Europe’s Anti-Communist Fighters See Battle in Middle East (1)
By Katya Andrusz
April 28 (Bloomberg) -- Lech Walesa travels to Tunisia today to advise the country’s new leaders on building a democracy after they ousted dictator Zine El Abidine Ben Ali. Based on Walesa’s experience, the transition may be a long one.
Walesa led a strike at the Gdansk shipyard in 1980 that sparked a wave of protests, forcing Poland’s communist rulers to negotiate with workers and fueling a period of relative freedom. A year later, General Wojciech Jaruzelski imposed martial law, threw Solidarity leaders into jail and outlawed the movement.
It wasn’t until 1989 that communism finally collapsed.
“A revolution may only take one day, but that doesn’t mean all the problems have been solved,” Walesa, 67, said in an interview. “A positive conclusion to these events is possible, anything’s possible. But it’s not even close to inevitable.”
While uprisings toppled Ben Ali and Egyptian President Hosni Mubarak, authoritarian leaders are clinging to power in Libya, Syria and Yemen. Prolonged unrest in the region, which accounts for 40 percent of the world’s oil reserves, may lead to higher, more volatile energy prices, slowing global economic growth, according to Uri Dadush and Marwan Muasher, analysts at the Carnegie Endowment for International Peace in Washington.
Oil has risen 23 percent this year in New York, trading today at $112.76 a barrel. Libya’s oil production has dropped by 76 percent, or 1.2 million barrels a day, this year. The Gulf Cooperation Council is trying to broker the departure of Yemeni President Ali Abdullah Saleh to prevent al-Qaeda from increasing its influence and using the country as a base to target Saudi Arabia, the world’s biggest oil exporter.
The Middle East’s pro-democracy movements must overcome challenges that countries such as Poland and Hungary didn’t face two decades ago, including the lack of an educated elite and extreme poverty fueled by rising food prices.
“You have to look at whether there’s a potential elite and who would form it,” said Wiktor Osiatynski, a law professor at Central European University in Budapest who helped write Poland’s post-1989 constitution. “They existed in Poland and Hungary, and there weren’t really any in Ukraine, Romania or Bulgaria. And you can still see that now.”
Ukraine, which has a population almost five times that of Portugal and an economy half the size, elected Viktor Yushchenko to replace former Soviet strongman Leonid Kuchma after the so- called Orange Revolution in 2004.
Since then, Ukrainian politics have been marked by brawls in parliament and allegations of corruption. Transparency International ranked Ukraine 134th in its corruption index last year, tied with countries such as Zimbabwe and Sierra Leone.
“Elections alone cannot solve the fundamental political problems confronting Egypt and Tunisia,” said former Prime Minister Yulia Tymoshenko, a leader of the Orange Revolution who is under investigation by Ukraine’s Prosecutor General for misusing funds and abuse of power. “In particular, they cannot create a liberal order and open society.”
Central Europe didn’t face the extreme poverty and rising youth unemployment that is fueling unrest in some Middle Eastern countries, said Boguslaw R. Zagorski, a lecturer in Arab and Islamic Studies at Collegium Civitas in Warsaw who was a member of underground organizations in the 1980s.
Unemployment among those aged 15 to 24 in the oil importing countries of the Middle East and North Africa exceeds 25 percent, the highest for any region worldwide, according to the International Monetary Fund.
Yemen has the region’s highest levels of poverty, with 34.8 percent of the population living below the poverty line, followed by Egypt at 22.8 percent, World Bank data show.
Rising food prices are contributing to the pressures, with 44 million people worldwide falling into poverty since June, according to the World Bank. Global food costs rose to an all- time high in February, according to the United Nations Food & Agriculture Organization.
“Food will be one of the most pressing challenges for North Africa,” Zagorski said. “Political stabilization, but also simply ensuring that there’s enough food to go around.”
Egypt’s benchmark stock index, the EGX30, has fallen 30 percent this year, the steepest decline among 90 primary indexes tracked by Bloomberg. Tunisia’s Tunindex is down 17 percent, the third-biggest drop.
The yield on Egypt’s benchmark dollar bond due in 2020 rose to a record high 7.21 percent on Jan. 31 as the protests against Mubarak intensified. The bond traded at 6.34 percent yesterday, compared with 4.49 percent on Aug. 23. Tunisia’s dollar bond due 2012 rose to 5.09 percent on Jan. 17, two days after Ben Ali resigned, and traded at 2.90 percent yesterday.
There is also a geopolitical difference between Eastern Europe in 1989 and the Middle East today, according to George Soros, the Hungarian-born billionaire who set up the Open Society Institute in 1993 to help formerly communist countries make the transition to democracy.
While the U.S. and Western Europe shared a common enemy with anti-communist movements, they supported the Middle East’s authoritarian rulers, Soros said.
“These revolutions were directed against some of our allies,” Soros said. “It is all the more important that we regain the confidence of the people by supporting their legitimate aspirations. If we do so, we will end up with more dependable and desirable alliances.”
As demonstrators in Yemen and Syria die in clashes with police and Libyan leader Muammar Qaddafi shells rebel forces, the question may be how long people are prepared to wait for democracy, said Polish central bank Governor Marek Belka, who was director of economic policy for the Coalition Provisional Authority in Iraq from 2003-2004.
“Sometimes it takes a generation, and people are not that patient anymore,” Belka said. “So then they could turn their back on democracy or democratically elected bodies and look for some other options. This is the problem.”
To contact the reporter on this story: Katya Andrusz in Warsaw at firstname.lastname@example.org
By DUNCAN MAVIN
China wants almost everything Canada has to offer–except its banks.
That is odd. China craves Canada's oil, natural gas, rare earth metals and potash. Canada's resources also include 1.4 million Chinese-Canadians with plenty of guanxi, the personal relationships that grease the wheels of business in China. And Canada's banks have a solid reputation after coming through the financial crisis relatively unscathed.
Meanwhile, China's resource-hungry state-owned enterprises have spent more than $10 billion on deals in Canada's energy and mining sectors in the past 18 months, according to the Asia Pacific Foundation of Canada. China Investment Corp., a sovereign wealth fund, announced plans in January to set up its first-ever overseas office in Toronto. And Canada was the second top target nation, after Brazil, for China's completed outbound mergers and acquisitions last year, with more than 20% market share, according to Dealogic.
Yet Canadian banks are largely conspicuous by their absence when it comes to deals involving Chinese companies.
In 2010, Bank of Nova Scotia ranked ninth in overall Chinese-outbound M&A. That was due to a single, large deal. You have to scroll right down the rankings to No. 59 to find the next Canadian bank, Royal Bank of Canada, which advised on two deals worth less than $1 billion in aggregate. So far this year, RBC ranks fifth, courtesy of advising Canada's Encana Corp. on its $5.4 billion investment in a natural-gas joint venture with PetroChina.
Outside advising Canadian clients who own the assets China wants, there is little evidence Canada's banks have built up the corporate connections needed to create a sustained M&A-advisory business in China.
Part of the problem is a lack of cross-border understanding. RFP Co., a boutique consultancy in Hong Kong, says only six of 70 top executives at the big Canadian banks have any experience living in Asia.
China's state-owned enterprises tend to favor their own banks or bulge-bracket brands like Goldman Sachs. Relevant expertise, such as mining professionals or geologists on staff, appears to count for less, according to Canadian bankers based in Asia.
Canada's big five—Bank of Nova Scotia, RBC, Canadian Imperial Bank of Commerce, Toronto-Dominion Bank and Bank of Montreal—do have businesses in China. So far, though, these operations have focused more on wealth management and insurance. Their investment-banking units have tended to focus on deals involving U.S. companies—understandable, given that 86% of Canadian deals in 2010 involved only Canadians and Americans, according to a recent report from PricewaterhouseCoopers.
China has spotted Canada's potential: Chinese acquisition activity in Canada last year was up 392% from the prior peak in 2007, according to PwC. The question for Canadian banks is whether they can mine China's interest for sustainable advisory fees beyond the mere sale of domestic assets.
Are drones a technological tipping point in warfare?
By Walter Pincus, Sunday, April 24, 6:06 PM
Debates are growing at home and abroad over the increasing use of remotely piloted, armed drones, with a new study by the British Defense Ministry questioning whether advances in their capabilities will lead future decision-makers to “resort to war as a policy option far sooner than previously.”
Active and retired U.S. Air Force officers involved in developing drones stress that the aircraft brings in more decision-makers, better targeting data and more accurate delivery systems than fighter jets.
But use of the unmanned aerial vehicles has drawn growing public scrutiny based on their lethal attacks in Pakistan against al-Qaeda, in Afghanistan against the Taliban, in Yemen against al-Qaeda in the Arabian Peninsula, and most recently in Libya, as announced Thursday by Defense Secretary Robert M. Gates.
The British study noted that drones are becoming increasingly automated. With minor technical advances, it said, a drone could soon be able to “fire a weapon based solely on its own sensors, or shared information, and without recourse to higher, human authority.” It cautioned that the Defense Ministry “currently has no intention to develop” such systems.
Nonetheless, the aircraft, piloted by people far from the battlefield, represents an approaching technological tipping point “that may well deliver a genuine revolution in military affairs,” according to the Joint Doctrine Note, which was conducted under the direction of the British Chiefs of Staff. Titled “The United Kingdom Approach to Unmanned Aircraft Systems,” it was first disclosed last week by the Guardian newspaper.
The British study said it was essential that military officials not “risk losing our controlling humanity and make war more likely” by using armed drones. It also asserted, however, that the laws of war call on commanders on both sides of the fight to limit loss of life and that “use of unmanned aircraft prevents the potential loss of aircrew lives and is thus in itself morally justified.”
At a Washington conference of the International Institute for Strategic Studies (IISS) last week, the issue of drones was also widely discussed.
Lt. Col. Bruce Black, program manager for the Air Force Predator and Reaper aircraft, noted that some 180 people are involved in each drone mission. The result, he said, is that “there is more ethical oversight involved with unmanned air vehicles than with manned aircraft.”
At the same conference, former CIA director Michael V. Hayden described how, with a Predator circling overhead, those involved in ordering use of its missiles from thousands of miles away can call up computer maps that show the potential effects of each weapon.
Before any of the Hellfire missiles are launched, he said, the backup team asks for the “the bug splat” of the attack — a readout of the impact the missile would have on its ground target. Nothing comparable can be done with ground-supporting manned aircraft, he said.
But the drones have become part of the propaganda war where they are used. Without referencing the Taliban or al Qaeda, the British paper noted that insurgents have cast themselves as the underdog against a “cowardly bully . . . that is unwilling to risk his own troops, but is happy to kill remotely.”
Retired Lt. Gen. David Deptula, former Air Force deputy chief of staff for intelligence, surveillance and reconnaissance, acknowledged that the use of drones comes with potential problems with public perceptions. “Our adversaries have interjected this as a question in [people’s] minds, as an attempt to limit the use of what is very, very effective,” he said.
At the IISS conference, participants were asked whether drone operators had been desensitized to killing, because they were so far away from the battlefield.
Col. Dean Bushey, deputy director of the Air Force Joint Unmanned Aircraft Systems Center, pointed out that the crews that run Predators in Nevada go through the exact routines that airplane pilots do prior to a mission. They go through a restricted area, wear brown flight suits, receive a mission brief and are put into a “warrior ethos” before ever stepping into a ground control station. “You are executing a mission to save lives,” he said.
Black said that when a Predator operator is connected to a fighter on the ground in Afghanistan, “you can hear his voice and you can hear the bullets whistling over his head. You feel that pressure.” He vividly described an operator in Nevada, sitting at a computer console and listening and looking at his colleague thousands of miles away through a micro-picture view.
“My situational awareness of what he is going through at that time is probably better than a guy that showed up at 10 minutes on station and dropped a weapon and left,” Black said. “I see my effects, I watched, I listened, I was with him the five hours prior to that. . . . I’d say we are very much in the fight.”
American drones are already being used for law enforcement in Mexico. It won't be long before they will be used by law enforcement domestically here in the United States. They've already started testing drones in Miami along with Black Hawk helicopters.
Drones are basically high tech government assassins. The personnel who select targets wear three hats: judge, jury and executioner.
People whined about guns when they were first invented too. I don't care about Al-Qaeda's whining, I care about making as many of them dead as possible. If there's some way that allows us to do that better, faster, with less risk to the rest of us, well I'm all for it. They have a choice too, they can stop being violent terroristic fanatics and then the rest of us won't have any motivation to want to kill them.
I'm not worried about these things gaining autonomy yet. When I st...
UN chief: More nuclear accidents are likely, world must work together to handle them
U.N. Secretary-General Ban Ki-moon and others portrayed the growth of nuclear power plants as inevitable in an energy-hungry world as they spoke at a Kiev conference commemorating the explosion of a reactor at Ukraine’s Chernobyl nuclear reactor 25 years ago。
( Alexander Zemlianichenko / Associated Press ) - U.N. Secretary-General Ban Ki-moon, left, and Ukrainian President Viktor Yanukovych, right, address a news conference in front of the building of Reactor No. 4 at the Chernobyl nuclear power plant in Chernobyl, Ukraine, Wednesday, April 20, 2011. The head of the International Atomic Energy Agency, speaking at the site of the Chernobyl nuclear power plant explosion, says that accident and the Japanese nuclear crisis do not undermine the value of nuclear power. Yukiya Amano spoke Wednesday at the site of the world’s worst nuclear accident. He was accompanied by U.N. Secretary-General Ban Ki-moon and Ukrainian President Viktor Yanukovych.
“To many, nuclear energy looks to be a relatively clean and logical choice in an era of increasing resource scarcity. Yet the record requires us to ask painful questions: have we correctly calculated its risks and costs? Are we doing all we can to keep the world’s people safe?” Ban said. “The unfortunate truth is that we are likely to see more such disasters.”
During a brief visit to the explosion site 60 miles (100 kilometers) north of the Ukrainian capital earlier in the day, Ban proposed a strategy for improving nuclear energy security worldwide, including strengthening the International Atomic Energy Agency and devoting more attention to “the new nexus between natural disasters and nuclear safety.”
The ongoing crisis at Japan’s Fukushima Dai-ichi nuclear power plant was triggered by last month’s huge earthquake and the ensuing tsunami that flooded the plant.
“Climate change means more incidents of freak weather,” Ban said in Kiev. “Our vulnerability will only grow.”
IAEA head Yukiya Amano, who accompanied Ban on the trip to Chernobyl, echoed those sentiments.
“Many countries will continue to find nuclear power an important option in the future, and that is why we have to do our utmost to ensure safety,” he said, speaking a few hundred yards (meters) from the exploded reactor, which is now covered by a hastily erected sarcophagus.
The sarcophagus has gone past its expected service life and work has begun to build an enormous shelter that will be rolled over the reactor building. The new shelter, designed to last 100 years, is expected to be in place by 2015, but a substantial amount of money for the project is still lacking.
An international donors conference Tuesday in Kiev sought to raise €740 million ($1.1 billion) for the shelter and a storage facility for the spent fuel at the plant’s other decommissioned reactors. But in the face of global economic problems, some countries held back from making funding promises and the pledges only came to €550 million ($798 million).
The Chernobyl explosion on April 26, 1986, spewed a cloud of radioactive fallout over much of Europe and forced hundreds of thousands from their homes in the most heavily hit areas. A 30-kilometer (19-mile) area radiating from the plant remains uninhabited except for some plant workers who rotate in and several hundred local people who returned to their homes despite official warnings.
Zsuzsanna Jacab of the U.N.’s World Health Organization told the Kiev conference that some 6,000 cases of thyroid cancer had been diagnosed among people who were children and teens when exposed to the fallout. She said more cases are expected although “the magnitude is difficult to quantify.”
Among the 600,000 people most heavily exposed to radiation — which apparently include the estimated 240,000 who worked on the first and most dangerous phase of the plant repair and clean-up — Jacab expects 4,000 more cancer deaths than average to be eventually found.
The U.N. figures have been criticized by the environmental group Greenpeace and others as severely understating Chernobyl’s consequences. Even the lower figures represent “an unacceptable price paid by the affected communities,” Jacab said.
Ban and others said the Chernobyl and Japan accidents highlighted the need for improved communication between countries about their nuclear programs. And Thorbjorn Jagland, secretary-general of the Council of Europe, drew a political lesson from the crises.
“The more complex technologies become, the more complex societies become, the more important it is to involve civil societies, to have democratic institutions, a free press,” he said.
Soviet authorities kept the Chernobyl disaster unreported for several days, and Japanese authorities have been criticized for initially providing insufficient information.
S&P cuts U.S. rating outlook to negative
10:37 am ET 04/18/2011 - MarketWatch Databased News
NEW YORK (MarketWatch) -- Standard & Poor's cut its ratings outlook on the U.S. to negative from stable, sending a lightning bolt through the deficit-reduction debate in Washington and sending stock markets sharply lower.
The rating agency effectively gave Washington a two-year deadline to enact meaningful change, just days after House Budget Committee Chairman Paul Ryan and President Barack Obama each outlined their plans for slashing debt. S&P nonetheless kept its best rating, AAA, on the U.S.
Relative to Triple-A-rated peers, the U.S. has very large budget deficits and rising government indebtedness, and the path to addressing those issues is unclear, S&P analysts said.
"More than two years after the beginning of the recent crisis, U.S. policy makers have still not agreed on how to reverse recent fiscal deterioration or address longer-term fiscal pressures," said Standard & Poor's credit analyst Nikola G. Swann. See text of S&P decision.
If a meaningful agreement to address medium- and long-term budgetary challenges isn't reached and implementation hasn't begun by 2013, it would render the U.S. fiscal profile meaningfully weaker than its AAA-rated peers, analysts said.
The news rattled markets, with the Dow Jones Industrial Average plunging 227 points in early trade and the dollar slumping vs. the Japanese yen. See Market Snapshot.
Gold and silver futures rose, while oil futures sold off by $2.66 a barrel.
"This is killing stocks and bonds," said David Ader, head of government bond strategy at CRT.
The White House scrambled officials there and at Treasury to counter the S&P decision, saying the agency underestimates lawmakers' ability and willingness to cut the country's debt
"Both Republicans in Congress and the President agree… that we have got to take significant actions to promote fiscal responsibility," said White House top economic advisor Austan Goolsbee in an interview with Bloomberg Television. "The numbers are close to one another."
"Just far, there is a disagreement over the world view of where the priorities should be," he said.
S&P's report closely followed one from Moody's Investors Service, which said the latest budget proposals from President Barack Obama and the Republican leadership would lower the U.S. deficit and debt levels and be positive for the country's credit rating, which is Aaa with a stable outlook.
Both proposals mark a significant shift toward indicating a willingness and a plan to improve the debt outlook, Moody's analysts wrote in a note.
"Either the president's revised proposal or the Republican proposal would improve the U.S. government's creditworthiness," Steven Hess, a senior credit officer at Moody's, wrote in a report.
The means to reduce the debt differ significantly, "and it is politically out of the question that either of them will be adopted as proposed," he said. "Despite these uncertainties, we view the changed parameters of the debate, with broadly similar goals as to government debt levels, as a turning point that is positive for the long-term fiscal position of the U.S. federal government."
U.S. Stock-Index Futures Fall; Citigroup, Texas Instruments Drop
By Adria Cimino
April 18 (Bloomberg) -- U.S. stock futures fell, indicating the Standard & Poor’s 500 Index will extend last week’s decline, before earnings reports from Citigroup Inc. and Texas Instruments Inc.
Citigroup, the third-largest U.S. bank, and Texas Instruments, the nation’s second-biggest chipmaker, retreated more than 0.9 percent. Eli Lilly & Co. dropped after saying quarterly profit fell 2.1 percent. Johnson & Johnson, the world’s largest health-products company, slipped after Synthes Inc. said it’s in talks about a possible merger.
S&P 500 futures expiring in June declined 0.7 percent to 1,310 at 7:12 a.m. in New York. Dow Jones Industrial Average futures lost 0.6 percent to 12,232 and Nasdaq-100 Index futures decreased 0.5 percent to 2,296.25.
“People are waiting for earnings data,” said Walter Harecker, a Vienna-based fund manager at Semper Constantia Privatbank AG, which oversees about $11 billion. “The outlooks are even more important than the figures from last quarter. Analyst expectations are going too far, too fast again.”
The S&P 500 has risen 4.9 percent in 2011. While total income for the index has topped the average analyst projection for eight straight quarters, the proportion of companies beating forecasts has fallen for three consecutive periods, the longest streak since 2000, according to data compiled by Bloomberg. Among the 11 reports last week, profit trailed the average forecast by 3.5 percent, the data show.
March increases in home sales and construction probably failed to make up for the ground lost the prior month, showing the U.S. residential real estate market continues to struggle almost two years into the economic recovery, economists said before reports this week.
A National Association of Realtors’ report on sales of previously owned homes is due April 20. A release on housing starts and an index of leading economic indicators are also set for release this week.
Citigroup fell 1.4 percent to $4.36 in early New York trading. Texas Instruments, which will report after the market close, lost 0.9 percent to $34.68 in Germany.
Lilly slid 2.1 percent to $35.24 in Europe. The company, whose top-selling antipsychotic drug Zyprexa faces generic competition in October, said first-quarter profit declined 15 percent on costs from a diabetes agreement with Boehringer Ingelheim GmbH. Net income decreased to $1.06 billion, or 95 cents a share, from $1.25 billion, or $1.13, a year earlier.
Johnson & Johnson slipped 0.3 percent to $60.39 in Germany after Synthes said it’s holding talks about a possible merger with J&J, with no certainty about any outcome.
West Chester, Pennsylvania-based Synthes would give J&J a line of hip screws, surgical power tools and instruments to treat spinal and soft-tissue injuries that generated $3.69 billion in sales last year. Synthes surged 6.2 percent to 147.3 Swiss francs in Zurich trading.
Halliburton Co. gained 4.6 percent to $48.99 in early New York trading. The world’s second-largest oilfield services provider said first-quarter profit rose to $511 million, or 56 cents a share, from $206 million, or 23 cents, a year earlier.
Kraft Foods Inc., the world’s second-largest food maker, retreated 1 percent to $33.01 in Germany. The stock was cut to “equal weight” from “overweight” at Morgan Stanley.
To contact the reporter on this story: Adria Cimino in Paris at email@example.com.
Bernanke Says Fed Will Act If Inflation More Than ‘Transitory’
By Scott Lanman and Steve Matthews
April 4 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said he expects an increase in commodity prices to create a “transitory” boost in U.S. inflation and that the central bank would act if he’s proven incorrect.
“So long as inflation expectations remain stable and well anchored” and commodity-price increases slow, as he’s forecasting, then “the increase in inflation will be transitory,” Bernanke said today in response to audience questions after a speech in Stone Mountain, Georgia.
“We have to monitor inflation and inflation expectations extremely closely because if my assumptions prove not to be correct, then we would certainly have to respond to that and ensure that we maintain price stability,” he said.
The dollar rose against the euro and yen after the comments, which are similar to both Bernanke’s congressional testimony and the statement from the policy-setting Federal Open Market Committee last month. He told lawmakers March 1 that Fed officials “continue to monitor these developments closely and are prepared to respond as necessary,” while the FOMC said on March 15 that it “will pay close attention to the evolution of inflation and inflation expectations.”
The dollar rose to 84.28 yen at 9:17 a.m. in Tokyo from 84.06 on April 4 after earlier touching 84.49. Against the euro, the dollar strengthened to $1.4211 from $1.4221 after reaching as high as $1.4193.
The Commerce Department reported last week that the Fed’s preferred price gauge, the personal consumption expenditures index, excluding food and energy, increased 0.9 percent in February from a year earlier. Including all items, prices rose 1.6 percent.
The FOMC, led by Bernanke, said after its last meeting on March 15 that the economy is on a “firmer footing” and affirmed plans to buy $600 billion of Treasuries through June. Bernanke hasn’t said what he favors as the next move for monetary policy after that.
The Fed has kept its benchmark interest rate close to zero since December 2008 and last month reiterated it would remain there for an “extended period.”
To contact the reporter on this story: Scott Lanman in Washington at firstname.lastname@example.org.