that while their family names might help them to be elected, they will not be re-elected unless they do a good job.

“Everyone has the right to run for election. It’s up to the voters to decide whether [candidates] are capable and competent,” says Samy Gemayel.

“The people who are competent will stay and those who should not be there will not stay.”

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Pragmatism offers route for Palestinian refugees

By David Gardner in London

Published: May 20 2009 18:33 | Last updated: May 20 2009 18:33

The tense meeting between Barack Obama, the US president, and Benjamin Netanyahu, Israeli prime minister, this week was a vivid reminder of the formidable obstacles in the way of Middle East peace. Even so, there are some Arab-Israeli minefields that can be traversed with a pragmatic compass: including the fate of the roughly 5m Palestinian refugees – used by rejectionists on both sides to argue that no reconciliation of this tragic history will ever be possible.

The Palestinian refugees – who fled or were driven out by the 1948 and 1967 wars – and the Palestine Liberation Organisation, insist on their right of return. According to the United Nations Relief and Works Agency (UNRWA) responsible for their welfare, the number of refugees is about 4.5m. Israel opposes their return, arguing that it would irreversibly change the demographic balance of the Jewish state. This is a real concern, so it would be as well to examine the reality.

First, the UNRWA numbers, though juridically correct, are not, in reality, accurate. In Lebanon, for example, the UN had just 374,000 refugees on its books in 2002, spread out in 12 camps. Fearful of its delicate confessional balance, Lebanon denies Palestinians not only citizenship, but the right to own property or work in 71 specified professions. Many Palestinians, using UNRWA-acquired educations as their passport, have therefore left. The actual number remaining in Lebanon in 2002, UN officials say privately, was 192,000.

Second, how many among them would exercise their right to return? Khalil Shikaki, a reputable Palestinian pollster, in 2003 asked refugees in Jordan and Lebanon if, given the choice, they would return to Israel, or accept compensation.

In Jordan, which hosts the biggest concentration of about 2.8m refugees who, unlike in Lebanon, enjoy citizenship, 5 per cent opted for return; in Lebanon it was 23 per cent.

Taken together, these two factors give some idea of the real dimensions of the problem. Furthermore, UNRWA’s regional tally is almost certainly a good deal higher than the actual number of refugees in the Arab states neighbouring Israel. The reason for the discrepancy is that the UN agency is obliged to safeguard the legal rights of all the refugees, wherever they are, against compensation they might receive under a settlement. Which brings us to the third element in the reality of the problem: compensation.

According to Shlomo Ben-Ami, former Israeli foreign minister, the outline deal issued to the parties in December 2000 by Bill Clinton, then US president, gave the refugees the right of return to “historical Palestine”, but “no explicit right of return to the state of Israel”, which could limit the numbers it admitted. The rest of the refugees would be covered by a multi-billion dollar compensation and resettlement programme.

The Arab League peace offer agreed at Beirut in 2002, moreover, proposed “a just solution” to the right of return that foresees compensation for the majority of refugees.

Israeli officials complain the Clinton parameters and Beirut plan are too nebulous. Yet Israel negotiated just such a deal in 2000, with Syria. That package fell apart, but there was agreement on an internationally funded deal of up to $17bn (€12.3bn, £10.8bn), to compensate 450,000 Palestinian refugees in Syria.

The right of return conundrum, in other words, is pragmatically soluble so long as it is clearly understood that no Palestinian leader can possibly yield on the rights of the refugees, as opposed to negotiating how those rights are honoured.

The cost of overall compensation, benchmarked against the Syrian package, could exceed $100bn, most probably financed by the US, the European Union and the Gulf states. That would prove a lot cheaper than the alternative: a beleaguered Israel ringed by dozens of camps, desperate huddles of misery so cut off from any hope of a decent future they become the new universities of jihad. No Israeli wall will be proof against that.

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夏ボーナス、下落幅最大　経団連集計、19.3％減

　日本経団連は20日、大手企業による夏のボーナスの1回目の集計結果を発表した。妥結額は前年比19.39％減の75万4009円だった。企業業績の急速な冷え込みから7年ぶりに前年よりも下回り、下落幅は過去最悪となった。自動車や電機といった主力産業が軒並み20％を超えるマイナスで、国内消費の重しになりそうだ。

　東証1部に上場する従業員500人以上の67社から回答を得た。調査は50年前から開始。これまで前年比の下落幅は1999年の6.8％減が最も悪かったが、世界同時不況下で初めて2ケタの落ちこみに達した。7月中旬に最終集計をとりまとめる。

　製造業は同24.1％減の74万5899円、非製造業は2.07％減の77万8570円。昨年後半から外需に急ブレーキがかかり、輸出を中心とする製造業が内需型の非製造業よりも落ちこんだ。経団連は「製造業のボーナスは業績に連動しやすく大きな下落幅になった」とみている。(20日 18:40)

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第一生命、契約者配当６年ぶり減

　第一生命保険は20日、今年の個人保険の契約者配当を6年ぶりに減らすと発表した。配当の総額は前年度と比べて40億円減る。運用環境の悪化で保有株式の配当や利息収入が減少したことが要因。2009年3月期の業績悪化の責任を取り、役員報酬も1―3割カットする。

　同日発表した09年3月期決算は運用環境の悪化で運用利回りが契約者に約束した利回りを下回り、648億円の逆ざやとなった。本業のもうけを示す基礎利益は前の期に比べ20％減の3608億円。当期純剰余は同6％減の1305億円となった。(01:54)

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都内マンションの賃貸利回り、08年は４％　0.1ポイント低下

　不動産経済研究所（東京・新宿）は2008年に都内で売り出されたマンションを賃貸した場合の「利回りインデックス」をまとめた。平均の表面利回りは 4.0％で、前年に比べて0.1ポイント低下した。1月から9月までマンション価格、賃料ともに変化が小さく、安定した動きになったという。

　マンション価格と周辺物件の事例などを基に推定した賃料水準から、利回りを試算した。四半期別にみると1―3月は4.01％、4―6月は4.00％、 7―9月は4.02％とほぼ横ばいで推移していたが、10―12月は4.18％に上昇した。9月の「リーマン・ショック」以降、マンション価格が下落したためだ。

　区・市別にみると、最も利回りが高かったのは墨田区、中央区、三鷹市で、いずれも4.8％だった。調査は不動産鑑定士で構成する不動産鑑定士市場賃料研究会と共同で実施した。(11:30)

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三井住友建設など、強風でも開閉が楽なマンション用ドア

　三井住友建設はマンション用のドアを手掛ける日本フネン（徳島県吉野川市）と共同で、風が強い日でも軽く開閉できるドアを開発した。高層マンションでは、強い風が吹くと室内と室外の気圧に差ができるため、ドアを開けるのに強い力が必要だった。

　ドアを開ける前に、その脇に配置した表札の裏に設けた通気口を開く操作をする仕組み。内と外の気圧差が半分程度に減り、開閉しやすくなるという。「差圧解消ドア」と名付け、高層マンションを中心に売り込む構えだ。(11:01)

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三菱マテリアル、銅地金をフル生産　８月から

　三菱マテリアルは銅地金を生産する国内外3拠点の工場を、8月からフル稼働する。今年の2月から能力比で約1割減産しているが、中国への輸出が堅調なことに加え、自動車向けを中心に国内需要が回復傾向にあるため。日鉱金属など他の銅地金メーカーも国内向けの出荷を増やしている。素材生産の一部に回復の兆しがでてきた。

　三菱マテリアルは銅製錬国内3位。直島製錬所（香川県直島町）と小名浜製錬所（福島県いわき市）のほか、インドネシアにグレシック製錬所を持つ。銅鉱石（品位30％前後）から地金（銅の塊）を生産する能力は合計月間約5万トン。(08:03)

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堀江元社長らに７６億円賠償命じる　株主らライブドア事件で損害
2009.5.21 15:14

　ライブドア事件による株価急落で損害を受けたとして、株主と法人２４社がライブドア（現ＬＤＨ）と堀江貴文元社長（３６）らに計２３０億円余りの損害賠償を求めた集団訴訟で、東京地裁（難波孝一裁判長）は２１日、同社の粉飾決算による損害を認め、堀江元社長らに約７６億２８００万円の賠償を命じた。

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小泉氏次男、公認見送りへ　自民の世襲制限「次から」（1/2ページ）

2009年5月21日11時23分

　自民党の党改革実行本部（本部長・武部勤元幹事長）は２１日、国会議員の世襲制限を次の総選挙から実施する方向で調整に入った。国会議員の子供ら親族が同じ選挙区から続けて立候補する場合に公認しないことを内規で定める。小泉元首相が地盤を譲ると表明した次男・進次郎氏の公認も見送られ、無所属で出馬する公算が大きくなった。

　自民党は、菅義偉選挙対策副委員長が「次の次の総選挙からの世襲制限」を総選挙公約に盛り込むことを主張。世襲議員を中心に反発が広がったが、民主党が総選挙の政権公約（マニフェスト）の柱に世襲制限を掲げることを踏まえ、「自民党も公約に掲げないと選挙を戦えない」（幹部）と判断、実施時期を前倒しすることにした。

　党改革実行本部は２１日午前の会合で、同一選挙区から続けて立候補する親族は公認しないとする素案を示し、幹部への一任を取り付けた。親族の範囲などの詳細は引き続き検討するが、次の総選挙で適用されるのは親族の地盤を受け継ぐ新顔候補に限られる。現職は含まない。このため、実際に対象となるのは小泉進次郎氏（神奈川１１区）と、臼井日出男元法相の長男・正一氏（千葉１区）に限られそうだ。

　ただ、立候補そのものを法律で禁じることは見送るため、無所属で出馬する道は残される。

　この問題をめぐっては、武部氏は最近、小泉元首相と会談して世襲制限についても意見交換を重ねており、小泉氏も一定の理解を示しているとみられる。自民党幹部は「神奈川県連からの反発も予想されるが、党本部が決めれば従わざるを得ない」と述べ、進次郎氏の公認は見送られるとの見方を示した。

　進次郎氏は自民党神奈川１１区の支部長になっており、公認されなくても事実上県連の支援を受けて無所属で出馬するとの見方が強い。当選すれば追加公認される可能性もある。

　素案は月内にも麻生首相に提出され、党内手続きを経て正式決定される見通し。一部に異論もあり流動的な面も残るが、石原伸晃幹事長代理は「次の総選挙からしっかりやり、（進次郎氏の）公認は出ないことになるのでは」との見通しを記者団に示した。

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S&P cuts UK's rating outlook to negative
Thu May 21, 2009 5:02am EDT

LONDON, May 21 (Reuters) - Ratings agency Standard & Poor's lowered its outlook on Britain to negative on Thursday, citing government debt that would be hard to rein in and political uncertainty about the policy response with an election looming.

The agency affirmed Britain's 'AAA' long-term and 'A-1+' short-term sovereign credit ratings.

"We have revised the outlook on the UK to negative due to our view that, even assuming additional fiscal tightening, the net general government debt burden could approach 100 percent of GDP and remain near that level in the medium term," Standard & Poor's credit analyst David Beers said in a statement.

Beers said S&P had a more cautious view than the government of "how quickly the erosion in the government's revenue base may be repaired, the extent to which the growth in government spending can be curtailed, and consequently the pace at which historically high fiscal deficits are likely to narrow".

Official data released minutes after the S&P announcement showed British public borrowing hit a record high for the month of April -- the first month of the new tax year -- as the recession-hit economy battered public finances. [nONS004245]

The June gilt future and the pound tumbled sharply after the S&P announcement.

By 0827 GMT, June gilt futures were down 46 ticks at 119.50, having hit a session low of 119.43.

Fellow ratings agency Moody's declined comment on its plans.

In his April budget, finance minister Alistair Darling said public debt would spiral -- with a record 220 billion pounds of debt supply this year -- but would decline further out based on assumptions of a return to growth which business chiefs and economists have described as optimistic.

S&P said Britain's ratings were supported by its wealthy, diversified economy, fiscal and monetary policy flexibility and relatively flexible product and labour markets.

But an election due by next year, which opinion polls suggest Prime Minister Gordon Brown's ruling Labour party is likely to lose to the opposition Conservatives, was creating uncertainty about government policy despite support across the parties for fiscal tightening.

"The rating could be lowered if we conclude that, following the election, the next government's fiscal consolidation plans are unlikely to put the UK debt burden on a secure downward trajectory over the medium term," Beers said.

"Conversely, the outlook could be revised back to stable if comprehensive measures are implemented to place the public finances on a sustainable footing, or if fiscal outturns are more benign than we currently anticipate."

Analysts said S&P had heaped further pressure on the next government to act to rein in public debt.

"Whoever wins the next election, tax hikes and sharp spending cuts will be the order of the day -- but today's announcement by S&P puts that much more pressure on the next government to act quickly," Colin Ellis of Daiwa Securities said.

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中国がコピー兵器を続々生産　露の怒り受け知的財産保護協定
2009.5.21 17:13
このニュースのトピックス：中国
中国の自走ロケット砲ＡＲ－２の模型（漢和防務評論提供）中国の自走ロケット砲ＡＲ－２の模型（漢和防務評論提供）

　中国がロシアから購入した戦闘機や潜水艦、戦車など主要兵器２０種以上をコピーして国産化、途上国へ大量に販売し、怒ったロシアの要求で、昨年１２月に両国間で兵器に関する知的財産権保護協定が結ばれていたことが２０日までに分かった。

　カナダの軍事専門家、平可夫氏によると、中国の戦闘機「殲１１Ｂ」はロシア製スホイ２７のコピーのほか、「元」級潜水艦はキロ級潜水艦、９９式戦車の車台はＴ７２、自走ロケット砲ＡＲ－２はスメルチのコピー。少なくとも２１種に上るという。

　兵器のコピーは過去１５年間にわたって行われており、ロシア側は詳細なコピー兵器リストを作成し、中国側に突きつけた。知的財産権保護に関する協定は昨年１２月中旬、ロシアのセルジュコフ国防相が訪中した際に調印されたが、両国は一切公表していない。（共同）

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RF, Norway premiers to ensure operation of major projects-Putin

19.05.2009, 16.34

MOSCOW, May 19 (Itar-Tass) - The Russian and Norwegian premiers will work out measures to ensure operation of major projects, despite the crisis phenomena in the world economy. “As is known, we now live in conditions of economic and financial difficulties, and your visit is ever more important now so as to see what can be done in current work to ensure operation of major joint projects,” Russian Prime Minister Vladimir Putin said at the meeting with his Norwegian counterpart Jens Stoltenberg.

Putin said, “The two countries have regular contacts at every level, from the working level to the top.” “But the main thing is not that, but the fact that relations develop quite well, and this applies to every area of our interaction,” he noted. “Thus, the objective indication of this is the growth of trade turnover, which reached the record level last year,” the premier added.

Jens Stoltenberg, on his part, remarked that Russia and Norway “have been maintaining very close contacts over many years, which is of much importance for the broadening of interaction.” “Norway and Russia are advanced in many areas,” the Norwegian premier holds, “in energy, Arctic, particularly fisheries, where our countries have jointly achieved much success.”

According to Itar-Tass information, bilateral trade turnover increased by 45.1 percent in 2008 as compared with the previous year, to reach 2,297 million dollars. However, in January-February 2009 trade turnover amounted to 237 million dollars, decreasing by 36.4 percent on the same period last year. The indicators of Russian export worsened particularly. Russian export for two months made up 96 million dollars, dropping by 54 percent on January-February 2008, while import decreased by only 13 percent, making up 141 million dollars.

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Norway's friendly ties with Russia complicated with NATO's radar
20.05.2009 Source: Pravda.Ru URL: http://english.pravda.ru/world/europe/107591-norway-0

Norwegian Prime Minister Jens Stoltenberg arrived in Moscow to meet Russia’s President Dmitry Medvedev and Prime Minister Vladimir Putin.

Norway has been mentioned quite frequently in the news lately. A scandal has recently occurred between Russia and Norway, when the Norwegian Coast Guard arrested Russian fishing boats. The question regarding Norway’s participation in the development of the Shtokman field (one of the world’s largest natural gas fields) does not have a simple solution either. To crown it all, Norway, which borders on Russia, is a NATO member, which raises certain concerns with the Russian administration.

It is worthy of note that there are many positive aspects in the relations between Russia and Norway. The protection of fish resources in northern seas, the cooperation in the gas industry – the two countries have no problems in these and many other fields of cooperation. The leaders of both Russia and Norway are on very good terms with each other too.

Pravda.Ru interviewed Natalia Antyushkina, the chief scientist of the Center for Northern Europe of the European Institute, about the peculiarities of Russian-Norwegian relations.

“Which peculiarities does Norway have as Russia’s partner?”

“Norway is a small country with significant peculiarities. It is a member of the Schengen zone, but the population of the country rejected the nation’s incorporation in the European Union twice – at referendums in 1972 and 1994. Since Norway is not a member of the EU, the country is allowed to run independent policies, which in its turn give the nation an opportunity to balance between the EU and Russia.”

“Which are the main lines of cooperation between the two countries?”

“Norway differs a lot from other countries here. Like Russia, Norway is a large exporter of hydrocarbons. Therefore, there is no such aspect in the turnover between the two countries. Russia ships raw materials, non-ferrous metals and fish to Norway. In general, Norway’s trade with Russia makes up only a hundredth part of the Norwegian foreign trade.

“Norway mostly cooperates with Russia’s North-West. The country invested their funds in 120 Russian enterprises. For example, Norway’s Telenor owns a considerable shareholding of one of Russia’s largest mobile operators.

“The fishing industry is the most important line of cooperation for Russia and Norway. The countries have recently agreed to regulate the fishing quotas in the Barents Sea. The agreement made it possible to halve the illegal fishery in northern seas.”

“What about the detention of Russian fishing boats near the coast of Spitsbergen?”

“A brief insight into the history of Spitsbergen shows that the island is subjected to the sovereignty of Norway in accordance with the Paris Treaty of 1920. However, other countries that signed the treaty are entitled to run their economic activities on the island. Russia uses that factor.

“Norway single-handedly extended the fishery conservation zone up to 200 miles, which was made in violation of the Paris Treaty. This is how the story with the arrest of the Russian fishing boats occurred. Russia did not recognize the changes. For the time being, the question remains unsolved.”

“Has the border issue between the two countries been solved?”

“The problem is about the grey zone in the Barents Sea . Norway insists the border should be equidistant from the two coasts, whereas Russia promotes the sectoral principle when the border should be drawn from the tips of nations’ territories along the meridians to the North Pole. The grey zone appeared because of the differences in these two approaches. The talks continue for 40 years already and the issue still remains open.”

“What about the cooperation in the gas industry?

“Russia and Norway could not come to agreement on the development of the well-known Shtokman gas field in the Barents Sea. However, the solution was eventually found. As a result, Norway’s StatoilHydro currently participates in the project along with Russia’s Gazprom and France’s Total. It is worthy of note that Norwegian specialists have developed a unique technology to extract crude and gas from vast depths in northern latitudes. Russia does not have such a technology yet. This technology will be absolutely essential during the development of the Shtokman field.”

“Can Norway’s NATO membership be an obstacle in its relations with Russia?”

“This is a difficult question. NATO’s radar station is deployed in Norway very close to Russia ’s borders. The radar scans nearly the entire European territory of Russia. It goes without saying that Russia can not be happy about it.”

“What about the development of the informal ties between Russia and Norway?”

“Girls from Russia’s North-West often marry Norwegian men. One may not say that they find happy careless lives in the foreign countries. Many of those girls become hostages to their own higher education. It is very hard for them to find a job there that would fit their profession.”

Interview prepared by Vadim Trukhachev

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RF, Turkey ready to switch to settlements in national currencies

16.05.2009, 20.27

SOCHI, May 16 (Itar-Tass) - Russia and Turkey are ready to switch to settlements in national currencies in trade and economic relations, Turkish Prime Minister Recep Tayyip Erdogan said.

Speaking at a press conference on Saturday, Erdogan said, “During the talks with the Russian prime minister, we discussed the key issue – to switch to settlements in national currencies in trade and economic relations.”

In his words, this “would help decrease risks and meet the interests of both countries.”

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Medvedev calls for promoting Chinese invest in Russia’s Far East


MOSCOW, May 21 (Prime-Tass) -- Russian President Dmitry Medvedev on Thursday called for promoting Chinese investment in Russia's Far East, ITAR-TASS reported.

"(China) has not only the most capacious market for our industry but also ample financial resources that could be invested in our economy," he said at an official meeting in the Russian city of Khabarovsk.

In particular, Medvedev called for Chinese investments in Russia's oil refining, petrochemical, coal, shipping, and power industries.

He also proposed that Russia and China consider using their national currencies in bilateral trade settlements.

Commenting on other issues, Medvedev said that he believed major projects being implemented in Russia's Far East, including the East Siberia-Pacific Ocean oil pipeline and Sakhalin-2 oil and gas project, should not be halted despite the economic crisis.

He also called for promoting domestic timber processing.

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Russia freezes warplane contract with Syria - report

13:5120/05/2009

MOSCOW, May 20 (RIA Novosti) - Russia has put on a hold a contract to deliver MiG-31E Foxhound interceptor-fighters to Syria, a Russian business daily reported on Wednesday, citing defense-industry sources.

According to Kommersant, the $400-500 million contract for the delivery of eight MiG-31E aircraft was signed in 2007. Since production of MiG-31E's had stopped in 1994, Syria was to receive retrofitted aircraft from Russia's Air Force reserves.

There has been no official comment on the decision to freeze the contract, but an industry source quoted by the daily said the contract was terminated due to Damascus's financial problems.

In the winter of 2005, Russia forgave 70% of Syria's debt, which at the time stood at $13.4 billion. After that Damascus still owed Moscow $3.6 billion.

Later in the year, Russia resumed military cooperation with Syria, delivering, in particular, Strelets surface-to-air missile systems.

Earlier this month, some Russian and foreign media reported Belarus was planning to sell S-300 surface-to-air missiles and Iskander tactical missile systems to Iran, and said that Tehran had arranged to transfer some of the systems to Syria. However, the Belarusian president denied the country had any plans to sell weapons to Syria or Iran.

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Russia seeks resumption of Turkmen gas imports

16:1919/05/2009

BERLIN, May 19 (RIA Novosti) - Russia wants to resume natural gas imports from Turkmenistan under existing contracts, a Gazprom deputy CEO said on Tuesday.

Gas supplies to Russia have been suspended since Turkmengaz, Turkmenistan's state-run gas company, reported a pipeline blast and an ensuing blaze early in April.

Alexander Medvedev said that the issue of resuming supplies depends on the Turkmen side.

"We are prepared to accept Turkmen gas in accordance with our contractual terms," he told a Berlin conference on the Russia-EU energy dialogue.

Turkmenistan earlier accused Russia of cutting its import volume without warning the Turkmen side, resulting in a pressure buildup in the pipeline that caused the blast.