China's Alibaba submits updated prospectus

HANGZHOU, June 16 (Xinhua) -- Chinese e-commerce firm Alibaba submitted an updated initial public offering prospectus to the U.S. Securities and Exchange Commission (SEC) on Monday (Beijing time).

The updated filing revealed for the first time the 27-person partnership, future listed company's nine-member board of directors, and its financial situation.

The partnership includes 22 members of management, four members of the company's Small and Micro Financial Services Co and one management member of China Smart Logistics.

Alibaba's founder Jack Ma, Executive Vice-Chairman Joseph Tsai, Chief Executive Officer Jonathan Lu and others are found in the namelist.

According to its planned corporate structure, partnership will play a decisive role in the development of the company. They are selected from employees who have worked more than five years in Alibaba and will have the right to nominate a majority of the company's nine-member board of directors.

Joseph Tsai said the value of partnership is it gives bigger strategic decision-making rights to the company's core managers and reduces the impact of rapid fluctuation of capital market, so as to ensure long-term interests of customers, the company itself and all shareholders.

In early May, Alibaba filed an initial public offering document to the U.S. SEC.

Hong Kong was once the top choice for its IPO but the plan was aborted partly because of Hong Kong's Securities and Futures Commission's opposition to Alibaba's unique corporate structure.

Under Alibaba's statutes, the company's partners are able to nominate and control the board, a challenge to the one share -- one vote standard applied in Hong Kong.

In the updated prospectus, Alibaba also announced the composition of the nine-member board, which includes five directors and four independent directors.

Former Hong Kong Chief Executive Tung Chee Hwa is included in the four independent directors, who have been invited to join the board.

Meanwhile, the updated prospectus revealed Alibaba's financial situation.

It said the total revenue of Alibaba reached 52.504 billion yuan (about 8.4 billion U.S. dollars), up 52.1 percent year on year, and its net income almost tripled to 23.403 billion yuan in 2014 fiscal year (from April 1, 2013 to March 31 this year).

In the 2014 fiscal year, its mobile transactions increased 394 percent compared to the previous year, it said.

Sources said Alibaba will make its IPO debut in the U.S. as early as August.

Free trade zones (FTZs) will not flourish everywhere in China

 Free trade zones (FTZs) will not flourish everywhere in China, a senior official with the Ministry of Commerce said on Monday.

The statement came almost nine months after the country's Shanghai pilot FTZ started operating as a test bed for deepening market-oriented reforms and boosting economic vitality.

At least 20 local governments have reportedly submitted proposals for similar zones.

In response, the official, who did not give his or her name, told Xinhua that FTZs would not be set up everywhere and it was not the goal of the central government to build zones in areas featuring a whole range of preferential policies.

The FTZ "frenzy" goes back to before the Shanghai zone opened. Last year, south China's Guangdong Province announced it was upgrading one of its "special economic development zones," calling it a "trade zone" and boasting unrivaled connections with neighboring Hong Kong.

This year has seen other provinces maneuvering to join the party: The coastal city Qingdao in Shandong Province wants to leverage its proximity to Japan and the Republic of Korea; Xiamen in east China's Fujian Province has said similar things about Taiwan; and Chongqing said it will open up westwards.

Despite all these proposals, authorities have given almost no indication that they intend to approve other zones.

Where and when to set up a FTZ and what and how to test favorable policies in the zone will depend on whether they are replicable elsewhere in the country, the official said.

However, the ministry supports local governments' efforts to study and learn from experiences of the Shanghai FTZ, the official added.

Source: Xinhua

China to accelerate nuclear power development

 China still relies too heavily on coal for power, with nuclear power seen as the route to an optimized energy structure and cleaner growth.

In a meeting of the Central Leading Group for Financial and Economic Affairs on Friday, President Xi Jinping said clean and efficient use of coal and development of other energy sources were crucial to development plans. An energy supply system should be driven diversely by coal, oil, gas, nuclear, new energy and renewable resources, he said.

"By adopting top international standards and ensuring safety, China should lose no time in constructing nuclear power projects in eastern coastal regions," he said.

At the end of 2013, nuclear power accounted for a paltry 2.11 percent of China's total, dwarfed by 80.4 percent of thermal power and 15 percent for hydropower. The installed nuclear power capacity represented only 1.19 percent to total power generation capacity.

The need to conserve energy, reduce emissions and steer away from reliance on coal--the dirtiest form of energy--has never been more obvious.

China aims to reduce energy consumption per unit of GDP by 16 percent from the 2010 level by 2015. The indicator dropped 9.03 percent from 2011 to 2013, accounting for only 54 percent of the overall target.

"In reality, the development of nuclear power is all about substituting coal," said Liu Qiang, an energy expert with the Chinese Academy of Social Sciences.

Considering the economic realities, nuclear power is not likely to face great opposition, Liu said.

Since the Fukushima nuclear disaster in 2011, China has reinforced safety at all nuclear plants. Plans for nuclear power safety and long-term development of nuclear power were passed in 2012, with approval planned for only a few projects in coastal areas before 2015, and none in inland regions.

By the end of last year, 17 nuclear plants were in operation, with a total capacity of nearly 15,000 megawatts of electricity.

At a meeting of the National Energy Commission on April 18, Premier Li Keqiang announced the introduction of new nuclear power plants along the east coast "at a proper time".

Earlier this month, the Ministry of Environmental Protection released the environmental impact statements for two new nuclear power plants, one in Guangdong Province and another in Shandong, but this is still not enough in the longer term.

"China's nuclear power sector still has a long way to go before reaching the global average," said Ye Qizhen of the Chinese Academy of Engineering.

A proportion of 10 percent of nuclear power is an ideal number for China, Ye said.

Source: Xinhua

Beijing housing sales slump 35 %

Home sales in Beijing slumped 34.9 percent year on year in the first five months of the year, a sign of cooling in property sector.

Real estate developers in the city sold 3.29 million square meters of housing during the period, the municipal bureau of statistics said in a statement Monday. Housing starts edged 0.3 percent lower to 4.84 million square meters.

Ssales of commercial buildings, which include residential and commerical property, fell 33.6 percent year on year to 4.54 million square meters, it said.

Sales of residential property in China fell 7.7 percent during the first quarter of 2014 to 1.1 trillion yuan (about 175 billion U.S. dollars). Month to month, home prices have been falling in more of the pool of 70 major cities surveyed by the National Bureau of Statistics.

Source: Xinhua

China sees rising number of new companies

The number of newly registered companies has grown fast since a new registration rule took effect in the beginning of March, new data showed on Monday.

Between March and May, some 929,000 companies were registered, soaring 74.5 percent year on year, according to State Administration for Industry and Commerce data.

Aggregate new capital doubled over the same period last year to 4.8 trillion yuan (780 billion U.S. dollars).

Liu Yuting, deputy head of the administration, said the new rule to lower the minimum registered capital requirements for new companies, which became effective in March, has been very successful in invigorating the market.

China is pushing ahead with market-oriented reforms to combat an economic slowdown. The economy expanded 7.4 percent year on year in the first quarter, the lowest quarterly expansion since the third quarter of 2012. During this period, the number of new private companies stood at 878,000, with aggregate capital reaching 3.78 trillion yuan, up 78.3 percent and 225 percent respectively.

Source: Xinhua

Xinhua: China, 13 executed over terror attacks, violent crimes in Xinjiang

URUMQI, June 16 (Xinhua) -- Thirteen people were executed on Monday for terrorist attacks and violent crimes in northwest China's Xinjiang Uygur Autonomous Region.

They were involved in seven cases and convicted of organizing, leading and participating in terrorist groups; murder; arson; theft; and illegal manufacture, storage and transportation of explosives, according to local courts in prefectures of Aksu, Turpan and Hotan.

All death penalties have been approved by the Supreme People's Court, as required in China.

The 13 planned attacks and killed police officers, government officials and civilians. They took innocent lives, caused huge property losses, and seriously endangered public security, according to local courts.

In one case, three defendants -- Ehmetniyaz Sidiq, Abdulla Srepli and Gulam Eli-- were convicted of organizing and leading terrorist attacks on a police station, hotel, government office building and other venues, killing 24 police officers and civilians and injuring 23 others at Lukqun Township in Shanshan County of Turpan Prefecture on June 26 last year.

In another case, Abdujelil Metnasir joined a terrorist group in February 2012 under the influence of extremism, participated in illegal religious activities many times and led physical training for terrorists. In May 2012, he and other members of the group killed two members who wanted to quit, and planned the assassination of government officials. In June 2012, he provided the bombs that killed one child and injured 17 others at an illegal preaching venue.

"The execution of criminals involved in terrorist attacks and violent crimes answers the calls of all ethnic groups, deters criminal activities, and demonstrates the resolve of the Communist Party of China and the government in cracking down on terrorism," said a spokesman of Xinjiang regional higher people's court.

He said the local judicial organs will continue to perform their functions; severely punish terrorists and criminals using legal weapons; defend the dignity of the law; and safeguard fairness, justice, social harmony and stability.

Also on Monday, three other people were sentenced to death by the Urumqi Intermediate People's Court over a terror attack near Beijing's Tian'anmen Square in October 2013.

A year-long crackdown on terrorism was launched in China with Xinjiang as the major battleground after a terrorist attack on May 22 in an open market in the regional capital Urumqi. The attack, the deadliest in recent years in the region, killed 39 innocent people and injured 94 others.

Related:

China's police chief calls for anti-terrorist readiness

BEIJING, June 16 (Xinhua) -- Minister of Public Security Guo Shengkun on Monday told Chinese police to step up anti-terrorism measures and be prepared to cope with various risks and challenges "at any given time".

Guo stressed that the police must fully realize the role of stability in ensuring the country's reform, development and people's happiness.

News Analysis: China's Huawei's Kirin 920 to shake global chip market?

When it comes to chips for powering smartphones, it has long been a story of the world's leading smartphone chip-maker -- U.S. firm Qualcomm. This time, it is a Chinese-made chip that has caught the eye of market observers.

The octa-core Kirin 920, unveiled by Huawei-owned HiSilicon on Friday, features support for QHD displays, 4K video recording and a high-speed LTE category-6 platform, something even the global industry leaders find it difficult to offer.

While it is too early to say this signals the rise of China in the global mobile processor market, the news should still come as a boon to the country's IT sector, especially the chip-making industry, which has been lagging far behind the world heavyweights.

China relies heavily on imported chips, which are among the country's top four import categories in terms of value, along with oil, iron ore and LCD panels.

As its reliance on foreign oil and iron ore cannot be reversed overnight, China has been working hard to promote the other two industries.

China has become less reliant on LCD panel imports in recent years, as its two leading makers of the panels, BOE and TCL, have been making strides in innovation. However, chips, known as the "heart" of the digital information industry for their importance, continue to be imported in massive quantities.

With China's smartphone market booming, the country imported 232.2 billion U.S. dollars' worth of integrated circuits, generally known as chips, in 2013, up 34.6 percent year on year, according to customs authorities.

The figure was higher than the 219.6 billion U.S. dollars' worth of imported oil for the year, making chips top the list of imports, resulting in a trade deficit of 144.1 billion U.S. dollars for the industry, which had been expanding for four years in a row.

However, there is still a long way to go before China can significantly reduce its chip imports.

Li Mingjun, deputy secretary general of the Shenzhen Semiconductor Industry Association, was quoted by local media as saying that most Chinese chip-makers are still only capable of making medium-to-low-end chips.

In addition, China's chip-making firms are still too small to challenge the U.S. dominance of the market, at least in the near future

Qualcomm registered a business revenue of 17.3 billion U.S. dollars in 2013, up 31.6 percent from a year earlier. The business revenue of HiSilicon, China's leading chip-maker, was only one eighth of Qualcomm's last year.

Another obstacle preventing HiSilicon's Kirin 920 from challenging the dominance of Qualcomm and other U.S. players is Huawei's reluctance to do so.

Huawei is not aiming to export its chips and does not see them as a stand-alone product, the 21st Century Business Herald quoted Xu Zhijun, deputy president of Huawei, as saying.

Xu said, "The strategy we adopt is one plus one or one plus N," which means that for every HiSilicon chip that Huawei incorporates in its products, it will integrate one chip or more from other suppliers.

The reason for this is that Huawei doesn't want to stir concerns with Qualcomm or other industry giants, fearing such a situation might affect chip supplies, the Herald reported.

Huawei was taught a tough lesson in March 2012 when it unveiled its quad-core processor K3V2 and said it would use the new chips in its Ascend D smartphones.

The new mobile phones appeared on the market several months later than planned. A source close to Huawei told the Herald that the delay was at least partly down to the high-profile release of the chips making its screen supplier Samsung nervous and leading it to stall the supply.

"We can only lead U.S. companies in sectors the size of a needle. But it is out of the question for our lead to expand to sectors the size of a matchstick," said Ren Zhengfei, Huawei's founder and CEO, during a speech earlier this year when publishing the firm's 2013 annual report.

Source: Xinhua

Chinese premier arrives in Britain for official visit

 Chinese Premier Li Keqiang arrived here Monday for an official visit to Britain, with a series of cooperation deals worth 30 billion U.S. dollars expected to be signed.

Upon his arrival in London, Li said that this year marks the 10th anniversary of the establishment of the China-Britain comprehensive strategic partnership and the two sides are faced with an important opportunity to carry forward bilateral relations into a new phase.

"I am looking forward to having in-depth exchanges of views with British leaders on bilateral affairs and other issues of common concern, adding fresh impetus to and charting the course for the bilateral partnership so as to speed up the development of China-Britain relations in the upcoming decade," he said.

During his stay in Britain, Li will meet Queen Elizabeth II and hold an annual meeting with British Prime Minister David Cameron.

The Chinese premier will also attend China-UK Global Economic Round-table and the China-UK Financial Forum, give a speech to top British think tanks and meet with business leaders from both countries.

The trip is Li's first visit to Britain since he took office in March last year, and another major diplomatic event between China and Europe following President Xi Jinping's tour in late March.

Observers in China view the visit as a sign that both countries have managed to ride out a rough patch in their relationship that started with Cameron meeting the Dalai Lama in May 2012 despite Beijing's objections.

Britain is China's third largest trading partner in the European Union and second largest investment source as well as a major destination for China's overseas investment. Two-way trade topped 70 billion dollars last year.

The visit is the first leg of Li's two-nation trip to Europe, which will also take him to Greece.

Source: Xinhua

China urges restraints after Ukrainian military airplane shot down

 A Chinese Foreign Ministry spokeswoman on Monday urged calm and restraint after a Ukrainian military transport plane was shot down and all 49 soldiers on board killed.

"As the situation in Ukraine is at a critical period, (we) hope all sides will keep calm," Spokeswoman Hua Chunying told a daily news briefing. Media reports say the plane was shot down by pro-Russia rebels.

Hua said all sides concerned are intensely pursuing a political solution to the Ukrainian crisis after Ukrainian President Petro Poroshenko mapped out a peace plan.

She urged the sides to cease fire as soon as possible to create favorable conditions for a political solution.

During the briefing, Hua also condemned the attack by hundreds of Ukrainian protesters on Russia's embassy in Kiev.

According to the Vienna Convention on Diplomatic Relations and other international conventions, the safety of diplomatic missions and personnel should be ensured effectively, said the spokeswoman.

Source: Xinhua

China will effectively respond to security challenges

China is determined to effectively respond to security challenges, a Chinese Foreign Ministry spokeswoman said on Monday after Japan's deployment of anti-ship missiles in Okinawa.

Hua Chunying made the remarks at the ministry's regular press briefing when asked to comment on the Japan Ground Self-Defense Force's deployment of surface-to-ship missiles and its 2016 plan to equip Kumamoto Prefecture with the missiles.

She said China adheres to the diplomatic policy of good neighborhood and friendly relations, and will take effective measures to respond to security challenges and safeguard national and territorial sovereignty.

Japan's military deployment will complicate the security situation in the region, Hua said, noting that Japan should explain its intention of the military move.

Source: Xinhua

Seeking Alpha: Argentine stocks slump after U.S. Supreme Court rejects defaulted bond plan

Seeking Alpha: Some analysts say energy stocks are getting too hot

Alibaba Gives More Details About Internet Business in New IPO Filing

       The WSJ reports,"In an amended filing for its initial public offering, released Monday, Alibaba included a host of details investors had complained were missing in its initial filing in May. Chief among them: a sales breakdown for the e-commerce company's two main shopping sites; names of the 27 people who control nominations for a majority of the board; details related to its Alipay online-payments affiliate; insight into the company's acquisition strategy; and more information on how the company is planning to handle shipping inside China".

"Alibaba also released new financial figures that showed the company's margins were under pressure—falling to 45.3% in the quarter ended in March from 51.3% a year earlier—due to rising spending to attract mobile users".

"The broader disclosure in the amended filing, which was released as part of a back-and-forth with U.S. securities regulators prior to the IPO's approval, is aimed at making sure global investors are comfortable with Alibaba, which is a household name in China but relatively unknown in the West. 

Yet some investors say there are plenty of questions left, from how much the company charges merchants for marketing and advertising on its site, to guidance on acquisition and spending plans".

In Monday's filing, Alibaba for the first time revealed that Taobao, its biggest consumer marketplace with millions of small Chinese merchants, handled $177 billion of transactions last year—more than twice as much as Tmall, an online mall that hosts brands and retailers, which handled $70 billion. But Tmall has been growing much faster than Taobao over the past year, with transaction volume in the first quarter of the year rising 90% over the previous year, versus 32% for Taobao.

Alibaba also said Tmall, which charges commissions, generates more revenue per transaction than Taobao, which makes money mostly through advertising.

Alibaba expanded the section on acquisitions to explain some of the rationale behind its recent multibillion-dollar acquisition spree. Its recent acquisition of mobile Web browser operator UCWeb helped Alibaba gain access to 264 million monthly active smartphone users, while another investment in one of China's most successful soccer teams gives it a "marketing platform" that could expose the company to millions of Chinese soccer fans, the filing said.

Alibaba said it takes minority investments in companies to feel out its relationship with potential acquisition targets, before moving to buy the entire company. Alibaba's minority stakes in Youku Tudou Inc.,a Chinese online video site, and popular China social-networking site Weibo would give it a better grasp of Internet users' behavior, which could be useful for marketing, the company said.

Alibaba also gave new details of risks facing its payments affiliate Alipay, which has been extremely successful at pushing into areas that are traditionally the preserve of banks, like investment management. Alibaba said some Chinese banks had put caps on the amount consumers are allowed to transfer to Alipay per day, ranging from 10,000 yuan ($1,610) to 50,000 yuan. Alibaba says the caps aren't significant, but admits it cannot predict the banks' future behavior.

Alibaba listed the nine members of its post-IPO board—a group that includes Alibaba's charismatic founder Jack Ma and the company's executive vice chairman, Joseph Tsai, as well as former Hong Kong Chief Executive Tung Chee-hwa.

The company revealed the 27 members of its "partnership" structure, which has the power to nominate more than half of its board. Twenty-two of those members are from Alibaba's management including Messrs. Ma and Tsai, while four are executives of Alipay, and one is an executive at Alibaba's logistics joint venture.

China Smart Logistics, a joint venture in which Alibaba holds a 48% stake, plans to build a nationwide network of logistic hubs such as warehouses, distribution centers and other facilities, placing them in locations where it expects the highest consumer demand. In some cities, China Smart Logistics will form partnerships with other companies to build out delivery infrastructure, at times taking on debt to do so, Alibaba said. The joint venture's long-term goal is "to support the delivery of over 100 million packages a day to consumers' doorsteps anywhere in China within 24 hours of an order being placed," Alibaba said.

Alibaba is aiming to list in New York during the first half of August, according to people familiar with the company's plans.

WSJ:Supreme Court Sides With Holdout Creditors in Argentina Debt Case

The U.S. Supreme Court on Monday handed Argentina a pair of legal setbacks in cases stemming from its historic 2001 default, a major blow for the country in its lengthy battle with holdout creditors.

In one highly anticipated case, the justices rejected Argentina's request that the high court intervene in litigation with holdout hedge funds that had refused to accept the country's debt-restructuring offers.

The Supreme Court, without comment, left in place a lower-court ruling that said Argentina can't make payments on its restructured debt unless it also pays the holdouts.

In a second related case, the high court ruled that bank records about Argentina's international assets can be made available to one holdout creditor seeking to collect on court judgments stemming from the default.

Argentina is fighting over billions of dollars with the holdouts, which include Aurelius Capital Management and Elliott Management Corp. affiliate NML Capital Ltd. The country has blasted the hedge funds as "vultures" seeking to reap a financial windfall on debt they bought at deeply discounted prices.

Argentina had warned the Supreme Court that the lower-court ruling in the main case left it facing the possibility of a new, court-ordered default, "which could trigger a renewed economic catastrophe with severe consequences for millions of ordinary Argentine citizens."

The country also said the rulings threatened international credit markets and impeded the debt-restructuring process.

In the wake of the ruling, Argentina's 2033 dollar bonds issued under New York law were trading at about 74 cents on the dollar from around 82 cents on Friday to yield 11.61%, according to Reuters. The bond is trading at its lowest price since March.

The hedge funds had urged the court to reject Argentina's appeal, saying the country had far overstated the financial impact of the case and has the money to pay up. They also said the Argentine government has a history of mistreating creditors and didn't deserve Supreme Court review because it will disobey the U.S. court rulings if it ultimately loses.

Argentina defaulted on about $100 billion of its debt during its financial crisis. The country in 2005 and 2010 offered holders of the defaulted bonds new heavily discounted debt in exchange. Between the two swaps, investors agreed to exchange about 93% of the defaulted bonds.

A New York federal trial judge and the Second U.S. Court of Appeals each ruled that Argentina's refusal to pay the holdouts while paying on the newer debt violated a so-called equal-treatment promise the country made on the older bonds.

The Second Circuit rejected Argentina's "blanket assertion" that a ruling against the country would plunge it into a new economic crisis.

The Supreme Court refused to disturb those rulings, saying in a brief written order that it wouldn't consider Argentina's appeal.

In the related bank-records case Monday, the Supreme Court sided with NML Capital, which had served subpoenas on Bank of America Corp. and Banco de la Nación Argentina, seeking records on bank accounts maintained by Argentina. NML said it wanted the records to learn how Argentina moves its assets around the world and to aid its attempt to collect on its judgments.

Argentina was seeking to shut down NML's discovery campaign on immunity grounds because it is a sovereign foreign state.

The Supreme Court, in the 7-1 ruling, affirmed a lower-court ruling allowing the subpoenas.

Justice Antonin Scalia, writing for the majority, said legal rules allow creditors to seek information on a debtor in order to collect on judgments. 

WSJ: White House: U.S. Won't Coordinate Military Actions With Iran

The WSJ reports, "the U.S. won't take coordinated military action with Iran as part of a broader effort to stem escalating violence in Iraq", the White House said on Monday.

"Any conversation with the Iranian regime will not include military coordination," White House spokesman Josh Earnest told reporters traveling with President Barack Obama on Air Force One. "We're not interested in any effort to coordinate military activity with Iran."

The Pentagon also said Monday it had no intention of coordinating a military response to the crisis in Iraq with Iran or its military forces, a position that appeared to vary from earlier comments by Secretary of State John Kerry.

Mr. Kerry said in an interview airing Monday that the U.S. was open to talks with Iran on the Iraq crisis, and that he wouldn't rule out the possibility of military cooperation between the two longtime adversaries.

"There is absolutely no intention, no plan to coordinate military activities between the United States and Iran," Adm. Kirby the Pentagon press secretary said, adding that they agreed that conversations on the sidelines of international talks over Iran's nuclear program would be appropriate.

U.S. Deadline Could Force Grand Bargain on Internet Taxes

      The WSJ reports,"This week, a House committee is expected to vote to renew a longstanding federal moratorium on Internet-access taxes. The 15-year-old moratorium on Internet access taxes prevents most states and local governments from applying telecommunications excise taxes and other levies on Internet connections, of which there are about 262 million in the U.S.

But the move to extend the moratorium on access taxes creates an opening for senators who see it as a vehicle for their legislation to allow states to collect online sales tax from out-of-state Internet merchants. Right now, that’s difficult for states, because the Supreme Court said in 1992 that a state can’t force an out-of-state merchant to collect its sales tax unless the merchant has a physical presence in the state. With Internet sales growing rapidly, governors and state lawmakers of both parties are pushing Congress to pass legislation that would set up a legal means for states to begin collecting their sales tax from more out-of-state vendors.

So, when the moratorium bill comes over from the House to the Senate, it’s likely that key senators will seek to add their online sales-tax legislation.

Then the question becomes what the House will do, as the clock ticks down to a fall deadline.

The eventual outcome is far from clear. But one thing is certain: unless Congress makes up its mind by Nov. 1, the current Internet tax moratorium will expire. That means many states and local governments would be able to start imposing telecommunications taxes on the online world.

Already, big telecommunications companies are preparing notices to send out to customers in coming weeks, saying the possibility exists that they will have to start collecting state and local taxes on Internet access soon. That’s gotten the attention of lawmakers who worry about angering constituents ahead of the November election.

Congress could eventually blink, and re-enact the moratorium without the online sales-tax legislation.

But sponsors of the sales-tax bill aren’t likely to give up without a fight. They see this as a big pressure point for passing some version of their bill.

Even a few online retailers are looking for a national solution to the sales-tax mess, to prevent a patchwork of state rules.

But many lawmakers – especially House Republicans – view the legislation as a burden on businesses and also a politically unpopular new tax on consumers".

Russia cuts off gas to Ukraine as Kiev orders border secured

KIEV/GORKI, Russia, June 16 (Reuters) - Russia cut off gas to Ukraine on Monday in a dispute over unpaid bills that could disrupt supplies to the rest of Europe and set back hopes for peace between the former Soviet neighbours.

After the weekend loss of 49 troops when pro-Russian rebels shot down a military transport plane, Ukraine's new president ordered his forces to retake full control of their border with Russia - saying this could then pave the way for negotiations.

Calling time on weeks of wrangling in talks over natural gas supplies, Russia said Kiev had missed a Monday morning deadline to repay $1.95 billion owed for previous purchases and announced Ukraine would now only get gas it has paid for in advance.

At the same time, Moscow insisted that Ukraine must let Russian gas flow across the country through international pipelines to Russia's clients in the European Union - noting a temptation for Kiev to tap into those supplies in transit.

Kiev and Moscow blamed each other for the failure to agree on the price of future gas deliveries and refused to abandon well established positions: Russia offering a discount and Ukraine rejecting that as a tool for political manipulation.

The talks are bound up with the worst crisis between Russia and Ukraine since the Soviet Union collapsed - a crisis that has brought Western sanctions on Moscow, the Russian annexation of Crimea and Cold War-style sabre-rattling along the borders.

Western-backed Ukrainian President Petro Poroshenko, elected last month to replace the Kremlin-friendly leader ousted in February, said on Monday he wanted troops to regain full control of the border with Russia this week. After that, there could be a ceasefire and efforts to come up with a peace plan.

"The ceasefire will be declared as soon as the border is secure," Poroshenko told his security chiefs. "Declaring a ceasefire while the border is open would be irresponsible."

His remarks underlined his concern that Russia is supporting the rebels by sending in tanks, guns and men. Hopes of a lowering of tension had already been dented before the gas talks failed by the downing of the plane near the eastern frontier, an attack on Russia's embassy in Kiev and new accusations from NATO that Russia is arming the Ukrainian rebels.

All that sent Russian financial markets lower on Monday and helped oil and gas prices climb in Europe that were already firm on fears of supply disruption due to violence in Iraq.

"Thanks to the unconstructive position of the Ukrainian government, today a prepayment system was introduced," Alexei Miller, the chief executive of Russian state exporter Gazprom , told Prime Minister Dmitry Medvedev during a meeting at a government residence at Gorki, outside Moscow.

He said Ukraine had "adopted a position that can only be called blackmail", adding: "They wanted an ultra-low price."

At a news conference, he said it would no longer be enough for Kiev to pay part of its debt for supply to resume. That would now happen only once Ukraine paid off all the almost $4.5 billion and paid up-front for a month's deliveries, he said.


"NOT ABOUT GAS"

Ukrainian Prime Minister Arseny Yatseniuk accused Russia of deliberately blocking a deal to cause Kiev supply problems next winter, when temperatures plunge and heating needs increase.

"But it is not about gas. It is a general Russian plan to destroy Ukraine," Yatseniuk said. "It is yet another step against the Ukrainian state and against Ukrainian independence."

Medvedev said some of Kiev's ruling elite were not up to the job, echoing outrage over Ukraine's acting foreign minister using a coarse anatomical expression to describe President Vladimir Putin during the weekend embassy protest in Kiev.

"You can see this in many situations; from the paranoid behaviour of the acting foreign minister at the Russian embassy in Kiev to the failure of the prime minister of Ukraine to agree on gas on the basis of a discounted price," he said on Facebook.

Source: Reuters

Blame Canada: New pipes set to hit U.S. Gulf with heavy crude

 A new chapter in the North American oil revolution is about to open on the Texas coast, with two major pipelines poised this summer to deliver an unprecedented influx of heavy Canadian crude to U.S. refineries

- and potentially beyond.

The anticipated startup of the Seaway Twin oil pipeline later this month will open the door for another 450,000 barrels per day (bpd) to flow from Cushing, Oklahoma, to oil tanks near Houston. A second line, Flanagan South, built at a cost of $2.6 billion, will start pumping even more Canadian crude from Illinois to Oklahoma.

They are part of a wave of investment that is reshaping the domestic crude oil market, reversing the flow of oil that traditionally moved inland from the coast and increasingly replacing imports from long-time suppliers Mexico and Venezuela, whose heavy crudes face growing competition from Canada's.

"There is a new landscape of connectivity coming for the second half of the year," said Michael Cohen, an analyst at Barclays in New York.

The one-two punch may land hardest on domestic crudes such as Southern Green Canyon , an offshore, medium grade delivered into Nederland, Texas. It may initially spare some rivals like Mars , which is traded in Louisiana, where new pipelines are slow to deliver Canadian oil.

The first jolt will come from the expansion of the Seaway pipeline, a 400-mile conduit that was reversed in 2012 to accommodate the unexpected flow of burgeoning Canadian and North Dakota crude in the north to refiners in the south.

In 2012, operators Enterprise Product Partners and Enbridge Inc got commitments to more than double its capacity to a total 850,000 bpd with a $2 billion parallel line called the Seaway Twin or Loop. That should begin pumping by the end of this month, the company said this month.

Other projects will also offer new trading flexibility along the Houston Ship Channel, such as a 6 million barrel expansion of Enterprise's Echo storage terminal in early 2015, forcing market participants to grapple with shifting patterns, volatile prices and fluctuating stockpiles.

One question will be how much of the new oil ends up flowing overseas. The first known cargo of Canadian crude re-exported via the U.S. Gulf sailed for Spain a month ago out of the Freeport, Texas, terminus of the original Seaway line. [ID:nL1N0O00YS]


SGC VS MARS

To be sure, the Twin is capable of carrying a variety of crude oil from across North America, including the Midcontinent and the Bakken play in North Dakota, according to its website.

However, with surging production at the nearby Eagle Ford and Permian Basin plays already sating much Gulf Coast demand for lighter, sweeter crudes like Bakken, trading sources say the focus will be on shipments of Canadian crude instead.

Exports of Canadian crude directly to Texas have risen sharply this year, reaching a record of nearly 110,000 bpd in March, more than three times as much as in February, according to Energy Information Administration (EIA) data. But that's barely a trickle for Gulf Coast refiners, which churn out nearly half of America’s fuel, burning more than 7 million barrels of crude daily.

Traders say the Seaway Twin has almost enough committed shippers to run at full rates, although it won't likely run full in the near term until there is increased capacity to bring Canadian crude to the Midwest.
That will change in the third quarter, however, when Enbridge's nearly 600,000 bpd Flanagan South will connect the company's main Canadian export pipeline to Cushing. It will run 600 miles from Pontiac, Illinois.

"Seaway Twin is mostly going to be designed to bring Canadian barrels, which won't happen greatly until Flanagan starts up," said Sandy Fielden of RBN Energy consultancy.

The most immediate impact is likely to be felt on Southern Green Canyon (SGC), which is named for a region in the Gulf of Mexico and is produced by oil majors including BP Plc , Anadarko Petroleum Corp , Marathon Oil Corp and BHP Billiton Petroleum .

SGC production has risen recently, according to data on the Cameron Highway Oil Pipeline System (CHOPS), which delivers SGC to the coast. CHOPS pumped just over 190,000 bpd in the first quarter, double the rate of 2012, according to a Securities and Exchange Commission filing by operator Genesis Energy L.P. 

SGC is comparable to Mars sour in quality: its API gravity is 0.6 points lower and its sulphur content is 0.5 percent weighted higher, according to an assay on BP's website.

But a major difference is location. SGC is delivered into Nederland, Texas, some 100 miles from the terminus of the Seaway Twin, while Mars is delivered into Clovelly, Louisiana.

SGC is already beginning to suffer by comparison. It traded as much as $1.90 a barrel above Mars crude in 2012, but cash prices have collapsed more recently as it faces competition from grades crude being pumped into the Houston area.

On the 30-day moving average, SGC has traded at a discount of as much $2.44 a barrel versus Mars, according to Reuters data, the biggest such discount since production began more than five years ago. Last Wednesday the discount was $3.13 a barrel, and traders expect demand for SGC to continue to weaken once the pipeline starts up.


THE SECOND BLOW

Seaway Twin is coming online at a moment of seismic change in the way excess domestic inventory is being distributed.

Until recently, inventory tended to pool up at Cushing, the delivery point for futures and the biggest hub of independent oil storage tanks. But with rising production in the north and new pipelines pumping oil all the way to the coast, the location of the growing domestic glut has shifted.

Cushing stocks fell recently to their lowest levels in six years, while stocks on the Gulf Coast rose to a record high at the start of May, according EIA data.

Adding to the flexibility of oil flows, a 95-mile, 30-inch-diameter lateral pipeline will soon connect the Echo storage and distribution terminal in south Houston to the Beaumont and Port Arthur, Texas, area, expanding the reach of WCS crude beyond Houston's refinery row.

As more heavy, sour crude flows east from Houston, more Mars is likely to be displaced, and eventually imports, particularly Mexican Mayan and Venezuelan, will be pushed out, Fielden said.

“Will they sell their barrels somewhere else? This will impact trade flows.”

Gulf Coast region imports of Mayan crude dropped to 67,233 bpd in May from 81,125 bpd a year earlier, according to data from PIERS available via Eikon.

Source: Reuters

IMF cut its U.S.Forecast Growth of 2% this year below 2.8%(prediction in April)

- The International Monetary Fund cut its growth forecast for the United States on Monday and said the economy would not reach full employment until the end of 2017, allowing the Federal Reserve to bide its time before raising interest rates.

In its annual health check of the U.S. economy, the IMF also urged the United States to boost the minimum wage, which is below most international standards, to fight poverty, which lingers above 15 percent.

The IMF forecast economic growth of 2 percent this year, below the 2.8 percent rate it predicted in April, due to a weak first quarter. It kept its 2015 forecast unchanged at 3 percent.

"Recent data ... suggest a meaningful rebound in activity is now underway and growth for the remainder of this year and 2015 should well exceed potential," the IMF said.

Yet the country's potential growth should only be around 2 percent going forward, below historical averages, as the population ages and productivity growth slows, it added

"Given the substantial economic slack in the economy, there is a strong case to provide continued policy support," the IMF said.

It said its forecasts show the U.S. economy would only return to full employment by the end of 2017, with inflation remaining low, suggesting the Fed could keep rates at zero for longer than the middle of 2015.

The IMF urged the United States to increase spending on infrastructure and education and change parts of its tax system, including boosting the federal gasoline tax and reinstating the tax credit for research and development, to help spur growth.

In the future, the United States should also reform corporate taxes, introduce a carbon tax and move toward a federal value-added tax, the IMF said.

A greater reliance on growth-enhancing fiscal policies could allow the Fed to retreat more quickly from its extraordinary monetary stimulus, it added.

"This would be the best policy mix from an economic perspective but, regrettably, political agreement on such an approach remains elusive," the IMF said.

The IMF warned that financial markets could be too complacent about possible volatility surrounding a future rate hike. Markets predict a narrow range of future policy rates, despite uncertainty about the amount of slack in the U.S. labor market and the potential for wage and price inflation.

"This sets up the risk, even with a successful and well-communicated increase in interest rates, for significant swings in market flows and prices in the months ahead," the IMF said.

It said the Fed should consider further changes to its communication to better guide markets, including holding a news conference after each meeting of its policy-setting committee and publishing quarterly reports on monetary policy.

"Finally, the (Fed's policy-setting panel) could provide greater clarity about how financial stability considerations figure into its monetary policy calculus," the IMF said. Fed policymakers meet on Tuesday and Wednesday to consider their monetary policy stance.

As in previous reports, the IMF warned a prolonged period of ultra-low U.S. interest rates raises financial stability concerns, pointing especially to fragmented oversight of the U.S. insurance sector.

Source: Reuters

Ukrainian president seeks truce to push peace plan

President Petro Poroshenko called on Monday for a truce in east Ukraine, where his government faces a rebellion by pro-Russian separatists, to provide time to seek agreement on a peace plan.

In a statement to security chiefs, Poroshenko said he had set government forces the task of regaining full control of Ukraine's border with Russia this week. One this was done, he said, a temporary ceasefire should be observed and efforts made to agree on a peace plan.

Source: Reuters

Ukraine: Naftogaz files claim in Stockholm arbitration court over gas supplies from Gazprom. The latter says no more deliveries until debt is covered.

Source: Reuters

WSJ: Gazprom Demands Ukraine Prepay for Gas

Russian state gas giant OAO Gazprom , said Monday it will only ship fuel to Ukraine if it pays in advance, making good on a threat that could lead to supply cuts affecting European customers after late-night EU-mediated talks on debt repayment failed to yield a deal.

Gazprom said it hadn't received payment for a debt it put at $4.458 billion by the Monday deadline it had set. "Ukraine will receive gas only in the amounts it has paid for," Gazprom said.

The shift to prepayment is likely to lead to a reduction in supplies to Ukraine and could affect Russia's shipments to Europe, the bulk of which go through Ukraine. Industry analysts say the initial effect on European markets of any supply disruption may be limited because of current high inventories of gas in storage and lower summer demand.

Ukraine will be able to maintain domestic supplies of natural gas and ensure the transit of Russian exports to Europe for at least several months, Ukraine officials said.

"The Ukrainian side has prepared for this eventuality and we are ensuring reliable transit as well as supplies to domestic consumers," Yuriy Prodan, Ukraine's minister of energy and coal, told a cabinet meeting in Kiev, the Interfax news agency reported.

Andriy Koboliv, head of state gas company NAK Naftogaz told the same session that, "We have time to resolve this issue at least until December." Transit volumes to Gazprom's European customers are flowing normally at 185 million cubic meters a day, he said.

The officials noted that Ukraine's inventories of gas in storage—now nearly 14 billion cubic meters—and imports from Europe via reverse flows through Slovakia, combined with lower consumption in the summertime, will allow Ukraine to manage without Russian supplies.

The deadlock between the two sides coincides with growing political tensions, after Ukrainian government forces clashed with pro-Russian separatists in east Ukraine.

Ukraine has refused to pay the debts until Gazprom agrees to reduce the price to market levels. EU-mediated talks failed to reach a deal and European officials blamed Moscow for refusing to concede.

Russia accuses Ukraine of intransigence and says Kiev's price demands are unreasonable and sought to reassure its European clients that it intends to meet its contractual obligations.

There are no more negotiations scheduled.

Both sides said Monday they filed claims in an international arbitration court in Stockholm, but arbitration proceedings could take months or years to resolve.