NEWS,30.06.2013

Kazakhstan trade trip test for Cameron

British prime minister David Cameron flew into Kazakhstan on Sunday to help inaugurate the world's costliest oil project and seal new business deals, but faced immediate pressure to denounce the country's poor human rights record.
Cameron's visit, the first by a serving British prime minister, is seen by the Central Asian government as a coup it hopes will cement its status as a rising economic power and confer a degree of legitimacy from the West it has long sought.
It comes just days before the 73rd birthday of President Nursultan Nazarbayev, who has ruled the former Soviet republic with a tight grip for over two decades.
Former British prime minister Tony Blair's consultancy firm already advises Nazarbayev, a former Communist party apparatchik who tolerates no dissent or opposition.
"We are very honoured and privileged to have such attention on the part of two prime ministers - Tony Blair and David Cameron," Kazakh foreign minister Erlan Idrissov told reporters in a phone call before the visit.
"We cherish and enjoy the support of developed countries."
Cameron, who is accompanied by a British business delegation, is expected to oversee the signing of about a dozen contracts involving British firms and to cut the ribbon on infrastructure elements of the Kashagan offshore oilfield.
Royal Dutch Shell has a 16.81% stake in the facility, which is in the Kazakh segment of the Caspian Sea. Nazarbayev said last week consortium members had so far invested $48bn, making it the most expensive oil venture in the world.
It is due to produce its first oil in September.
Cameron is also hoping to persuade Kazakhstan to expand transit rights for British military forces relocating equipment from Afghanistan between now and a planned withdrawal next year. Nazarbayev has already granted overflight rights, but Cameron is looking for land transit rights too.
As Britain's trade with the euro zone suffers because of the currency bloc's debt woes, it is looking further afield to forge business links with countries that have enjoyed rapid economic growth in recent years.
Tempting target
With a $200 billion economy, the largest in Central Asia, and deep oil and gas reserves, Kazakhstan is a tempting target. Britain is already among the top three sources of foreign direct investment, according to Kazakh officials.
Since its 1991 independence, officials said British firms have invested about $20bn in their economy, part of a total $170 billion ploughed into Kazakhstan since then. But more high profile trade links carry political risks.
New York-based Human Rights Watch said Cameron had a duty to use his trip to denounce human rights abuses.
"We are very concerned about the serious and deteriorating human rights situation there in recent years, including credible allegations of torture, the imprisonment of government critics, (and) tight controls over the media and freedom of expression and association," it said in a letter on Friday.
Cameron told reporters in Islamabad on Sunday he never shied away from having difficult conversations on such trips.
"In all the relationships we have there's never anything off the table and we raise and discuss all these issues, and that will be the case with Kazakhstan as well," he said.
"It is important to make this visit. It's very much something I chose and wanted to do."
Kazakhstan was a key market for British firms, he added, saying that other European leaders had visited and it was "high time" a British prime minister did too.
In another awkward twist for Cameron, the London-based daughter of a jailed former Kazakh businessman, Mukhtar Dzhakishev, has urged him to raise her father's case when he meets Nazarbayev.
But it is the case of Vladimir Kozlov, a jailed opposition leader, that activists most want Cameron to mention.
An outspoken critic of Nazarbayev, Kozlov was jailed for seven-and-a-half years in October for colluding with a fugitive billionaire in a failed attempt to rally oil workers to bring down the government. Kozlov denied the charges.
Idrissov, the foreign minister, said criticism of his country was overdone.
"We do not claim that we have got everything right," he said. "It was never going to be possible to turn a country with no democratic institutions or culture into a Jeffersonian democracy in two decades."

Europeans demand answers over bugging

The European Union angrily demanded answers from the United States on Sunday over allegations Washington had bugged its offices, the latest spying claim attributed to fugitive leaker Edward Snowden.
The report in German weekly Der Spiegel is likely to further strain relations between the United States and Europe, shortly after they launched formal negotiations to create what would be the world's biggest free trade area.
Der Spiegel said its report, which detailed covert surveillance by the US National Security Agency (NSA) on EU diplomatic missions, was based on confidential documents, some of which it had been able to consult via Snowden.
"We have immediately been in contact with the US authorities in Washington DC and in Brussels and have confronted them with the press reports," the European Commission said in a statement.
"They have told us they are checking on the accuracy of the information released yesterday and will come back to us."
One document, dated September 2010 and classed as "strictly confidential", describes how the NSA kept tabs on the European Union's mission in Washington, Der Spiegel said.
Microphones were installed in the building and the computer network infiltrated, giving the agency access to emails and internal documents.
The EU delegation at the United Nations was subject to similar surveillance, Der Spiegel said, adding that the spying also extended to the 27-member bloc's Brussels headquarters.
It said the leaked documents referred to the Europeans as "targets", in intelligence activity reminiscent of the Cold War.
US Deputy National Security Advisor Ben Rhodes refused to be drawn into commenting directly on the allegations in a briefing in Johannesburg on Saturday, but said it was "worth noting" the US was "very close" to EU security services.
In another report on Sunday, Der Spiegel said leaked documents showed that the US secret services targeted Germany more than any other EU country.
Citing figures from NSA documents, the magazine said that half a billion forms of communication phone calls, emails, text messages and Internet chat entries were monitored in Germany every month.
The Spiegel reports are the latest in a series of allegations about US spying activity revealed by Snowden, a former NSA contractor who is holed up in a Moscow airport transit zone after the United States issued a warrant for his arrest and revoked his passport.
Speaking before the latest Spiegel revelations on Sunday, EU powerhouse Germany said the United States must quickly say whether the spying allegations were true or not.
"It's beyond our imagination that our friends in the US consider the Europeans as enemies," Justice Minister Sabine Leutheusser-Schnarrenberger said in a statement.
"If the media reports are accurate, it is reminiscent of actions among enemies during the Cold War."
European Parliament president Martin Schulz said he was "deeply worried and shocked" by the claims.
"If the allegations prove to be true, it would be an extremely serious matter which will have a severe impact on EU-US relations," he said in a statement, demanding full and speedy clarification from the US authorities.
The US authorities issued an arrest warrant this month for Snowden after he revealed details of NSA's so-called PRISM programme which collects and analyses information from Internet and phone users around the world, with access to data from Google, Yahoo! and other Internet firms.
US officials say the information gathered is vital in the fight against global terrorism but the scale of the programme raised deep concerns around the world.
Der Spiegel also referred to an incident more than five years ago when EU security experts discovered telephone and online bugging devices at the Justus Lipsius building.
In 2003, the EU announced it had found phone taps in the building targeting the offices of several countries, including Britain, France and Germany. It was not immediately clear if Der Spiegel was referring to this case.
Even before the most recent allegations, EU Justice Commissioner Viviane Reding wrote to US Attorney General Eric Holder earlier this month calling for answers about its Internet spy programme, saying: "Fundamentally, this is a question of trust."
Snowden himself remains in political limbo at Moscow's Sheremetyevo airport after flying in from Hong Kong last week, unable to fly on without legal travel documents or exit the airport without a Russian visa.
Ecuador's President Rafael Correa said that US Vice President Joe Biden had asked Quito to reject any asylum request from the 30-year-old who is wanted by the United States on charges including espionage.
But he said Snowden's fate was in Russia's hands as Quito could not process his asylum request until he was on Ecuadoran soil.
"We have not sought out this situation," said Correa, saying it was WikiLeaks founder Julian Assange who recommended he seek asylum in Ecuador.
Assange, who is wanted for questioning in Sweden on sexual assault allegations, took refuge at the Ecuadoran embassy in London a year ago to avoid Britain putting him on a plane to Stockholm.
French MEP Jean-Luc Melenchon said Sunday that France should grant Snowden asylum and called for a suspension of all trade negotiations with the United States.
Earlier this month, Brussels and Washington formally launched negotiations on a Free Trade Agreement which would add tens of billions of dollars to the EU and US economies.

Kerry in last-minute push on Mideast peace

US Secretary of State John Kerry made a last-minute push on Sunday to revive Middle East peace talks as Israeli media said that days of exhaustive shuttle diplomacy had failed to break the deadlock.

Kerry has spent 13 hours with Israeli Prime Minister Benjamin Netanyahu since Thursday, with the latest session between the two men and their aides lasting until nearly 04:00 (01:00 GMT) at a hotel suite overlooking Jerusalem's Old City.

A sleep-deprived Kerry was to head to Ramallah in the West Bank on Sunday morning to consult for the third day in a row with Palestinian president Mahmoud Abbas, a US official said. His previous two meetings with Abbas took place in Amman.

Israel's army radio painted a grim picture of Kerry's initiative, saying that he has apparently failed in his goal of restarting direct Israeli-Palestinian negotiations after a gap of nearly three years.

The last face-to-face negotiations broke down quickly in September 2010, with Abbas accusing Israel of refusing to talk substance.

Sign on commitment

The Palestinian leader is pushing Israel to free the longest-serving Palestinian prisoners as a sign of commitment to peace, to remove roadblocks in the West Bank and to publicly agree to making the borders that existed before the 1967 Middle East war the baseline for negotiations.

But army radio said that Netanyahu was willing to consider just the first two conditions - but only after talks were under way, and even then in stages.

So far, Israel has flatly refused to countenance any return to the 1967 borders.

Army radio also said an Israeli committee was likely to push through the construction of another 900 new homes in annexed east Jerusalem, in a meeting scheduled to take place on Monday.

The committee had given final approval to around 70 homes in the same area on Wednesday, on the eve of Kerry's visit.

Palestinian leaders have accused Israel of a lack of sincerity by moving ahead on construction in east Jerusalem - which they want as the capital of a future Palestinian state.

A top priority

Kerry has made the elusive goal of Middle East peace a top priority. He is paying his fifth visit to the region since taking on the role of top US diplomat in February.

But he is running against the clock.

Kerry is scheduled to attend a meeting of southeast Asian leaders in Brunei on Monday, at which he will also hold talks with Russian Foreign Minister Sergei Lavrov on the Syrian crisis and a row over the presence in Moscow of US leaker Edward Snowden.

Kerry - whose predecessor Hillary Clinton had made Asia a defining focus - also plans to meet Chinese Foreign Minister Wang Yi and to hold three-way talks with Japan and South Korea, US allies whose relations have recently been sour.

US officials said Kerry was dedicated to seeking progress in the Middle East and plans to speak before flying out. He cancelled a dinner on Saturday in Abu Dhabi on the Syria crisis to spend more time shuttling between Netanyahu and Abbas.

"Kerry is willing to put in the legwork necessary to move this process forward in a meaningful way," a US official said on condition of anonymity.

Tight-lipped about meetings

US officials have been tight-lipped about the substance of Kerry's meetings, fearing that any public statements could put at risk his efforts.

On Kerry's all-night meeting with Netanyahu and senior aides, a US official said only that the two men discussed a "wide range of issues related to the peace process" over a dinner of hummus, pita and sea bream.

Netanyahu had a tense relationship with President Barack Obama during the US leader's first term, with the Israeli leader resisting calls to renew a freeze on settlement construction as part of efforts aimed at leading to a Palestinian state.

Israel had observed a 10-month freeze on new West Bank construction which expired shortly after direct negotiations began in September 2010, with the renewal of settlement building causing the talks to collapse.

While some ministers and aides have described Netanyahu as increasingly pragmatic, he emerged from January elections with a coalition of hardliners, many of whom oppose a Palestinian state.

Economy Minister Naftali Bennett, who heads the far-right Jewish Home party, recently described the Palestinian issue as "shrapnel in the buttocks" a problem Israel simply had to keep suffering through but threatened to quit if the government agreed to a Palestinian state.

Abbas also faces internal dissent with the Islamist Hamas movement, which controls the impoverished Gaza Strip, strongly criticising him for pursuing talks.

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,08. AND 09.05.2013

Brazil wins race for next WTO director

The World Trade Organisation has settled on Roberto Azevedo of Brazil, a well-known diplomat and consummate insider in Geneva circles, to serve as its director general for the next four years, officials said on Tuesday.

The directorship is chosen by consensus in a complex and secretive process, and the runner-up is expected to concede afterward. Diplomats emerged from consultations Tuesday to rush past journalists out of the building, barely acknowledging that Azevedo had defeated Mexican former trade minister Herminio Blanco in the final round.
Two diplomats confirmed Azevedo's selection to journalists on condition of anonymity because they were not authorised to reveal the winner ahead of the formal announcement, but Azevedo also re-tweeted that he has been chosen for the job and comments from various trade circles began trickling in.
A formal announcement on his selection is not expected until Wednesday.
In Washington, Jack Colvin, a vice president of the National Foreign Trade Council, said Azevedo's selection reflects "his extensive experience and deep familiarity with international trade institutions and processes on behalf of Brazil and the focus he has placed on consensus-building in Geneva."
Under WTO rules, a meeting of member-nations must be convened no later than May 31 to formally appoint Azevedo. The selection - not an election - spanned months of consultations among ambassadors from all 159 members, most of them nations but also some territories such as Hong Kong and Macau.
Azevedo is to take over the organisation on September 1 from Pascal Lamy of France, who has been the director-general for eight years.
He is poised to become the first Latin American to head the Geneva-based trade organisation since its creation in 1995. He won out in a field that originally had nine candidates at the start of this year.
Azevedo will be taking over an organisation whose role as a multilateral forum for negotiations is, according to insiders and observers, in growing doubt.
In recent years, the WTO has been used more as forum to settle trade disputes and monitor policy than as a host for serious trade negotiations. That tendency reflects the rise of regional and bilateral trade negotiations among the major powers.
Azevedo, who has insider knowledge of the WTO's workings, calls himself a consensus-builder between developed and developing countries. He says he will set aside his Brazilian hat to take on the global role.
But it has been no secret during the selection process that member nations wanted the next director to come from a developing nation after having a director from one of Europe's major economies.
The original nine candidates also included contenders from Ghana, Costa Rica, Indonesia, New Zealand, Kenya, Jordan and Korea.

China's exports jump 14.7% in April

China's trade accelerated in April in a possible positive sign for its shaky economic recovery.

Exports rose 14.7% over a year earlier, up from March's 10% growth, customs data showed Wednesday. Imports gained 16.8%, up from the previous month's 14.1%.
The stronger data suggest growth of the world's second-largest economy might be improving after an unexpected decline to 7.7% in the first three months of the year from the previous quarter's 7.9%.
Some analysts suggest Chinese trade data are distorted by reporting errors and unreliable as an economic indicator. Still, April's stronger numbers might help to reassure companies and investors after the weaker first-quarter growth jolted global financial markets.
"Subdued actual export growth in April points to sluggish global demand," said RBS economists Louis Kuijs and Tiffany Qiu in a report. "Reasonable import growth suggests domestic demand has held up better so far."
Surveys by HSBC Corp. and a Chinese industry group showed Chinese manufacturing growth weakened in April. HSBC said new export orders fell for the first time this year.
Some analysts have warned China's recovery is being shored up by state-led investment and bank lending and could be vulnerable if trade or investment weakens. The weaker-than-expected first quarter numbers prompted the World Bank and private sector analysts to trim forecasts for full-year growth, though to still robust levels of about 8%.
Chinese leaders are trying to nurture self-sustaining growth driven by domestic consumption instead of trade and investment. But consumer spending is growing more slowly than they want.
A Cabinet statement last month promised to improve the role of consumption as a driver of economic growth. It pledged changes in medical, pension and other policies but gave no details. Analysts say more government spending on such social programs will be required to free up household budgets for consumer spending.
April's stronger gains in imports compared with exports caused China's global trade surplus to narrow by about 1%, though to a still-wide $18.2bn.
China runs a deficit with most of its trading partners, which supply oil, other raw materials and industrial components, and makes up for it by running large surpluses with its US and European export markets.
China's exports to Europe, hurt by the continent's debt troubles, declined 6.5% to $25.9bn and the surplus with the 27-nation European Union narrowed by 32% to $7.9bn.
Trade with some European countries suffered even bigger declines. Germany's imports of Chinese goods fell 7.2% and France's by 6.7%.
Exports to the United States edged down by a fraction of 1% to $28.1bn while the trade gap with the US narrowed by 13% to $14.7bn.
China's data on exports have been under scrutiny since some analysts pointed out last year that they failed to match up with its trading partners' lower figures for their purchases of Chinese goods.
Some analysts suggested Chinese exporters might be inflating values on customs declarations as a way to evade Beijing's currency controls and bring money into the country for investment.
Kuijs and Qiu of RBS said that after factoring out irregularities, they estimated China's exports rose only by about 5.7% in April, about 9 percentage points lower than the reported level. They said they saw no obvious irregularities in import data and no reason to inflate the values of goods.

Slovenia scrambles to avert bailout

Slovenia pledged on Thursday to sell 15 state firms including its second-largest bank, biggest telecoms operator and the national airline under a crisis package to avert an international bailout.
Prime Minister Alenka Bratusek said value added tax would rise from 20% to 22% from July but that the government was still in talks with unions on planned cuts to the public sector wage bill.
She said the budget deficit would soar to 7.8% of national output this year but the government aimed to bring it down to 3.3% in 2014.

Finance Minister Uros Cufer said the package would result in total savings of around €1bn in spending cuts and revenues.

US jobless claims fall to 5-year low

The number of Americans filing new claims for unemployment benefits dropped to its lowest level in nearly 5-1/2 years last week, signaling labour market resilience in the face of fiscal austerity.
Initial claims for state unemployment benefits fell 4 000 to a seasonally adjusted 323 000, the lowest level since January 2008, the Labor Department said on Thursday.
Claims for the prior week were revised to show 3 000 more applications received than previously reported. Economists polled by Reuters had expected first-time applications to rise to 335 000 last week.
US stock index futures pared losses on the report, while Treasury debt prices trimmed gains. The dollar trimmed losses against the yen.
The third straight weekly decline in claims pushed them further below the 350 000 mark, which economists normally associate with a firming labour market.
Claims are showing no sign of a pick-up in layoffs even as other parts of the economy such as manufacturing start to show strain from tighter fiscal policy.
"It's nice to see improvement in claims. We are not worried about the separation side of the equation. We continue to be worried about the hiring side," said Jacob Oubina, senior economist at RBC Capital Markets in New York.
A Labor Department analyst said no states had been estimated and there was nothing unusual in the state-level data.
The four-week moving average for new claims, a better gauge of job market trends, dropped 6 250 to 336 750 - the lowest level since November 2007.
Coming on the heels of data last week showing surprising strength in the labor market, the claims report could further assuage fears of an abrupt slowdown in the economy.
Employers added 165,000 new jobs to their payrolls in April and hiring in the previous two months was stronger than initially reported. The unemployment rate dropped to a four-year low of 7.5%.
The improvement in employment contrasts sharply with other data, including retail sales and manufacturing, that have suggested a cooling in the economy at the end of the first quarter, which persisted early in the April-June period.
The slowdown in activity after the economy expanded at a 2.5% annual pace in the first three months of the year has been blamed on higher taxes which went into effect on January 1 and $85bn in government budget cuts known as the "sequester."
The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid dropped 27 000 to 3.0 million in the week ended April 27. That was the lowest level since May 2008.

Obama set to renew focus on jobs

President Barack Obama travels to Texas on Thursday to put his focus back on job creation and economic growth after giving intensive attention to gun control legislation and immigration reform.
The president is due to hold events around the country to draw attention to his efforts to boost economic growth through jobs that benefit the middle class, a White House official said.
The trip comes as a poll shows Americans say what they want most from politicians in Washington is job creation and helping the economy grow.
In a visit to the Austin, Texas, area, Obama is due to visit Applied Materials which makes semiconductors and other technology, and a high school focused on math and science. He will also meet local residents and entrepreneurs.
Obama's jobs tour follows some policy frustrations for him. The president failed to persuade Congress to accept expanded background checks for gun buyers, a disappointing setback to his efforts to toughen gun rules after the December murders of 20 children and six adults at an elementary school in Newtown, Connecticut.
He is also at an impasse with congressional Republicans over a deficit reduction deal that he insists should include higher tax revenues, which Republicans oppose.
The president does appear to be making headway in his efforts to change immigration laws to open a path to citizenship for a portion of the 11 million people who are in the United States without proper documentation. However, final legislation is months off.
In the meantime, a Gallup poll released Tuesday found 86% of those surveyed this month ranked creating more jobs as their top priority for action by Congress and the president, tied at 86% with helping the economy grow.
Lower on the priority list were reducing the federal deficit at 69%, reforming the tax code 59%, reducing gun violence 55% and reforming immigration 50%.
The U.S. economy is recovering slowly after the deep recession of 2007-2009. Despite some encouraging signs of economic resurgence, such as stock market record highs, the jobless rate, while falling, remains at an elevated 7.5%.
The president will announce a competition for locations to site three manufacturing institutes where businesses, government and educational institutions will get funding to develop new technologies, the White House official said.
He will also issue an executive order requiring that newly released government data be made freely available in easily readable formats.
The president's jobs tour is also likely be a chance for him to argue that across-the-board spending cuts referred to as sequestration that went into effect March 1 are slowing economic growth and should be replaced.
The spending reductions went into force after congressional Republicans balked at the president's insistence that any alternative spending cuts be offset by some tax increases.
Some Republicans have welcomed the cuts as necessary austerity measures to check government overspending.

Cameron: Britain must stay in EU

British Prime Minister David Cameron took on critics in his own Conservative party on Thursday, saying it would be wrong for Britain to leave the European Union.
Some pessimists "say there is no prospect of reforming the European Union, you simply have to leave", Cameron told an investment conference
"I think they are wrong ... I think it is possible to change and reform this organisation."
Cameron came under renewed pressure from EU sceptics this week when former finance minister Nigel Lawson said the prime minister's plan to renegotiate Britain's commitments to the EU before a planned membership referendum in 2017 were doomed to fail and the country should leave the bloc.
Cameron used his speech on Thursday to underscore his determination to keep on narrowing Britain's budget deficit at a "sensible and measured pace" and to help push for new trade deals between the EU and the United States and Canada.
He also said he would continue to defend Britain's financial services industry against some European measures such as a planned financial transaction tax which has been agreed by most countries in the eurozone and would affect the City of London.
"We shouldn't spend our time in politics endlessly bashing banks and financial institutions. If you want the economy to recover and if you want the economy to grow, you have got to play to your strengths," Cameron said.

G7 finance chiefs to discuss bank reforms

Some of the world's most powerful finance chiefs will meet in an English stately home on Friday and Saturday to try to speed up banking and finance reforms, with Cyprus' near meltdown fresh in their minds.
Finance ministers and central bank governors from the Group of Seven industrialized economies probably will not break new ground on how to fix the weak world economy as discussions at the International Monetary Fund took place just three weeks ago.
Officials from two of the G7 economies said the talks - on Friday and Saturday at a 17th-century country house 40 miles northwest of London - were likely to focus more on the slow progress of reforms to banking and finance around the world.
"It's very rare for a G7 to focus on financial regulation," one of the officials said, speaking on condition of anonymity.
The emergency rescue of Cyprus in March acted as a reminder of the need to finish an overhaul of the banking sector, five years after the financial crisis began.
"It makes sense for the G7 financial leaders to send out a message, from high up, that global efforts to ensure financial stability via appropriate regulation must continue," the official said.
Germany may come under renewed pressure to give more support to a banking union in the euro zone as it did at the recent IMF/G20 meeting in Washington.
The idea was proposed last year to help strengthen the single currency area but Berlin worries it may foot the bill for future bank bailouts.
While the first step - to create a single bank supervisor under the European Central Bank - looks set to be in place by mid-2014, a second pillar, a 'resolution' agency and fund to close failed banks, is in doubt. And there is little prospect that a third leg, a single deposit guarantee scheme, will ever see the light of day.
"We welcome those discussions," a senior US Treasury official told reporters in Washington. "I think Cyprus just further highlighted the importance of moving to break that feedback loop between sovereigns and bank balance sheets."
Another G7 official said new rules for derivatives trading and the Basel III plan for minimum bank capital levels were running behind schedule and would be among the issues the G7 would discuss, as well as the risk of a reversal in soaring share prices in some countries which contrasts with weak growth.
But some of the officials said they said they did not know why Britain, which is chairing the G7, had called the meeting.
"I am really annoyed that I've got to give up my weekend for this," one complained, adding the talks could have taken place on the sidelines of IMF's meetings in Washington in mid-April.
A British finance ministry official said there was value in informal talks among the world's biggest industrialized economies but declined to comment on the agenda.
Changed role for G7
G7 finance ministers and central bank governors used to hold global markets in their thrall when they met, given the combined financial firepower of the group's members - the United States, Germany, Japan, Britain, Italy, France and Canada.
But it lost its mantle as the main forum for thrashing out differences over the global economy in 2009 when responsibility was passed to the wider Group of 20 which includes emerging heavyweights such as China, Brazil and India.
Since then, the G7 has met on the sidelines of G20 and IMF meetings but has held few standalone meetings although officials say the smaller grouping makes for more open discussion.
"As often is the case, the G7 is a photo opportunity. But it's important that it stays together as a forum to address the issues," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.
The U.S. official said Washington would keep up its calls on Europe to boost demand and maintain its focus on Japan's aggressive monetary policy which has raised US concerns about a weakening of the yen.
A Canadian official said discussions would again focus on the right degree of belt-tightening for debt-laden countries which are struggling to get their moribund economies growing and have relied heavily on massive central bank stimulus.
No communique and no formal decisions are expected at the meeting which would instead help prepare the way for a G20 leaders' summit in Russia in September.
It comes at a relatively good time for its host, UK finance minister George Osborne. He will be able to point to a few signs of life in Britain's stagnant economy that have taken some of the heat out of criticism of his austerity policies.
The meeting will also be a chance for the G7 to get to know new members of the group - such as the finance ministers of the United States and Italy - and to bid farewell to Mervyn King, who retires from the Bank of England in June.