Russia told Nato today that it had suspended military cooperation activities with alliance countries until further notice, the Western military pact said. "Russia has informed us through military channels that the minister of defence of the Russian Federation has taken a decision to halt international military cooperation events between Russia and Nato countries ... until further instructions," Nato spokeswoman Carmen Romero said. Nato members Norway, Estonia and Latvia have already said they had received notice of the step, which emerged after the alliance agreed this week that normal ties with Moscow were not possible until it had withdrawn troops from Georgia in line with efforts to end the South Ossetia conflict.
Russia told Nato today that it had suspended military cooperation activities with alliance countries until further notice, the Western military pact said.
"Russia has informed us through military channels that the minister of defence of the Russian Federation has taken a decision to halt international military cooperation events between Russia and Nato countries ... until further instructions," Nato spokeswoman Carmen Romero said.
Nato members Norway, Estonia and Latvia have already said they had received notice of the step, which emerged after the alliance agreed this week that normal ties with Moscow were not possible until it had withdrawn troops from Georgia in line with efforts to end the South Ossetia conflict.
Russia has told Nato that it is halting military co-operation over the continuing crisis in Georgia, an alliance spokeswoman has said. The move follows a statement by Nato that there would be no "business as usual" with Russia unless its troops pulled out of Georgia. However, the alliance had stopped short of freezing co-operation with Moscow. Meanwhile, Georgia's breakaway regions of South Ossetia and Abkhazia have held mass rallies calling for independence.
Russia has told Nato that it is halting military co-operation over the continuing crisis in Georgia, an alliance spokeswoman has said.
The move follows a statement by Nato that there would be no "business as usual" with Russia unless its troops pulled out of Georgia.
However, the alliance had stopped short of freezing co-operation with Moscow.
Meanwhile, Georgia's breakaway regions of South Ossetia and Abkhazia have held mass rallies calling for independence.
The president of Syria spent two days in Russia this week with a shopping list of sophisticated weapons he wanted to buy. The visit may prove a harbinger of things to come. If the conflict in Georgia ushers in a sustained period of renewed animosity between Russia and the West, Washington fears that a newly emboldened but estranged Moscow could use its influence, money, energy resources, United Nations Security Council veto and, yes, its arms industry to undermine American interests around the world. The list of ways a more hostile Russia could cause problems for the United States extends far beyond Syria and the mountains of Georgia. In addition to increased arms sales to other anti-American states like Iran and Venezuela, policymakers and specialists here envision a freeze in cooperation on counterterrorism and nuclear nonproliferation, manipulation of oil and natural gas supplies, pressure against U.S. military bases in Central Asia and the collapse of efforts to extend Cold War-era arms-control treaties. "It's Iran, it's the UN," said Angela Stent, who served as the top Russia officer at the U.S. government's National Intelligence Council until 2006 and now directs Russian studies at Georgetown University. "It's all the counterterrorism and counternarcotics programs, Syria, Venezuela, Hamas - there are any number of issues over which they can be less cooperative than they've been. And of course, energy."
If the conflict in Georgia ushers in a sustained period of renewed animosity between Russia and the West, Washington fears that a newly emboldened but estranged Moscow could use its influence, money, energy resources, United Nations Security Council veto and, yes, its arms industry to undermine American interests around the world.
The list of ways a more hostile Russia could cause problems for the United States extends far beyond Syria and the mountains of Georgia. In addition to increased arms sales to other anti-American states like Iran and Venezuela, policymakers and specialists here envision a freeze in cooperation on counterterrorism and nuclear nonproliferation, manipulation of oil and natural gas supplies, pressure against U.S. military bases in Central Asia and the collapse of efforts to extend Cold War-era arms-control treaties.
"It's Iran, it's the UN," said Angela Stent, who served as the top Russia officer at the U.S. government's National Intelligence Council until 2006 and now directs Russian studies at Georgetown University. "It's all the counterterrorism and counternarcotics programs, Syria, Venezuela, Hamas - there are any number of issues over which they can be less cooperative than they've been. And of course, energy."
At least 63 people have been killed and dozens injured in twin suicide bombings outside Pakistan's main munitions factory in the town of Wah, police say. The attack is the deadliest on a military site in Pakistan's history. Police say one man is in custody for the attack, which occurred some 30km (18 miles) north-west of Islamabad. A spokesman for the Pakistani Taleban said they had carried out the attacks, which he said were a response to army violence in the country's north-west. Speaking to the BBC, Maulvi Umar of the Tehrik-e-Taleban Pakistan said the bombings in Wah were in retaliation for the deaths of "innocent women and children" in the tribal area of Bajaur. He said more attacks would take place in Pakistan's major urban conurbations unless the army withdrew from the tribal areas.
At least 63 people have been killed and dozens injured in twin suicide bombings outside Pakistan's main munitions factory in the town of Wah, police say.
The attack is the deadliest on a military site in Pakistan's history.
Police say one man is in custody for the attack, which occurred some 30km (18 miles) north-west of Islamabad.
A spokesman for the Pakistani Taleban said they had carried out the attacks, which he said were a response to army violence in the country's north-west.
Speaking to the BBC, Maulvi Umar of the Tehrik-e-Taleban Pakistan said the bombings in Wah were in retaliation for the deaths of "innocent women and children" in the tribal area of Bajaur.
He said more attacks would take place in Pakistan's major urban conurbations unless the army withdrew from the tribal areas.
It would help enormously if Pakistan were able to determine its strategic goals and get all branches of the govt to work towards them, cos right now they're all working against each other. keep to the Fen Causeway
ISI regard control of Afghanistan and Kashmir as legitimate Pakistani foreign policy objectives and the use of the Taleban to sow discord in such regions is a long standing policy going back 25 years. As an example of the priorities, remember the recent "War on Terra" grants from the US were spent on upgrading F-16s that have only ever been used in Kashmir, never against the Taleban. keep to the Fen Causeway
At least 50 people have reportedly been killed in clashes in the Somali capital Mogadishu and the port of Kismayo. Some 30 people have been killed in two days of fierce fighting between Islamists and a clan militia in Kismayo, a BBC reporter says. Some mortars landed near the compound of President Abdullahi Yusuf, who is currently out of the country. Another landed near a mosque in the busy Bakara market, killing at least six people, a witness told the BBC.
At least 50 people have reportedly been killed in clashes in the Somali capital Mogadishu and the port of Kismayo.
Some 30 people have been killed in two days of fierce fighting between Islamists and a clan militia in Kismayo, a BBC reporter says.
Some mortars landed near the compound of President Abdullahi Yusuf, who is currently out of the country.
Another landed near a mosque in the busy Bakara market, killing at least six people, a witness told the BBC.
FDIC to modify IndyMac loans The agency plans to cut interest rates and extend payments for some in hopes of limiting foreclosures. By E. Scott Reckard, Los Angeles Times Staff Writer August 21, 2008 The regulators operating failed IndyMac Bank said Wednesday that they would try to modify about 25,000 troubled mortgages by slashing interest rates to as low as 3% for five years, extending payments over 40 years and in some cases charging interest on only part of the loan balance. The plan, aimed at about 37% of IndyMac's seriously delinquent borrowers, is the start of a modification program that eventually could involve thousands of other borrowers at the savings and loan. Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., said she hoped it would become a model for the reeling mortgage industry. -Skip- Soon after it took over IndyMac, the FDIC said it was freezing foreclosures on the almost 40,000 loans still owned by the thrift. Those loans amount to 6% of the 637,000 existing IndyMac-serviced mortgages at the end of July. The FDIC also has broad powers to change the terms of 225,000 loans that were pooled to back debt securities under the IndyMac name. But the remaining 372,000 mortgages serviced by IndyMac, nearly 60%, can't be modified easily because of complications in the terms under which they were sold to investors or bought or guaranteed by mortgage finance giants Fannie Mae and Freddie Mac. -Skip- The borrowers, most of whom initially stated their incomes without proof, must fully document their earnings to obtain modified loans and sign a statement pledging to live in the home. They must have enough income to devote no more than 38% of their gross earnings toward principal and interest on a modified first mortgage, along with home insurance and taxes. The fact that many borrowers took on hefty second mortgages and have credit card, automobile and other debts will also complicate the picture, FDIC officials said. But the most difficult pill for borrowers to swallow may be the large majority who won't qualify for the program because IndyMac doesn't own all the loans it services. The FDIC will try to help those borrowers when they get in trouble on their loans despite not being able to use its standard model to modify them, Bair said. -Skip- To achieve the 38% debt-to-income ratio, the FDIC may extend the loan term to 40 years and reduce the interest rate -- now typically 7.51% on IndyMac-owned loans -- to as low as 3%. After five years, the rate would rise by 1 percentage point a year until it reached the current Freddie Mac survey rate for conforming mortgages, now about 6.5%, where it would be permanently capped. The FDIC also may suspend interest on a portion of the loan amount, although the principal not earning interest will still have to be paid off if the home is sold or the loan is refinanced. Michael Krimminger, a policy advisor to Bair, said that option had limited use because it tended to substantially reduce the value of loans.
The plan, aimed at about 37% of IndyMac's seriously delinquent borrowers, is the start of a modification program that eventually could involve thousands of other borrowers at the savings and loan. Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., said she hoped it would become a model for the reeling mortgage industry.
-Skip-
Soon after it took over IndyMac, the FDIC said it was freezing foreclosures on the almost 40,000 loans still owned by the thrift. Those loans amount to 6% of the 637,000 existing IndyMac-serviced mortgages at the end of July. The FDIC also has broad powers to change the terms of 225,000 loans that were pooled to back debt securities under the IndyMac name.
But the remaining 372,000 mortgages serviced by IndyMac, nearly 60%, can't be modified easily because of complications in the terms under which they were sold to investors or bought or guaranteed by mortgage finance giants Fannie Mae and Freddie Mac.
The borrowers, most of whom initially stated their incomes without proof, must fully document their earnings to obtain modified loans and sign a statement pledging to live in the home. They must have enough income to devote no more than 38% of their gross earnings toward principal and interest on a modified first mortgage, along with home insurance and taxes.
The fact that many borrowers took on hefty second mortgages and have credit card, automobile and other debts will also complicate the picture, FDIC officials said.
But the most difficult pill for borrowers to swallow may be the large majority who won't qualify for the program because IndyMac doesn't own all the loans it services. The FDIC will try to help those borrowers when they get in trouble on their loans despite not being able to use its standard model to modify them, Bair said.
To achieve the 38% debt-to-income ratio, the FDIC may extend the loan term to 40 years and reduce the interest rate -- now typically 7.51% on IndyMac-owned loans -- to as low as 3%. After five years, the rate would rise by 1 percentage point a year until it reached the current Freddie Mac survey rate for conforming mortgages, now about 6.5%, where it would be permanently capped.
The FDIC also may suspend interest on a portion of the loan amount, although the principal not earning interest will still have to be paid off if the home is sold or the loan is refinanced. Michael Krimminger, a policy advisor to Bair, said that option had limited use because it tended to substantially reduce the value of loans.
This is the first action I have seen by Federal agencies that seems to move in the right direction, i.e., recognizing that the loans are worth only a fraction of their face value. If sanity be culturally normative, then by the norms of this culture I claim insanity.
Nobel laureate Daniel McFadden, who teaches at the University of California, said in Landau that a financial equivalent of the U.S. Food and Drug Administration should be established to monitor and certify new financial instruments.
Fannie Mae and Freddie Mac, the two largest mortgage finance companies, ``don't have any net worth,'' billionaire investor Warren Buffett said. "The game is over" as independent companies said Buffett, the 77-year-old chairman of Berkshire Hathaway Inc., in an interview on CNBC today. ``They were able to borrow without any of the normal restraints. They had a blank check from the federal government.''
"The game is over" as independent companies said Buffett, the 77-year-old chairman of Berkshire Hathaway Inc., in an interview on CNBC today. ``They were able to borrow without any of the normal restraints. They had a blank check from the federal government.''
Secretary Henry Paulson's response to the sinking fortunes of Fannie Mae and Freddie Mac might boil down to picking which investors get hurt and by how much. At stake if Paulson does intervene: the fate of worldwide bondholders of $5.2 trillion of agency and mortgage-backed debt and scores of large banks, insurers and pension funds that own the firms' common and preferred shares. Paulson's choices probably include buying Fannie's and Freddie's bonds, a special class of preferred shares or preferred shares convertible into common stock, analysts and investors said. The terms and conditions of any purchases would put the government ahead of other creditors and stockholders, while ensuring that bondholders are protected, they said."The presumption" is that holders of the government- chartered companies' subordinated bonds ``will be covered,'' McCulley said in an interview on Bloomberg Television from Jackson Hole, Wyoming. Common shareholders would be wiped out, he predicted.
At stake if Paulson does intervene: the fate of worldwide bondholders of $5.2 trillion of agency and mortgage-backed debt and scores of large banks, insurers and pension funds that own the firms' common and preferred shares.
Paulson's choices probably include buying Fannie's and Freddie's bonds, a special class of preferred shares or preferred shares convertible into common stock, analysts and investors said. The terms and conditions of any purchases would put the government ahead of other creditors and stockholders, while ensuring that bondholders are protected, they said.
"The presumption" is that holders of the government- chartered companies' subordinated bonds ``will be covered,'' McCulley said in an interview on Bloomberg Television from Jackson Hole, Wyoming. Common shareholders would be wiped out, he predicted.
US negotiators have not yet succeeded in getting Iraqi officials to agree to keep US troops well into the next US president's first term, the US secretary of state confirmed yesterday.On a surprise visit to Baghdad, Condoleezza Rice, denied earlier reports this week that the two sides had ironed out the last disputes in a heavily-contested draft agreement that is due to replace the UN mandate covering the US occupation. President Bush wants the pact to authorise a troop presence at least until 2011 so that he can trumpet it as proof of his policy's success. But the Iraqi prime minister, Nouri al Maliki, has adopted the rising nationalism in the Iraqi parliament and public and is insisting on a clear withdrawal timetable, the lifting of judicial immunity for US troops who commit abuses, and an Iraqi veto on US military operations, including the arrest of Iraqis.
US negotiators have not yet succeeded in getting Iraqi officials to agree to keep US troops well into the next US president's first term, the US secretary of state confirmed yesterday.
On a surprise visit to Baghdad, Condoleezza Rice, denied earlier reports this week that the two sides had ironed out the last disputes in a heavily-contested draft agreement that is due to replace the UN mandate covering the US occupation.
President Bush wants the pact to authorise a troop presence at least until 2011 so that he can trumpet it as proof of his policy's success. But the Iraqi prime minister, Nouri al Maliki, has adopted the rising nationalism in the Iraqi parliament and public and is insisting on a clear withdrawal timetable, the lifting of judicial immunity for US troops who commit abuses, and an Iraqi veto on US military operations, including the arrest of Iraqis.
Oil roared above the $120 a barrel level on Thursday and gold prices jumped amid mounting geopolitical tensions following Russia's decision to suspend military co-operation activities with Nato in response to a missile shield agreement between the US and Poland. Nymex October West Texas Intermediate touched a session high of $122.04 before easing back to trade $5.89 higher at $121.45 a barrel while ICE October Brent rose $6 to $120.36 a barrel.Moscow said it would respond with more than a diplomatic protest to a deal to place part of a US missile defence system in Poland. It also made it clear that it has no intention of bowing to calls for a withdrawal to positions held before the invasion of Georgia.
Oil roared above the $120 a barrel level on Thursday and gold prices jumped amid mounting geopolitical tensions following Russia's decision to suspend military co-operation activities with Nato in response to a missile shield agreement between the US and Poland.
Nymex October West Texas Intermediate touched a session high of $122.04 before easing back to trade $5.89 higher at $121.45 a barrel while ICE October Brent rose $6 to $120.36 a barrel.
Moscow said it would respond with more than a diplomatic protest to a deal to place part of a US missile defence system in Poland. It also made it clear that it has no intention of bowing to calls for a withdrawal to positions held before the invasion of Georgia.
It's one thing that US foreign policy wonks imagined that Russia would remain in a coma forever, but the idea that we could encircle Russia strategically with defensible bases in landlocked mountainous countries halfway around the world...? You have to ask what were they smoking over at the Pentagon and the CIA and the NSC? So, this asinine policy has now come to grief. Not only does Russia stand to gain control over the Baku-to-Ceyhan pipeline, but we now have every indication that they will bring the states on its southern flank back into an active sphere of influence, and there is really not a damn thing that the US can pretend to do about it. We could have spent the past ten years getting our own house in order -- waking up to the obsolescence of our suburban life-style, scaling back on the Happy Motoring, reconnecting our cities with world-class passenger rail, creating wealth by producing things of value (instead of resorting to financial racketeering), protecting our borders, and taking the necessary measures to defend and update our own industries. Instead, we pissed our time and resources away. Nations do make tragic errors of the collective will. The cluelessness of George Bush is nothing less than a perfect metaphor for the failure of a whole generation. ... This must be an equally sobering moment for Europe, and an additional reason for the recent plunge in the relative value of the Euro, for Europe is now at the mercy of Russia in terms of staying warm in the winter, running their kitchen stoves, and keeping the lights on. Russia also exerts substantial financial leverage over the US in all the dollars and securitized US debt paper it holds. In effect, Russia can shake the US banking system at will now by threatening to dump its dollar holdings. The American banking system may not need a shove from Russia to fall on its face. It's effectively dead now, just lurching around zombie-like from one loan "window" to the next pretending to "borrow" capital -- while handing over shreds of its moldy clothing as "collateral" to the Federal Reserve.
...
This must be an equally sobering moment for Europe, and an additional reason for the recent plunge in the relative value of the Euro, for Europe is now at the mercy of Russia in terms of staying warm in the winter, running their kitchen stoves, and keeping the lights on. Russia also exerts substantial financial leverage over the US in all the dollars and securitized US debt paper it holds. In effect, Russia can shake the US banking system at will now by threatening to dump its dollar holdings. The American banking system may not need a shove from Russia to fall on its face. It's effectively dead now, just lurching around zombie-like from one loan "window" to the next pretending to "borrow" capital -- while handing over shreds of its moldy clothing as "collateral" to the Federal Reserve.
for Europe is now at the mercy of Russia in terms of staying warm in the winter, running their kitchen stoves, and keeping the lights on.
No it's not.
That's been repeated so many times that everybody believes it to be true. But it's not. In the long run, we're all dead. John Maynard Keynes
So I can only assume it's a cultural tendency to say "yes things are bad, but poor Old Europe is worse". As if it somehow excuses anything they're doing wrong. keep to the Fen Causeway
Dear Professor Krugman, I am a huge fan, but regarding a statement you made in a recent column, "The Great Illusion" -- After all, Russia has already used gas as a weapon: in 2006, it cut off supplies to Ukraine amid a dispute over prices. -- please see "Don't Blame Gazprom for Europe's Energy Crunch" by Jérôme Guillet of the European Tribune. Best regards, ...
I am a huge fan, but regarding a statement you made in a recent column, "The Great Illusion" --
After all, Russia has already used gas as a weapon: in 2006, it cut off supplies to Ukraine amid a dispute over prices.
-- please see "Don't Blame Gazprom for Europe's Energy Crunch" by Jérôme Guillet of the European Tribune.
Best regards, ...
i know some gas comes from n. africa, but why are all these pundits so uninformed?
even after years here, i thought it was true, at least mostly.
leave aside the 'weapon' stuff, i don't buy that, they need the money... The person who says it cannot be done should not interrupt the person doing it. Chinese Proverb.
Thus Ukraine has never paid for the gas it needs to import from Russia, as it can simply tap the transit gas. That happened in 1992 and 1992, when Russia tries to cut them off and Ukraine reduced transit by the same volume. Since then, both countries have agreed to "swap" transit rights for free deliveries, which is actually a pretty cheap price for Russia to pay to protect exports which make 25% of its hard currency earnings, and, some years, the same proportion of its federal tax income. Today's noise is an attempt to try to scare off the Europeans again into putting pressure on the Ukrainians to behave, but it stands exactly zero chance of success, because Russia will never cut its gas deliveries to the West. Its credibility as a supplier is too vital an asset for it to endanger it. That situation shows the interesting thing about pipelines - they create lasting dependencies that force countries to talk and find peaceful agreements, because otherwise both get hurt economically. Pipelines are pretty much like kids in a marriage - they tie you for a long time, force you to talk - but in this case, they cannot even be hurt...
Today's noise is an attempt to try to scare off the Europeans again into putting pressure on the Ukrainians to behave, but it stands exactly zero chance of success, because Russia will never cut its gas deliveries to the West. Its credibility as a supplier is too vital an asset for it to endanger it.
That situation shows the interesting thing about pipelines - they create lasting dependencies that force countries to talk and find peaceful agreements, because otherwise both get hurt economically. Pipelines are pretty much like kids in a marriage - they tie you for a long time, force you to talk - but in this case, they cannot even be hurt...
Marco might want to direct Krugman to that post, too. A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
that's exactly what i needed to read and understand. The person who says it cannot be done should not interrupt the person doing it. Chinese Proverb.
Skennah Kowa
Oil speculators held great sway over prices, data suggest At one point in July, a Swiss trading firm is believed to have held 11% of futures contracts on the New York Mercantile Exchange for profit rather than for lining up fuel supplies. By David Cho, The Washington Post August 21, 2008 WASHINGTON -- Regulators had long classified a private Swiss energy conglomerate called Vitol as a trader that primarily helped industrial firms that needed oil to run their businesses. But when the Commodity Futures Trading Commission examined Vitol's books last month, it found that the firm was in fact more of a speculator, holding oil contracts as a profit-making investment rather than a means of lining up the actual delivery of fuel. Even more surprising was the massive size of Vitol's portfolio -- at one point in July, the firm held 11% of all the oil contracts on the regulated New York Mercantile Exchange. The discovery revealed how an individual financial player had gained enormous sway over the oil market without the knowledge of regulators. Other CFTC data showed that a significant amount of trading activity was concentrated in the hands of just a few speculators. The CFTC, which learned about the nature of Vitol's activities only after making an unusual request for data from the firm, now reports that financial firms speculating for their clients or for themselves account for about 81% of the oil contracts on the Nymex. Some lawmakers have blamed those firms for the volatility of oil prices, including the tremendous run-up that peaked earlier in the summer. -Skip- CFTC documents show Vitol was one of the most active traders of oil on the Nymex as prices reached record levels. By June 6, for instance, Vitol had acquired a huge holding in oil contracts, betting prices would rise. The contracts were equal to 57.7 million barrels of oil -- about three times the amount the United States consumes daily. That day, the price of oil soared $11 to settle at $138.54. Oil prices eventually peaked at $147.27 a barrel July 11; crude closed at $114.98 on Wednesday. -Skip- The biggest players on the commodity exchanges often operate as "swap dealers" that primarily invest on behalf of hedge funds, wealthy individuals and pension funds. To build up the vast holdings this practice entails, some swap dealers have maneuvered behind the scenes, exploiting their political influence and gaps in oversight to gain exemptions from regulatory limits and permission to set up new, unregulated markets. Many big traders are active not only on the Nymex but also on private and overseas markets beyond the CFTC's purview. Using swap dealers as intermediaries, investment funds have poured into the commodity markets, raising their holdings to $260 billion this year from $13 billion in 2003. During that same period, the price of crude oil rose unabated. Data from the CFTC show that at the end of July, just four swap dealers held one-third of all Nymex oil contracts that bet prices would increase. Energy analysts say the data are evidence of the concentration of power in the markets. -Skip-
At one point in July, a Swiss trading firm is believed to have held 11% of futures contracts on the New York Mercantile Exchange for profit rather than for lining up fuel supplies.
By David Cho, The Washington Post August 21, 2008
WASHINGTON -- Regulators had long classified a private Swiss energy conglomerate called Vitol as a trader that primarily helped industrial firms that needed oil to run their businesses.
But when the Commodity Futures Trading Commission examined Vitol's books last month, it found that the firm was in fact more of a speculator, holding oil contracts as a profit-making investment rather than a means of lining up the actual delivery of fuel. Even more surprising was the massive size of Vitol's portfolio -- at one point in July, the firm held 11% of all the oil contracts on the regulated New York Mercantile Exchange.
The discovery revealed how an individual financial player had gained enormous sway over the oil market without the knowledge of regulators. Other CFTC data showed that a significant amount of trading activity was concentrated in the hands of just a few speculators.
The CFTC, which learned about the nature of Vitol's activities only after making an unusual request for data from the firm, now reports that financial firms speculating for their clients or for themselves account for about 81% of the oil contracts on the Nymex.
Some lawmakers have blamed those firms for the volatility of oil prices, including the tremendous run-up that peaked earlier in the summer.
CFTC documents show Vitol was one of the most active traders of oil on the Nymex as prices reached record levels. By June 6, for instance, Vitol had acquired a huge holding in oil contracts, betting prices would rise. The contracts were equal to 57.7 million barrels of oil -- about three times the amount the United States consumes daily. That day, the price of oil soared $11 to settle at $138.54. Oil prices eventually peaked at $147.27 a barrel July 11; crude closed at $114.98 on Wednesday.
The biggest players on the commodity exchanges often operate as "swap dealers" that primarily invest on behalf of hedge funds, wealthy individuals and pension funds.
To build up the vast holdings this practice entails, some swap dealers have maneuvered behind the scenes, exploiting their political influence and gaps in oversight to gain exemptions from regulatory limits and permission to set up new, unregulated markets. Many big traders are active not only on the Nymex but also on private and overseas markets beyond the CFTC's purview.
Using swap dealers as intermediaries, investment funds have poured into the commodity markets, raising their holdings to $260 billion this year from $13 billion in 2003. During that same period, the price of crude oil rose unabated.
Data from the CFTC show that at the end of July, just four swap dealers held one-third of all Nymex oil contracts that bet prices would increase. Energy analysts say the data are evidence of the concentration of power in the markets.
Even more surprising was the massive size of Vitol's portfolio -- at one point in July, the firm held 11% of all the oil contracts on the regulated New York Mercantile Exchange.
(a) NYMEX WTI is increasingly irrelevant as a benchmark;
(b) 11% is fuck all; and
(c) even if it were 91% it wouldn't matter....it's what's going on in the physical market that counts.
In any case, I find 81% as the percentage offinancial investors to be extraordinarily low - usually the paper trade outnumbers the physical trade by more than 5 to 1. This shows that this is a market where physical players still play a major role.
Anyway, doesn't change a thing about my point on the high sensitivity of the market to any news - because what's at stake is not the marginal cost of producing a barrel, it's the marginal cost of demand destruction. and that's a highly elastic number. In the long run, we're all dead. John Maynard Keynes
The recovery of lost White House e-mails will not be completed by the time George W. Bush leaves office, according to an internal draft document. As many as 225 days worth of e-mails from the time of the Abu Ghraib prison scandal and the probe into the disclosure of CIA agent Valerie Plame are missing.
According to the Ministry, the situation in the Georgian conflict zone remains tense. The Defence Ministry claims that OSCE observers knew of the date of Georgia's attack, but did not report it to Russian peacekeepers.
The US warned Georgia against trying to retake rebel South Ossetia by force, with one message coming on the eve of the attack that drew a crushing response from Russia, it emerged yesterday. Kurt Volker, the American envoy to Nato, said Russia was looking for an excuse to flex its military might and send troops into Georgia. 'We consistently counselled Georgia, over a long period of time, that there is no military solution (in South Ossetia).
Kurt Volker, the American envoy to Nato, said Russia was looking for an excuse to flex its military might and send troops into Georgia.
'We consistently counselled Georgia, over a long period of time, that there is no military solution (in South Ossetia).
They build their stories that way. It's stupid and dangerous, I know. Peak oil is not an energy crisis. It is a liquid fuel crisis.
The oligarchs could be Russia's best bet Russian capitalism - and, more crucially, Russian capitalists - may be our best bet if we hope to limit Moscow's malign actions abroad. Of course, thinking of the oligarchs as the good guys will take some getting used to, acknowledges Chrystia Freeland -
Russian capitalism - and, more crucially, Russian capitalists - may be our best bet if we hope to limit Moscow's malign actions abroad. Of course, thinking of the oligarchs as the good guys will take some getting used to, acknowledges Chrystia Freeland -
Chrystia Freeland: The oligarchs could be Russia's best bet By Chrystia Freeland (August 21 2008)
One of the great debates about Russia is now over. We no longer need to argue about whether Russian leader Vladimir Putin's reassertion of state power is good for the economy and thus essentially benign. We do not need to ponder whether the selection of the "liberal" Dmitry Medvedev as president means the country will soon, again, become freer. We can cast aside discussions about whether strong-arm Kremlin chiefs will make more reliable partners for the west than the shambolic democrats who preceded them.
One of the great debates about Russia is now over. We no longer need to argue about whether Russian leader Vladimir Putin's reassertion of state power is good for the economy and thus essentially benign. We do not need to ponder whether the selection of the "liberal" Dmitry Medvedev as president means the country will soon, again, become freer. We can cast aside discussions about whether strong-arm Kremlin chiefs will make more reliable partners for the west than the shambolic democrats who preceded them. The war with democratic Georgia has created a new, sharp consensus across Europe and North America, as voiced with surprising harmony at Nato's emergency summit in Brussels this week. Mr Putin's neo-authoritarian regime - and it is clearly his state and his fight, no matter that we now call him "prime minister" - is a country with which, as the Nato summit concluded, we cannot continue "business as usual". But this sad conclusion has left us with another, trickier dilemma: what can we do instead? The initial answers have been sobering. Having finally agreed that the new Russia is nasty - and not just to its own journalists or human rights activists - western leaders are also coming to the view that it may be hard to influence, let alone contain. (...) This brings me to my modest proposal. The west must, of course, be determined in using the few formal tools it has for hemming in a resurgent Russia, particularly denying it membership of the World Trade Organisation and stepping up support for vulnerable neighbours such as Ukraine. But why not take a page from the Kremlin's own unconventional and deviously brilliant play-book? Mr Putin, as we have seen, is not squeamish about direct confrontations, but sometimes Moscow finds it more convenient to harass the countries, companies and non-government organisations on its blacklist with the subtler tools of denied visas and zealous tax inspectors - you could call it the TNK-BP technique, in honour of BP's recent Russian joint venture travails. With their lavish foreign holiday homes, healthy foreign bank accounts and appetite for buying foreign assets, Russia's tycoons are vulnerable to the same pin-pricks. An oligarch recently told me that Mr Putin's tragedy is that he wants to rule like Stalin but live like Roman Abramovich, the Russian plutocrat. We need to make it clear to him and his business buddies that they cannot do both.
The war with democratic Georgia has created a new, sharp consensus across Europe and North America, as voiced with surprising harmony at Nato's emergency summit in Brussels this week. Mr Putin's neo-authoritarian regime - and it is clearly his state and his fight, no matter that we now call him "prime minister" - is a country with which, as the Nato summit concluded, we cannot continue "business as usual".
But this sad conclusion has left us with another, trickier dilemma: what can we do instead? The initial answers have been sobering. Having finally agreed that the new Russia is nasty - and not just to its own journalists or human rights activists - western leaders are also coming to the view that it may be hard to influence, let alone contain.
(...)
This brings me to my modest proposal. The west must, of course, be determined in using the few formal tools it has for hemming in a resurgent Russia, particularly denying it membership of the World Trade Organisation and stepping up support for vulnerable neighbours such as Ukraine. But why not take a page from the Kremlin's own unconventional and deviously brilliant play-book? Mr Putin, as we have seen, is not squeamish about direct confrontations, but sometimes Moscow finds it more convenient to harass the countries, companies and non-government organisations on its blacklist with the subtler tools of denied visas and zealous tax inspectors - you could call it the TNK-BP technique, in honour of BP's recent Russian joint venture travails. With their lavish foreign holiday homes, healthy foreign bank accounts and appetite for buying foreign assets, Russia's tycoons are vulnerable to the same pin-pricks. An oligarch recently told me that Mr Putin's tragedy is that he wants to rule like Stalin but live like Roman Abramovich, the Russian plutocrat. We need to make it clear to him and his business buddies that they cannot do both.
Like who? Boris Berezovsky? "The basis of optimism is sheer terror" - Oscar Wilde
Mainland China overtook the US as Japan's largest export destination for the first time last month, underlining the growing importance of Chinese demand to the world's second-largest economy.Exports to China, which have risen in each of the last 38 months, expanded by 16.8 per cent in July to their highest level since the Japanese government began compiling statistics in 1950.At the same time, exports to the US declined by 11.5 per cent, marking the 11th consecutive monthly drop. Overall, shipments rose by 8.1 per cent by value, after falling in June for the first time since 2003, the finance ministry said.
Exports to China, which have risen in each of the last 38 months, expanded by 16.8 per cent in July to their highest level since the Japanese government began compiling statistics in 1950.
At the same time, exports to the US declined by 11.5 per cent, marking the 11th consecutive monthly drop. Overall, shipments rose by 8.1 per cent by value, after falling in June for the first time since 2003, the finance ministry said.
Pakistan will hold a presidential election on September 6 to vote in a replacement for Pervez Musharraf, who resigned this week, the Election Commission said on Friday. Under Pakistan's constitution a new president is elected by members of the country's four provincial assemblies and the national parliament within 30 days of the post becoming vacant.Former Pakistani prime minister Nawaz Sharif agreed to a debate in parliament next week on the restoration of judges deposed last year, putting back a deadline on a demand that could split the ruling coalition. Sharif has been demanding that the judges purged by former president Pervez Musharraf should be restored and had threatened to pull his party out of a coalition with the party of assassinated former prime minister Benazir Bhutto if that was not done by Friday.
Under Pakistan's constitution a new president is elected by members of the country's four provincial assemblies and the national parliament within 30 days of the post becoming vacant.
Former Pakistani prime minister Nawaz Sharif agreed to a debate in parliament next week on the restoration of judges deposed last year, putting back a deadline on a demand that could split the ruling coalition.
Sharif has been demanding that the judges purged by former president Pervez Musharraf should be restored and had threatened to pull his party out of a coalition with the party of assassinated former prime minister Benazir Bhutto if that was not done by Friday.
