Friday 13 June 2014

Reuters: U.S. may have to "drink cup of poison" on Iran By John Kemp

In 1988, Supreme Leader Ayatollah Ruhollah Khomeini “drank the cup of poison” and agreed to a U.N.-mediated ceasefire with Saddam Hussein to end the devastating Iran-Iraq war.

For Iran’s leader, whose country suffered nearly a million deaths at the hands of the enemy, with countless more wounded, the bitterness can only be imagined, but it must have seemed better than continuing to fight.

Now President Barack Obama and the United States may have to drink their own cup of poison, and decide whether to settle with Iran on the nuclear issue and sanctions because it is better than watching the Middle East continuing to descend into chaos.


SERIOUSLY OVERSTRETCHED

Put bluntly, the United States is battling on too many fronts and not winning on any of them at the moment.

Syria has been lost to Islamist radicals and the government of Bashar Assad. Libya is well on the way to becoming a failed state. Large parts of Iraq have been overrun by insurgents. American policy across the Middle East is a shambles.

Elsewhere, the security situation in Nigeria and other parts of West Africa is deteriorating. Afghanistan, Pakistan, Yemen and East Africa remain violent and unstable, and continue to harbour large numbers of anti-American fighters.

The United States is locked in a confrontation with Russia over Ukraine and with China over the East and South China seas.

Washington is not without allies in Europe and Asia but its foreign policy and policymakers appear dangerously overstretched by trying to confront so many adversaries at the same time.

In this context, the Obama administration needs to improve relations with at least some of its adversaries to concentrate on winning the conflicts that really matter.

The current round of nuclear negotiations provides an opportunity to ease tensions with Iran and concentrate on re-establishing security across Iraq and Syria - as well as trying to tackle the threat of insurgency across Afghanistan, Yemen, East and North Africa.

Source: Reuters


WHO LOST THE MIDDLE EAST?

Concluding any deal with Iran will be exceptionally bitter for any U.S. president. Enmity between the two countries reaches back far beyond the nuclear issue to the hostage crisis in 1979 and the overthrow of Prime Minister Mohammad Mossadegh in 1953.

Israel wants a tough line against a country it sees as an existential threat and can be expected to push for the toughest deal possible even at the risk of derailing the negotiations. Other U.S. allies in the region are also wary.

No president can afford to appear weak for his audience at home or abroad.

The Iranian hostage crisis helped destroy the presidency of Jimmy Carter. The overthrow of Chiang Kai-shek’s U.S.-backed Kuomintang government in China in 1949 sparked a bitter debate about “Who lost China?” that undermined President Harry Truman and led eventually to McCarthyism.

Presidents must be seen to deal from a position of strength, something Richard Nixon managed in starting to normalise relations with China in the 1970s.

The same could not be said for any pact between the Obama administration and Iran. Any deal the administration tries to reach is likely to draw intense criticism from Congress and sections of the foreign policy community in Washington, as well as conservative talk shows.

But doing a deal now or fairly soon might still be the least worst option.


ZONE OF POSSIBLE AGREEMENT

No realistically available deal will satisfy everyone

(diplomacy never results in everyone getting everything they want).

The outlines have been obvious for some time. It will almost certainly leave Iran with some domestic capability of enriching uranium to reactor grade and with its own nuclear power and research plants.

But the aim is to limit the number of uranium-enriching centrifuges to ensure any breakout period is pushed back to a year or more, secure strict checks on the enrichment programme to detect any cheating or move to produce weapons-grade material quickly, and severely restrict the production of plutonium.

Any deal will come with intrusive monitoring and some accounting for past nuclear activities.

The Obama administration appears to have accepted that this would be the outline of any eventual deal when it agreed to negotiations last year.

Iran, too, has shown some flexibility, confirming on Thursday that it is redesigning its planned research reactor at Arak to minimise the production of plutonium [ID:nL5N0OT2DJ].

Recent leaks from the previously leak-free talks suggest the two sides are still divided over the number of centrifuges Iran will be allowed to keep, but that difference should be bridgeable if the parties have the will to do a deal.


TIME IS RIPE FOR DEALMAKING

Set against the disadvantages and questions surrounding any deal, there are a number of distinct advantages for the administration and the United States.

Shi'ite Iran is no friend of the Sunni militants sweeping through Iraq, intent on setting up a sectarian state across northern Iraq and neighbouring parts of Syria.

Iran could play a vital role in helping stabilise Iraq (or destabilise it if Tehran fails to reach an acceptable agreement with the United States).

There may never be a better moment to do a deal. The sanctions regime that the United States carefully constructed may have pushed Iran into talking but it appears to be fraying.

Iran’s oil and condensate exports have been rising. Russia and China, on which enforcement depends, are now locked in their disputes with the United States.

Even Iran’s Sunni-dominated Arab neighbours, Kuwait, the United Arab Emirates and Saudi Arabia, have signalled they want to improve links with Tehran.

With world attention divided between the chaotic scenes in Syria-Iraq, Ukraine, Nigeria, Libya, Afghanistan and Pakistan, the United States will not easily be able to mobilise a tough new round of sanctions if the talks break down in failure.

Given that Syria, Libya and Iraq appear to be disintegrating, Iran is no longer top of the security agenda. The world looks rather different today than it did in the summer and autumn of 2013, when sanctions were at their height and the negotiations began.


CAUTIOUS NEW BEGINNINGS

For the most optimistic observers, the goal of negotiations between the United States and Iran has always been a comprehensive deal that would address all the issues between the two nations. That appears unlikely. But there is plenty of scope for both countries to take some cautious first steps and build on the rapprochement that has been evident over the last year.

There are plenty of ways to structure an “interim” deal and make it the start of a gradual, long-term process of confidence building and gradual normalisation.

The Obama administration appears to understand it cannot fight simultaneously on so many fronts. There already appears to be an attempt under way to de-escalate tensions with Russia following Ukraine’s presidential election.

As the administration contemplates which adversaries to confront and which to conciliate, it must make a choice. Is the undeclared conflict with Iran still a core one for the United States, or should it yield to other concerns?

Source: Reuters

VimpelCom appoints new CEO of its Ukranian Business

AMSTERDAMJune 13, 2014 /PRNewswire/ -- VimpelCom Ltd. ("VimpelCom", "Company" or "Group") (NASDAQ: VIP), a leading global provider of telecommunications services, today announces the appointment of Peter Chernyshov as CEO of its Ukrainian Business Unit, Kyivstar. Peter Chernyshov will succeed Igor Lytovchenko, the Kyivstar founder, who has decided to retire from the company after 20 years in the role of CEO. The appointment will take effect from June 25, 2014. 
Commenting on the appointment, Jo Lunder, VimpelCom CEO said: "I want to express our deepest thanks to Igor, who founded Kyivstar and led it to its current position as the leading mobile operator in the Ukrainian market. He has made a great and important contribution not only to Kyivstar but also to VimpelCom as well as to the development of the Ukrainian and global telecommunications industry. On behalf of his colleagues in Ukraine and across the VimpelCom Group I wish Igor good luck and success in his future activities." Jo added:  "At the same time I am very pleased that Peter Chernyshov is joining our team. Peter is a first class professional and an experienced leader who is highly respected acrossUkraine. In his role, Peter will focus on strengthening Kyivstar's leadership position in the industry by providing the best service to our customers."
Peter Chernyshov commented: "Kyivstar is a company with a rich Ukrainian heritage and it is a proud member of the international VimpelCom family. I am excited by the opportunity to lead the Kyivstar team, to deliver the best customer service and capitalise on the opportunities of new technologies such as 3G and 4G/LTE, when they are available in Ukraine. I am delighted that I will be living and working inKiev, a city I know well and which has been my home for a number of years. I look forward to building on the great achievements of Igor and his team."

Japan's Abe unveils plan to cut corporate tax rate to spur business activity

Japanese Prime Minister Shinzo Abe unveiled a plan on Friday to cut the corporate tax rate below 30 percent in stages to help pull the economy out of two decades of sluggish growth and deflation.

Investors have been scrutinising whether Japan can substantially lower the corporate tax rate - among the highest in the world - to spur growth in the world's third-largest economy. Abe also needs to strike a delicate balance between stimulating growth and reining in snowballing public debt, twice the size of its $5 trillion economy.

The corporate tax cut is a major issue to be included in the government's key fiscal and economic policy outline, which will be finalised around June 27 along with a detailed "growth strategy" of structural reforms.

"Japan's corporate tax rate will change into one that promotes growth," Abe told reporters, adding that he hoped the lower burden on companies would lead to job creation and an improvement also for private citizens.

He also said the government would make sure that alternative revenue sources were secured to offset a decline in corporate tax revenue. He did not elaborate.

The government said in its draft economic and fiscal policy outline it would decide on a concrete plan by year's end to secure a "permanent revenue source" needed for corporate tax cuts, such as by broadening the tax base.

An alternative revenue source must be secured permanently so that Japan can achieve its aim of bringing its primary budget balance - excluding new bond sales and debt servicing - into the black in the fiscal year to March 2021, it said in the draft.

The government reiterated it would decide by year-end whether to go ahead with its plan to raise the sales tax to 10 percent in October 2015. The national sales tax rose to 8 percent from 5 percent on April 1 in a bid to fix the public debt.

Japan's corporate tax rate is nearly 36 percent for large companies operating in Tokyo, among the highest in the industrialised world.

Private-sector members of the government's top economic and fiscal council have proposed cutting the rate to 25 percent eventually to put it in line with international standards.

Japan's corporate tax rate ranks second after the United States among the 34-member OECD economies, with countries such as Britain, Italy, Canada below 30 percent.

In Asia, China and South Korea impose a corporate tax around 25 percent and Singapore puts it at 17 percent.

The government is hoping to see lower corporate tax rates lure foreign direct investment (FDI) and spur capital spending at home, rather than boosting cash reserves at firms.

"Corporate tax cuts alone would not be a panacea. Japan needs to break other barriers such as language and higher business costs, including electricity, to spur FDI."

The finance ministry and ruling party tax panel say that any revenue lost in a tax rate cut should be offset by bringing in alternative fixed revenues, rather than counting on any increase in tax revenue brought by higher economic growth.

Each percentage point of tax cuts would reduce government revenue by about 470 billion yen ($4.61 billion) a year, according to the finance ministry.

At the same time, only 30 percent of all Japanese firms pay corporate income tax, so fiscal hawks want many more brought onto the tax rolls to offset a cut in the tax rate.

Most loss-making firms in Japan are exempted from paying corporate tax and companies can defer losses over several years, making it easier for them to avoid paying taxes.

Source: Reuters

U.S. producer prices unexpectedly fell in May -0.2%

 U.S. producer prices unexpectedly fell in May as costs declined broadly, indicating inflation pressures remained benign.

The Labor Department said on Friday its producer price index for final demand slipped 0.2 percent, braking sharply from April's 0.6 percent increase, which was the largest gain in 1-1/2 years.

Economists polled by Reuters had forecast producer prices rising 0.1 percent.

The department revamped its PPI series at the start of the year to include services and construction. The series is volatile because of big swings in prices received for trade services, making it hard to get a good read on inflation.

Wholesale prices had hinted at some pick-up in inflation pressures in recent months. But Friday's report suggested that inflation at the factory gate remained muted.

"We have seen a lot of noise in these numbers the past couple of months. This puts us back in a relative benign trend," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

Source: Reuters

Iraq crisis: Shia volunteers confront Sunni insurgents in Samarra

Thousands of Shia fighters have rushed to the central Iraqi city of Samarra to defend two shrines that were blown up by insurgents eight years ago, sparking the sectarian war that almost destroyed the country.
Convoys of fighters were seen being escorted north by Iraqi police trucks from Baghdad early on Friday and many have now reached the city where insurgents were in control after a lightning strike south.
The volunteer Shia fighters were quickly assembled after Iraqi forcesabandoned their positions in most of the area, leaving only a small number of troops to guard the Imam al-Askarien shrines.
Samarra is the fourth northern city to have all but fallen out of government control. The embattled prime minister, Nouri al-Maliki, appears to have drawn battle lines further south in Taiji, hoping to defend Baghdad against insurgents who have occupied the north virtually unopposed.
Barack Obama on Thursday set the stage for renewed US military action in Iraq when he said his national security chiefs were looking at any and every way they could help the Iraqi authorities take the fight to the thousands of Sunni jihadists who have vowed to march on the capital.
White House officials said the president did not envision any circumstances in which ground troops could return to the country. Air strikes, however, are under active consideration.
Heavy clashes broke out by late Friday on the outskirts of Samarra between the Shia volunteers and Sunni insurgents who had been trying to win over residents, some of whom appear to view the new arrivals as liberators.
Witnesses said the shrines remained undamaged so far and that the insurgents had not been menacing residents. "Some of them have long hair and they are carrying black flags," said one man. "They are Arabs from other countries."
The Samarra shrines were twice reduced to rubble in February and April 2006 in attacks that sparked a brutal two-year sectarian war across Iraq. Since then, Shia Islamic sites have remained key targets as insurgent groups, led by the Islamic State of Iraq in the Levant (Isis) try to draw the Shia-led government back into the fight.
Source: theguardian

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