NEWS, 02.05.2012.

Cyber-Attacks 'Bought Us Time' On Iran: U.S. Sources

 

The United States under former President George W. Bush began building a complex cyber-weapon to try to prevent Tehran from completing suspected nuclear weapons work without resorting to risky military strikes against Iranian facilities, current and former U.S. officials familiar with the program said.Barack Obama accelerated the efforts after succeeding Bush in 2009, according to the sources who spoke on condition of anonymity because of the classified nature of the effort. The weapon, called Stuxnet, was eventually used against Iran's main uranium enrichment facilities.The effort was intended to bridge the time of uncertainty between U.S. administrations after the 2008 presidential election in which Obama was elected, and allow more time for sanctions and diplomacy to avert Iranian nuclear weapon development, according to the current and former officials.The sources gave rare insight into the U.S. development of its cyber-warfare capabilities and the intent behind it.One source familiar with the Bush administration's initial work on Stuxnet said it had stalled Iran's nuclear program by about five years."It bought us time. First, it was to get across from one administration to the next without having the issue blow up. And then it was to give Obama a little more time to come up with alternatives, through the sanctions, et cetera," said the source.Only in recent months have U.S. officials become more open about the work of the United States and Israel on Stuxnet, the sophisticated cyber-weapon directed against Iran's Natanz nuclear enrichment facility that was first detected in 2010.The cyber-attacks provided the United States with an avenue to try to stop Iran from producing a suspected weapon without turning to military strikes against Iranian facilities - all at a time when U.S. forces already were fighting wars in Iraq and Afghanistan, the sources said.In the end, senior U.S. officials agreed the benefit of stalling Iran's nuclear program was greater than the risks of the virus being harnessed by other countries or terrorist groups to attack U.S. facilities, one source said.Two sources with direct knowledge of the U.S. program said it cost hundreds of millions of dollars to carry out.The United States for years has been developing - and using - offensive cyber-capabilities to interfere with the computers of adversaries, including during the Battle of Falluja in Iraq in 2004 and in finding Osama bin Laden and other al Qaeda figures, the sources said.Last year, the United States also explicitly stated for the first time that it reserved the right to retaliate with military force against a cyber-attack.The New York Times reported on Friday that from his first months in office, Obama secretly ordered attacks of growing sophistication on the computer systems running the main Iranian nuclear enrichment facilities, greatly widening the first sustained U.S. use of cyber-weapons. The Times said the attacks were code-named Olympic Games.White House spokesman Josh Earnest declined comment on the substance of the New York Times article, but denied "in the strongest possible terms" that it was an authorized leak of classified information. Obama is seeking re-election on November 6 in part on the strength of his foreign policy achievements.Reuters reported on May 29 that the United Nations agency charged with helping member nations secure their national infrastructures plans to issue a sharp warning about the risk of the Flame computer virus that was recently discovered in Iran and other parts of the Middle East.Stuxnet is one of many weapons in the U.S. cyber-arsenal, which some experts say also includes a data-gathering tool known as Duqu that was deployed to cull information about Iran's weapons programs.Iranian officials have described the cyber-attacks as part of a "terrorist" campaign backed by Israel and the United States.Some current and former U.S. officials, who asked not to be named, criticized the Obama administration for talking too freely to the media about classified operations.Representative Peter King, the Republican chairman of the House of Representatives Committee on Homeland Security, said, "I believe that no one, including the White House, should be discussing cyber-attacks.""The U.S. will now be blamed for any sophisticated, malicious software, even if it was the Chinese or just criminals," added Jason Healey, who has worked on cyber-security for the Air Force, White House and Goldman Sachs, and is now with the Atlantic Council research group.

Spain PM insists on sticking to austerity measures

 

Spain will stick to harsh austerity measures until it emerges from financial crisis, the prime minister said Saturday, promising that the country would survive the present economic turmoil.Mariano Rajoy acknowledged that the country is experiencing turbulence, but said "we are not at the edge of a precipice, we will not sink."The government has "the will to persevere in this line for as long as is necessary," he said.Spain, where unemployment stands at a Eurozone high of 24.4 percent, has imposed spending cuts and tax hikes to escape a crisis many fear could eventually swallow other countries using the European single currency.Rajoy said Saturday that he supported the creation of a single European fiscal authority to uphold the credibility of the euro, and acknowledged that for this to happen it would be necessary for member states to "surrender more of their fiscal autonomy."He said that while it was possible Spain could have lived beyond its means, it was also true that those who are now criticizing Spain a reference to Germany had also lent it money at very cheap rates.German Chancellor Angela Merkel has long maintained that austerity is the most important step toward easing the eurozone debt crisis, however, the leaders of some of those countries hardest hit faced with anti-austerity demonstrations that have at times turned violent have also called for steps to be taken to try and boost employment.Newly elected French president Francois Hollande has also warned against too much of the belt-tightening that Merkel advocates for fear it could unleash political chaos.Demonstrations against austerity measures in Greece frequently turn violent, and Spanish police baton-charged striking coal miners marching in Madrid on Thursday after a group started throwing stones and bottles. Police said two people were arrested and nine were slightly hurt.Despite months of painful austerity reforms by Rajoy's conservative government, there is growing concern that its leaders have not done enough and Spanish banks may need to be saved from loans gone bad and foreclosures of property now worth far less than the loans paid out for it.The country's banking sector is laden with soured investments on real estate and the government recently needed (EURO)19 billion ($23.4 billion) to rescue just one bank, Bankia SA.Some estimates have put a complete Spanish banking sector bailout cost at between (EURO)50 billion and (EURO)150 billion, but Spain only has (EURO)5 billion left in the (EURO)19 billion bailout fund it established in 2009.Spain's banking sector, however, is not the sole issue. The economy is mired in its second recession in three years and is forecast to contract 1.7 percent for the year.This means the country has to raise money in bond markets and the interest rate on Spanish 10-year bonds finished trading Friday at 6.47 percent, as reported by financial data provider FactSet.A rate of 7 percent is considered unsustainable in the long run. Countries such as Greece, Portugal and Ireland that have faced such rates have had to be bailed out.Spain's current banking problems have startling similarities with Ireland. Both countries witnessed unprecedented property building and buying sprees enabled by their 1999 entry into the euro.

It was an entry that many economists say was partly responsible for both countries' present problems by entering into the single currency with more stable economies their credit-risk profiles were lowered giving their banks unprecedented access to international loans at rock-bottom rates.

NEWS,02.04.2012.

Attack On Iran Would Be 'Disastrous' For Middle East, Turkish Prime Minister Warns

Turkish Prime Minister Recep Tayyip Erdogan warned over the weekend that an Israeli strike on Iran would have "disastrous" consequences for the Middle East, likely sparking a regional war, Turkish newspapers reported on Sunday. Turkey is a major U.S. ally in the region and Erdogan indicated that he had expressed his concerns to President Barack Obama.Speaking to reporters on Saturday, Erdogan was quoted by the Turkish daily Hurriyet as warning against the "disastrous" outcome of a possible Israeli strike against Iran's nuclear facilities, saying: "The entire region would be devastated if Israel strikes Iran."Erdogan also criticized the international community for keeping mum on Israel's alleged nuclear weapons, while threatening Iran over what he said was a peaceful nuclear program."Israel has between 250 to 300 nuclear warheads. Nobody is discussing that," Erdogan said, adding: "Iran says they would not produce nuclear weapons. They are saying that they would produce a specific amount of enriched uranium rods and stop after that."Turkey is set to host a new round of diplomatic talks between Iran and a group of world powers -- the U.S., France, Britain, China, Russia, and Germany -- beginning on April 13.On Monday, Russia's foreign minister also strongly warned against a military attack on Iran, saying that a pre-emptive strike would violate international law. Sergey Lavrov said on a visit to Armenia that an attack on Iran would destabilize the region.Israel and the U.S. have warned that all options remain open, including military action, to prevent Iran from obtaining nuclear weapons.Iran insists its uranium enrichment program is aimed at civilian power generation and research, but Israel and Western nations believe it is a cover for a nuclear weapons bid.Russia, which built Iran's first nuclear power plant, backed some of the previous U.N. sanctions against Tehran, but in recent months has firmly rejected imposing new sanctions and called for dialogue.An end to a nearly decade-long nuclear standoff between Iran and major world powers will be possible if the United States and its European allies recognize Tehran's right to enrich uranium, a former Iranian negotiator said in an editorial. "Talks between Iran and the five permanent members of the U.N. Security Council plus Germany (P5+1), scheduled for next month, provide the best opportunity to break the nine-year deadlock over Iran's nuclear program," Hossein Mousavian, Iran's former chief nuclear negotiator, wrote in an editorial in the Boston Globe. Mousavian, now a visiting scholar at Princeton University in New Jersey, had been seen as a moderate when in the Iranian government. Although he is not currently a policymaker, such public presentations of Iranian thinking is rare. Iran says its nuclear program is peaceful and rejects U.S. and European allegations that it is secretly amassing the capability to produce atomic weapons. Iran has rejected Security Council demands that it halt enrichment and other sensitive nuclear work, saying it has a sovereign right to atomic energy. This has led to four rounds of increasingly stringent U.N. Security Council sanctions, mostly focusing on its nuclear and missile industries, but also targeting some financial institutions, a few subsidiaries of its major shipping firm, and companies linked to the Islamic Revolutionary Guard Corps. In recent months there has been increased speculation about possible Israeli air strikes on Iran's nuclear sites - which some analysts fear could spark a Middle East war. For the talks, expected to take place in mid-April, to open the door to a resolution of the standoff with Iran, Mousavian said the United States and its European allies must make clear that war and coercion are not the only options. They should seek enhanced engagement with Tehran, as U.S. President Barack Obama has repeatedly called for. "This could work - since 2003, Iran has been looking for a viable and durable solution to the diplomatic standoff," wrote Mousavian. Mousavian was Iran's chief nuclear negotiator from 2003 to 2005 before conservative President Mahmoud Ahmadinejad took over from his reformist predecessor Mohammad Khatami. According to Western envoys familiar with Mousavian, he appeared at the time to be genuinely interested in reaching a deal with the West. After he was removed from the nuclear negotiating team, Mousavian was arrested and briefly jailed in 2007 on accusations of espionage. He was acquitted of that charge, which could have carried the death penalty, but was found guilty of "propaganda against the system." Analysts and diplomats said the charges against Mousavian were really a reflection of an internal Iranian dispute over how to handle Iran's atomic dispute with the West. Some Iranians favor the moderate line adopted by Mousavian while others have backed Ahmadinejad's more confrontational approach. Mousavian writes that if a deal that is acceptable to both parties is to be reached, the two sides' "bottom lines" should be identified. "For Iran, this is the recognition of its legitimate right to create a nuclear program - including enrichment - and a backing off by the P5+1 from its zero-enrichment position." "For the P5+1, it is an absolute prohibition on Iran from creating a nuclear bomb, and having Iran clear up ambiguities in its nuclear program to the satisfaction of the International Atomic Energy Agency," Mousavian writes. The West also needs to abandon calls for regime change and accept that "crippling sanctions, covert actions, and military strikes might slow down Iran's nuclear program but will not stop it." "In fact, it is too late to demand that Iran suspend enrichment activities," Mousavian writes. "It mastered enrichment technology and reached break-out capability in 2002 and continues to steadily improve its uranium-enrichment capabilities." The so-called "break-out" capability refers to the ability of a country to construct a nuclear weapon. A U.S. think tank, the Institute for Science and International Security (ISIS), has said that capping Iranian uranium enrichment at 5 percent purity level compared with the 90 percent needed for a bomb could form part of an interim deal that would give time for more substantial negotiations. This and other priority measures would "limit Iran's capability to break out quickly," ISIS said in a report. Among the things the West should offer to Iran is a package that includes recognition of its nuclear rights, ending sanctions, and "normalization of Iran's nuclear file." In return, Iran should offer the IAEA full transparency and permit the most intrusive inspections possible.

NEWS,09.03.2012.

The world economy faces challenges

There has been a significant improvement in sentiment toward the global economy in the first few months of the year. Even though this improvement can be easily explained, it needs to be kept in context. There are still considerable challenges ahead. When considering the economic outlook, we must not lose sight of two key influences. The first is the shift in the balance of economic and financial power, highlighted by the emergence of China, India and Brazil – not to mention a host of other economies across Asia, Africa and the Middle East. This shift is a strong, positive driving force. The second factor is shorter-term in its influence, but is negative. This is the overhang of debt that continues to weigh on the recovery in Europe and the U.S. The need to deleverage – as people, firms and governments pay off debt – points to a steady but unspectacular recovery in the U.S., and signals further problems in the euro area. It is against this backdrop that one needs to view the recent improvement in financial-market sentiment across the globe. At the end of last year, a number of factors were weighing on the world economy. Lest we forget, the markets feared a double-dip recession in the U.S., a hard landing in China and a collapse of the euro. None of these fears materialized. Thankfully, I did not share the markets’ views about the U.S. or China, but I was pessimistic about the euro, expecting a muddle-through. The fact that economic data from both the U.S. and China was better than expected helped sentiment, but the actions of the European Central Bank were key.

The ECB did a great job pulling the euro area back from the brink by providing cheap three-year money in both December and February. The ECB averted a bank collapse and a credit crunch, which in turn helped sentiment. As profound and necessary as the ECB’s actions were, the short-term relief it has provided should not be seen as a longer-term cure for Europe’s problems. This year, the world economy still faces significant challenges. Let me highlight the main ones. The first is the euro. The euro area is in recession. With the exception of France, most major European economies contracted in the last three months of 2011. This included the peripheral euro-area countries of Ireland, Italy, Spain, Portugal and Greece. There is every likelihood that this contraction will have continued in the first quarter, and perhaps even in the first half of this year. In short, the periphery is seeing a double-dip recession. The ECB’s actions may have averted a credit crunch, but they will not prevent a credit squeeze where funds are still hard to come by.Moreover, the euro area is focusing on the wrong problem. Although debt levels are high, the biggest challenge is the lack of growth. Europe needs a growth strategy. It does not have one. Instead, it is cutting public spending and raising taxes to reduce debt. This is a long and painful process. Unless private spending picks up, economies will be weak. The trouble is, with demand sluggish, many firms are thinking twice about increasing their spending. The result is a continuation of the difficulties that have engulfed the euro area in recent years. This means further problems for Greece, and future worries for Spain, Portugal and Italy, as they will be in recession, probably this year and next.Another challenge is the U.S. I am positive about America’s long-term prospects. If there were to be a pleasant surprise this year, with U.S. growth being much higher, it would be because big companies whose balance sheets are in good shape decided to go out and invest. Instead, they seem reluctant, either because they fear demand will be weak, or because they are worried about the regulatory outlook following this year’s presidential election in November. Confidence, of course, is an impossible thing to predict. It would be pleasing if a rebound in confidence did allow corporate America to go on a spending spree. Yet, if it does not, then the backdrop for the average American will be one of only modest employment growth, a small rise in wages and a still-weak housing market. Americans still need to save more and spend less. This leads to the issue of energy and food prices. A year ago, rising food and energy prices added to inflation pressures across the globe, justifying higher interest rates in many growing economies. Now, rising oil prices appear more like a tax on global growth, eating into spending power in the U.S. and Europe, and hitting many Asian economies at a time when they are slowing. The impact of oil prices on the global economy can never be underestimated. Rising oil prices are usually the biggest threat to continued global growth. There can often be a big difference between oil prices being driven higher by strong demand and by supply shocks. If strong demand is driving prices, then at least when oil prices rise, there is also increased spending and trade. In the past, demand-driven spikes in oil prices would come late in an economic cycle. Now, it is demand from Asia and the Middle East that is driving oil prices up, and thus Western economies may not be in a strong position to cope. The more oil prices rise this year, the weaker the economic outlook will be in the West. This vulnerability is worse now, as supply-side worries surrounding Iran have led to a large risk premium, pushing oil prices up. Oil prices appear to have a firm floor because of strong demand, and a soft ceiling because of geopolitics. It is not just the West that watches prices closely. So, too, does China. Over the past year, China’s authorities have tightened policy in order to squeeze inflation. Their main focus appears to have been on property prices, yet they have also been keen not to see a wage-price spiral develop. As has so often been the case in recent years, the Chinese authorities have handled things well. But the challenges are not getting any easier. China’s economy is cooling, not collapsing, and it is having a soft, not a hard, landing. At this year’s National People’s Congress, Prime Minister Wen Jiabao sensibly cut the growth projection to 7.5 percent from 8 percent. Although I remain positive about China’s longer-term prospects, it is important to stress that, at some stage, China will have a setback. This should be seen as a feature of China’s likely development. As the economy grows bigger, it becomes harder to manage than in the past. Moreover, the need to switch from investment- to consumption-led growth poses many challenges. Thankfully, China has enough room for policy manoeuvre to cope with any setback, although that setback seems unlikely to occur this year. As the Chinese economy cools, one should expect further, gradual policy easing that allows for a rebound later this year.Overall, this should prove to be another challenging and interesting year for the world economy. In the immediate aftermath of the financial crisis, the world economy contracted in 2009, its first fall since World War II.In 2010, there was a strong rebound, with the world economy growing 4.4 percent, led by policy stimulus in the West, and by the strength of China and the emerging economies. But in 2011, the pace of growth slowed as the policy stimulus in the West started to wear off and as more economies in Asia and Latin America raised interest rates to curb inflation. Last year, the world economy grew by 3 percent.This year, the good news is that there will be growth, but the challenge is that it seems difficult for it to be any higher than it was in 2011. Europe faces further challenges. America still has a debt mountain to climb. And many emerging economies have been slowing in the early months of the year. The economic story is one of a fragile West and a resilient East.

NEWS,03.03.2012

Obama is not bluffing on Iran military option

President Barack Obama has issued his most direct threat yet of US military action against Iran if it builds a nuclear weapon, but in a message to Israel's leader ahead of White House talks he also cautioned against a pre-emptive Israeli strike.” As president of the United States, I don't bluff," Obama warned Iran in a magazine interview published on Friday, three days before he will host Israeli Prime Minister Benjamin Netanyahu in Washington. With the meeting expected to be dominated by stark differences over what Washington fears could be an Israeli attack on Tehran's nuclear sites, Netanyahu said he wanted to preserve the "freedom of action of the State of Israel in the face of threats to wipe us off the map”. Monday’s talks are shaping up as the most consequential encounter of US and Israeli leaders in years, with tensions further magnified by Republican presidential candidates slamming Obama over his Middle East policy. Further complicating the talks is a trust deficit between the two men, who have had a rocky relationship. There is mounting speculation that Israel, which fears that time is running out to stop Iran's nuclear advance, could act militarily on its own in coming months unless it receives stronger reassurances from Washington. Netanyahu is trying to convince Obama to more forcefully define the nuclear threshold that Iran must not cross, while the US president wants to convince Israel to hold off on any unilateral strike and give sanctions and diplomacy more time to work. Both leaders talked tough ahead of their meeting.” I think both the Iranian and the Israeli governments recognise that when the United States says it is unacceptable for Iran to have a nuclear weapon, we mean what we say," Obama said in an interview with the Atlantic magazine.Obama repeated the US refrain that "all options are on the table" but spoke in his most direct terms yet of a possible US military response if sanctions and diplomacy fail to curb Tehran's nuclear ambitions.” It includes a military component. And I think people understand that," Obama said when asked about US intentions on Iran, which insists it is not trying to develop nuclear weapons. While acknowledging Netanyahu's "profound responsibility" to protect the Israeli people, Obama cited "potential unintended consequences" as he made clear that it would be unwise for Israel to go ahead with any attack on Iran.” At a time when there is not a lot of sympathy for Iran and its only real ally, (Syria) is on the ropes, do we want a distraction in which suddenly Iran can portray itself as a victim?"Obama cannot afford to be too tough on Netanyahu, with Republican presidential candidates ready to pounce on any sign of a rift with close US ally Israel. But Obama's aides are also worried that a new war in the Middle East could sow chaos and bring further spikes in global oil prices. It was unclear, however, whether Obama's sharpened rhetoric on Iran would be enough to placate Netanyahu, who was visiting Canada on Friday before flying to Washington on Sunday. Netanyahu on Friday ruled out the idea of international talks to prevent Iran from gaining nuclear weapons, a possibility has raised in recent weeks as sanctions have started to take a heavier toll.” I think the international community should not fall into this trap," he told reporters in Ottawa after talks with Canadian Prime Minister Stephen Harper.

NEWS,05.02.2012.

Iran launches new exercises

Iran has begun ground military exercises and defiantly warned that it could cut off oil exports to "hostile" European nations as tensions rise over suggestions that military strikes are an increasing possibility if sanctions fail to rein in the Islamic Republic's nuclear program. Tehran has stepped up its rhetoric as international pressure mounts over allegations that it is seeking to develop atomic weapons, a charge it denies. Iran's Supreme Leader Ayatollah Ali Khamenei has issued stern warnings against any possible US or Israeli attacks against Tehran's nuclear facilities. Western forces also have boosted their naval presence in the Gulf led by the American aircraft carrier USS Abraham Lincoln. The new military manoeuvres came weeks after Iran rolled out its troops and arsenals in an unprecedented display of military readiness, with 10 days of naval manoeuvres that included the first threats to block Gulf oil tankers in early January. Ground forces also were sent on winter war games - against what a Tehran military spokesman called a "hypothetical enemy" - with US forces just over the border in Afghanistan. Plans for new Iranian naval games in the Persian Gulf off the country's southern coast have been in the works for weeks. Iranian state media reported the ground manoeuvres of the elite Revolutionary Guard started Saturday near Jiroft, 745 miles (1200 kms) south of the capital Tehran. No more details were available, but it appeared that they were small-scale exercises and not linked to the planned major naval manoeuvres near the Strait of Hormuz, the route for one-fifth of the world's crude oil. Iranian officials and lawmakers repeatedly have threatened to close the strait, which funnels down to a waterway no wider than 30 miles (50 kms) at the mouth of the Gulf, in retaliation for sanctions that affect Iran's oil exports. But they have as yet made no attempts to disrupt shipping through the waterway, and the US and other Western powers have warned they would respond swiftly to any attempts at a blockade. Washington and its allies fear Iran could use its uranium enrichment labs - which make nuclear fuel - to eventually produce weapons-grade material. Tehran insists it only seeks reactors for energy and medical research. So far, the West is relying primarily on the threat of economic sanctions to pressure Iran over its nuclear program. Tehran has claimed that the most recent move - EU sanctions approved on January 23, which include an oil embargo and the freezing of central bank assets - will be ineffective, while members of Iran's parliament say they have drafted a bill which would cut off the flow to Europe early, before it can find alternative suppliers. Iran's Oil Minister Rostam Qassemi also said on Saturday (local time) the Islamic Republic would "definitely" cut off oil to "hostile" European countries, without specifying which ones they were. However, he said Iran is moving toward reducing reliance on oil revenues, a hint that Tehran is preparing for the worst. Oil sales account for about 80 per cent of Iran's foreign revenues. Qassemi, the oil minister, reiterated Iran's argument that the EU oil embargo will not cripple Iran's economy, claiming that the country already has identified new customers to replace the loss in European sales that accounted for about 18 per cent of Iran's exports. "We've made the necessary planning to deal with that. We have friends in the world and will assist each other," he said. "We won't back down a single step under political pressures and won't give up our right position even if we can't sell a single barrel of oil." In contrast, he said, the ban would rebound on oil consumers. "If Iran's oil is totally deleted from the market, then a terrible tension will be created. The costs will be intolerable. The option of imposing a total ban on Iran's crude exports is unenforceable," he said. Qassemi also reinforced Iran's warning to Saudi Arabia and other fellow OPEC members against boosting production to offset any potential drop in Tehran's crude exports, saying the cartel should not be used as a political weapon against a member state.

Israel, for its part, has so far publicly backed the efforts by the US and European Union for tougher sanctions that target Iran's oil exports. But Israeli leaders have urged even harsher measures and warn that military action remains a clear option despite Western appeals to allow time for the economic pressures and isolation to bear down on Iran. Khamenei, in a nationally broadcast speech on Friday, staked out a hard line after suggestions by Israel that military strikes are an increasing possibility if sanctions fail to rein in Iran's nuclear program. He pledged to aid any nation or group that challenges Israel and said any military strikes would damage US interests in the Middle East "10 times" more than they would hurt Iran. The comments also may signal that Tehran's proxy forces - led by Lebanon's Islamic militant group Hezbollah - could be given the green light to revive attacks on Israel as the showdown between the rivals intensifies.