Turkey sees three alternatives for Cyprus, all involving gas

Πηγή: Cyprus Mail
March 29 2013

TURKISH Foreign Minister Ahmet Davutoglu has proposed three alternatives to end the stalemate in Cyprus, all involving the exploitation of natural gas around the island.

According to Turkish channel NTV, the Turkish minister said he has proposed three alternative endings for the Cyprus problem.

Either the two communities form a united Cyprus state and jointly exploit the natural resources around the island, or, in parallel to ongoing peace negotiations, Greek Cypriots and Turkish Cypriots form a joint committee to exploit and market natural gas.

The third option is a two-state solution on the island.

According to NTV, the minister said all three proposals were formulated within the framework of how to make use of the natural resources in the island’s exclusive economic zone (EEZ).

Turkey has strongly objected to Cyprus’ early development of its energy sector in its EEZ through the awarding of exploratory licences to French, Italian, South Korean and American energy companies.

The Turkish government argues the natural resources belong to both communities on the island and, as a non-signatory to the UN Convention on the Law of the Sea, even claims parts of Cyprus’ EEZ for itself.

As Cypriot leaders recently scrambled to find €5.8 billion to unlock a €10 billion troika bailout, the idea of borrowing money in lieu of future gas revenues triggered an immediate response from Turkey.

The Turkish Foreign Ministry released a statement saying: “It is not acceptable that the Greek Cypriot side uses the economic crisis it is facing as an opportunity to create new fait accompli.”

It added that the “only way to exploit the natural resources of the island” is “the clear consent of the Turkish Cypriot side regarding the sharing of these natural resources”.

Having seen their economy pummeled in the last two weeks, with talk of recession and a massive drop in GDP in the coming months and years, many Greek Cypriots are now resting their hopes on the plentiful natural gas reserves believed to be sitting in Cyprus’ EEZ.

Some commentators have argued now that Cyprus is under the economic gun, and in desperate need of proceeding rapidly with gas exploration, international efforts should focus on nudging or perhaps even pushing the Cypriots towards a solution to the island’s division.

'Golden Triangle' drug trade reaching highest levels in years

Πηγή: Wytv
By AP
March 24 2013

THON MIN YAR, Myanmar (AP) — Deep in the lawless mountains of the Golden Triangle, sloping fields of illegal poppies have just been scraped dry for opium. This is the peak season for producing drugs here, and in Myanmar's nascent era of democratic change, the haul has gotten only bigger.

Opium, its derivative heroin and methamphetamines are surging across Myanmar's borders in quantities that the United Nations and police in neighboring countries say are the highest levels in years.

Two years after replacing a long-ruling military junta, the civilian government is still struggling to get a foothold in its war against drugs. The trade is centered in a remote, impoverished area where the government has little control and where ethnic armies have waged civil wars for decades — wars financed with drug money.

The Associated Press was granted rare access to Myanmar's drug-producing hub in the vast, jungle-clad mountain region of northeastern Shan state, deep in a cease-fire zone that was closed to foreigners for decades. It's a land dotted with makeshift methamphetamine labs and tiny, poor villages where growing opium is the only real industry. The trip was part of a U.N. mission allowed only under armed police escort.

President Thein Sein has signed cease-fire agreements with a patchwork of rebel groups in the region, but the peace is extremely fragile and sporadic fighting continues. Cracking down on drug syndicates or arresting poor opium farmers risks alienating the ethnic groups he is courting for peace talks.

"To stop the drug problem, we need peace. And that is what the government is trying to achieve now," said police Col. Myint Thein, head of the Central Committee for Drug Abuse and Control, which controls the country's drug policy. "But that is just one of so many challenges. This is a very difficult task. It will take time."

Foreign aid that could help combat drugs is just beginning to trickle back into the area, which is rife with corruption. But the toughest task may be transforming the destitute rural economy, filled with poor farmers who view growing opium as the best way to provide for their families.
___

Dozens of those farmers live in Thon Min Yar, a village in southern Shan state that is far in every sense from Myanmar's postcard-perfect pagodas and colonial relics. So obscure it does not appear on maps, it is an image of dirt-road squalor and government neglect.

Its 73 bamboo huts have no electricity or running water. Its people have no access to health care, no job prospects, not enough food and no aspirations other than survival. Toddlers and teens get a one-sized-fits-all education in a one-room schoolhouse.

Almost everyone in Thon Min Yar is an opium farmer.

"My father and my grandfather grew opium. I have no other way to make money," said 28-year-old Peter Ar Loo, a father of two.

He does not smoke opium, but sometimes he envies the life of an addict. They seem more carefree, he said.

But he added, "Using opium only benefits one person. Selling it helps my whole family."

Opium farmers like Ar Loo are not the people getting rich from the drug trade. They are among the poorest people in one of the world's least-developed countries.

In a good year, Ar Loo makes about $1,000 from an acre-sized field of poppies. That doesn't include business expenses which he calls "paying respects" — a roughly 15 percent opium tax doled out to a variety of local authorities who turn a blind eye in exchange.

Police control the towns, government soldiers patrol the roads and ethnic armies rule the mountains. All of them get a cut.

"We give to the Shan militia, the police and the army," Ar Loo said.

There is a law that bans growing opium poppies, but he said no one in his village has ever been arrested. "We get permission from the local authorities, explaining that we need to do this to feed our children."

The government says it wants farmers to grow corn and other legal crops, but many poppy farmers say the terrible mountain roads mean getting legal crops to market is almost impossible.

Opium is different: The buyers come straight to your fields.

Ar Loo's poppy field is a 30-mile trek into the jungle, an inconvenient location he chose after police launched an anti-narcotics campaign a year ago and warned farmers to switch to legal crops — or face arrest.

"The farmers are just finding fields deeper in the mountains," shrugged Ar War, chief of a nearby community called Yar Thar Yar, or Beautiful View Village. Pointing at mist-shrouded jungles controlled by ethnic armies, he added, "It's harder for police to find them there."

And even with the campaign, part of the central government's new anti-narcotics effort, police may not be looking that hard. The payoffs continue.
___

The Golden Triangle is defined by the area where Shan state meets the borders of Thailand and Laos. It was the world's top opium-growing region for years, but in the 1990s, Afghanistan became the top producer and drug syndicates here began focusing more on methamphetamines.

Now heroin and methamphetamines are both on the rise.

In Thailand, authorities last year seized a record 82.2 million methamphetamine tablets, a 66 percent increase from the year before.

"These drugs are not produced in Thailand. They are from Myanmar," said Thailand's Deputy Prime Minister Chalerm Yubumrung, who has vocally called on Myanmar to step up its policing efforts. "If Myanmar cooperates, that's the end of the drug story. It's better than it used to be, but still far from perfect."

Authorities in Singapore, Laos and elsewhere in Southeast Asia also reported record hauls that the U.N. says are predominantly from Myanmar.

Myanmar's poppy cultivation, meanwhile, has more than doubled since 2006, according to the U.N. Office on Drugs and Crime. Myanmar produced an estimated 690 tons of opium in 2012, a 17 percent jump from the year before.

No one can say for sure what is driving the overall increase in Myanmar's drug production, but Ar Loo, who doubled his poppy production last year, said his motivation was inflation.

"Food prices are going up. Gasoline is more expensive," he said. "If the military or police force us to stop immediately, there will be problems. Because people will not have enough to eat."

Experts offer other explanations — notably that cash-strapped ethnic armies are planning for the future.

Many rebels are resisting a government demand to form a joint patrol force with the army by 2015 but need more strength and leverage at the negotiating table.

"It's an uneasy cease-fire, and most of the groups are jostling to be in a better bargaining position," said Leik Boonwaat, the UNODC deputy regional director for East Asia and the Pacific. "In order to be in a better bargaining position, you need money, you need more soldiers, and the best way to do that is drugs."

Drugs could also offer traffickers a path to greater riches once trade barriers are lifted. Thailand's intelligence indicates that the rebel-controlled drug syndicates are planning for when 10 Southeast Asian countries lift trade barriers to become a single market in 2015.

"In 2015, these drug dealers will want to invest in legitimate businesses. So right now they are trying to boost their capital, and pumping out large amounts of drugs can help them achieve their goal," said Narong Rattananugul, acting head of Thailand's Office of Narcotics Control Board.

Most of Myanmar's drugs are trafficked through its porous 1,100-kilometer (680-mile) border with Thailand. Narong said his country seizes drugs almost daily and added, "The problem cannot really be solved."
___

The drugs that exit the Golden Triangle ripple out across all of Asia, which is why Myanmar is seeking the world's help.

"This is not just Myanmar's concern. The whole international community should cooperate in eliminating the drug problem," said Myint Thein, the anti-drug official. "We cannot afford it alone."

Foreign funding has been trickling back into the country, now that most sanctions imposed during military rule have been lifted. The United States just reactivated a poppy yield survey in Shan state that was discontinued in 2004. The European Union and Germany have contributed $7 million for U.N. anti-drug projects over the next two years. But that is a tiny fraction of the money needed.

Earlier this month, Myanmar sent a high-level delegation to the U.N. Commission on Narcotic Drugs in Vienna for the first time to highlight the link between drugs, poverty and conflict, and to ask for financial help.

In October, Myanmar quietly revised a deadline the ex-junta set in 1999 to wipe out illicit drugs by 2014. It changed the date to 2019 and set a more realistic target.

"Our objective is to reduce opium poppy cultivation as much as we can." said Myint Thein. "There is no country where you have zero drugs."

For years, soldiers with sickles were sent to destroy poppy crops, which was easy but ineffective.

"The government now realizes eradication doesn't work," said Jason Eligh, the UNODC representative in Myanmar who is leading a U.N. pilot project to help farmers switch to legal crops. "The government is starting to understand the value in admitting mistakes and admitting failure. These are small steps, but this is progress."

After being unable to access the drug-and-conflict zone for decades, the U.N. agency was allowed to enter southern Shan state for the first time in January 2012. The breakthrough came a month after the government signed cease-fire agreements with different factions of the Shan State Army.

Convincing farmers to try planting new crops is one of many challenges ahead, Eligh says.

"The farmers don't just want to eat. They need to make money," he said, adding that the government needs to offer farmers a path to a better life, with better roads, new schools and health centers and, most of all, peace and security.

"A process has begun. Will a process continue? I don't know," said Eligh. "These are groups that have been killing each other for decades. We've only been talking a few months. I would say this is a fragile relationship."

Eligh's pilot project has already persuaded some farmers to switch, but they may end up switching right back.

A middle-aged farmer named Awa Wadaa grew opium for 20 years and was pulling in $3,500 a year in the five-month poppy season when the U.N. offered him a way out. In 2012, he worked year-round rotating crops of corn, potatoes and sunflowers, and earned just $500.

"I don't want to grow poppies. I understand it is illegal and that drugs hurt our children," Awa Wadaa said. But the father of five added that without his poppy-farming income, he can't afford to keep his children in school.

"If I can't find a way to make more money," he said, "I will definitely go back to growing poppies."

West wary of dangers lurking behind Libya’s boom

Foreign laborers at the construction site of a new tower overlooking the sea at the commercial center of Tripoli.

Πηγή: The Daily Star

By Jamie Dettmer
March 25 2013

TRIPOLI: Along several kilometers of the main thoroughfare of the upscale Tripoli district of Gargaresh the magic of capitalism is at work. What were dilapidated shops even a few months ago have undergone makeovers with bright new facades and contemporary shop fittings.

On late afternoons the street is full of new model Kias and hijab-chic mothers and daughters eyeing the latest Western and Gulf fashions. The shops are stocked with up-to-date electronics, food from Italy and fruit from as far away as Ecuador. Many of the store signs are in English – a snub to the past; Moammar Gadhafi wouldn’t have approved.

Gargaresh isn’t the only district in Libya’s capital witnessing a consumer liftoff. Ben Ashour and Fashloon are also undergoing face-lifts. And a consumer boom – although on a lesser scale – is under way in the eastern city of Benghazi.

For Richard Griffiths, president of the American-Libya Chamber of Commerce, Gargaresh is a harbinger of things to come.

“This is an attractive market,” he says. “If you look at the median age of the population and the access to markets in Europe and the Middle East, you realize the significant economic potential of the country.”

But that potential so far isn’t attracting U.S. businessmen, who are noticeable by their absence. At the construction-oriented Libya Build trade fair last spring there was only one American exhibitor among the 800 foreign firms present, most of which were Turkish.

In small trade exhibitions since in the capital’s five-star hotels American accents stand out they are so infrequent. Fast-food giants McDonald’s, Burger King and Pizza Hut have all turned down approaches from Libyan entrepreneurs eager to open up franchises of the famous brands.

And Americans aren’t the only ones holding back. European companies and investors also are hesitant. When it comes to overall risk assessments, Libya remains high. In fact, according to Giulio Dal Magro, chief economist of the Italian insurance group SACE, “Libya is category seven, the highest.”

With security alarms happening frequently it is unlikely Libya will slip down to a lower category any time soon. In recent weeks the country has seen the storming of Prime Minister Ali Zeidan’s office by disgruntled militiamen and an assault on a convey transporting the president of the country’s parliament, the General National Congress.

On March 6, hundreds of armed gunmen threatened lawmakers and held them hostage in an attempt to force approval of a controversial political isolation law banning from public office for a decade Gadhafi-era officials and Libyans holding dual nationality.

And militia-on-militia clashes have mounted outside Tripoli and in the Nafusa Mountains between tribes that took opposite sides in the revolution.

Griffiths acknowledges concerns over security and the rule of law are acting as deterrents. It is a point highlighted in an IMF assessment released this week that urges Libya’s new rulers to “normalize the security situation.”

On the face of it, Libya’s economy is recovering well from the 2011 uprising that ended the four-decade-long rule of Gadhafi. After contracting by almost 60 percent in 2011, the economy grew by 120 percent last year, thanks to oil output returning almost to where it was before the rebellion.The International Monetary Fund forecasts a 16 percent growth rate this year and the same for every year until 2018.

But for all of the good news, the IMF notes serious challenges ahead and warns that Libya is too dependent on oil. In fact, oil accounts for 60 percent of the country’s GDP. High oil prices have allowed Libya’s new rulers to maintain high spending, using the public purse to fund an array of subsidies and allowing it to maintain salaries for revolutionary militiamen.

All of that spending has been fueling the consumer boom being seen in districts like Gargaresh and tempering the frustrations of the militiamen, although not containing them completely.

The danger with that approach is it could, according to the IMF, lead to an “entitlement mentality,” one that will be hard to shake off later.

It is a worry shared by Mohammad Saad, a member of Libya’s General National Congress. “The problem is that people think that as we have money we can do and buy anything – that’s okay for an individual but not for a government; and we will have some serious reaction when we have to start to reduce the spending.”

For the IMF, managing the political transition and improving security are key short-term challenges. Get those right and then the country can start grappling with the medium-term challenges of developing government competency and the rule of law, improving education, rebuilding Libya’s infrastructure and encouraging business growth.

In the meantime, when it comes to the private sector, doing business can be especially challenging in an environment where the rule of law is shaky and governance weak. Add to that the fact that businessmen have to contend – or ignore – overly restrictive Gadhafi-era regulations and deal with a bureaucracy that’s notorious for graft.

According to a prominent Libyan investor in property development and retail, “there are no rules.” Chuckling, he says, “That means big risks but also big rewards.”

Investing in commercial property developments and retail can gross him 20 to 50 percent in profits over a six-month period, he claims.

Cutting corners comes at a price. He pays a militia to enforce his deals.

“Someone claimed ownership of one of my properties. I didn’t go to court, as it would have taken too long. So I had my militia friends visit him. They told him that if he returned to the property he would never leave – he’d be buried there. I have not heard from him since.”

Turkey may seek revisions to customs union over EU-US deal

Turkey is in a disadvantageous position in its bilateral trade with the US. Last year, exports to the US remained at $5.6 billion, while imports stood at $14.1 billion

Πηγή: Todays Zaman
March 24 2013

The free trade agreement (FTA) the European Union and the US have agreed to conclude is expected to adversely affect the Turkish economy, raising concerns among Turkish businesspeople and top economy officials.

“This would have a huge negative effect on our trade with the US,” Rızanur Meral, president of the Turkish Confederation of Business-men and Industrialists (TUSKON), recently said.

The Turkish side is worried because as per the customs union agreement Turkey had signed with the EU, Turkey needs to apply the same tariffs as the EU does to industrial products imported from third countries. And the problem is that Turkey, while having to lower customs duties in accordance with a potential FTA the EU could sign with the US, can’t benefit from the lowering of the same by the US as it is not a member of the EU.

Turkey is already in a disadvantageous position in its bilateral trade with the US. Last year, Turkey’s exports to the US remained at $5.6 billion, while its imports, which stood at $14.1 billion, were nearly three times as much. The announcement of the FTA has set off alarm bells in the country because Turkey is afraid its imports from the economic giant would further soar, given that the US will have the right to export to Turkey without paying any customs tariff. So it’s crucial for Turkey to simultaneously sign an FTA with the US in order not to be adversely affected by the FTA. “[If that can’t be achieved] Turkey will be very badly affected,” Economy Minister Zafer Çağlayan recently stated.

On a Voice of America broadcast in mid-March, Meral said: “This is a great danger for Turkey. In the future, the trade imbalance between Turkey and the US would further increase.” In mid-February, the EU and the US issued a joint statement, announcing their decision to initiate the internal procedures necessary to launch negotiations on a Transatlantic Trade and Investment Partnership, that is, an FTA that the two sides hope to complete by the end of next year.

Although US Secretary of State John Kerry is said to have given positive signals during his Turkey visit at the beginning of the month that the US is willing to sign an FTA with Turkey, nothing is guaranteed until such a deal is signed, as Turkey has previously had frustrating experiences in this domain. Three countries among those with which the EU had formerly signed an FTA, namely, Mexico, South Africa and Algeria, refrained from concluding a similar agreement with Turkey, as they already enjoy the benefits of zero customs duty for their products in the Turkish market.

Given the disadvantageous position the customs union agreement forces Turkey into, Turkey now sees the agreement as a source of unfair competition for itself and accuses the EU of turning a deaf ear to its rightful demands that it should also be included as a party in the FTAs the EU concludes with third countries.

Seemingly exasperated by the EU’s neglect of Turkey as regards the FTA, Çağlayan told reporters in the middle of the month that “Turkey has been subject to all kinds of injustices because of the agreement. Let the EU know that we are in a position to revise some things should circumstances so impose.” He hinted that Turkey may demand major changes in the agreement. “Our discourse on the EU will, from now on, get sharper. We will fight fire with fire,” the minister added.

Turkey’s criticism of the EU got stronger when the US came into the picture because it is an economic giant with a lot of potential to negatively or positively affect Turkey’s economy. The comments that Ali Babacan, deputy prime minister for the economy, made on the issue at the beginning of the month reveal the importance Turkey attaches to the issue. “The US is not any other country. It’s a huge market, and a [major] manufacturer [of goods],” he said.

It’s estimated that the FTA to be concluded between the US and the EU may cause a loss of 2.5 percent, which amounts to $20 billion of Turkey’s gross domestic product (GDP) in the long run. Babacan’s remarks also indicated that there may be political repercussions of the US-EU FTA process for Turkey. Although stating that if the process could be well conducted, the deal between the EU and the US may also greatly contribute to ties between Turkey and the parties to the deal. “But it may also turn out that Turkey’s political relations with both the EU and the US deteriorate compared to the present level,” Babacan added.

The US and the EU are expected to start negotiations by June on the deal, through which, the world’s two biggest economies will reduce or eliminate tariffs and other barriers to trade, while setting, as two partners accounting for half the world’s GDP, the standards for world trade. “These negotiations will set a standard, not only for our future bilateral trade and investment, including regulatory issues, but also for the development of global trade rules,” Jose Manuel Barroso, president of the European Commission, said.

The issue of standards is more important an item in foreign trade than it may seem at first. Bozkurt Aran, director of the Center for Trade Studies at the Ankara-based think tank Economic Policy Research Foundation of Turkey, describes the FTA that the EU and the US will conclude as a new generation trade agreement, which the world will also have to take into consideration, as the signatories are the world’s economic giants. “They will set the standards, rules for trade. And Turkey will also be adversely affected as it’s not a party to the deal,” he told Sunday’s Zaman.

Aran is not of the opinion that US customs duties, which are no more than 3-4 percent on average, would pose a major threat for Turkish exports. “The main effect will be on standards and services,” he said. One peculiarity of the current FTA is that it will probably also cover services, introducing regulations in that area as well. Karel De Gucht, EU trade commissioner, proposed last week that financial services should be among the sectors to be included in the negotiations.

Regulations on services may have hugely negative repercussions on the Turkish economy because the service sector is open to the world, but Turkey has no domestic regulation. “In services, Turkey would suffer from this weakness,” said Aran, a former ambassador who also served until recently as Turkey’s permanent representative to the World Trade Organization (WTO).

Turkish businesspeople have long expressed discomfort with the customs union agreement, maintaining that it doesn’t work in Turkey’s favor, especially because of the FTAs the EU has concluded with third countries. The textile industry may be one of the potential victims. “If Turkey is not allowed to be a party to the FTA, then Turkey should think about getting out of the customs union,” Hikmet Tanrıverdi, president of the İstanbul Textile and Apparel Exporters’ Associations (İTKİB), told Sunday’s Zaman, suggesting at the same time that Turkey may also think of replacing the customs union with an FTA with the EU.

The FTA is expected to contribute around 0.5 percent a year to both the US and the EU economies, which means more than $100 billion for Europe a year, and around $65 billion for the US. A large proportion of the growth is expected to result not from the elimination of tariffs but from the elimination of differences regarding standards for goods and services. A 10 percent decrease may be seen in production costs in both economies thanks to standardization in regulations.

Turkey seems to have officially set a deadline for being accepted as a full member of the EU -- 1923, the 100th anniversary of the foundation of the Republic of Turkey. But Cemil Ertem, a columnist for Sunday’s Zaman and a member of the academic advisory board of the Turkish Exporters Union, believes that waiting until 1923 would cause huge losses for Turkey in trade because Turkey is bound by the customs union agreement with the EU. Noting that the EU-US FTA would cause major losses for Turkey he told Sunday’s Zaman that “the articles in the customs union agreement that work against Turkey need to be revised.”

Like Aran, Ertem also believes standards the new FTA will bring are of major importance. “The standardization in regulations is highly important, and Turkey is not prepared for such a development,” he said. “Turkey has no economic simulation models to work out how such an eventuality would affect its economy.”

Switzerland and Norway, which are bound by customs union agreements with the EU but not members of the union as is the case with Turkey, will be facing similar problems. So, Tuskon’s Meral said he proposed to the American side that the US could deal with the three countries in a package deal and sign a single FTA with these countries. Last week, the executive commission of the EU approved a European negotiating mandate, the content of which is being kept secret. The mandate needs to be approved by all the EU member countries before negotiations start on the FTA.

Turkey and Israel change the gas game

Πηγή: Cyprus Mail
By Stefanos Evripidou
March 25 2013

THE US-brokered Israeli apology to Turkey has opened the door to the resumption of close relations between the two former allies and raised the prospect of energy collaboration in the eastern Mediterranean, raising questions as to the potential impact on Cyprus’ own gas plans. 

 
Last Friday, Israeli Prime Minister Benjamin Netanyahu expressed Israel’s apology to Turkish Prime Minister Tayyip Erdogan “for any mistakes that might have led to the loss of life or injury” during the raid on the Turkish ship Mavi Marmara, which tried to reach Gaza in 2010, resulting in the death of nine Turkish activists.

The next day, Erdogan said Israel’s apology highlighted Turkey’s growing regional clout. 

“We are entering a new period in both Turkey and the region,” said Erdogan, who plans to visit the Palestinian territories, including the Gaza Strip, next month.

“We are at the beginning of a process of elevating Turkey to a position so that it will again have a say, initiative and power, as it did in the past,” he said.

Netanyahu, in a post on his Facebook page on Saturday, said deteriorating circumstances in Syria were a main factor behind his decision to resolve the crisis with Turkey.

According to Reuters, a source close to Netanyahu said the new chapter in Turkish-Israeli relations could be very important for the future not just regarding what happens in Syria but also developments in Iran. 

 
Apart from removing Turkish objections to Israeli participation in NATO exercises, the prospect of reconciliation has also “removed a big obstacle to collaboration over the development of strategic energy resources in the eastern Mediterranean”, reported the Financial Times (FT) yesterday. 

The London-based paper noted that improved ties between Turkey and Israel could also affect Cyprus should greater energy cooperation result in Nicosia getting sidelined. 

A Turkish official told FT that reconciliation also made a possible gas pipeline from Israel to Turkey a “much more viable” idea. 

According to FT, Noble Energy and Delek Energy, who are the main investors in Israel’s large offshore natural gas fields- as well as partners in Cyprus’ Block 12- have in recent weeks “sounded out possible customers in energy-hungry Turkey”. 

The paper noted that until now, the private sector was eager to proceed with a possible pipeline between Israel and Turkey but that the political rift between the two governments did not allow progress to be made.
With the first step in reconciliation taken, will further collaboration in the hydrocarbons sector leave Cyprus with fewer choices as to where and how to export its own gas? 

 
Israeli deputy ambassador to Cyprus Shani Cooper said yesterday: “The normalisation of relations between Turkey and Israel was an important bilateral step but it will not affect any multilateral, trilateral or bilateral relations between Israel and other countries. Israel will maintain its close relations with Cyprus, and continue strengthening them as we have done the last few years.” 

 
Matthew Bryza, a former US ambassador to Azerbaijan, was quoted by FT saying that without Israel to provide economies of scale, “in the short term the Cypriots lose their ability to do a pipeline or an LNG (liquefied natural gas) option”, adding that in the longer run a Cypriot pipeline to Turkey would make most commercial sense.

However, speaking to the Cyprus Mail, an industry insider argued that a pipeline from Cyprus to Turkey was not so obviously beneficial, even if the financial savings appeared attractive at first glance. 

“You’ve got a 25-year project. Are you comfortable having Turkey being your best friend for that length of time? With LNG, you can change your customers, do whatever you want. With a pipeline to Turkey, you only can sell to Europe, and the pipeline to Europe is too far,” he said. 

The source argued that LNG was the best option for Cyprus: “The key is to find enough gas to make it commercial. And if you can add gas from the nearby Israeli gas field Leviathan, even better.” 

 
A Cypriot diplomatic source told the Cyprus Mail that reports suggest Turkey is seriously considering a pipeline between Israel and Ceyhan. 

“This could very well be a game-changer. There is much more (to the apology) than meets the eye,” he said.
“It is naive not to think that they will put everything in one basket in the future: the Cyprus problem, hydrocarbons, Erdogan’s water pipeline project. All of this will come to a head,” he said, adding, “With Cyprus’ gas reserves, there is a light at the end of the tunnel, but let’s hope it’s not a train.” 

 
Regarding a pipeline between Israel and Turkey, another diplomatic source reminded that Israel has yet to even take a decision on whether it will allow the export of natural gas. The latest opinion of an advisory committee of the Israeli government is that if gas should be exported, it will have to go through Israel first.
The industry source argued that it was too early to tell whether a Turkey-Israel pipeline was even feasible both politically and physically. 

One has to take into consideration the route that any pipeline would take. Will it pass through Lebanese and Syrian waters or go around them by cutting through Cyprus’ Exclusive Economic Zone (EEZ)?
“We’re talking about going up against horrendous engineering challenges. And it’s not just about building it, but maintaining it. It’s doable but it won’t be cheap,” said the source. 

Should Israel and Turkey decide to go ahead with the pipeline, the industry source argued this would not affect Cyprus’ decision to build an LNG plant initially with one train to accept gas via pipeline from Noble’s Block 12 A-structure, which has an estimated 7 trillion cubic feet of natural gas.
The thinking behind the ‘stand alone’ project is to get gas from the Aphrodite field in Block 12 to the LNG plant earmarked for construction at Vassilikos by 2019. 

“This is an aggressive, challenging but achievable target,” said the source.

 
Should more gas be found in other parts of Block 12, or in the blocks recently acquired by French, Italian and South Korean companies, Total, ENI and KOGAS, then more trains will be built at the LNG plant to take in more gas. The current thinking is that Cyprus’ EEZ has plenty of potential for more hydrocarbon discoveries. 

The source argued that a pipeline from Block 12 to Vassilikos and the operation of an LNG plant are not dependant on the inclusion of Israeli gas from the nearby Leviathan gas fields. In any case, should Israel agree to export its gas, it would have to build its own pipeline to Vassilikos as the depth of water in the region does not allow a big enough pipeline to be built to cover the needs of both Aphrodite and Leviathan fields. 

Asked whether the current economic crisis in Cyprus could affect energy development, the source said only if the government should take its foot off the pedal, though at the moment, it “seems willing to proceed expeditiously”. 

He added: “The whole project could provide very robust and meaningful amounts of money that would be coming into the country.” 

Regarding press reports that Russia could participate in the financing of an LNG plant, the source said Russia would then have a say over the tariff charged to gas companies using the plant. 

“If the Russians want to make a killing they will have very high fees, making LNG very costly, and as a result, Cyprus won’t make a big profit. If they’re reasonable, it could work. But you don’t want someone not totally trustworthy having their hand around your throat.”

Sprawling and struggling: Poverty hits America's suburbs

Tara Simons, left, and her daughter Alexis talk in their kitchen in West Hartford, Conn.

Πηγή: NBCnews
By Allison Linn
March 22 2013

WEST HARTFORD, Conn. – Like many Americans who move to the suburbs, Tara Simons came to West Hartford because she wanted her daughter to grow up in a nice, safe place with good schools.

Her fall from a more financially secure suburban life to one among the working poor also happened for the same reason it’s happened to so many others. She had a bout of unemployment and couldn’t find a new job that paid very well.

As a single mother, that’s made it hard to hold on to the suburban life that is, in her mind, key to making sure her daughter gets off to the right start.

“I’m basically paying to say I live in West Hartford,” she said. “It is worth it.”

It’s a struggle that many Americans bruised by the weak economy can relate to.

The number of suburban residents living in poverty rose by nearly 64 percent between 2000 and 2011, to about 16.4 million people, according to a Brookings Institution analysis of 95 of the nation’s largest metropolitan areas. That’s more than double the rate of growth for urban poverty in those areas.

“I think we have an outdated perception of where poverty is and who it is affecting,” said Elizabeth Kneebone, a fellow at the Brookings Institution and co-author of the research. “We tend to think of it as a very urban and a very rural phenomenon, but it is increasingly suburban.”

Simons’ situation is complicated by the fact she’s a single mom. Poverty and financial insecurity among single moms is far higher than for households headed by single dads or two parents.

The rate of poverty among single mothers actually improved dramatically through the 1990s, thanks to a strong economy, more favorable tax breaks and the success of so-called welfare-to-work programs. But two recessions and years of high unemployment erased many of those gains.

Moving for a better life
Simons and her daughter Alexis moved from Massachusetts to West Hartford eight years ago because Simons had a job with a local rug retailer.

Alexis, now 14, made friends, became an avid lacrosse player and is now a high school freshman.

The picturesque suburb, with its well-kept homes and an upscale town center, has a median household income of $80,061, more than double that of Hartford itself, which is $29,107 according to the Census Bureau.

And yet the number of people needing help has skyrocketed in recent years, said Susan Huleatt, the human services manager for West Hartford.

About five years ago, Huleatt said a mobile van began coming to town once a month to distribute fresh produce to people in need. Now, four vans come each month, and more than 200 people sometimes line up for the food. That’s in addition to the city’s own food pantry.

Simons chooses an outfit for a job interview.

Simons expected to work for the rug retailer until retirement, but about a year ago she quit after disputes with one of the two owners. She had never had trouble finding a new job and was unprepared for how hard it would be.

“I know that part of it is my fault and I absolutely take responsibility for that, but I never in a million years thought that I would (be in this position),” she said.

Simons went without work or unemployment benefits for five months before she got her current job about six months ago. The position, as a customer service representative for a local health products company, pays $14 an hour. That leaves her with take-home pay of about $460 to $480 a week, plus about $127 a week in child support. Simons has full custody of her daughter.

She is behind on her electric and gas bills and owes nearly $400 to her daughter’s club lacrosse team, which has her worried that her daughter won’t be able to play this spring.

Like many working poor people, she has fallen into a debt spiral. She took out an $800 payday loan, and she estimates that it will end up costing her $1,600 to pay it back. She also has several hundred dollars in credit card debt and has worked to pay off hundreds of dollars in bank overdraft fees. She’s sold jewelry for cash.

She and Alexis had to leave the house they were renting after she lost her job and a roommate. She got one-time aid from the city’s crisis fund to help with the down payment for her new, cheaper apartment. Still, the $1125 rent eats up more than half of her monthly take-home pay.

She went on Medicaid after being unable to afford health insurance.

Simons said it’s been hard, and sometimes embarrassing, to accept help.

“The thing is, I don’t want it,” she said. “I want to pay my bills.”

Hoping for a break
Simons has continued to apply for jobs daily, hoping to land a higher-paying position with health insurance she can afford.

One morning in early March, she got a break. A rug retailer about 40 miles from West Hartford offered her a job interview.

Excited and anxious, Simons carefully picked out her clothes and fretted about her hair. She was too nervous to eat.

A few hours before the interview, her boyfriend Phil Volonis stopped by to give Simons some gas money. Her 2005 Chevrolet Cavalier had broken down the day before, so he had lent her a car.

Simons takes cover from the rain as she heads into a job interview.

Later that evening, Simons walked out of the interview confident that she had done well, but still not sure if she had gotten the job.

Driving home in the pouring rain, Simons said that while living in West Hartford has been good for her and her daughter, she dreams of moving somewhere warmer.

She mused that perhaps Alexis will go to University of Florida – which has a good women’s lacrosse team - and she could move down there, too.

But for now, she said, she would do almost anything to keep her daughter in this town.

“The kid’s been through enough,” Simons said. “So, I just want her to feel as safe and settled as possible, and I want her to know that she can count on her mom to keep her where she is and keep promises.”

Barack Obama brokers Israel-Turkey rapprochement

Πηγή: NDTV
By Reuters
March 23 2013

Jerusalem: Israel apologised to Turkey on Friday for killing nine Turkish citizens in a 2010 naval raid on a Gaza-bound flotilla and the two feuding U.S. allies agreed to normalise relations in a surprise breakthrough announced by U.S. President Barack Obama.

The rapprochement could help regional coordination to contain spillover from the Syrian civil war and ease Israel's diplomatic isolation in the Middle East as it faces challenges posed by Iran's nuclear programme.

In a statement released by the White House only minutes before Obama ended a visit to Israel, the president said Prime Minister Benjamin Netanyahu and his Turkish counterpart Tayyip Erdogan had spoken by telephone.

"The United States deeply values our close partnerships with both Turkey and Israel, and we attach great importance to the restoration of positive relations between them in order to advance regional peace and security," Obama said.

The first conversation between the two leaders since 2011, when Netanyahu phoned to offer help after an earthquake struck Turkey, gave Obama a diplomatic triumph in a visit to Israel and the Palestinian Territories in which he offered no new plan to revive peace talks frozen for nearly three years.

The 30-minute call was made in a runway trailer at Tel Aviv airport, where Obama and Netanyahu huddled before the president boarded Air Force One for a flight to Jordan, U.S. officials said.

Israel bowed to a long-standing demand by Ankara, once a close strategic partner, to apologise formally for the deaths aboard the Turkish vessel Mavi Marmara, which was boarded by Israeli marines who intercepted a flotilla challenging Israel's naval blockade of the Palestinian-run Gaza Strip.

"In light of Israel's investigation into the incident which pointed to a number of operational mistakes, the prime minister expressed Israel's apology to the Turkish people for any mistakes that might have led to the loss of life or injury," Netanyahu's office said in a statement in English.

It added that he had agreed to conclude an agreement on compensation and said Netanyahu and Erdogan agreed to normalise ties between the two countries, including returning their ambassadors to their posts.

Erdogan's office said he had accepted the apology and had told Netanyahu that he valued centuries of "strong friendship and cooperation between the Turkish and Jewish nations".

Turkish Foreign Minister Ahmet Davutoglu said that, with the apology, all of Turkey's fundamental demands had been met.

FRAYED TIES

Ankara expelled Israel's ambassador and froze military cooperation after a U.N. report into the Mavi Marmara incident, released in September 2011, largely exonerated the Jewish state.

Before the diplomatic breakdown, Israel and Turkey shared intelligence information and carried out joint military exercises. Israeli pilots trained in Turkish skies, improving their capability to carry out long-range missions such as possible strikes against Iran's nuclear facilities.

Israel had balked at apologising to the Turks, saying this would be tantamount to admitting moral culpability and would invite lawsuits against its troops.

Voicing until now only "regret" over the incident, Israel has offered to pay into what it called a "humanitarian fund" through which casualties and their relatives could be compensated.

An Israeli political source said the way to a formal apology was paved by the sidelining of far-right ex-foreign minister Avigdor Lieberman, who opposed the move. He resigned in December after being indicted on fraud charges.

A source in Netanyahu's bureau said opening a new chapter with Turkey "can be very, very important for the future, regarding what happens with Syria but not just what happens with Syria".

Tzipi Livni, a minister in charge of regional diplomacy, praised what she saw as "restoration of a first-rate strategic dialogue" that could help Israel forge a "camp of more moderate elements" to confront Islamist radicals in Syria and Iran.

In Turkey, Erdogan's success in obtaining an Israeli apology was viewed as a diplomatic coup, although the deal fell short of meeting his earlier insistence that Israel remove a blockade on Gaza that it imposed when Hamas Islamists rose to power there.

"This is a diplomatic success," said Turkish political scientist Ufuk Ulutas.

In a statement, Hamas applauded Erdogan for having won an apology from Israel, and said he had told the group's leader Khaled Meshaal by telephone that Netanyahu also promised to "lift the siege on the Palestinian people".

Israel said, however, that it undertook to ease conditions in the Palestinian territories should the situation allow, and that Netanyahu and Erdogan had pledged to work together to improve the humanitarian situation in Palestinian areas, including Gaza.

In Greece, Public Health Declines As Unemployment Rate Rises

Πηγή: IBT
By Roxanne Palmer
March 22 2013

The effects of economic crises go beyond the pocketbooks of a country’s citizens; there’s a wealth of evidence showing that crashes, austerity measures and uncertainty can affect the health of a nation as well.

This is particularly evident in Greece, where the global economic crisis left the country unable to pay its debts. Other European countries and the International Monetary Fund have helped keep the country afloat with new loans, in exchange for massive austerity efforts. By the end of 2012, the unemployment rate was at 26.8 percent.

A study presented in March at a meeting of the American College of Cardiology found that heart attack rates in Greece have risen along with the unemployment rate.

Researchers looked at the medical records of more than 22,000 patients admitted to the General Hospital of Kalamata’s cardiology department over eight years. The patient records were divided into two chronological groups: one set that were admitted between January 2005 and December 2007, before the economy tanked, and another that came in between January 2008 and December 2011, post-economic crisis.

After the crisis struck, heart attacks rose across the board – the researchers found a 21 percent increase in patients younger than 45, a 29 percent increase in patients older than 45, a 26 percent increase in men, and a 39 percent increase in women.

"Unemployment is a stressful event and stress is connected with heart disease, but other issues also come with financial difficulties," study author Emmanouil Makaris, a cardiologist at Kalamata’s General Hospital, said in a statement. "In these times a lot of people do not have money to buy medications or to go to their primary care doctor. There's a great increase in cardiovascular diseases across the country. The cost to the society is very high."

Makaris points out his work focuses on a specific region, Messinia – the heart attack impact could be even worse in the more urban capital, Athens.

The health effects of the crisis aren’t just felt in the heart. A telephone survey of about 4,500 Greeks found that there was a substantial increase in the number of reported suicide attempts between 2009 and 2011, and more people reported having suicidal thoughts.

“People suffering from depression, men, married individuals, people experiencing financial strain, people with low interpersonal trust, and individuals with a history of suicide attempts were particularly vulnerable,” the authors wrote in the journal World Psychiatry in February.

Economic woes also affect the health of a state’s youngest citizens. Researchers from Greece’s National School of Public Health analyzed official health statistics and found that while the rate of stillbirths had been steadily declining before the crisis – from about 16 per 1,000 live births in 1966 to a low of 3.31 per 1,000 in 2008 – they’re now on the rise again. The stillbirth rate was 4.28 per 1,000 births in 2009 and 4.36 in 2010, a 32 percent jump between 2008 and 2010.

“We are worried that the stillbirth rate will continue to rise because an increasing number of pregnant women are unemployed and without insurance, and thereby excluded from the Greek National Healthcare System’s obstetric care,” authors Nikolaos Vlachadis and Eleni Kornarou wrote in a letter to the British Medical Journal this past February.

Amid all the dark news, there is at least one ray of light: Pollution levels have been declining in Greece since the crisis, likely because of less car use and industrial activity. Researchers led by Mihalis Vrekoussis of the Cyprus Institute monitored air pollution over Greece with satellites and ground-based instruments between 2007 and 2011. Sharp drops in nitrogen dioxide, nitrogen monoxide, carbon monoxide and sulphur dioxide were reported in a paper published in Geophysical Research letters in January.

That might cut Greece’s asthma rate a bit in the short term, but unless serious efforts are made to cut pollution and invest in greener energy, pollution levels could bounce back up again if, and when, the economy recovers.

"Investments in clean technologies and low-carbon green strategies have been abandoned," Vrekoussis told New Scientist. "I'm afraid that in the long run the negative effects will override the positives."

As Cyprus Implodes, Bitcoin Interest Explodes

Πηγή: Fox Business
By Matt Egan
March 22 2013

As policymakers in Europe threaten the sanctity of bank deposits in crumbling Cyprus, the faceless operators of decentralized electronic currency Bitcoin must be smiling somewhere.

The currency, a favorite among those worried about the safety of traditional banking and paper currency, is emerging as an apparent winner from the drama surrounding the bailout of tiny Cyprus.

Bitcoin “is clearly having a breakthrough moment here, and a deeply surprising one given its novelty and nascent infrastructure,” said Nicholas Colas, chief market strategist at ConvergEx, in a note on Friday.

To be sure, Bitcoin is still a relatively new and small system that is subject to technical glitches and regulators are only now scrambling to keep up. Still, led by surging interest in the embattled eurozone and Russia (a favorite client of Cypriot banks), that breakthrough is clear through a number of metrics, including the surging value of the currency itself.

One Bitcoin is now worth around $73.75, up 84% from just two weeks ago when it was worth around $40.

Not Your Father’s Currency

The value of Bitcoins outstanding has now exploded beyond $800 million. Colas notes that if Bitcoin were a country, its outstanding currency would rival the annual gross domestic product of a dozen World Bank-recognized nations.

People “are looking for alternatives” because of a “loss of confidence in paper money and traditional banking systems,” said Jim Rickards, author of Currency Wars.



So what are Bitcoins and why are they enjoying a moment in the spotlight now?

Founded in 2009 as an open-source software code, Bitcoin is a complex and anonymous type of electronic currency that can be swapped for local currencies like dollars, yen and euros.

Users can create accounts, deposit local currency and then use that cash to buy Bitcoins at a rate that fluctuates with the market. The Bitcoins can be stored in an online wallet, used to make purchases and converted back into local currencies.

However, unlike most currencies that are controlled by central bankers, Bitcoin is highly decentralized and the number of Bitcoins in circulation expands at a predictable and limited rate. Bitcoin also notes that its accounts cannot be seized by local authorities.

Crisis in Cyprus Buoys Bitcoin

For all of these reasons, Bitcoins stand in stark contrast with the value of euros sitting in Cypriot banks.

The controversial push to impose a levy on bank deposits in Cyprus, a tax haven and money laundering epicenter favored by Russians, has fueled ATM cash shortages and forced the tiny island country to shut its banks for a week.

The decision to go after bank deposits reflects the lack of options to raise money for a bailout of Cyprus and its outsized banking system. However, that move also appears to have broken a cardinal rule in financial crises: don’t give people a reason to fear for the safety of their bank accounts.

“Cyprus, if it’s not Lehman Brothers, it’s certainly causing a certain amount of nervousness,” said Rickards, a partner at New York hedge fund JAC Capital Advisors.

Colas said he’s been seeing “explosive growth” in the Russian ruble/Bitcoin exchange in recent days. He said average daily transactions have soared from around 500,000 to 1 million rubles per day to 3 million to 3.5 million rubles a day on Wednesday and Thursday.

“It may not seem fair, but the deposits of oligarchs, drug dealers and tax cheats need to have the same protection as widows and orphans,” said Colas. “The people themselves, no. But if you can’t convict them for their crimes, attacking everyone’s deposits in retribution is bad policy.”

Rickards said the recent popularity of Bitcoins is part of a broader trend around the world in favor of alternative currencies.

U.S. Treasury Takes Note

This includes in the U.S., as some fear the Federal Reserve’s unprecedented quantitative easing program, which has swelled the central bank’s balance sheet to $3 trillion, may eventually cause rampant inflation.

“Gold is a great way to preserve wealth, but it is hard to move around,” said Rickards. “You do need some kind of alternative and Bitcoin fits the bill. I’m not surprised to see that happening.”

Regulators seem to be taking notice as earlier this week the Treasury Department said it is applying money-laundering rules to so-called virtual currencies.

“It’s almost a badge of respect when the Treasury starts regulating you,” said Rickards. “You must be doing something right.”

The attention from the U.S. comes amid some concern that Bitcoins and similar virtual currencies could become a haven for criminal activity. An FBI report last year revealed that at least one online service accepts Bitcoins in exchange for illegal drugs.

“It’s not a knock on Bitcoin,” said Rickards. “I’m sure there are criminals using the Bitcoin world, but there are criminals and bad actors in the dollar world as well. The sight of a drug smuggler opening a suitcase full of $100 bills is not unusual.”

‘Cautionary Tale’

It’s also worth pointing out that while Bitcoin may not be subject to policy missteps like the Cyprus deposit proposal, the electronic exchange isn’t immune to technical issues.

An apparent glitch in the Bitcoin network fueled a steep selloff earlier on March 12 that caused the currency’s value to briefly plummet 23% to $37 before recovering. Interestingly, the snafu doesn’t appear to have dented demand for Bitcoins as the currency’s value has rebounded well beyond $70 since then.

So what does the rise of virtual currency say about the state of confidence in the traditional banking structure?

“The rampant success of Bitcoin is a profoundly cautionary tale for global monetary systems. And we seem to be more in the introduction rather than the epilogue of the story,” said Colas. “If central banks and regulators actually ran their monetary policies to maintain public confidence in the value of their currency, Bitcoin wouldn’t have a chance. “

Libya rights-panel chief flees country, citing death threats

Πηγή: Washington Times
By Ashish Kumar Sen
March 21 2013

The chairman of Libya’s parliamentary human-rights committee has resigned and fled to London, saying militias threatened to kill him after he criticized their unchecked power and flagrant violations of the law.

“The whole country is full of armed men, many of them are hanging onto their guns because they still feel the revolution is not safe,” Hassan El Amin said in a phone interview with The Washington Times on Thursday evening. “Many of those militias are totally out of control.”

The threats to Mr. El Amin were delivered in menacing phone calls and warnings scrawled on the walls of Misrata, his hometown in the western part of Libya.

Militia leaders in Misrata threatened him after he demanded that families be allowed to visit their relatives in prison.

“I cannot carry out my job under these circumstances … The balance of power belongs to the militias and hooligans on the streets,” he said.

U.S. Ambassador J. Christopher Stevens, State Department officer Sean Smith, and former Navy SEALs Glen Doherty and Tyrone Woods were killed in an attack on the U.S. diplomatic compound in the eastern city of Benghazi on Sept. 11.

Mr. El Amin said that while the problem of rogue militias is rampant across the country, Islamist militias are more active in Benghazi.

Libya’s former dictator, Moammar Gadhafi, was killed by revolutionary militias on Oct. 20, 2011, in his hometown of Sirte, a city on the Mediterranean coast about 230 miles east of Tripoli.

While the revolution ended with Gadhafi’s death, many of the militias have refused to give up their weapons. Human-rights groups have accused some of them of torturing detainees suspected of being loyal to the Gadhafis.

The United Nations Security Council passed a resolution last week in which it expressed concern about reports of human-rights violations and abuses in detention centres across Libya.

“I have so many concerns about human rights violations in Libya, it is getting to a stage where it is even worse than during Gadhafi’s time,” said Mr. El Amin, who spent 28 years in exile at the time of Gadhafi’s rule and was elected to parliament in July.

While Mr. El Amin has been a longtime critic of the militias, the “last straw” for him was when they attacked the Libyan parliament, the General National Congress, in Tripoli earlier this month. Gunmen also fired on the armored car of General National Congress president Mohamed al-Megariaf.

This week, militias tried to storm Prime Minister Ali Zeidan’s office in Tripoli.

Mr. El Amin said he wanted to send a message through his resignation to the Libyan parliament to “get its act together” and take on the militias.

“A lot of facts have become clear about human rights abuses [by the militias], the continuous attacks on the government, the kidnappings, and all of this is setting off a warning bell for the Libyan people,” he said. “The people are fed up and there is a lot of awareness that something needs to be done.”

Russia's Energy Ministry Eyes Incentives for New LNG Projects

Πηγή: Downstream Today
By Russia & CIS Energy Newswire
March 19 2013

Russia's Energy Ministry is considering the possibility of introducing additional incentives, including discounts on duties, for new projects to produce liquefied natural gas (LNG), Energy Minister Alexander Novak told reporters.

"It will be possible to consider some incentives," Novak said.

He said the Yamal LNG project already enjoys a discount on the natural resource extraction tax (NRET), but stressed that such tax breaks will not be targeted and will be worked out for all new LNG projects.

Production of LNG must be encouraged because Russia faces the challenge of winning a place on the global LNG market, the minister said. "We have too small a share of this market. However, there is a niche for new supplies on the LNG market and we must occupy this niche," Novak said.

"There is a window of opportunity until 2018-2020. After this period, analysts estimate, supply will already exceed demand," Novak said, recalling that Australia, for example, plans to increase production of LNG by 40 million tonnes after this period.

The most realistic new LNG projects in Russia, Novak said, are Novatek's (RTS: NVTK) Yamal LNG, Gazprom's project to build an LNG plant in Vladivostok, and Rosneft's proposal to build an LNG plant on Sakhalin Island.

"We see this as one of the Russian LNG projects. Rosneft (RTS: ROSN) has a resource base in this region. Rosneft and its partner ExxonMobil must now work out everything in more detail and prepare more detailed proposals," Novak said.

Novatek in talks to sell stake in Yamal LNG

Novatek, Russia's biggest independent gas producer, is holding negotiations with South Korean, Japanese and Chinese companies on the sale of part of its stake in the Yamal LNG projects, Novak said.

"Novatek is prepared to reduce its stake in the project from 80% to 51%. It is offering a stake in the project to Korean, Japanese and Chinese companies. Competition for this stake will be very great," the minister said.

Novatek has already agreed with a number of Japanese companies - Tokyo Gas, Tokyo Electric, Marubeni and Mitsui - to form working groups that will "work out in greater detail the possibility of their joining the project," Novak said. "For we are not only offering gas supplies from this project, but also minority participation," he added.

Yamal LNG is expected to produce 16.5 million tonnes of LNG. The plant will be launched in three phases of 5.5 million tonnes per year each, at the end of 2016, 2017 and 2018 respectively.

Novak said the project will remain on schedule on the condition that a decision is made in the first half of the year on liberalizing exports of LNG. "We are working on this, in order to work out the issue of liberalization, provide additional possibilities for financing the project. I think that if we make this decision by the middle of the year, everything will be quite alright in terms of the timetable," the minister said.

He said Gazprom (RTS: GAZP) has not yet presented its proposals on the possibility of foreign companies participating in the Vladivostok LNG project. The company plans to hold a separate meeting with Japanese companies to discuss this topic.

These issues were discussed during a visit to these Asia-Pacific countries by a Russian delegation that included the management of Novatek and Gazprom Export, Novak said.

The $20 billion Yamal LNG project calls for the development of the South Tambei field on the Yamal Peninsula. Novatek has an 80% stake in Yamal LNG and France's Total owns the other 20%. Novatek said earlier that it plans to retain a controlling stake in the project, and did not rule out that a consortium of new partners, primarily such that could ensure the marketing of the product, might join the project.

Vladivostok LNG could produce 10 mln tonnes in 2020

Gazprom's project to build an LNG plant in Vladivostok could reach the stated production target of 10 million tonnes in 2020, Novak said. The first phase of 5 million tonnes per year is expected to be launched in 2018 and a second phase for another 5 million tonnes could start up in 2020, he said.

Therefore, with the launch of Yamal LNG, new LNG production capacity in Russia could reach 26.5 million tonnes by 2020. The CIS is expected to account for about 15% of total gas exports by 2020.

Gazprom's management board in February approved the rationalization for investment in the Vladivostok LNG project, which calls for building an LNG plant on the Lomonosov Peninsula in Perevoznaya Bay with three production lines of 5 million tonnes each. The resource base for the plant will be the Sakhalin, as well as Yakutia and Irkutsk gas producing regions. The target market will be the Asia-Pacific region.

Ministry proposes pipeline gas for Europe, LNG for Asia-Pacific

The Energy Ministry believes that Russian gas exports to Europe should be dominated by pipeline gas, while LNG should predominate in exports to the Asia-Pacific region, Novak said.

He said such an approach would make it possible to avoid having Russian gas compete on global markets, including if exports of Russian LNG are liberalized.

"For example, while Gazprom dominates in Europe and there is the possibility of increasing supplies of purely pipeline gas, there is no point in going there with LNG. There is the eastern market, where we don't have a pipeline, there we must compete. So in addition to Gazprom we should give other companies the opportunity to participate in this market," Novak said.

He said other proposals for tackling the problem of Russian LNG competing against itself on global market include the creation of non-commercial partnerships. There is also the possibility of issuing licenses for production of LNG that would specify export markets, the minister said.

"There can be various ways of coordination, there could a non-commercial partnership with oil and gas companies. It could be simply by way of permitting exports of LNG only with the issue of corresponding licenses to specific projects, and the licenses could specify the conditions of shipments. There is the option of going through a government commission," Novak said.

"There should be a strong mechanism here for coordinating the activities of all participants in the process, so that we don't have a situation where, to the detriment of the domestic market, we allow everyone to build LNG plants and everyone starts to chaotically ship to Europe or Asia," Novak said.

He said that his ministry would within a month complete an updated report on mechanisms for liberalizing LNG exports and tackling the problem of regulating this market. The proposals will consider granting certain projects the opportunity to export LNG.

"We're not talking about cancelling Gazprom's monopoly on gas exports. Gazprom remains the gas exporter by law, we are talking about the possible access of certain projects to LNG markets," Novak said.

The final decision on liberalizing LNG exports will be made by the Russian president.

The minister stressed that the global challenge in Russia's entry into the LNG market should not be fighting competition among Russian LNG suppliers, but competition with other global suppliers of LNG.

"Russia still only has 10% of the market, how can we compete internally here. Competition must be not among our projects, but with the projects of other countries that also plan to increase LNG exports, including Australia and Qatar," Novak said.

He remarked that not only is global demand for LNG growing, but so is the number of countries that are starting to use liquefied gas.

"In the last few years eleven countries have been added that have begun to build regasification terminals, and in the next few years there will be even more. The market will grow not only by volume of consumption, but also by number of countries. New countries are emerging - Argentina, Thailand. We need to occupy this niche and compete not against ourselves but for new markets," Novak said.

A New Reality in U.S.-Israeli Relations

Πηγή: Stratfor
By George Friedman
March 19 2013

U.S. President Barack Obama is making his first visit to Israel as president. The visit comes in the wake of his re-election and inauguration to a second term and the formation of a new Israeli government under Prime Minister Benjamin Netanyahu. Normally, summits between Israel and the United States are filled with foreign policy issues on both sides, and there will be many discussed at this meeting, including Iran, Syria and Egypt. But this summit takes place in an interesting climate, because both the Americans and Israelis are less interested in foreign and security matters than they are in their respective domestic issues.

In the United States, the political crisis over the federal budget and the struggle to grow the economy and reduce unemployment has dominated the president's and the country's attention. The Israeli elections turned on domestic issues, ranging from whether the ultra-Orthodox would be required to serve in Israel Defense Forces, as other citizens are, to a growing controversy over economic inequality in Israel.

Inwardness is a cyclic norm in most countries. Foreign policy does not always dominate the agenda and periodically it becomes less important. What is interesting is at this point, while Israelis continue to express concern about foreign policy, they are most passionate on divisive internal social issues. Similarly, although there continues to be a war in Afghanistan, the American public is heavily focused on economic issues. Under these circumstances the interesting question is not what Obama and Netanyahu will talk about but whether what they discuss will matter much.

Washington's New Strategy

For the United States, the focus on domestic affairs is compounded by an emerging strategic shift in how the United States deals with the world. After more than a decade of being focused on the Islamic world and moving aggressively to try to control threats in the region militarily, the United States is moving toward a different stance. The bar for military intervention has been raised. Therefore, the United States has, in spite of recent statements, not militarily committed itself to the Syrian crisis, and when the French intervened in Mali the United States played a supporting role. The intervention in Libya, where France and the United Kingdom drew the United States into the action, was the first manifestation of Washington's strategic re-evaluation. The desire to reduce military engagement in the region was not the result of Libya. That desire was there from the U.S. experience in Iraq and was the realization that the disposal of an unsavory regime does not necessarily -- or even very often -- result in a better regime. Even the relative success of the intervention in Libya drove home the point that every intervention has both unintended consequences and unanticipated costs.

The United States' new stance ought to frighten the Israelis. In Israel's grand strategy, the United States is the ultimate guarantor of its national security and underwrites a portion of its national defense. If the United States becomes less inclined to involve itself in regional adventures, the question is whether the guarantees implicit in the relationship still stand. The issue is not whether the United States would intervene to protect Israel's existence; save from a nuclear-armed Iran, there is no existential threat to Israel's national interest. Rather, the question is whether the United States is prepared to continue shaping the dynamics of the region in areas where Israel lacks political influence and is not able to exert military control. Israel wants a division of labor in the region, where it influences its immediate neighbors while the United States manages more distant issues. To put it differently, the Israelis' understanding of the American role is to control events that endanger Israel and American interests under the assumption that Israeli and American interests are identical. The idea that they are always identical has never been as true as politicians on both sides have claimed, but more important, the difficulties of controlling the environment have increased dramatically for both sides.

Israel's Difficulties

The problem for Israel at this point is that it is not able to do very much in the area that is its responsibility. For example, after the relationship with the United States, the second-most important strategic foundation for Israel is its relationship -- and peace treaty -- with Egypt. Following the fall of Egyptian President Hosni Mubarak, the fear was that Egypt might abrogate the peace treaty, reopening at some distant point the possibility of conventional war. But the most shocking thing to Israel was how little control it actually had over events in Egypt and the future of its ties to Egypt. With good relations between Israel and the Egyptian military and with the military still powerful, the treaty has thus far survived. But the power of the military will not be the sole factor in the long-term sustainability of the treaty. Whether it survives or not ultimately is not a matter that Israel has much control over.

The Israelis have always assumed that the United States can control areas where they lack control. And some Israelis have condemned the United States for not doing more to manage events in Egypt. But the fact is that the United States also has few tools to control the evolution of Egypt, apart from some aid to Egypt and its own relationship with the Egyptian military. The first Israeli response is that the United States should do something about problems confronting Israel. It may or may not be in the American interest to do something in any particular case, but the problem in this case is that although a hostile Egypt is not in the Americans' interest, there is actually little the United States can do to control events in Egypt.

The Syrian situation is even more complex, with Israel not even certain what outcome is more desirable. Syrian President Bashar al Assad is a known quantity to Israel. He is by no means a friend, but his actions and his father's have always been in the pursuit of their own interest and therefore have been predictable. The opposition is an amorphous entity whose ability to govern is questionable and that is shot through with Islamists who are at least organized and know what they want. It is not clear that Israel wants al Assad to fall or to survive, and in any case Israel is limited in what it could do even if it had a preference. Both outcomes frighten the Israelis. Indeed, the hints of American weapons shipments to the rebels at some point concern Israel as much as no weapons shipments.

The Iranian situation is equally complex. It is clear that the Israelis, despite rhetoric to the contrary, will not act unilaterally against Iran's nuclear weapons. The risks of failure are too high, and the consequences of Iranian retaliation against fundamental American interests, such as the flow of oil through the Strait of Hormuz, are too substantial. The American view is that an Iranian nuclear weapon is not imminent and Iran's ultimate ability to build a deliverable weapon is questionable. Therefore, regardless of what Israel wants, and given the American doctrine of military involvement as a last resort when it significantly affects U.S. interests, the Israelis will not be able to move the United States to play its traditional role of assuming military burdens to shape the region.

The Changing Relationship

There has therefore been a very real if somewhat subtle shift in the U.S.-Israeli relationship. Israel has lost the ability, if it ever had it, to shape the behavior of countries on its frontier. Egypt and Syria will do what they will do. At the same time, the United States has lost the inclination to intervene militarily in the broader regional conflict and has limited political tools. Countries like Saudi Arabia, which might be inclined to align with U.S. strategy, find themselves in a position of creating their own strategy and assuming the risks.

For the United States, there are now more important issues than the Middle East, such as the domestic economy. The United States is looking inward both because it has to and because it has not done well in trying to shape the Islamic world. From the Israeli point of view, for the moment, its national security is not at risk, and its ability to control its security environment is limited, while its ability to shape American responses in the region has deteriorated due to the shifting American focus. It will continue to get aid that it no longer needs and will continue to have military relations with the United States, particularly in developing military technology. But for reasons having little to do with Israel, Washington's attention is not focused on the region or at least not as obsessively as it had been since 2001.

Therefore Israel has turned inward by default. Frightened by events on its border, it realizes that it has little control there and lacks clarity on what it wants. In the broader region, Israel's ability to rely on American control has declined. Like Israel, the United States has realized the limits and costs of such a strategy, and Israel will not talk the United States out of it, as the case of Iran shows. In addition, there is no immediate threat to Israel that it must respond to. It is, by default, in a position of watching and waiting without being clear as to what it wants to see. Therefore it should be no surprise that Israel, like the United States, is focused on domestic affairs.

It also puts Israel in a reactive position. The question of the Palestinians is always there. Israel's policy, like most of its strategic policy, is to watch and wait. It has no inclination to find a political solution because it cannot predict what the consequences of either a solution or an attempt to find one would be. Its policy is to cede the initiative to the Palestinians. Last month, there was speculation that increased demonstrations in the West Bank could spark a third intifada. There was not one. There might be another surge of rockets from Gaza, or there might not be. That is a decision that Hamas will make.

Israel has turned politically inward because its strategic environment has become not so much threatening as beyond its control. Enemies cannot overwhelm it, nor can it control what its enemies and potential enemies might do. Israel has lost the initiative and, more important, it now knows it has lost the initiative. It has looked to the United States to take the initiative, but on a much broader scale Washington faces the same reality as Israel with less at stake and therefore less urgency. Certainly, the Israelis would like to see the United States take more aggressive stands and more risks, but they fully understand that the price and dangers of aggressive stands in the region have grown out of control.

Therefore it is interesting to wonder what Obama and Netanyahu will discuss. Surely Iran will come up and Obama will say there is no present danger and no need to take risks. Netanyahu will try to find some way to convince him that the United States should undertake the burden at a time suitable to Israel. The United States will decline the invitation.

This is not a strain in the U.S.-Israeli relationship in the sense of anger and resentment, although those exist on both sides. Rather it is like a marriage that continues out of habit but whose foundation has withered. The foundation was the Israeli ability to control events in its region and the guarantee that where the Israelis fail, U.S. interests dictate that Washington will take action. Neither one has the ability, the appetite or the political basis to maintain that relationship on those terms. Obama has economics to worry about. Netanyahu has the conscription of the ultra-Orthodox on his mind. National security remains an issue for both, but their ability to manage it has declined dramatically.

In private I expect a sullen courtesy and in public an enthusiastic friendship, much as an old, bored married couple, not near a divorce, but far from where they were when they were young. Neither party is what it once was; each suspects that it is the other's fault. In the end, each has its own fate, linked by history to each other but no longer united.

A much better alternative for Cyprus

Πηγή: Reuters
By Felix Salmon
March 19 2013

Andrew Ross Sorkin defends the Cyprus deal today, on the grounds that (a) Cyprus is “tiny”, and “largely irrelevant to the global economy”; (b) Cyprus is a genuinely unique case; (c) it would be grossly unfair not to bail in Russian depositors, who are generally losing less than they’ve made in interest over the past few years; and (d) the Greek alternative “will not work in Cyprus”, and that therefore (this last bit is only implied, never stated outright) the current plan is really the only option.

Notably, Sorkin doesn’t attempt to defend the most indefensible part of the plan — the confiscation of wealth from depositors with sovereign deposit guarantees. While hedge-fund bondholders will get paid their full $1.4 billion on June 3, the date of Cyprus’s next coupon payment, small depositors with just a few hundred or a few thousand euros in savings will lose money which the Cypriot government had promised them was safe. Why is the government’s promise to foreign hedge funds more important than its promise to its own citizens? Sorkin never attempts an answer to that one.

And even if Cyprus is tiny and irrelevant to Andrew Ross Sorkin, it most certainly isn’t tiny and irrelevant to the hundreds of thousands of people who live there, and deserve for their government to deliver the best possible plan it can.

Which raises the single biggest question facing the Cypriot parliament as it prepares to vote today: should it accept the deal on the table, or should it hold out for something better? And if it chooses the latter option — as seems likely — should it simply fiddle with the tax-rate percentages, much as one might fiddle with the Breakingviews Cyprus calculator, or should it try to build something which is more different and more fair? Most importantly, what alternatives does Cyprus’s parliament have?

This is where Sorkin’s column is (at least in its implication) wrong: there is an alternative. It isclearly better, in every regard, than the option currently on the table. And it most emphatically isworkable. We know that it’s workable because it has been put forward by none other than Lee Buchheit, the godfather of sovereign debt restructuring, and for decades, in dozens of sovereign contexts, every time that Lee Buchheit has said something can be done, he’s been absolutely right.

Here’s the short, three-page paper: it’s called Walking Back from Cyprus, and it’s authored by Buchheit and his frequent collaborator, Mitu Gulati of Duke University. Their plan is simple:

First, leave all deposits under €100,000 untouched. Hitting those deposits was by far the biggest mistake of the Cyprus plan as originally envisaged, and everybody would be extremely happy if guaranteed depositors could be kept whole.

Second, term out everybody else by five years, or ten if they prefer.

That’s it! That’s the whole plan, and it’s kinda genius. If you have bank deposits of more than €100,000, they will be converted into bank CDs, with a maturity of either five years or 10 years — your choice. If you pick the longer maturity, then your CD will be secured by future Cypriot gas revenues, which could amount to hundreds of billions of dollars.

And if you have sovereign bonds, they too will be termed out by five years, giving Cyprus a bit of breathing room to get its act together.

Do that, say Buchheit and Gulati, and you manage to reduce the size of the needed bailout bymore than the €5.8 billion that Cyprus is currently planning to raise with its tax on bank deposits — and you don’t touch anybody’s principal at all. To be sure, the new CDs, which would be tradable, would surely trade at less than par: there would be a present-value haircut on deposits over €100,000. But that’s going to happen anyway. And at least in this case patient depositors will have a chance of getting all their money back in full — with interest. And, most importantly, guaranteed depositors will remain unscathed.

This is the deal that no one had the imagination to put on the table during all-night negotiations last week, and it makes a lot more sense than what we’re looking at right now. In the first round of negotiations, the Germans had the upper hand, presenting Cyprus with a take-it-or-leave-it deal. Buchheit and Gulati have now given the Cypriot parliament the opportunity to turn the tables: pass a bill along these lines, and tell the Germans to take it or leave it.

The Buchheit/Gulati plan would cost Germany no more than the current plan, so the Germans would have no good reason to veto. But if the Germans did veto, then the result would be a sovereign nation being forced to exit the Eurozone: the worst possible outcome of all. Given that kind of ultimatum, I suspect the Germans would sign on to the Cypriot plan.

The ball is in the Cypriot parliament’s court today, and most observers are expecting the current plan to go through, with a tweak here or there to the tax rates and the points at which they kick in. But Buchheit and Gulati have now given Cyprus’s parliament a clear Plan B. If the lawmakers want to reject the Eurogroup’s plan, they know what they must do.