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Russia Risks Soviet - Style Collapse As Rouble Defence Fails
Dec 17th, 2014
Daily NewsThe Telegraph
Categories: Today's Headlines;Contemporary Issues

'What is happening is a nightmare that we could not even have imagined a year ago,' says Russia's central bank

Russia has lost control of its economy and may be forced to impose Soviet-style exchange controls after "shock and awe" action by the central bank failed to stem the collapse of the rouble.

“The situation is critical,” said the central bank’s vice-chairman, Sergei Shvetsov. “What is happening is a nightmare that we could not even have imagined a year ago."

The currency crashed to 100 against the euro in the biggest one-day drop since the default crisis in 1998 as capital flight gathered pace, despite a drastic rise in interest rates to 17pc intended to crush speculators and show resolve.

Yields on two-year Russian bonds spiralled to 15.36pc, while credit default swaps are pricing in a one-third chance of a sovereign default. The shares of Russia’s biggest lender, Sberbank, fell 18pc.

Neil Shearing, from Capital Economics, said the spectacular failure of the rate shock may bring matters to a head. “If a rise of 650 basis points won’t do the job, we are near the end. That means stringent capital controls,” he said.

In Washington, the White House said it had no intention of easing pressure on Russia to halt the freefall. "It is president Vladimir Putin's decision to make. The aim is to sharpen the choice that he faces," it said.

President Barack Obama will not veto a law passed by Congress imposing a raft of new sanctions against Russia, even though he warned previously that it goes too far for European leaders and risks splitting the trans-Atlantic front. The measures include $350m of military assistance to Ukraine, and authorize Mr Obama to impose curbs on energy companies investing in Russia, as well as to prohibit credit to Gazprom.

Sergei Lavrov, Russia's foreign minister, said it is now clear that the US aim is to topple Mr Putin through "regime change" but vowed that the Russian people would rise in defiance. “We have been in much worse situations in our history, and every time we have got out of our fix much stronger,” he said.

After years of bluster and suggestions by Mr Putin that the US is a paper tiger, the Kremlin is now coming face to face with the cataclysmic consequences of what it has done by invading Ukraine and changing Europe's borders by force. By the same token, Washington needs to move with care since it would be a geostrategic miscalculation of the first order to push a nuclear-armed Russia too far into a corner, or to perpetuatue a cycle of grievance.

Anthony Peters, from SwissInvest, said Russia's leaders had misled their own people and have until now been in denial about the crisis engulfing them. "Not since Soviet times have we seen such steadfast refusal by the Kremlin to acknowledge the presence of severe political and economic problems while sacrificing the people in the name of orthodoxy. The Russian people are legendarily stoic in the face of hardships but beware if, and when, their patience runs out,” he said.

The rouble crash has doubled the cost of servicing nearly $700bn of external debt owed by Russian banks, companies and state bodies, mostly in dollars. They must repay $30bn this month and a further $100bn next year. Oil giant Rosneft has requested $49bn of state aid to weather the crisis.

Traders in Moscow expressed fury at the central bank’s refusal to deploy its $416bn of foreign reserves to “turbo-charge” the defence of the rouble, though the authorities may have intervened in late trading. The currency clawed back some ground - to 69 against the dollar - after one of the wildest days of the modern era. Eugene Kogan, from Moscow Partners, said the Russian stock market faces “slow death” over the next six months as liquidity vanishes.

It is clear that the authorities are guarding their reserves jealously after burning through $100bn this year to little avail. BNP’s Tatiana Tchembarova said what remains no longer covers external debt, unlike 2008 when there was still ample cover. “In addition to being twice as levered, Russia is entering this crisis with lower reserves,” she said.

The government has already committed $143bn in foreign reserve spending for next year. “We think that more will be required to support Russia’s banking system,” she said. The Kremlin had to spend $170bn rescuing the banks in the 2008-2009 crisis.

Lubomir Mitov, from the Institute of International Finance, said any fall in reserves below $330bn could prove dangerous, given the scale of foreign debt and a confluence of pressures. “It is a perfect storm. Each $10 fall in the price of oil reduces export revenues by some 2pc of GDP. A decline of this magnitude could shift the current account to a 3.5pc deficit,” he said. The total “financing gap” could soon reach 10pc of GDP due to the combined effects of capital flight and sanctions.

The central bank knows that Russia’s seemingly large reserves are a Maginot Line. Yet its attempt to defend the rouble only by raising rates is itself lethal. Even before the latest move it warned that the economy could contract by 4.7pc next year in a scenario of $60 oil prices.

The slump may now be far worse as a violent monetary squeeze sends tremors through the banking system and sets off a wave of corporate bankruptcies. BNP Paribas said each 100-point rise in rates cuts 0.8pc off GDP a year later. Rates have risen 750 points in a week.

Lars Christensen, from Danske Bank, said the Kremlin’s actions have led to the “absolutely worst possible outcome” since the botched move is enough to do grave damage, without solving anything. “They should have let the currency go rather than killing the economy. Investment is in freefall, and I fear this shock is going to be even bigger than in 2008-2009. Nothing suggests that oil is going to rebound quickly this time,” he said.

Growth has held up over recent months but this may be an illusion of the crisis itself as people scramble to rid themselves of roubles to buy homes, cars, washing machines or anything that keeps its value. Ikea has seen a surge of orders for new kitchens. This is a one-off effect, and creates a cliff-edge from the economy next year.

The rouble trauma came as premier Dmitry Medvedev held an emergency meeting with economic planners, and rumours swirled of a sweeping purge at the top of Kremlin. Officials denied there were any plans for capital controls after the meeting.

There is no sign yet of relief from the oil markets. Brent crude fell below $59 a barrel on Tuesday for the first time since the depths of the Great Recession in 2009. The fallout from the crisis is already hitting banks linked to Russia and Ukraine. The share price of Austria’s Raiffeisen fell 8pc in Vienna. More than 240pc of its tangible equity is exposed to the region. The biggest external lender is France’s Societe Generale, with €25bn of exposure, or 62pc of tangible equity.

Contagion is spreading across the emerging market nexus, hitting countries such as Turkey and India that should be beneficiaries of lower oil prices. “There is absolutely no liquidity anywhere. The system is stressed and we have a crunch all over the place,” said one hedge fund trader.

There are signs that the sell-off is becoming self-feeding as investors withdraw money from emerging market bond funds, forcing the funds to liquidate holdings into the downturn. In some cases managers are acting tactically, selling “proxies” such as Turkish debt given the difficulty of exiting Russian positions.

The rouble has now fallen 56pc against the dollar over the past year. Russian GDP has shrunk to $1.1 trillion, smaller than the economy of Texas, and half the size of Italy’s. The effect has been to double Russia’s external debt to at least 70pc of GDP, a high-risk level for rating agencies.

“A Russian downgrade to junk is only a matter or time,” said Tim Ash, from Standard Bank.

Palestinians to Press UN Statehood Bid Wednesday
Dec 17th, 2014
Daily NewsThe Times of Israel
Categories: Today's Headlines;The Nation Of Israel

Despite US threat to veto, PA officials say draft resolution setting timetable for Israeli withdrawal to pre-67 lines going ahead

Palestinian Authority President Mahmoud Abbas speaks during a meeting of the Palestinian leadership in the West Bank city of Ramallah, on December 14, 2014. (photo credit: AFP/Abbas Momani)
Palestinian Authority President Mahmoud Abbas speaks during a meeting of the Palestinian leadership in the West Bank city of Ramallah, on December 14, 2014. (photo credit: AFP/Abbas Momani)

The Palestinians will press ahead Wednesday with a UN bid to boost their hopes of statehood, despite a warning that the US will block the move, officials said.

“We will submit our project to the UN Security Council tomorrow,” a senior adviser to Palestinian Authority President Mahmoud Abbas told AFP late Tuesday.

The draft resolution calls for Palestinian statehood and a full Israeli withdrawal to the country’s pre-1967 lines within two years. The resolution is likely to be submitted by Jordan.

US Secretary of State John Kerry has held three days of intense talks in Europe seeking to head off a pre-Christmas crisis at the UN Security Council.

An unnamed Palestinian official described a meeting in London between chief Palestinian negotiator Saeb Erekat and US Secretary of State John Kerry as “difficult.” During the meeting, Kerry asked the Palestinian delegation not to rush ahead with the demand for a two-year timetable, and, according to the source, indicated the US would veto the resolution at the Security Council if it called for a timetable for Israel’s withdrawal, Ynet reported. The US position is not to automatically veto any resolution, the report said, but it will veto a resolution that seeks to determine the result of negotiations before those negotiations are concluded.

US Secretary of State John Kerry delivers remarks during a news conference at the U.S. Embassy, on Tuesday, Dec. 16, 2014, in London (photo credit: AP Photo/Evan Vucci)

US Secretary of State John Kerry delivers remarks during a news conference at the U.S. Embassy, on Tuesday, Dec. 16, 2014, in London (photo credit: AP Photo/Evan Vucci)

Erekat reportedly told Kerry that Israel’s attitude to the Palestinians had left them no choice but to seek statehood via the UN, and said that if the US vetoed the resolution they would seek to join numerous UN and other international organizations en route to statehood.

They include the International Criminal Court, another move opposed by Washington which fears the Palestinians will seek to try Israeli officials for alleged war crimes.

There have been reports of competing Arab-backed and French-led resolutions — with the Palestinians pushing one that would set a two-year deadline for the withdrawal of Israeli troops from the West Bank,  with no talk of land swaps or security measures.

While France still hasn’t formally introduced its proposal, it is expected to call for the setting of the 1967 lines as the basis for dividing the land. There have been mixed reports as to whether it will include key Israeli — and US — conditions such as Palestinian recognition of Israel as a Jewish state.

Support for the French draft even within Europe is uncertain, despite a series of parliamentary votes across the continent recognizing a Palestinian state. Countries are divided over the idea of setting a 2016 deadline, with Germany particularly reluctant, diplomats said.

But Mohammed Shtayyeh, a member of Abbas’s inner circle, said France had “accommodated” the Palestinians.

“We have merged. We don’t have two texts now. There is one single text. We have happily accepted the French text when the modifications have been added,” he said, without elaborating.

Earlier, Shtayyeh had said that Palestinian and French officials were coordinating and putting final touches on their own UN resolution, the Palestinian Ma’an news agency reported.

Asked what kind of resolution Washington might be able to support at the UN, Kerry insisted the US administration has “made no determinations… about language, approaches, specific resolutions, any of that.”

“What we’re trying to do is have a constructive conversation with everybody to find the best way to go forward,” Kerry added.

“We want to find the most constructive way of doing something that… will not have unintended consequences, but also can stem the violence.”

Speaking to reporters in the West Bank town of Beit Jala earlier, Shtayyeh said that “the United States does not want a Palestinian state, and does not want to use the veto either.”

“It is avoiding it by preventing us from collecting nine votes,” he added.

The support of nine out of the 15 Security Council members is needed to pass a resolution. However, each of the five permanent members, the US among them, has the right to veto any decision taken by the majority.

On Monday, Erekat told a Nazareth-based radio station that Palestinians have yet to secure the necessary nine votes from the 15-member council, according to Haaretz.

Kerry’s Tuesday meeting with Erekat came a day after the secretary’s conversation in Rome with Israeli Prime Minister Benjamin Netanyahu, who took a hard line against both the Palestinian and French proposals for UN-mandated parameters and timelines for a two-state solution.

Netanyahu Asks U.S. to Veto UN Palestinian Vote
Dec 17th, 2014
Daily NewsJerusalem on line
Categories: The Nation Of Israel

Prime Minister Benjamin Netanyahu met with US Secretary of State Jon Kerry in Rome on Monday in order to prevent the Palestinians from gaining support for a state in the UN.

Netanyahu was reported to have requested that the US use their veto power in the event of a vote. He refused to reveal whether or not Kerry agreed. Netanyahu said that Israel would not recognize a Palestinian state in a unilateral move. It is reported that the US encouraged the French to propose a vote to the UN.

Let the Headlines Speak
Dec 17th, 2014
Daily NewsFrom the internet
Categories: Today's Headlines;Contemporary Issues

Russia invites North Korea leader for May visit: paper
TOKYO - Russia has invited North Korean leader Kim Jong Un to attend a May ceremony marking the end of World War Two, in what would be Kim's first foreign visit since taking the helm of the reclusive state in 2011, Japan's Asahi Shimbun daily said on Wednesday.  

Syria moves to ensure Iranian oil supplies do not falter
BEIRUT/DUBAI - The Syrian government took steps on Tuesday to ensure oil imports from major ally Iran will continue to meet its needs as winter approaches, sending a high-level delegation to Tehran for talks with Iranian officials including President Hassan Rouhani.  

US judge says Obama immigration action invalid
U.S. District Judge Arthur Schwab says Obama's order in November designed to spare millions living illegally in the United States from deportation amounts to "unilateral legislative action" in violation of the Constitution. Schwab issued his opinion Tuesday in a criminal case involving an immigrant here illegally from Honduras.  

More than 100 children among the dead in Taliban attack on Pakistan school
At least 126 people, including more than 100 children, were killed Tuesday when Taliban gunmen stormed a school in the Pakistani city of Peshawar, taking hundreds of students hostage in the bloodiest insurgent attack in the country in years.  

66 journalists killed in past year as attacks grow more barbaric: report
Paris - Attacks on journalists have grown more barbaric and kidnappings have soared, Reporters Without Borders said Tuesday, after a year when violence against the media took centre stage and 66 reporters were killed.  

Palestinians to push UN vote despite US veto warning
Ramallah (Palestinian Territories)- The Palestinians will press ahead Wednesday with a UN bid to boost their hopes of statehood, despite a warning that the US will block the move, officials said.  

The Assad Regime Is Facing Its Most Severe Crisis In Years
After three years of grueling warfare against armed opposition fighters, the Syrian regime faces a dire internal crisis not witnessed since the initial months of the conflict. Despite reinforcement from tens of thousands of foreign volunteers, Lebanese Hezbollah militants, and pro-government militias, regime forces have proven unable to decisively overcome rebel brigades on the battlefield.  

Judge declares Obama immigration action unconstitutional
WASHINGTON - President Barack Obama's new plan to ease the threat of deportation for 4.7 million undocumented immigrants violates the U.S. Constitution, a federal judge found on Tuesday, handing down the first legal ruling against the plan. The ruling has no immediate impact, with the government saying there was no reason for Judge Arthur Schwab of the Western District of Pennsylvania to address the issue in the case, which concerns 42-year-old Honduran immigrant Elionardo Juarez-Escobar.  

Hamas - Ruled Gaza Prepares for Next War Against Israel
Dec 17th, 2014
Daily NewsIsrael Today
Categories: The Nation Of Israel

In Gaza, there is no serious reconstruction and certainly no disarmament. Instead, the Hamas-ruled enclave is gearing up for its next war against Israel.

Three months after Operation Protective Edge, nothing has changed in Gaza. The Palestinian media has been full of reports about how the people in Gaza continue to suffer and how Hamas does nothing to help, preferring instead to invest its time and money in new rockets and terror tunnels.

Tens of thousands of Palestinians whose homes were destroyed in the recent war are still living in tent camps set up by the refugee agency UNRWA. Well over one million Gazans continue to be caught in the middle of an often-violent dispute between Hamas in Gaza and the Fatah-controlled Palestinian Authority in Ramallah. Hamas sees violence against Israel as a means of strengthening its own position.

Reconstruction funds totaling USD $5.4 billion that were promised during negotiations in Cairo this summer continue to exist only on paper. Palestinian Prime Minister Rami Hamdallah is currently touring the Persian Gulf in an attempt to collect the pledges.

But Palestinian President Mahmoud Abbas says the money is not being released because Hamas refuses to honor its agreement to hand over control of Gaza’s border crossings.

Hamas, in turn, blames Israel and Fatah of holding up the money, but it has become clear to both Israelis and Palestinians that the terror group will do anything to prevent the reconstruction of Gaza.

Israel, for its part, has been working for months with the UN to advance the reconstruction in Gaza. But every step of the way, Hamas has scuttled any progress, such as when it suddenly raised taxes on imported cement.

Earlier this week, Hamas forces proudly marched through Gaza City with large missiles and aerial drones, a clear message that the group intends to strike Israel even harder next time, even to the detriment of its own population.

China to Deploy World's Largest Coast Guard Ship Next Year
Dec 17th, 2014
Daily NewsWant China Times
Categories: Contemporary Issues;Contemporary Issues

The picture of the ship posted by the internet user is making the rounds on Sina Weibo. (Internet photo)
The picture of the ship posted by the internet user is making the rounds on Sina Weibo. (Internet photo)

A ship with a displacement of 10,000 tons is set to be deployed by the China Coast Guard next year, the largest coast guard vessel in the world, according to Shanghai-based New Outlook.

On Dec. 13 a Chinese netizen uploaded a picture of the ship at the Shanghai Jiangnan Shipyard, which shows that the country's first coast guard ship to break the 10,000 ton displacement mark is already in water and the paintwork is almost complete. The vessel, the Haijing 2901, is bigger than any of the Japan Coast Guard ships, making it the biggest coast guard ship in the world. The ship will be deployed in spring next year at the earliest, according to reports.

Maritime enforcement has become a major isssue for Beijing, given its determination to assert its territorial claims in the South and East China seas. Chinese law enforcement units outmatched the Japan Coast Guard in the April 23 standoff over the disputed Diaoyu (Senkaku or Diaoyutai) islands, the website asid.

Before the China Coast Guard Bureau was set up last year, the chief engineer at the Jiangnan Shipyard, Hu Keyi, said the shipyard had received orders for two maritime patrol ships with a displacement of 10,000 tons. As early as 2013, a report from Japan's Fuji News Network had already suggested that China was developing law enforcement vessels on this scale. The report stated that China had purchased 40 powerful new diesel engines from German engine manufacturer Man Diesel & Turbo, reportedly for use by the China Coast Guard Bureau.

Reports suggest that the loaded displacement of the ship could reach 12,000 tons, with a speed of 25 knots. The vessel has 76mm rapid-fire naval guns, two secondary turrets and two anti-aircraft machine guns. Its cruising endurance, seaworthiness and speed give it an advantage over other countries in the region, according to the news organization. As the first number in the ship's serial number is 2, the ship will likely be deployed to the East China Sea, with the disputed Diaoyu islands its main area of patrol.

After examining the photograph taken by the Chinese internet user, observers have stated that the Jiangnan Shipyard is also building a Type 071 Yuzhao-class amphibious transport dock, a Type 054A multirole frigate and a Type 815G electronic intelligence ship.

Reports have stated that the ship began the painting process last month and that it will be completed by the end of this year. The ship will displace Japan's Shikishima PLH31 and the Akitsushima PLH32 as the biggest coast guard ships in the world.

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