NEWS,22.03.2013

China, Russia eye energy, investment deals

China's new leader Xi Jinping, on his first foreign trip as president, held talks with Russian host Vladimir Putin on Friday which focused on a raft of energy and investment accords. A key deal expected to be signed between the two nations will see Russia ramp up oil supplies to China, which is the world's biggest energy consumer."We are grateful for your decision to make your first foreign trip to our country," Putin said at the start of the Kremlin talks."Russian-Chinese ties are an important factor of international politics."Xi, who arrived in Russia accompanied by first lady Peng Liyuan, said he was eager to boost "strategic cooperation" with Putin, stressing his personal rapport with the Russian strongman."We always treat each other with an open heart," said Xi, who will travel to Africa after his Moscow talks."We are good friends," said Xi, who will preside over the world's second-largest economy for the next 10 years.Putin and Xi first met in 2010 when the Chinese leader, then vice-president, travelled to Moscow for talks.Earlier in the day Russian Deputy Prime Minister Dmitry Rogozin and his Chinese counterpart Wang Yang oversaw the signing of a number of deals.These agreements included a $2bn (€1.5bn) deal involving Russian energy firm En+ Group and China's largest coal company Shenhua Group to develop coal resources in Russia's Far East.Experts say the two leaders will use the symbolic visit to try and map out a cooperation plan for the next 10 years."Essentially we are talking about a new epoch in relations between Russia and China," said Sergei Sanakoyev, a veteran China expert with links to the Russian government.Once bitter foes during the Cold War, Moscow and Beijing have over the past years ramped up cooperation as both are driven by a desire to counterbalance US global dominance.At the UN Security Council, China and Russia have both vetoed resolutions to impose sanctions on Syrian President Bashar al-Assad's regime, which is locked in a two-year conflict with the opposition.Both Syria and North Korea are set to be high on the day's agenda. But the economy is expected to be at the forefront of the talks between Russia, the world's largest energy producer, and China, the world's largest energy consumer.Russia, which wants to diversify its energy markets away from Europe, needs to finalise a potentially huge gas deal which could eventually see almost 70 billion cubic metres of gas pumped to China annually for the next 30 years.The Russian state's natural gas giant Gazprom is likely to sign an agreement although not a firm contract, said company spokesman Sergei Kupriyanov.The commercial contract has so far proved elusive as talks have become mired in pricing disputes.Russia's biggest oil company Rosneft is expected to sign an agreement to boost supplies to China from the current 15 million tonnes a year. A Rosneft spokesperson declined to comment but Rosneft chief Igor Sechin indicated that the firm could increase supplies to China to 50 million tonnes a year."China is a strategic market for Rosneft," he told Russian media. "The goal of 50 million (tonnes a year) is not something that's unattainable."Sanakoyev, general secretary of the Russia-China Chamber for Promotion of Trade in Machinery and Innovative Products, said the two countries will also sign a preliminary agreement allowing Chinese companies to help develop Russia's remote Far East. Xi's first overseas trip will then take him to Africa to shore up his resource-hungry country's soaring influence on the continent with visits to Tanzania, South Africa and the Democratic Republic of Congo.Russia and China are members of the BRICS grouping of emerging economies, which includes Brazil, India and South Africa and which will hold a summit in South Africa next week attended by both Putin and Xi.

Russia rebuffs Cyprus, EU awaits 

'Plan B'

Russia rebuffed Cypriot entreaties for aid on Friday, leaving the island's increasingly isolated leaders scrambling to strike a bailout deal with the European Union by next week or face the collapse of its financial system.In Nicosia, lawmakers considered proposals to nationalise pension funds, pool state assets and split the country's second-largest bank in a desperate effort to satisfy exasperated European allies.The governor of the Central Bank, Panicos Demetriades, warned political leaders the country would face a disorderly bankruptcy on Tuesday unless they approved the bills, an official present at the talks said."The next few hours will determine the future of the country," government spokesman Christos Stylianides said before the parliamentary debate. "We must all assume our share of the responsibility."Even if the measures are approved, there was no confirmation they would raise the €5.8bn demanded by the EU in return for a €10bn bailout to avoid a default.Hundreds of protesters rallied outside the parliament and depositors, who began raiding banks' cash machines last weekend, queued again to withdraw what they could.The clock was running down to a Monday deadline set by the European Central Bank for a deal to be in struck before it cuts funds to Cyprus's stricken banks, potentially pushing it out of Europe's single currency.Nicosia angrily rejected a proposed levy on tax deposits in exchange for the EU bailout on Tuesday and turned to the Kremlin to renegotiate a loan deal, win more financing and lure Russian investors to Cypriot banks and gas reserves."The talks have ended as far as the Russian side is concerned," Russian Finance Minister Anton Siluanov told reporters after two days of crisis talks with his Cypriot counterpart, Michael Sarris.Russians have billions of euros at stake in Cyprus's outsized and now crippled banking sector, a factor in the EU's unprecedented demand that bigger depositors take a hit in the interests of keeping Cyprus afloat.But Siluanov said Russian investors were not interested in Cypriot gas and that the talks had ended without result. Sarris was due to fly home, where lawmakers were locked in yet more crisis talks.New bills submitted to the Cypriot parliament included a "solidarity fund" to bundle state assets, including future gas revenues and nationalised semi-state pension funds, as the basis for an emergency bond issue.JP Morgan likened it to "a national fire sale", and eurozone paymaster Germany indicated it opposed the nationalisation of pension funds.They were also considering a bank restructuring bill that officials said would see the country's second largest lender, Cyprus Popular Bank, split into good and bad assets, and a government call for the power to impose capital controls to stem a flood of funds leaving the island when banks reopen on Tuesday after a week-long shutdown.There was no silver bullet, however, and Cyprus's partners in the 17-nation currency bloc were increasingly unimpressed. It was unclear whether parliament would even vote on the bills on Friday."I still believe we will get a settlement, but Cyprus is playing with fire," Volker Kauder, a leading conservative ally of German Chancellor Angela Merkel, told public television ARD.Merkel told lawmakers that nationalisation of pension funds was unacceptable as a way to plug a hole in finances and clinch the bailout, parliamentary sources said.Two lawmakers quoted the chancellor as saying debt sustainability and bank restructuring would have to be the core of any deal, which she called a matter of "credibility".They also quoted Merkel as saying: "There is no way we can accept that", and "I hope it does not come to a crash".Her finance minister, Wolfgang Schaeuble, said he did not know whether eurozone finance ministers would meet over the weekend. "I can't say in advance if and when Cyprus will deliver results," he said.Cypriots have been stunned by the pace of the unfolding drama, having elected conservative President Nicos Anastasiades barely a month ago on a mandate to secure a bailout.News that the deal would involve a levy on bank deposits, even for smaller savers, outraged Cypriots, who raided cash machines last weekend.While EU lenders, notably Germany, had wanted larger, uninsured bank depositors to bear some of the cost of recapitalising the banks, Cyprus feared for its reputation as an offshore banking haven and planned to spread the levy to deposits under €100000 were covered by state insurance.Senior eurozone officials acknowledged in a confidential conference call on Wednesday that they were "in a mess" and discussed imposing capital controls to insulate the currency area from a possible collapse of the small Cypriot economy.Cyprus itself refused to take part in the call. Several participants described its absence as troubling and reflecting the wider confusion surrounding the island's predicament.In Brussels, a senior European Union official told ECB withdrawal would mean Cyprus's biggest banks being wound up, wiping out the large deposits it has sought to protect, and probably forcing the country to abandon the euro."If the financial sector collapses, then they simply have to face a very significant devaluation, and faced with that situation, they would have no other way but to start having their own currency," the EU official said.Cypriot banks have been crippled by their exposure to Greece, the centre of the eurozone debt crisis.On Thursday there were angry scenes outside parliament, where hundreds of demonstrators gathered after rumours spread that Popular Bank would be closed down and its staff laid off."We have children studying abroad, and next month we need to send them money," protester Stalou Christodoulido said through tears. "We'll lose what money we had and saved for so many years if the bank goes down."

Cyprus knocks German business confidence

German business confidence fell unexpectedly in March, data showed Friday, as weak economic data, political gridlock in Italy and the Cyprus crisis begin to sour business confidence in Europe's top economy.The Ifo economic institute's closely watched business climate index slipped to 106.7 points in March from 107.4 points in February. Analysts had been expecting a modest increase this month to 107.6 points."After rising sharply last month, the Ifo business climate index edged downwards in March," said Ifo president Hans-Werner Sinn. "Companies were slightly less positive about their future business outlook than in February, but assessed their current business situation almost as positively as last month."But he insisted: "The German economy remains on track in a challenging environment thanks to strong domestic demand."Ifo calculates its headline index on the basis of companies' assessments of their current business and the outlook for the next six months.The sub-index measuring current business slipped fractionally to 109.9 points in March from 110.2 points in February. And the outlook sub-index fell by one full point to 103.6 points.Cyprus's Parliament overwhelmingly rejected a proposed tax on bank deposits as a condition for aid, pushing the Mediterranean island a step closer to the brink of financial meltdown.The Cypriot Parliament is expected to discuss a new banking bill on Friday. This follows reports that the European Central Bank would withdraw its emergency liquidity assistance programme by next Monday if an agreement has not been agreed.

US congress OKs funding stopgap

US lawmakers approved a funding stopgap on Thursday that prevents a government shutdown, but their clash over budget blueprints signaled a contentious debate over the future of federal spending. A trio of key votes bookended the action in Congress ahead of a two-week congressional recess, the most urgent one being on the so-called continuing resolution, a $1.2 trillion appropriations measure that will keep the doors of federal agencies open through September, the end of the fiscal year. The Senate passed the measure on Wednesday, and with the House following suit and making no changes, it now heads to President Barack Obama's desk for his signature.The CR locks in the $85bn in automatic spending cuts mandated by the so-called sequester, although it cushions the blow by providing some flexibility within the Pentagon and other departments to make more targeted, less reckless cuts.Obama must sign the CR into law by March 27 or the US government will go into partial shutdown.With 2013 funding largely resolved, lawmakers turned immediately to the impasse over future government spending, as well as the looming battle over raising the country's borrowing cap. The House passed the plan crafted by Paul Ryan, the House Budget Committee chairperson and last year's failed Republican vice presidential nominee, along a mostly party-line vote, 221 to 207."We've done the hard work of bringing this plan forward," House Speaker John Boehner told members on the floor.All US budget blueprints are essentially political messaging documents, leaders on both sides acknowledged on Thursday.Still, 10 Republicans voted against the Ryan plan. And when it was brought to a vote in the Democratically-led Senate, it was rejected 40-59, with five Republicans opposed, potentially weakening the Republican bargaining hand during upcoming negotiations.The Ryan blueprint aims to balance the budget over the next 10 years, but Democrats denounce it as a recipe for a decade of austerity marked by slow economic growth and dramatic cuts to social programs, education and training.It would slash federal spending, reform entitlements and repeal Obama's landmark healthcare law. It also insists on no new taxes, despite aiming to pare down the $16 trillion national debt.Chris Van Hollen, top Democrat on the House Budget Committee, criticised the Ryan plan as "an uncompromising ideological approach to our budget issues."The Democrats introduced their own budget this week for the first time in four years, and with the Ryan plan rejected, the blueprint by Senate Budget Committee chair Patty Murray could be voted on as early as Friday.Murray is pushing what she says is a balanced approach to deficit reduction, including targeted spending cuts and new tax revenue."The House Republicans have doubled down on the failed policies" that lost them the 2012 election Murray said.An ideological battle is brewing, with House minority leader Nancy Pelosi accusing Ryan of seeking to line the pockets of the wealthy by hollowing out programs for seniors and the poor like Medicare, Medicaid and Social Security.Pelosi said she was ready to discuss ways to strengthen such entitlements, but warned: "If your goal, though, is to have them wither on the vine or be reduced in a way that does not meet their purpose, then them's fighting words."Boehner hinted that a battle over the debt ceiling loomed too, saying the only way the House would raise the ceiling before it is reached in May would be if Obama agreed to an equal amount in spending cuts."Dollar for dollar is the plan," Boehner told reporters. "The president has been clear that he's not going to address our entitlement crisis unless we're willing to raise taxes. I think the tax issue has been resolved.""So at this point then, I don't know how we're going to go forward."Asked if he saw the debt ceiling as leverage in getting Obama to agree to entitlement reform, Boehner said "there might be some there" but stressed: "I'm not going to risk the full faith and credit of the federal government."Meanwhile the Defense Department, thanks to the CR which tweaked the defense cuts, said it was delaying by two weeks this week's notices to 800 000 civilian workers that they would face rolling furloughs through September.

Airfares climb 25% - report

Airfares to some of the most popular U.S. and international destinations rose by 25% or more last year, and June was the most expensive month to travel, according to the website Kayak.com.The costs of flights from North America to Lima soared 33%, London fares were up 30% and tickets to New Orleans, Madrid, Munich and Sydney jumped 28%.Data compiled by the website, which compares hundreds of travel sites at once, showed a ticket to Paris, Beijing, Key West in Florida and Hong Kong was 25% more last year than in 2011, while the airfare to Toronto slumped 3%."We found that overall airfare increased 17% across the board from 2011 to 2012," said Maria Katime, a Kayak spokesperson."Toronto, of all the popular destinations that we looked at, was the only one where the airfare decreased," Katime added. Kayak did not analyze the reasons for the price increases.Despite the jump in airfare to London, which hosted the Olympics and celebrated Queen Elizabeth's Diamond Jubilee in 2012, was the top international destination for North American travelers, followed by San Juan, Cancun, Paris and Rome.Gambling mecca Las Vegas topped New York, Los Angeles, Orlando and San Francisco as the most popular US city to visit.Destinations that increased in popularity in 2012 but did not have hefty increases in airfare included Punta Cana and Santo Domingo in the Dominican Republic, Tokyo, Mumbai and Nashville.Kayak found that the cheapest flights were in January, February, September and October for domestic flights, and February and March for international fares. January was the least busy month to travel.The cheapest average airfares for domestic trips of up to one week are for flights leaving on Saturday and returning on Monday. For longer stays, leaving on Tuesday and returning on a Wednesday can lower airfares by an average of 10%.The website found the opposite for international trips. Prices were 21% lower than average for passengers on short trip of up to a week if they left on Tuesday and returned on a Wednesday, and 9% lower for longer stays with a Saturday departure and a Sunday return.

S&P cuts Cyprus rating

Ratings firm Standard & Poor's dealt a further blow to reeling Cyprus on Thursday, cutting its credit rating as the eurozone country struggles to avoid a banking sector meltdown.S&P lowered Cyprus's rating to 'CCC' from 'CCC+' as the country raced under a tight deadline to formulate an acceptable rescue plan with the European Union.The lowered credit rating would make it more costly for Cyprus to borrow, further exacerbating the stricken nation's woes.The US ratings firm warned the outlook was negative for the country, and that the rating could be lowered further if critical financing was not secured "soon."While a bailout deal is possible, S&P said, "In light of building economic and financial stability pressures, the terms of any support package are likely to be unpopular and challenging to implement in the context of a severe, protracted economic downturn and an extended bank holiday.""As a consequence, we believe that risks of a sovereign default are rising."S&P said that neither Cyprus's government nor bank shareholders appeared capable to meet the pressing capital needs of its teetering banks."In the absence of foreign private or official capital injections into the Cypriot banks, we see few means to recapitalise the distressed portion of the system without converting bank liabilities, including deposits, into equity claims," it said in a statement.The S&P downgrade came as the Cyprus cabinet, meeting in a crisis session, was attempting to approve an alternative bailout plan after parliament rejected an agreement with the EU and International Monetary Fund because it included a heavy tax on bank deposits.The European Central Bank, ratcheting up the pressure, said that Cyprus must agree a bailout deal by Monday or it will withdraw emergency financing of Cypriot banks.Standard & Poor's warned: "We would likely lower the rating if Cyprus's government fails to obtain a financing program soon."The CCC rating is three notches above sovereign default.S&P discounted speculation that the crisis may force Cyprus to exit the eurozone."Our baseline expectation is that Cyprus will remain a member of the European Economic and Monetary Union," it said.

Eurozone ready to discuss Cyprus bailout

Eurozone finance ministers extended a Cypriot olive branch late on Thursday, as their leader said currency partners were willing to work with Nicosia on new plans to make work a bailout that re-draws the island's stricken banking sector."The Eurogroup stands ready to discuss with the Cypriot authorities a draft new proposal, which it expects the Cyprus authorities to present as rapidly as possible," Eurogroup chairperson and Dutch Finance Minister Jeroen Dijsselbloem said in a statement after a two-hour conference call with peers.As the ministers huddled around their video screens, the Cyprus cabinet was in crisis session bidding to approve a "Plan B" after an earlier agreement with the EU and IMF collapsed amid anger over a weekend raid on savers that Dijsselbloem says should have been understood as a "wealth tax" aimed principally at mainly Russian oligarchs' investments.The European Central Bank has given Cyprus until Monday to find a way out of a crisis that has left Moscow furious over frozen government agency accounts with banks in the offshore finance centre shut for a full week, the worst affected imposing radically lowered cash withdrawal limits.With EU sources semi-openly floating a willingness to cut Nicosia loose if it doesn't clobber a finance industry Germany and others associate openly with the onward eurozone circulation of ill-gotten money-laundering gains, and a nervous crowd gathered outside the Cypriot parliament, Dijsselbloem's remarks served as an inducement to lawmakers there."The Eurogroup would subsequently, on the basis of a Troika analysis that needs to be undertaken, be prepared to continue negotiations on an adjustment programme," Dijsselbloem added, teeing up a tense weekend of negotiations from Moscow to Nicosia and Brussels or Berlin.However, in what analysts have warned is a dangerous game of Russian roulette, he also underlined that any new plan to fill a €6bn hole and so unlock up to €10bn in eurozone and IMF loans between now and 2016 would need to "respect" other demands already made by creditors.Rapid passing of legislation then provides a further hurdle in a race against time to prevent a collapse in the island's banking sector - one heavily based on deposits rather than credit, and so potentially more vulnerable than other victims during the debt crisis to runs on weak banks.As the political point-scoring continued, Dijsselbloem finished by insisting that ministers "reaffirmed the importance of fully guaranteeing deposits" below the sensitive threshold of €100 000 - the cut-off point for European Union legal protections.