December 30, 2011
December 29, 2011
Japan's Prime Minister Yoshihiko Noda (R) reviews an honor guard with China's Premier Wen Jiabao during a welcoming ceremony in Beijing on December. 25, 2011.
Chinese Prime Minister Wen Jiabao and his Japanese counterpart Yoshihiko Noda have reached an agreement to promote direct use of their currencies in bilateral trade, limiting the use of dollar in Asia.
The announcement was made in a statement by the Japanese government on Monday after the Asian leaders met in China's capital Beijing.
Both sides also agreed that Japan will hold Chinese currency, yuan, in its foreign-exchange reserves, now largely denominated in dollars.
Chinese Foreign Ministry spokesman Hong Lei said after the meeting that the agreement “benefits the ease of trade and investments between the two countries.”
“It strengthens the region's ability to protect against risks and deal with challenges,” Lei added.
The direct currency swap between the world's second- and third-largest economies reflects efforts to reduce risks stemming from fluctuations of foreign exchange rates and transaction costs.
"As implications from the current global financial crisis continue to spread and the complexity and severity of the world and regional situations are worse than expected, it is necessary and possible that China and Japan join efforts to address the challenges and deepen strategic reciprocal ties," the Chinese premier said.
China is Japan's biggest trading partner, with transactions between the two amounting to $340 billion in 2010, from $120 billion a decade earlier.
China also forged a deal with Thailand for a direct currency swap worth $11 billion last week as part of a plan outlined in October to promote the use of the yuan in the Association of Southeast Asian Nations and establish free trade zones.
at 7:31:00 PM
By DAVID E. SANGER and ANNIE LOWREY
Published: December 27, 2011
WASHINGTON — A senior Iranian official on Tuesday delivered a sharp threat in response to economic sanctions being readied by the United States, saying his country would retaliate against any crackdown by blocking all oil shipments through the Strait of Hormuz, a vital artery for transporting about one-fifth of the world’s oil supply.
The declaration by Iran’s first vice president, Mohammad-Reza Rahimi, came as President Obamaprepares to sign legislation that, if fully implemented, could substantially reduce Iran’s oil revenue in a bid to deter it from pursuing a nuclear weaponsprogram.
Prior to the latest move, the administration had been laying the groundwork to attempt to cut off Iran from global energy markets without raising the price of gasoline or alienating some of Washington’s closest allies.
Apparently fearful of the expanded sanctions’ possible impact on the already-stressed economy of Iran, the world’s third-largest energy exporter, Mr. Rahimi said, “If they impose sanctions on Iran’s oil exports, then even one drop of oil cannot flow from the Strait of Hormuz,” according to Iran’s official news agency. Iran just began a 10-day naval exercise in the area.
In recent interviews, Obama administration officials have said that the United States has developed a plan to keep the strait open in the event of a crisis. In Hawaii, where President Obama is vacationing, a White House spokesman said there would be no comment on the Iranian threat to close the strait. That seemed in keeping with what administration officials say has been an effort to lower the level of angry exchanges, partly to avoid giving the Iranian government the satisfaction of a response and partly to avoid spooking financial markets.
But the energy sanctions carry the risk of confrontation, as well as economic disruption, given the unpredictability of the Iranian response. Some administration officials believe that a plot to assassinate the Saudi ambassador to the United States — which Washington alleges received funding from the Quds Force, part of the Iranian Revolutionary Guards Corps — was in response to American and other international sanctions.
Merely uttering the threat appeared to be part of an Iranian effort to demonstrate its ability to cause a spike in oil prices, thus slowing the United States economy, and to warn American trading partners that joining the new sanctions, which the Senate passed by a rare 100-0 vote, would come at a high cost.
Oil prices rose above $100 a barrel in trading after the threat was issued, though it was unclear how much that could be attributed to investors’ concern that confrontation in the Persian Gulf could disrupt oil flows.
The new punitive measures, part of a bill financing the military, would significantly escalate American sanctions against Iran. They come just a month and a half after the International Atomic Energy Agency published a report that for the first time laid out its evidence that Iran may be secretly working to design a nuclear warhead, despite the country’s repeated denials.
In the wake of the I.A.E.A. report and a November attack on the British Embassy in Tehran, the European Union is also contemplating strict new sanctions, such as an embargo on Iranian oil.
For five years, the United States has implemented increasingly severe sanctions in an attempt to force Iran’s leaders to reconsider the suspected nuclear weapons program, and answer a growing list of questions from the I.A.E.A. But it has deliberately stopped short of targeting oil exports, which finance as much as half of Iran’s budget.
Now, with its hand forced by Congress, the administration is preparing to take that final step, penalizing foreign corporations that do business with Iran’s central bank, which collects payment for most of the country’s energy exports.
The sanction would effectively make it difficult for those who do business with Iran’s central bank to also conduct financial transactions with the United States. The step was so severe that one of President Obama’s top national security aides said two months ago that it was “a last resort.” The administration raced to put some loopholes in the final legislation so that it could reduce the impact on close allies who have signed on to pressuring Iran.
The legislation allows President Obama to waive sanctions if they cause the price of oil to rise or threaten national security.
Still, the new sanctions raise crucial economic, diplomatic, and security questions. Mr. Obama, his aides acknowledge, has no interest in seeing energy prices rise significantly at a moment of national economic weakness or as he intensifies his bid for re-election — a vulnerability the Iranians fully understand. So the administration has to defy, or at least carefully calibrate, the laws of supply and demand, bringing to market new sources of oil to ensure that global prices do not rise sharply.
“I don’t think anybody thinks we can contravene the laws of supply and demand any more than we can contravene the laws of gravity,” said David S. Cohen, who, as treasury under secretary for terrorism and financial intelligence, oversees the administration of the sanctions. But, he said, “We have flexibility here, and I think we have a pretty good opportunity to dial this in just the right way that it does end up putting significant pressure on Iran.”
The American effort, as described by Mr. Cohen and others, is more subtle than simply cutting off Iran’s ability to export oil, a step that would immediately send the price of gasoline, heating fuel, and other petroleum products skyward. That would “mean that Iran would, in fact, have more money to fuel its nuclear ambitions, not less,” Wendy R. Sherman, the newly installed under secretary of state for political affairs, warned the Senate Foreign Relations Committee earlier this month.
Instead, the administration’s aim is to reduce Iran’s oil revenue by diminishing the volume of sales and forcing Iran to give its customers a discount on the price of crude.
Some economists question whether reducing Iran’s oil exports without moving the price of oil is feasible, even if the market is given signals about alternative supplies. Already, analysts at investment banks are warning of the possibility of rising gasoline prices in 2012, due to the new sanctions by the United States as well as complementary sanctions under consideration by the European Union.
Since President Obama’s first months in office, his aides have been talking to Saudi Arabia and other oil suppliers about increasing their production, and about guaranteeing sales to countries like China, which is among Iran’s biggest customers. But it is unclear that the Saudis can fill in the gap left by Iran, even with the help of Libyan oil that is coming back on the market. The United States is also looking to countries like Iraq and Angola to increase production.
Daniel Yergin, whose new book, “The Quest,” describes the oil politics of dealing with states like Iran, noted in an interview that “given the relative tightness of the market, it will require careful construction of the sanctions combined with vigorous efforts to bring alternative supplies into the market.” He said that it would “add a whole new dimension to the debate over the Keystone XL pipeline,” the oil pipeline from Canada to the United States that the administration has sought to delay.
“The only strategy that is going to work here is one where you get the cooperation of oil buyers,” said Michael Singh, managing director of the Washington Institute for Near East Policy. “You could imagine the Europeans, the Japanese, and the South Koreans cooperating, and then China would suck up all of the oil that was initially going to everyone else.”
A broader question is whether the sanctions — even if successful at lowering Iran’s oil revenue — would force the government to give up its nuclear ambitions.
One measure of the effects, however, is that the Iranian leadership is clearly concerned. Already the Iranian currency is plummeting in value against the dollar, and there are rumors of bank runs.
“Iran’s economic problems seem to be mounting and the whole economy is in a state of suspended expectation,” said Abbas Milani, director of Iranian studies at Stanford University. “The regime keeps repeating that they’re not going to be impacted by the sanctions. That they have more money than they know what to do with. The lady doth protest too much.”
at 7:23:00 PM
Tensions between the US and Iran have all but reached a breaking point with a naval standoff moments away from occurring in the Strait of Hormuz.
Following rumors of a budding nuclear program in the works from Tehran,American authorities attempted to infiltrate Iran, most notable with a filed stealth surveillance mission that ended with a US spy drone being downed, recovered and decoded by overseas authorities. After Iran mocked Americafor the country’s inability to manage and command their own aircraft, theEuropean Union fired back in recent days by threatening sanctions against Iran. In response, overseas authorities say that they would respond by shutting down the Strait of Hormuz, a notable channel in the Persian Gulf that serves as a key component in Iran’s oil export exhibitions.
America who has made it no secret that she’s a fan of oil, says it won’t let Iran get away with shutting down the strait — and the US has thousands of marines on the ready to back up its bark.
While tensions between the two countries have been tight for years, the standoff on the brink of battle could finally bring both nations to loggerheads as word of an all-out war between the two countries has continuously been rumored.
“Anyone who threatens to disrupt freedom of navigation in an international strait is clearly outside the community of nations: any disruption will not be tolerated,” US Fifth Fleet spokeswoman Lt Rebecca Rebarich tells the Associated Press. At its narrowest point, the strait is barely 30 miles wide and is bordered by Iran to the north and the United Arab Emirates to the South. Even if its thousands of miles away from America, Lt Rebarich adds that the US Navy is “…always ready to counter malevolent actions to ensure freedom of navigation.”
In recent weeks, the US has increased military presence in the vicinity of Iran, allegedly installing troops in Pakistan and Afghanistan and arming the UAE with weaponry that could crush any barracks or nuclear facilities across the strait. The mobilization of the Fifth Fleet adds to that arsenal already on the ready an army of more than 15,000 men on over 20 ships and aircraft.
Iran warns that it shut down the strait in a heartbeat, however. “Closing the Strait of Hormuz for Iran’sarmed forces is really easy … or as Iranians say, it will be easier than drinking a glass of water,” Iran’s navy chief Habibollah Sayyari tells the state’s Press TV this week. In the meantime, Sayyari says “we don’t need to shut it,” but could be waiting for America to make the next move.
at 7:19:00 PM
China Nation urged to increase holdings of gold
DECEMBER 27, 2011
DECEMBER 27, 2011
BEIJING - China should further diversify its foreign-exchange portfolio and make more gold purchases when the metal's price dips but is still at a relatively high level, a senior central bank official said on Monday.
"The Chinese government should not only be cautious of the imported risk caused by rising global inflation, but also further optimize its foreign-exchange portfolio and purchase gold assets when the gold price shows a favorable fluctuation," said Zhang Jianhua, director of the research bureau affiliated with the People's Bank of China (PBOC).
He made the remarks in an article in the Beijing-based Financial News, a newspaper run by the PBOC.
The spot gold price declined 16 percent over the past three months to less than $1,600 an ounce last week. It touched a record of more than $1,900 in early September.
Zhang said bleak economic conditions, increasing international liquidity as countries turned to monetary easing and the resulting high inflation had dampened investors' confidence. He said that gold had become the only "safe haven" for risk-averse investors. "No asset is safe now. The only choice to hedge risks is to hold hard currency - gold."
Zhang didn't specify what proportion of China's $3.2 trillion foreign reserves should be held in gold.
China is the largest foreign holder of US Treasury securities, having invested about one-third of its foreign reserves in those bonds. About 20 percent has been invested in euro-denominated assets.
As of this month, China ranked sixth worldwide in gold holdings, with about 1,054 tons. The value accounted for about 1.8 percent of the country's total foreign reserves, according to a report released by the World Gold Council (WGC).
The US topped the list by holding more than 8,133 tons of the metal, 76.6 percent of its foreign reserves by value, while Germany ranked second by holding 3,396 tons, 73.7 percent of its reserves.
In 2011, countries including Russia, Thailand, South Korea, Bolivia, Colombia, Kazakhstan and Venezuela purchased the metal to increase gold holdings of their central banks' reserves.
China didn't sell or buy gold from 2010 to 2011, according to WGC statistics.
"The PBOC may have realized that its euro-denominated assets are in greater danger than it expected and started to eye gold," said Li Jie, director of the foreign-reserves research center at the Central University of Finance and Economics.
"But it's impractical for China to put its foreign reserves into commodities, including gold, because all these markets are too small for such a big hoard.
"For example, China's purchasing gold would push up the price of the metal and increase its own cost," said Li.
Li added that there was no easy way for China to get as much gold as it wished because major economies such as the US hold the majority of gold and market supplies are very limited.
China produced 31.75 tons of gold in October, the Ministry of Industry and Information Technology said on Monday. Gold production gained 5 percent in the first 10 months of this year to 290.752 tons.
Driven by increasing demand from risk-averse investors, the international price of gold repeatedly reached new highs in 2011.
Central banks made their biggest gold purchases for a single year in 2011 since the Bretton Woods system dissolved in 1973 and major currencies began to float against each other without being pegged to gold. China has vowed to further diversify the nation's foreign-reserve portfolio amid growing global financial uncertainty. In October, it cut holdings of US Treasury securities by $14.2 billion to $1.13 trillion, the lowest level this year.
Media reports have said that the PBOC plans to create a fund worth $300 billion to invest the country's foreign reserves in the US and European markets. The fund will reportedly seek to invest in real assets and company shares, rather than government securities.
at 8:16:00 AM
December 28, 2011
December 27, 2011
December 26, 2011
The world’s attention is increasingly focused on Syria and Iran as the region continues to move toward military confrontation. Less noticed, however, is that the pieces are being put into place for a truly global conflict, with military buildup taking place in every region and threatening to draw in all of the world’s major powers.
at 6:50:00 AM
December 25, 2011
December 24, 2011
December 16, 2011
December 15, 2011
December 14, 2011
Iran is set to produce its own drones modeled on a US spy craft intercepted over its territory. Experts are at the final stages of decoding the US RQ-170 Sentinel drone and are to copy it using reverse engineeringtechnology.
Iranian lawmaker Parviz Sorouri, a member of parliament’s national security and foreign policy committee, said the country has the capability to reproduce the drone, Iranian TV reports.
If Iran successfully reverse-engineers the drone it will get access to high-tech secrets such as the chemical composition of the device’s radar-deflecting paint or its sophisticated optics.
Also, if the experts are able to hack the drone’s database, they might recover data the US would not want revealed. However, such drones usually do not store much data and if they do, it is encrypted.
Sorouri said that the information from the seized drone would be used to file a law suit against the US for the “invasion” by the unmanned aircraft.
On December 4, the Iranian military reported they had shot down a US reconnaissance drone aircraft in eastern Iran after a border incursion.
The US first denied the report, but then admitted that they had lost a connection with one of its drone aircraft in the region.
Although Washington claimed the drone had crashed and was beyond repair, citing satellite imagery, Tehran asserted that the craft was in perfect shape. Iranian TV even broadcast footage of the drone on Thursday.
The craft was identified as an RQ-170 Sentinel drone, a model which the US Air Force have been operating for years. While the USAF have not revealed the design or capabilities of this model, many believe it to be a stealth aircraft possessing surveillance technologies.
Later, Iran announced it was not going to return the aircraft, which it claims belongs to the CIA. Iran has also addressed the United Nations, asking it to condemn the US incursion into Iranian airspace, calling it a “hostile act
at 7:46:00 AM