NEWS,05.08.2013

U.S. Embassy Closings: State Department Says Posts In 19 Countries To Remain Closed

U.S. diplomatic posts in 19 cities in the Mideast and Africa will remain closed for the rest of the week amid intercepted "chatter" about terror threats, which lawmakers briefed on the information likened to intelligence picked up before the Sept. 11, 2001 attacks.
One lawmaker said the chatter was specific as to certain dates and the scope of the operation; others said it suggested that a major terrorist attack, akin to 9/11, was being planned by the al-Qaida affiliate in Yemen.
Diplomatic facilities will remain closed in Egypt, Jordan, Libya, Yemen, Saudi Arabia and Kuwait, among other countries, through Saturday, Aug. 10. The State Department announcement Sunday added closures of four African sites, in Madagascar, Burundi, Rwanda and Mauritius. The U.S. reopened some posts on Monday, including those in Kabul, Afghanistan and Baghdad.
Last week the State Department announced a global travel alert, warning that al-Qaida or its allies might target either U.S. government or private American interests. It said Americans should take extra precautions overseas and cited potential dangers involved with public transportation systems and other prime sites for tourists.
Spokeswoman Jen Psaki said the decision to keep certain embassies and consulates shuttered throughout the week was done out of an "abundance of caution" and to "protect our employees, including local employees, and visitors to our facilities."
Sen. Richard Blumenthal, D-Conn., a member of the Senate Judiciary Committee, said Monday the briefings he has received "certainly emphasize these threats are specific and credible, equal if not more serious to the kind of chatter, as the intelligence called it, that was heard prior to 9/11."
But he added: "The average American should continue to be alert and vigilant and cautious but certainly not unduly alarmed or panicky." He spoke on MSNBC.
The intercepted intelligence foreshadowing an attack on U.S. or Western interests is evidence of one of the gravest threats to the United States in years, said several lawmakers said Sunday.
Sen. Saxby Chambliss of Georgia told NBC's "Meet the Press" that the conversation was "very reminiscent of what we saw pre-9/11." Chambliss, the top Republican on the Senate Intelligence Committee, said it was that chatter that prompted the Obama administration to order the closures and issue the travel warning.
Rep. C.A. Dutch Ruppersberger of Maryland, the top Democrat on the House Intelligence Committee, told ABC's "This Week" that the threat intercepted from "high-level people in al-Qaida in the Arabian Peninsula" was about a "major attack."
Yemen is home to al-Qaida's most dangerous affiliate, blamed for several notable terrorist plots on the United States. They include the foiled Christmas Day 2009 effort to bomb an airliner over Detroit and the explosives-laden parcels intercepted the following year aboard cargo flights.
Rep. Peter King, the New York Republican who leads the House Homeland Security subcommittee on counterterrorism and intelligence, told ABC that the threat "was specific as to how enormous it was going to be and also that certain dates were given."
The Obama administration's decision to close the embassies and the lawmakers' general discussion about the threats and the related intelligence discoveries come at a sensitive time as the government tries to defend recently disclosed surveillance programs that have stirred deep privacy concerns and raised the potential of the first serious retrenchment in terrorism-fighting efforts since Sept. 11.
Senate Judiciary Committee Chairman Patrick Leahy, D-Vt., has scoffed at the assertion by the head of the National Security Agency that government methods used to collect telephone and email data have helped foil 54 terror plots.
Rep. Adam Schiff, D-Calif., a House Intelligence Committee member, said while he takes the threat seriously he hasn't seen any evidence linking the latest warnings to that agency's collection of "vast amounts of domestic data."
Other lawmakers defended the administration's response and promoted the work of the NSA in unearthing the intelligence that led to the security warnings.
King, a frequent critic of President Barack Obama, said: "Whether or not there was any controversy over the NSA at all, all these actions would have been taken."
The State Department noted that previous terrorist attacks have centered on subway and rail networks as well as airplanes and boats. It suggested travelers sign up for State Department alerts and register with U.S. consulates in the countries they visit. The alert expires Aug. 31.
The intelligence intercepts also prompted Britain and Germany to close their embassies in Yemen on Sunday and Monday. British authorities said some embassy staff in Yemen had been withdrawn "due to security concerns." France said Monday it would keep its embassy in the Yemeni capital closed through Wednesday.
Interpol, the French-based international policy agency, has also issued a global security alert in connection with suspected al-Qaida involvement in recent prison escapes including those in Iraq, Libya and Pakistan.

Turkey's Ergenekon Trial: Alleged 2002 Coup Plotters Convicted, Including Former Military Chief Ilker Basbug

In a landmark trial, scores of people including Turkey's former military chief, politicians and journalists were convicted on Monday of plotting to overthrow Prime Minister Recep Tayyip Erdogan's government soon after it came to power in 2002.
Retired Gen. Ilker Basbug was the most prominent defendant among some 250 people facing verdicts after a five-year trial that has become a central drama in tensions between the country's secular elite and Erdogan's Islamic-oriented Justice and Development Party.
The trial has sparked protests, and on Monday police blocked hundreds of demonstrators from reaching the High Criminal Court in Silivri, 40 kilometers (25 miles) west of Istanbul, in a show of solidarity with the defendants.
But Monday's verdicts were not expected to set off the kind of violent anti-government demonstrations that were recently sparked by a government plan to build a replica Ottoman-era barracks at a park near Istanbul's central Taksim Square.
In addition to Basbug, at least 18 other defendants were sentenced to life in prison, including 10 retired military officers and Dogu Perincek, leader of the left-wing and nationalist Workers Party. At least 64 other defendants received sentences ranging from a year to 47 years, according to state-run TRT television news.
At least 21 people were acquitted. The fully tally of verdicts and sentences was not immediately available.
The defendants were accused of plotting high-profile attacks that prosecutors said were aimed at sowing chaos in Turkey to prepare the way for a military coup. The prosecutions already have helped Erdogan's government reshape Turkey's military and assert civilian control in a country that had seen three military coups since 1960.
The trial, which began in 2008, grew out of an investigation into the seizure of 27 hand grenades at the home of a noncommissioned officer in Istanbul in 2007.
The defendants were accused of being part of an alleged ultranationalist and pro-secular gang called Ergenekon, which takes its name from a legendary valley in Central Asia believed to be the ancestral homeland of Turks.
In thousands of pages of indictments, prosecutors maintained that the gang was behind a series of violent acts, including one in 2006 on a courthouse that killed a judge. Prosecutors say that the incidents were made to look as though they were carried out by Islamic militants, in a bid to create turmoil and provoke a military intervention.
Prosecutors say the gang also plotted to kill Erdogan, Nobel laureate author Orhan Pamuk and other high-profile figures.
The defendants have rejected the accusations, and they are expected to appeal Monday's verdicts and sentences to the Court of Appeals in Ankara.
Representatives of Turkey's main pro-secular opposition party lashed out against the verdicts, accusing the government of influencing the justice system.
"A verdict that was decided five years ago was made public today," said Akif Hamzacebi, a legislator from the opposition Republican People's Party. "All principles of rights, justice, human rights, fair trial were trampled on here."
Peter Stano, spokesman for the EU's Enlargement Commissioner Stefan Fuele, said he would not comment on the specific rulings, but noted that the European Union has expressed concern before about defendants' rights in Turkey and indictments that are too general.
Prosecutors demanded life prison terms for 64 of the defendants, mostly on terrorism charges. Others were charged with possession of firearms or merely membership in Ergenekon.
Mehmet Haberal, a surgeon and founder of a university in Ankara, and Mustafa Balbay, the Ankara representative of pro-secular Cumhuriyet newspaper, both faced life prison terms but received sentences of 12 years and 34 years, respectively. The two men were elected to Parliament in 2011, while in prison, but were not able to take their seats. The court ordered Haberal released on time served because of health considerations.
Tuncay Ozkan, a prominent journalist who helped organize a series of anti-government protests in 2007, was given a life sentence.
The case has polarized the country between those who see it as an opportunity to unravel a shadowy network of ultranationalists known as the "Deep State" that allegedly acted behind the scenes with impunity, and those who believe it is a government attempt to muzzle Erdogan's secular-minded foes and undermine Turkey's secular legacy.
In a separate case, more than 300 military officers, including Turkey's former air force and navy chiefs, were convicted last year of other plots to bring down the government in 2003 and some were sentenced to 20 years in prison. Those verdicts are being appealed.

 

Gibraltar Entrance Fee: Chief Minister Compares Spain To North Korea Over Exit Charge

The chief minister of Gibraltar on Monday accused Spain of acting like North Korea after suggesting it could impose steep new entry and exit fees for the British territory.
Spain has long laid claim to Gibraltar, and the British territory on the southern tip of the Iberian peninsula is the source of occasional diplomatic friction between Madrid and London.
The latest spat involves an artificial reef being built in Gibraltar that Spain says is hurting its fishermen. It has floated the idea of charging people entering and leaving Gibraltar 50 euros ($66) as compensation.
Gibraltar Chief Minister Fabian Picardo told BBC radio that such fees would violate European Union freedom of movement rules, and said "hell would freeze over" before the reef would be removed.
"What we have seen this weekend is saber-rattling of the sort that we haven't seen for some time," Picardo said, describing threats of border fees as "more reminiscent of the type of statement you'd hear from North Korea than from an EU partner."
Under Spain's former Socialist government, relations between Madrid, London and Gibraltar eased greatly.
But in an interview published Sunday in Spanish newspaper ABC, Spanish Foreign Minister Jose Manuel Garcia-Margallo said the "playtime" of that era was over.
Britain's Foreign Secretary said late Monday that he had spoken to Picardo to express solidarity with territory's residents.
"The U.K. stands shoulder to shoulder with the people of Gibraltar at this time of increasing Spanish pressure and rhetoric," William Hague said in a statement, repeating that the U.K. had pledged "not to compromise on British sovereignty over Gibraltar."
But he also nodded to the fact  so far the talk of sanctions had not amounted to real clampdown on the territory.
"We agreed that it was important to respond to actions, not rhetoric," he said.

North Korea Floods: Army Drills Cut Short To Provide Relief

North Korea has cut short summer military drills to mobilise troops for flood relief efforts after torrential rains left dozens killed and ravaged farmlands nationwide, according to a South Korean report.
The North's military ordered troops based in the country's west and southeast regions to hold "minimum" summer exercises and to instead focus on post-floods reconstruction, Yonhap news agency said.
It cited an unnamed Seoul government source.
"Many military units stopped the exercises and have mobilised troops for floods relief works," said the source quoted by Yonhap.
The communist state has staged summer military drills that partially coincided with the annual Ulchi Freedom Guardian exercise conducted by its rival South Korea and the United States, that usually takes place in August.
"But this year's summer drill in the North will be scaled back considerably because it needs to focus on repairing floods damages," the source was quoted as saying.
Floods caused by heavy rains that pummelled the North since early July have destroyed some 6,000 houses, displaced more than 23,000 people and washed away a large swathes of farmlands, the North's state media said late last month.
The death toll has reached 33 across the nation and some 13,300 hectares of farmlands have been damaged, the International Federation of the Red Cross and Red Crescent Societies (IFRC) said last week, warning of "longer-term impact" on the country's food security.
Decades of deforestation and decrepit infrastructure have left the impoverished North vulnerable to floods, which led to some 170 deaths last summer.

Berlusconi: 'I Am Innocent'

Former Premier Silvio Berlusconi pledged his support for Italy's fragile coalition government to a gathering of thousands of supporters on Sunday, but he remained defiant in the face of a supreme court ruling confirming his tax fraud conviction and four-year prison sentence, declaring: "I am innocent."
The three-time ex-premier and media mogul, who also faces a ban from public office, said he would not resist criticizing the verdict against him, nor the judges who passed it, calling Italian magistrates "irresponsible."
Berlusconi looked energized and appeared to speaking off the cuff throughout the 15-minute rally in front of his Rome residence, in contrast to his nine-minute video address after last week's ruling in which he appeared shaken and on the verge of tears as he read a prepared statement.
The crowd, many of whom arrived on buses during the day, waved flags and posters urging Berlusconi, 76, not to give up and declaring support from cities and regions throughout Italy. Supporters repeatedly chanted: "Silvio."
"I don't believe that anyone can come and say to us that this is a subversive demonstration, as many have said," Berlusconi said. "And no one can come and say, as they have, that we are irresponsible. Because we have said loud and clear that the government needs to continue to approve economic measures that we have requested."
The confirmation of Berlusconi's conviction on final appeal has put more stress on Premier Enrico Letta's uneasy cross-party coalition government, which requires the support of both Berlusconi's conservative forces and the center-left to pass urgent economic measures.
Berlusconi said the last few days were "the most anguished and painful of my life," and he thanked supporters for demonstrating their affection.
"I am here. I am staying here. I won't give up," Berlusconi said.
Italy's highest court on Thursday upheld Berlusconi's four-year prison sentence, the first time that the media mogul was definitively convicted and sentenced in two decades of trials and other criminal probes.
A law to reduce prison overcrowding slashes his sentence to one year and since he is over 70, he can choose home confinement or perform social services instead of going to prison.
He also faces a public office ban, which would deprive him of his Senate seat and prevent him from running in elections for the duration of the ban. Another appeals court in Milan has been ordered to decide its length.

NEWS,18. AND 19.05.2013

UK’s Labour moots new company tax plan

Britain's opposition Labour party, tapping into widening public anger over corporate tax avoidance, wants the government to push for new international rules to force companies to report profit and tax payments country-by-country.
Campaigners say the move, which is receiving increased support internationally despite strong opposition from business, will deter companies from shifting profit into tax havens where they have no staff or sales.
Prime Minister David Cameron has said corporate tax avoidance would be discussed at the annual summit of the Group of Eight leading industrial economies, which Britain is hosting in Northern Ireland next month.
He has urged companies to be more transparent but has only proposed voluntary measures.
Companies say country-by-country reporting will impose unreasonable administrative burdens.
But campaigners say firms fear being embarrassed by highlighting how they frequently pay low or no taxes in countries where they have big sales and how they report big profits in tax havens.
The standard could also lead to companies revealing that they earned no money in countries where they told investors they operated profitably.
Tax reform
Coffee chain Starbucks received broad political, media and public criticism in Britain last year after an investigation showed it assured investors the United Kingdom was a profitable market after telling tax authorities its operations lost money.
The European Union agreed earlier this year to force European banks to report profit on a country-by-country basis as part of measures to ensure they hold enough capital.
The US and EU have also agreed measures to force companies in the extractive industries to publish tax and other payments to resource-rich nations, to reduce corruption.
Labour on Sunday issued a new policy document on corporate tax reform which backed forcing companies to publish figures on revenues, profit and taxes in each country that they operate.
Ernst & Young, one of the 'big four' accounting firms which audit most of the big multinational companies, has warned clients that country-by-country reporting may become a global standard unless they come up with an alternative.
Britain's CBI business lobby group has urged businesses to publish "narrative" reports explaining their tax affairs to the public.
A committee of UK lawmakers has accused Google of "unethical behaviour" for avoiding tax by shifting profit from UK sales to an untaxed unit in Bermuda.
Google says it complies with tax rules in every country where it operates.

Cyber experts fear escalation of attacks

Cyber security professionals know a myriad of ways hackers can try to wreak havoc on critical infrastructure or infiltrate corporations to steal or spy, but it is the fear of the unknown that some say keeps them up at night.
US security officials and private sector experts wonder what kinds of time-bombs can be - or have been - embedded by malware into computer networks, just waiting to explode.
Cyber espionage is already "the greatest transfer of wealth in history", National Security Agency Director Keith Alexander, the top US general in charge of cybersecurity, told the Reuters Cybersecurity Summit in Washington this week.
"Disruptive and destructive attacks on our country will get worse," he said. "Mark my words, it will get worse."
Stealing software or money like the $45m lifted from two Middle Eastern banks in a daring global plot revealed this month might pale next to an attack that could, for example, switch off the lights in a major US city.
That was the fear in New Orleans in February when a power outage struck the Super Bowl, the National Football League's championship game, witnessed by tens of millions of viewers. The outage was blamed on an electrical relay device and not a cyber attack.
"The known unknown is what I worry about," US Secretary of Homeland Security Janet Napolitano told the Summit.
"For example, we don't have the identity of all the adversaries who are trying to either commit crimes or acts over the cyber networks. The things we know about, we can deal with. It's the known unknown," she added.
The military is a big target, something that Rear Admiral William Leigher, who is in charge of "information dominance" with the US Navy, takes on board.
"Our networks see thousands of intrusion attempts every day...staying up with the threat, making sure that our defensive systems are up to par is probably one of the things that gets most of my attention," Leigher said.
To be sure, the United States has not suffered the kind of destructive cyber attack that damaged some 30 000 computers at Saudi Arabia's oil company, Saudi Aramco, last year. But experts said they were worried about the increasingly sophisticated cyber capabilities of countries such as China, Russia and Iran.
"This new growing trend of nation states engaged in cyber attacks that are designed to be destructive to parts of the US economy is very, very concerning," said Mike Rogers, chairperson of the US House Intelligence Committee.
"The ferociousness of these attacks is increasing and it's something that we better get a handle on," Rogers added.
Dmitri Alperovitch, co-founder of Crowdstrike, a security technology specialist firm that works with governments and private companies, said he is most concerned about Iran, particularly if there is a spike in tensions in the Middle East.
He is watching the attacks that have taken down the websites of more than a dozen US banks in the past nine months. There are no signs that hackers have managed to destroy or modify crucial financial data, but that is the fear.
"Attacks that focus on modifying data in the stealth way, sabotage, integrity attacks - those are the ones that are most insidious and those are the ones we really should worry about," Alperovitch said.
The migration of ever more elements of the economy to the digital world opens the door to malfeasance.
"We keep hooking more and more stuff up to the internet, so the attack surface keeps growing," said Michael Daniel, cyber security policy coordinator at the White House.
"Pretty soon your coffee maker and your refrigerator is going to be an attack vector because it's going to be hooked up to the internet."

More Than 1,000 Unaccompanied Diplomats Face Threats, PTSD As Obama Calls For Increased Embassy Security

When the Yemen-based branch of al Qaeda placed a bounty on her husband's head, Mary Feierstein learned of it from a friend who called and said, "You must be a mess!"

U.S. Ambassador Gerald Feierstein was thousands of miles (km) away at the U.S. Embassy in Sanaa, without his wife and family on what is called an "unaccompanied" posting.

He is one of more than a thousand U.S. diplomats on such tours of duty in danger spots around the world, part of a trend that is changing the definition of being a diplomat.

Over time, his wife has learned to stay calm when the phone rings unexpectedly at her home outside Washington. For nearly five years, she has not lived in the same country as her husband, a career diplomat who specializes in the Middle East and South Asia.

After militants stormed the U.S. Embassy in Yemen last September, breaking through to the inner building and ripping plaques and lettering from the walls, Feierstein called his wife to tell her he was OK.

He had also called her a few years earlier when he was based in Islamabad, Pakistan, and a bomb went off near his residence. He was unhurt in that attack.

But when Al Qaeda in the Arabian Peninsula considered by U.S. officials to be al Qaeda's most dangerous affiliate offered 3 kg of gold last December for the killing of Feierstein, it was Mary's turn to call her husband. He played down the danger.

"He said it was old news. They are constantly under threat, you know," Mary Feierstein said in her first media interview since the threat.

After a police officer came to her home to give her his card and tell her to call him if she needed any help, "that's when I got scared," Feierstein said.

The new perils for foreign service officers were spotlighted last Sept. 11, when militants overran the temporary U.S. mission in Benghazi, Libya, killing four Americans, including Ambassador to Libya Chris Stevens. Two other U.S. diplomats were killed in Afghanistan in the past year.

President Barack Obama, still grappling with controversy over the Benghazi attack, called on Congress on Friday to fully fund his $4 billion embassy security budget request.

In a memorial ceremony earlier this month at the State Department, Vice President Joe Biden said that diplomats "take risks that sometimes exceed those of the women and men in uniform."

Honored along with Stevens were Sean Patrick Smith, Tyrone Woods and Glen Doherty, who died in Benghazi; and foreign service officers Anne Smedinghoff and Ragaei Said Abdelfattah, killed in Afghanistan in 2013 and 2012.


FIVE-FOLD INCREASE IN UNACCOMPANIED DIPLOMATS

The State Department says there are about 1,100 U.S. foreign service officers now at posts abroad where they are unaccompanied or there are limits on who can accompany them - usually meaning no children.

That is a five-fold increase in unaccompanied American diplomats over the past decade, and represents about 14 percent of U.S. foreign service officers serving overseas.

The change began with "civilian surges" into the war zones of Iraq and Afghanistan to help with stabilization and reconstruction. Over 400 unaccompanied diplomats are in those countries.

Then, the Arab Spring uprisings starting in 2011 added many unstable countries to the list where the State Department did not want to send families.

The fluctuating list now includes Afghanistan, Iraq, Pakistan, Yemen, Libya and Tunisia, as well as the new African state of South Sudan, the State Department said.

The U.S. embassies in Algeria, Sudan and Lebanon are in the "limited accompanied" category as is the U.S. Consulate in Mexico's third-largest city, Monterrey, a focal point for drug-related violence.

The risks to diplomats are not all external. A 2007 State Department survey said 17 percent of employees who had served in dangerous posts indicated some symptoms similar to those of post-traumatic stress disorder. The department, following the military's lead, has set up a program to help diagnose and treat PTSD in its employees.

Mary Feierstein realized she was one of an expanding group of left-behind relatives when she started attending the year-end holiday parties the State Department throws for them, and noticed the crowd getting bigger every year.

She also noticed a lot of small children at those parties, and admitted to thinking, "At least my kids are grown." Her children, two daughters and a son, are all in their 20s. Her son has served two tours of duty with the Marines in Iraq.

Then-Secretary of State Hillary Clinton attended the holiday parties, at which some of the unaccompanied diplomats were Skyped in from abroad. Feierstein said she thought Obama should attend too.

The president did call Gerald Feierstein to thank him for his service after the Yemen embassy was attacked last Sept. 13, two days after the Benghazi assaults.


'NEW NORM'

The United States used to be quicker to evacuate its embassies and consulates when dangers arose, said Susan Johnson, president of the American Foreign Service Association, the official union representing the Foreign Service.

These days, Washington tries to manage risks by building up the physical security of posts and increasing diplomatic security personnel, she said.

"In the process, we seem to have built a new level of tolerance for the amount of risk our diplomats face," Johnson said, adding that unaccompanied tours were increasingly becoming "a new norm."

There is pressure on diplomats to do the dangerous tours in order to advance. It is perceived to be "almost mandatory" to serve at an unaccompanied post and "punch that ticket" during a Foreign Service career, she said.

The State Department said 20 percent of its current employees had served in Iraq, Afghanistan or Pakistan.

The department offers incentives such as danger pay and shorter tours. Unaccompanied posts can be just 12 months, with several breaks, and families can often be left behind at a previous post to minimize disruption.

The State Department has made considerable progress in supporting employees in unaccompanied posts, its inspector general said in a 2010 report. Still, it said, "many returnees experience problems adjusting to their follow-on assignments," and more counseling services may be needed.

Mary Feierstein was born in Pakistan and met her husband on his first tour there in the 1970s. She said he was one of some "really tough people" that the State Department keeps cycling through stressful, dangerous posts.

Gerald Feierstein served in Lebanon unaccompanied in 2003 and 2004, then returned to Washington for a few years and was a senior official in the State Department's counterterrorism office.

He was sent to Pakistan for the third time in his career in 2008, as deputy chief of mission in Islamabad. His family stayed in the United States. In September 2010, Feierstein went to Yemen, again without his family.

"We were planning to go later. ... After the Arab Spring, we haven't been able to go there at all," Mary Feierstein said.

At home, she volunteers for the local Democratic Party and supports causes like gun control. She last saw her husband in March.

While tired of the separation, she said she felt sorrier for her children, even though they are grown. "They miss him so much. They are so happy when he comes home."

New Energy Policies in the Middle East Must Go Hand in Hand With Subsidy Reform

The Middle East has amongst the highest average per capita energy consumption of any region in the world, at twice the global average. Consequently, it also has amongst the highest per capita carbon emissions as well. Furthermore, not only is overall energy use high but the energy mix itself is unusually weighted towards oil compared as compared with other regions, with oil accounting for 50 percent of primary energy demand compared with a global average of 33 percent and an OECD average of 38 percent.
There are three major consequences of the Middle East's high energy intensity and reliance on oil: first, it carries a large implicit economic cost as a result of the value of oil and gas exports foregone and additional gas imports required in some cases; second, such a high degree of energy dependence increases the economy's volatility through its greater exposure to energy supply disruptions or price shifts; and third, it has increased the region's greenhouse gas emissions.
Given the intentions of the region to boost economic growth, reduce economic dependence on volatile energy markets and curtail greenhouse gas emissions growth, the region's high energy intensity is a natural target for reform.
Fortunately, the very fact that the region's energy use is anomalously high and possibly inefficient is a sign that relatively easy gains are possible to bring it under control. There are clear signs that there is significant scope for efficiency improvements. Energy use per unit of GDP is even more dramatically out of step with other regions than per capita statistics, with energy use per unit GDP double the G7 average for example, suggesting that with the right reforms energy demand growth can be slowed or even cut without harming economic growth. Indeed cutting energy demand by increasing energy efficiency would actually boost economic output as for the region's oil producers more crude would be available for export, while for the region's net gas consumers less gas would be need to be imported, improving the balance of trade in both cases.
So the theoretical potential for improvements is clear, but what are the practical steps to achieve it? Governments are currently focused on developing alternative energy options as their primary solution, nuclear and solar power especially. These energy sources will deliver two of the key energy policy aims of the regions' authorities: reducing their economic dependence on oil and cutting greenhouse gas emissions growth. However, to focus solely on these fuels would not fix the Middle East's energy problems.
First of all, the high cost and slow delivery of these new energy sources mean that they cannot deliver all of the energy supply changes needed in a timely manner. That is why policymakers must also put the promotion of natural gas front and center alongside nuclear and solar. Natural gas is the clear choice to complement these alternative energy supplies because the region has reserves in abundance which can be developed quickly, while gas-fired power plants are fast to build, reliable, responsive to demand and emit the least greenhouse gases of any hydrocarbon, at least 50 percent less than coal and 30 percent less than oil in power generation.
Second, and more fundamentally, promoting nuclear and solar, or even natural gas, do not address the problem of energy consumption as previously mentioned. Without addressing this, economic growth will still be affected by demand constantly surpassing supply.
The underlying source of the region's high energy intensity must be addressed and reformed if the region is to deliver a sustainable energy policy with maximum economic benefits: subsidies. Subsidies to oil, gas, water, electricity mean that consumers pay far less than the market rate for these products while producers cannot achieve full value for their output. The United Arab Emirates, for example, has amongst the highest subsidy rates per person in the world, with energy subsidies worth nearly $4,200 per capita per annum in 2011 according to the IEA. While such costs may be internalized by the state and judged to provide worthwhile social benefits, subsidies also always distort market incentives and result in a less efficient energy and economic outcome in the long-term.
Middle East energy use is so high because consumers have little incentive to reduce their energy consumption or make their energy use more efficient since the financial savings from doing so are negligible. Conversely, producers have less incentive to develop new supplies if they cannot sell for above the cost of production. Moreover, as the economy and energy market fundamentals shift, the lack of any market-based price signals means that supply and demand does not respond quickly enough to changing circumstance, slowing the economy down further.
A classic example of the effects of subsidies to constrain the region's economic potential is the role of oil in Saudi Arabia's power sector. In the summer months over a million barrels per day of oil is burnt in power plants to meet peak power demand because there is insufficient non-associated gas production to meet demand. Subsidies exacerbate the problem at every turn: subsidized power prices boost demand; subsidized oil prices make it feasible to burn for power even though it comes at a huge opportunity cost compared to the revenues it would have achieved if exported; at current prices Saudi Arabia there is an opportunity cost of USD 85-95 on every barrel burnt in its power generation sector, and so with oil demand in the power sector in excess of 230 million barrels a year that is $20 billion of lost export revenues. Finally subsidized gas prices create the supply shortfall in the first place because they make it uneconomic to explore for and develop the non-associated gas resources that Saudi Arabia is believed to have in abundance in recent years LUKoil, Eni, Repsol, Shell and Sinopec have all committed to look for natural gas in the country and subsequently exited without success while leading to unconstrained industry demand growth. Moving towards a market based system would address all of these imbalances and make the Saudi or any other Middle East economy healthier and more robust.
The eventual removal of subsidies will create both winners and losers, so a transfer from the current system to a new one must be carefully designed to smooth any disruption and compensate the vulnerable but if a plan is prepared and carried out over a number of years this should not be an insurmountable problem. Ultimately, supply side reforms, to boost alternative energy sources can only ever be half a solution. Demand side reform, via a path to ending energy subsidies in the region, is equally essential to deliver the best economic future for the Middle East and its wider effect on the global economy.

NEWS,31.03.2012.

US to press on with Iran sanctions

President Barack Obama vowed today to forge ahead with tough sanctions on Iran, saying there was enough oil in the world market - including emergency stockpiles - to allow countries to cut Iranian imports.In his decision, required by a sanctions law he signed in December, Obama said increased production by some countries as well as "the existence of strategic reserves" helped him come to the conclusion that sanctions can advance."I will closely monitor this situation to assure that the market can continue to accommodate a reduction in purchases of petroleum and petroleum products from Iran," he said in a statement.Obama had been expected to press on with the sanctions to pressure Iran to curb its nuclear program, which the West suspects is a cover to develop atomic weapons but which Iran says is purely civilian.The overt mention of government-controlled stockpiles may further stoke speculation that major consumer nations are preparing to tap their emergency stores this year."I do think it was interesting that it was laid out there," said David Pumphrey, an analyst at the Center for Strategic and International Studies."It was sort of like a reminder that yes, this is part of the tool kit," said Pumphrey, a former Energy Department official.Oil markets remain tight, the White House said. Surging gasoline prices have become a major issue in the presidential election campaign."A series of production disruptions in South Sudan, Syria, Yemen, Nigeria, and the North Sea have removed oil from the market," the White House said in a statement.France is in talks with the United States and Britain on a possible release of strategic oil stocks to push fuel prices lower, French ministers said on Wednesday.Senior Obama administration officials told reporters that the United States views releasing emergency stocks as an option, but said no decision has been made on specific actions.Oil prices briefly rallied by about 70 cents on the announcement, but later reversed gains to end almost flat as traders turned mindful of the possible use of reserves."There's been a shift from focus on a threat (by Iran) to close the Strait of Hormuz to whether or not reserves are going to be released," said Dominick Caglioti, a broker at Frontier Trading Co. in New York.Going forward, Obama is required by law to determine every six months whether the price and supply of non-Iranian oil are sufficient to allow consumers to "significantly" cut their purchases from Iran.The law allows Obama, after June 28, to sanction foreign banks that carry out oil-related transactions with Iran's central bank and effectively cut them off from the US financial system."Today, we put on notice all nations that continue to import petroleum or petroleum products from Iran that they have three months to significantly reduce those purchases or risk the imposition of severe sanctions on their financial institutions," said Senator Robert Menendez, co-author of the sanctions law.Obama can offer exemptions to countries that show they have "significantly" cut their purchases from Iran, and recently exempted Japan and 10 EU countries from the sanctions.A senior administration official told reporters that talks continue with China, India, South Korea and other importers."Each day I think really we see a number of positive indicators from a broad range of countries," the official said, citing an announcement by Turkey today that it would cut imports of oil from Iran by 10% as an example.Obama faces a delicate balancing act on Iran, leading up to November US general election. On the one hand, he must show voters he is being tough on the Islamic state.But with oil and gasoline prices surging in response to geopolitical risks, he must also avoid steps that would unduly rattle oil markets. That could threaten the global economy and hurt voters already angered by the rising cost of fuel.Obama also faces pressure from some lawmakers in Congress who want to make sanctions on Iran even tighter. The House of Representatives has already passed additional sanctions, and a bill is pending in the Senate.Senior administration officials briefing reporters declined comment on the proposed new sanctions."We welcome the president's determination and applaud the administration's faithful implementation of the Menendez-Kirk amendment," said a spokesman for Senator Mark Kirk, a Republican who has pushed for additional measures."To build on this momentum, we hope the Senate will consider amendments to the pending Iran sanctions bill that would continue to increase the economic pressure on the Iranian regime," Kirk's spokesman said.

Spain announces deep cuts amid public protest

Spain has announced deep cuts to its central government budget as it battles to convince European partners and debt markets it can rein in its budget deficit in the face of growing complaints from the public.The government said it would make savings of 27 billion euros for the rest of 2012 from the central government budget, equivalent to around 2.5% of gross domestic product. The figure includes tax rises and spending cuts of around 15 billion euros announced in December.The cuts come despite popular resistance - a general strike on Thursday disrupted transport, halted industry and saw some minor violence - and against a grim economic backdrop; Spain is thought to have fallen back into recession in the first quarter and has the highest unemployment rate in the European Union."Everyone knows the difficult problem we face in this country, and it calls for special efforts in fiscal consolidation and structural reforms to grow and create employment," Deputy Prime Minister Soraya Saenz de Santamaria said after the weekly cabinet meeting.The centre-right government, which swept to power in November with the largest parliamentary majority in 30 years, has already passed labour market and banking sector reforms that it says can improve competitiveness and reduce wage costs.EU partners have agreed to let Prime Minister Mariano Rajoy aim for a total 2012 deficit at 5.3% of gross domestic product, a less demanding goal than the 4.4% originally suggested but substantially less than last year's 8.5%.Speaking in Copenhagen after an EU ministerial meeting, Spanish Economy Minister Luis de Guindos said the measures would be implemented as soon as possible, adding that any suggestions that Madrid needed emergency international funds was "absurd".Spain is trying to assure its EU partners that it is in control of slashing its deficit and to avoid needing a bailout package like that of smaller neighbour Portugal."What comforts markets are domestic policies. If we don't do what is needed, then there will be no rescue fund that is big enough," de Guindos said. Finance ministers agreed on Friday to increase a financial firewall to 700 billion euros to ward off fears the euro zone debt crisis could spill over to Spain or Italy, much larger economies than those bailed out previously.The Spanish government said it was aiming for a central government deficit equivalent of 3.5% of GDP, a deficit of 1.5% of GDP coming from Spain's regions and a balanced social security budget. Smaller local authorities expect a deficit equivalent to 0.3% of GDP.The regions announced a deficit of 2.9% of GDP in 2011, meaning they would have to cut around 15 billion euros to meet the 2012 target.Details were scarce, with the government due to set the budget before parliament on Tuesday, but some economists are concerned that deep austerity measures could hurt already weakened growth and further endanger the deficit targets.The government said it would slash spending by 16.9% across the ministries, with spending at the Foreign Ministry cut by more than half, and the Industry, Energy and Tourism Ministry taking a cut of more than 30%.Total cuts of over 42 billion euros, between the central administrations and the regional authorities, could be tough for an economy struggling to grow, economists warn."This is as austere as it gets. It's a tightening of fiscal policy until the pips squeak. There can be no doubting the government's willingness to curb Spain's excessive budget deficits," said Nicholas Spiro at Spiro Sovereign Strategy.Rajoy can ill afford to upset nervous bond market investors, who pushed the yield premium for Spanish 10-year debt on Thursday close to their highest levels since early January.The premium investors demand to hold Spanish over German debt dipped slightly after the budget announcement to around 356 basis points, suggesting a cautious welcome for the plan intended to improve Madrid's ability to service its debt.Investors fear, however, that the government may fail to deliver the budget cuts it is promising or will need to announce new measures before the end of the year which could hurt growth."I suspect that the government could be forced to implement further austerity measures later this year, with lingering economic downturn set to place additional strains on an already perilous budget deficit reduction plan," said IHS Global Insight economist Raj Badiani. "The main risk is that the government's tax revenue projections for 2012 look too optimistic."