Thursday, 23 August, 2012

Oil falls below$114 on eurozone uncertainty

Oil fell below $114 a barrel on

Wednesday, with investors on

edge over whether Europe

would overcome its debt

crisis, while Middle East

tension kept the potential for

supply disruption in focus

LONDON

AGENCIES

Brent crude has recovered from a low of$88.49 reached in June to hit a three-month top last week on hopes ofprogress in Europe and worries aboutIran. But to sustain that momentum, oildealers will need to see more concretesteps taken by central banks from Eu-rope to China to stimulate theireconomies. Brent shed over $1 andsank to a session low of $113.53. By1256 GMT, it recovered to $113.82 - aloss of 82 cents. U.S. crude lost 42cents to $96.42 per barrel.“Technically the market is starting tostagnate a little bit,” said Swiss energymarket analyst Olivier Jakob. “Brenthas not been able to push through theresistance of $115.” Stocks and currencymarkets have also been rallying in re-cent weeks on speculation the Euro-pean Central Bank is set to take steps tocap borrowing costs in Spain and Italy.Greek Prime Minister Antonis Samarasis holding bilateral talks with leaders ofFrance, Germany and the Eurogroupthis week to seek concessions for itsausterity-to-bailout swap. His firstmeeting is later this afternoon witheuro zone chief Jean-Claude Juncker.“... All we’ve got (from Europe) at themoment is dialogue, but they haven’tgot any action or any follow-through,”said Ben Le Brun, a Sydney-based mar-ket analyst at OptionsXpress.ESCALATING TENSION: Supplyconcerns continue to support prices,with escalating tension in Iran andSyria adding to worries over an ex-pected cut in output from the North Seabecause of maintenance operations.Turkey is investigating possible Syrianlinks to a deadly car bomb attack nearits southeastern border, underscoringfears the conflict in Syria is fuelling in-stability in neighbouring countries.The International Atomic EnergyAgency (IAEA), a U.N. nuclear watch-dog, will try to persuade Iran to addressquestions about its suspected nuclearweapons research at a meeting on Fri-day, more than two months after previ-ous talks ended in failure.

TEHRAN

NNI

IRAN-PAKISTAN gas pipelinewill reach the zero border pointin the first half of next Iranianyear of 1392, Managing Direc-tor of National Iranian Gas

Company (NIGC), Javad Oji, said onWednesday. Oji, noting that significantsteps were taken in the 9th and 10thgovernments in country’s gas industry,said the 56-inch Iranshahr-Pakistanborder Chabahar-Zahedan pipeline willmake 90 percent progress by March 19,marking end of the Iranian year of 1391.

He said the pipeline will be com-pletely operational by end of Shahrivar(the sixth Iranian month).

Islamabad has reiterated its deter-mination to cooperate with Iran in en-ergy sector and pursue Iran-Pakistan(IP) gas pipeline project.

Speaking recently, Pakistan’s For-eign Ministry spokesman, MoazzamAhmad Khan, said the Pakistani govern-ment is determined to complete theIran-Pakistan gas pipeline project before2014 and other energy projects with theUS having nothing to do with them.

Ahmad Khan dismissed reports thatthe United States plans to invest $280million in Pakistan’s power sector in re-turn for Islamabad’s commitment not to

pursue the multi-billion-dollar deal withIran. The Iran-Pakistan gas pipeline, pro-jected to cost $1.2-1.5 billion, is aimed toexport a daily amount of 21.5 millioncubic meters of Iranian gas to Pakistan.

Maximum daily gas transfer capacityof the 56-inch pipeline — which runsover 900 kilometers from Iran’s south-ern port city of Assalouyeh in BushehrProvince to the city of Iranshahr in Sis-

tan-Baluchestan Province — is esti-mated to hit 110 million cubic meters.

Iran has already constructed morethan 900 kilometers of the pipeline onits soil.

BORDER BOUNDIran-Pakistan gas pipeline to reach border point by Sept 21: NIGC

LONDON/FRANKFURT

AGENCIES

An RBS spokeswoman declined detailed com-ment on Wednesday but referred to disclo-sures published with the bank’s half-yearresults earlier this month. These said RBS hadinitiated talks with U.S. and British authoritieson whether it complied with economic sanc-tions on Iran, and that it could face a “materialimpact” from the investigation.

The inquiry raises the possibility of asubstantial punishment for the part-nation-alized British bank, which is also being in-vestigated for its involvement in the Liborrate rigging scandal, ramping up pressureon Chief Executive Stephen Hester.

The United States first imposed sanc-tions on Iran more than 30 years ago but hastightened them in recent years as it tries tostifle Tehran’s nuclear program.

In the disclosures accompanying theRBS results on August 3, the British banksaid it had “initiated discussions with UKand U.S. authorities to discuss its historicalcompliance with applicable laws and regu-

lations, including U.S. economic sanctionsregulations”. These followed an internal re-view begun by Hester shortly after his arrivalat the bank in 2008.

“The investigation costs, remediationrequired or liability incurred could have amaterial adverse effect on the group’s net as-sets, operating results or cash flows in a par-ticular period,” the bank said. RBS had beenmaking similar disclosures for the past 18months, the spokeswoman said.

The scale of the transactions being in-vestigated at RBS, which is 82 percent-owned by the taxpayer, was not clear.

The Financial Times reported onWednesday that the U.S. Federal Reserveand Department of Justice were conductingthe investigation, citing several people closeto the situation. It cited a person familiarwith the situation as saying one risk man-ager had already left the bank following theinternal review. A spokesman for the Fed-

eral Reserve said it could not “comment onsupervisory matters pertaining to individualinstitutions”. A representative at the JusticeDepartment did not respond to a request forcomment.“CONSIDERABLY NEGATIVE” CON-SEQUENCES: Germany’s second biggest-lender, Commerzbank, also said in aregulatory filing that investigations by theUnited States into violations of sanctions onIran and other countries could hold “consid-erably negative” consequences. Com-merzbank, which is 25 percent-owned by theGerman state, said U.S. authorities were in-vestigating whether its dealings with Iran,Sudan, Myanmar, North Korea and Cubahad violated U.S. embargoes, and pointedout that other banks had paid large settle-ments to end such investigations.

“The financial impact of the procedureand its termination cannot be predicted andcould exceed eventual provisions, which

could have considerably negative conse-quences,” Commerzbank said.

Commerzbank repeated on Wednesdaythat it had had no new business with Iransince 2007 and that it was too early to saywhat the financial consequences of the U.S.probes would be.

Washington imposed economic sanc-tions on Tehran in 1979 after Iranian stu-dents stormed the U.S. embassy and tookdiplomats hostage. Until November 2008U.S. banks could process some transactionsfor Iranian banks or individuals providedthey were initiated offshore by non-Iranianforeign banks and were on the way to othernon-Iranian foreign banks.

The European Union has also imposedsanctions, including a ban on trading Iran-ian oil, due to fears that Tehran is trying todevelop nuclear weapons. Iran says the pro-gram is purely peaceful but the measures aremaking it increasingly difficult for Tehran to

conduct business in U.S. dollars and euros.The United Nations Security Council

has also introduced more limited restric-tions.

Standard Chartered agreed last week topay $340 million to the New York bank reg-ulator after it was accused of concealing$250 billion in Iranian transactions. TheLondon-based bank joined a long list oflenders which have been punished for doingbusiness with sanctioned states such as Iranand Cuba.

Barclays Plc, Lloyds Banking Group Plc,Credit Suisse and ING Bank NV have agreedto fines and settlements totaling $1.8 billion,while regulatory filings show that HSBCHoldings Plc is under investigation.

In 2010, RBS agreed to pay $500 mil-lion to settle similar allegations by U.S. fed-eral authorities that ABN Amro, a Dutchbank RBS acquired in 2007, had violatedU.S. sanction laws.

RBS, Commerzbank drawn into US Iran money probeUS authorities are investigating Royal Bank of Scotland and Commerzbank over possible breaches ofsanctions on Iran, in a widening crackdown which has already cost Standard Chartered a hefty fine

SAN JOSE

AFP

The mammoth Apple-Samsung patent trialmoved to the jury Tuesday, setting thestage for a verdict that could have huge im-plications for the hot market in smart-phones and tablet computers.

US District Judge Lucy Koh beganreading instructions to the nine-memberjury in San Jose, California, as lawyers forthe two tech giants readied closing argu-ments. Apple, which accuses the South Ko-rean electronics giant of copying the iPhoneand iPad too closely, is seeking damages ofup to $2.75 billion and an injunction thatcould knock some Samsung products offthe US market.

Even a delay in sales could endangerSamsung’s position in the US market,where it is currently the top seller of smart-phones. Samsung has countered by argu-ing that its patents on wirelesscommunication were infringed by Apple,

and is demanding up to $422 million fromthe Silicon Valley manufacturer.

The trial is wrapping up after 10 daysof testimony over three weeks, in whichApple put its own designers and executiveson the stand, along with experts, all ofwhom accused Samsung of illegally copy-ing Apple designs.

Samsung witnesses said meanwhilethat they had come up with the designs andicons they used on their own.

However, internal Samsung docu-ments introduced as evidence did showthey were aware that they were behindApple’s iPhone when it came to some user-interface features.

One Samsung designer described thegap between the iPhone and a Samsungsmartphone as the “difference betweenHeaven and Earth.”

The case has been a particularly heatedone, with lawyers from both sides filing

hundreds of pages of objections againstparticular exhibits and witnesses.

At one point, Koh asked an Applelawyer if he was “smoking crack” when heproposed to put more than 20 witnesses onthe stand in the final day of testimony.

“First of all, I’m not smoking crack,your honor,” replied Apple lawyer Bill Lee.

The jury was expected to begin delib-erations in the case on Wednesday, and willhave to pore over a complicated 20-pageform addressing hundreds of separate alle-gations, that Samsung violated Apple’spatents and trademarks.

Last week, Koh asked for one more set-tlement conference, with the chief execu-tives of the two companies speakingdirectly by telephone.

“I see risk for both sides,” Koh said atthat time. “It’s time for peace.”

On Monday a Samsung lawyer con-firmed that Apple chief Tim Cook and Sam-

sung boss Kwon Oh-Hyun did talk but nosettlement was reached.

This is one of several court casesaround the world involving the two elec-tronics giants in the hottest part of the techsector

— tablet computers and smartphones.While the results so far have been

mixed in courts in Europe and Australia,Samsung has a lot at stake in the US case,which could result in large damages or in-junctions against its products in the Amer-ican market.

A survey by research firm IDC showedSamsung shipped 50.2 million smart-phones globally in the April-June period,while Apple sold 26 million iPhones. IDCsaid Samsung held 32.6 percent of the mar-ket to 16.9 percent for Apple.

Samsung is the leading maker ofsmartphones using Google’s Android oper-ating system, which has become the mostpopular platform despite complaints fromApple that it has infringed on its patents.

AND JUSTICE FOR ALLApple-Samsung smartphone clash heads to jury

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02

Thursday, 23 August, 2012

BusinessUS corn, soy prices hit

records as drought lingersCHICAGO

AFP

US corn and soybean prices closed at newrecord highs Tuesday as a new survey

showed worse-than-expected cropdamage from a brutal drought

across the country’s centralbreadbasket. The price of

corn jumped 1.7 per-cent to $8.3875 a

bushel, whilesoybeans

finished at$17.3025 abushel, up 2.8percent from Tues-day. That left the cornprice up 68 percent fromJune and soybeans 39 percenthigher. An all-time record hotJuly accompanied by nearly threemonths of extreme drought have baked the country’s primefarmland in the midwestern and central states, where theworld’s largest corn and soybean crops are grown.Prices jumped after reports from the annual Pro FarmerMidwest Tour gave analysts and traders more bad news onthe state of the crops. “Crops in western Ohio and eastern In-diana were far below the norm,” said Pro Farmer analystBrian Grete. Yields in South Dakota meanwhile were called“stunningly low.” “The Pro Farmer tour sparked the rally”Tuesday, said Frank Cholly of RJO Futures.“They have a pretty good peg at final yields,” he said.The Pro Farmer estimates were significantly lower than theUS Department of Agriculture’s sharply slashed forecastsfrom last week. “We are getting less production from SouthAmerica, so that forces buyers to go to the US,” driving upprices, Cholly added. On August 10, the USDA sharply re-duced its production forecast for the globally crucial crops,saying output would likely be at the lowest level in six years.Last week, they estimated that 50 percent of the corn cropwas in poor or very poor condition, compared to 15 percentat the same time last year.

Iranian currency traders find

a haven in Afghanistan: NYTKABUL

NNI

With American and European sanctions spurring a currencycrisis in Iran, officials say a growing number of Iranians arepacking trucks with devalued rials and heading to the free-wheeling currency market next door in American-occupiedAfghanistan, to trade for dollars.The rial has lost more than half its value against the dollar,and cross-border bank transfers and currency exchangeshave become difficult, as sanctions have slashed Iran’s vitaloil revenue and cut the country off from international finan-cial markets. Iranian businesses and individuals are desper-ate to avoid further losses, by converting their money andmoving it out for safekeeping. At the same time, the govern-ment is trying to find alternate ways to bring in hard cur-rency, The New York Times reported.Enter Afghanistan, where dollars function as a second na-tional currency after years of Western spending and wherefinancial oversight is so lax that billions of dollars in cashleave the country every year. Though Afghan and Western of-ficials say they cannot put a precise figure on the trade withIran, they see it as a potential challenge to the sanctions, andone that the United States, as Afghanistan’s main benefactor,helped create. The Iranians are “in essence using our ownmoney, and they’re getting around what we’re trying to en-force,” one American official said.

LONDON

AFP

EUROPEAN stock markets slidWednesday following losses inAsia and on Wall Street and asinvestors awaited key talks onGreece’s debt woes plus minutesfrom the US Fed’s last monetary

policy meeting.London’s benchmark FTSE 100 index of top

companies shed 1.05 percent to 5,796.08 pointsin late morning deals.

Frankfurt’s DAX 30 dropped 0.76 percent to7,034.83 points and in Paris the CAC 40 slipped0.71 percent to 3,488.49 points. Milan declined0.50 percent and Madrid lost 1.13 percent.

“Weaker equity markets across the board inAsia due to disappointing trade data out of Japanand renewed concerns about sharply falling cor-porate profits in China is also taking a toll on Eu-ropean equity markets... with most major indiceshanding back yesterday’s gains,” said ETX Cap-ital trader Markus Huber.

“With once again very little data out in Eu-rope today the spotlight will remain on Greece.”The country’s Prime Minister Antonis Samarason Wednesday called for more time to makespending cuts and reforms to unlock funds tokeep the debt-wracked country afloat, two daysbefore Greece’s crunch talks in Germany.

“All that we want is a little ‘breathing space’to revive the economy quickly and raise state in-come. More time does not automatically meanmore money,” Samaras said in an interview withGerman daily Bild. Samaras was to meet thehead of the Eurogroup of eurozone finance min-isters, Jean-Claude Juncker, on Wednesdayahead of a trip on Friday to Berlin to meet Ger-man Chancellor Angela Merkel.

He holds talks with French President Fran-cois Hollande on Saturday. As part of a rescue

package with its international creditors, Greecehas committed to slashing some 11.5 billioneuros from spending over two years from 2013.

Samaras reportedly wants to discuss extend-ing the deadline by two years in his talks inBerlin and Paris. European stock markets hadclosed higher on Tuesday and the euro jumpedback above $1.24 as investors remained hopefulof central bank action over the eurozone crisisand cheered Spain’s latest debt auctions.

With the eurozone still firmly in focus fortraders, the euro stood at $1.2475 approachingmidday Wednesday in London, up from $1.2470late on Tuesday in New York, when the singlecurrency reached a seven-week high at $1.2488.

“Optimism in the eurozone has not been theonly driving force behind the better tone in theeuro against the dollar recently,” said Jane Foley,senior currency strategist at Rabobank.

“This month’s better than expected US non-farm payrolls, trade and retail sales data releaseshas driven optimism about the recovery on theother side of the Atlantic. As a result risk appetitehas perked up,” she added. Investors were alsowaiting for the release of minutes from the FederalReserve’s last monetary policy meeting. Due later

Wednesday, the minutes should provide indica-tions as to why the US central bank has shied awayfrom launching a fresh round of economic stimu-lus in the form of quantitative easing (QE).

“The release of the ... minutes from the Au-gust 1 policy meeting is the next prime focus forthe markets,” said Foley.

“The firmer tone of treasury yields since thestart of this month reflects the better US data re-leases and the simultaneously held view that theFed may step back from the QE trigger.”

In company news Wednesday, shares in BHPBilliton were down 1.69 percent to 1,946.5 penceas the mining giant delayed expansion of its hugeOlympic Dam project after posting a near 35-per-cent slump in annual net profit in a sign theglobal slowdown is hurting commodities. Theworld’s biggest miner put plans to grow the cop-per and uranium mine in Australia on hold aftera 15 percent plunge in underlying earnings dueto softer prices for most of its products through2012. BHP’s first profit drop in three years toUS$15.42 billion is a significant reversal of for-tunes for the company following a recordUS$23.6 billion profit last year — the largest everrecorded in Australian corporate history.

Greece takes Europe downEuropean stocks slide before Greece talks, Fed minutes

UN

AGENCIES

Iran’s growing interest in its neighbor Ar-menia, a mountainous, landlocked coun-try of about 3.3 million people, comes ata time of rising international isolation forTehran and increasing scrutiny by West-ern governments and intelligence agen-cies of Iranian banking ties worldwide asthey attempt to stifle the country’s nu-clear program.

The most recent example is Britishbank Standard Chartered (STAN.L),which has been in the spotlight due toU.S. charges that it hid from U.S. regula-tors and shareholders some $250 billionof transactions tied to Iran.

An expanded local-currency footholdin a neighbor like Armenia, a former So-viet republic which has close trade ties toIran and is working hard to forge closer

links to the European Union, could makeit easier for Tehran to obfuscate pay-ments to and from foreign clients and de-ceive Western intelligence agencies tryingto prevent it from expanding its nuclearand missile programs.

Armenian officials denied illicit bank-ing links to Iran. The country’s centralbank issued a press release in response tothis article, stating that it requires allbanks to scrutinize their transactions toavoid dubious financial exchanges.

“The Central Bank of Armenia willfollow its supervision over the behaviorand transactions of all financial institu-tions and their customers in ... Armenia,in order to safeguard its financial systemfrom any destabilizing effects,” it said.

While the four rounds of U.N. sanc-tions remain limited, with only two Iranbanks blacklisted by the Security Council,the United States and European Union

have implemented much tougher restric-tions, sanctioning dozens of banks andother firms and making it increasinglydifficult for Tehran to conduct businessin U.S. dollars and euros.

A U.N. panel of experts that monitorscompliance with the sanctions againstTehran recently submitted a report to theU.N. Security Council’s Iran sanctionscommittee that concluded Iran was con-stantly searching for ways to skirt restric-tions on its banking sector.

“One state bordering Iran informedthe Panel of requests from Iran to opennew financial institutions,” the reportsaid. “The requests were not pursued ap-parently because of that country’s bur-densome legislation.”

Several U.N. diplomats familiar withthe panel’s work confirmed that the un-named state was Armenia, where Iran al-ready has banking ties.

Despite Armenia’s denials of illegalbanking arrangements, Iran has notgiven up trying to expand in the country,the diplomats said, and U.S. officials haverepeatedly cautioned Armenian col-leagues to tighten financial controls.REPORTS AND DENIALS: Iran’strade with Armenia, including an oilpipeline that Armenian news reports sayshould be finished in 2014, requires someform of cross-border banking. IranianPresident Mahmoud Ahmadinejad hassaid that Iran’s annual trade with Arme-nia is around $1 billion, according toIranian news reports. Engaging in trans-actions with Iranian banks is not a viola-tion of international sanctions as long asit is not linked to Iran’s nuclear or missileprograms or companies or individualsunder U.S., EU or U.N. sanctions.

Iran insists its nuclear program ispeaceful and refuses to shut it down. It

says the sanctions are illegal.But Washington has made clear to

governments around the world that trad-ing with Iranian firms that are sanctionedby the United States could lead to a U.S.blacklisting.

A Western intelligence report shownto Reuters, and dated May 2012, said thatIran was searching for “convenient” loca-tions to develop alternative banking rela-tionships away from spy agencies andother international monitoring bodies. Itsaid an expanded presence in Armeniawas one of Iran’s goals.

“The Central Bank of Iran (CBI) hasbeen operating for years to establish anddevelop concealed infrastructures to en-able Iran to continue trading with foreigncountries, particularly in countries con-venient for Iranian activity, such as theUAE (United Arab Emirates) andTurkey,” the report said.

SANCTIONS SOAP OPERA: TOW Iran looks to Armenia to skirt bank sanctionsWith international sanctions squeezing Iran, the Islamic Republic is seeking to expand its banking foothold in the Caucasus

nation of Armenia to make up for difficulties in countries it used to rely on to do business, according to diplomats and documents

NEW YORK

AGENCIES

Expectations have built in recent weeks that the Euro-pean Central Bank will announce at its next policymeeting on September 6 plans to help lower Spanishand Italian bond yields, which some analysts believewill enable the euro to gain further.

Minutes from the latest U.S. Federal Reservemeeting due later on Wednesday were alsoadding to investor caution. Any hint of mone-tary easing would weigh on the dollar andbenefit the euro but no mention will insteadsee the euro suffer on lower risk tolerance.

“There are a huge amount of (euro) sellorders at $1.2500, about a billion dollars,” said BorisSchlossberg, managing director of FX strategy at BK

Asset Management in New York. “We tried to test the upper band anddidn’t have enough gas.” “People will also look at the FOMC minutes to

see if there is the possibility of any further accommodation and if thereis, there is more softness for the dollar,” Schlossberg said.

The euro fell 0.2 percent to $1.2447, still close to Tuesday’shigh of $1.2488, and traders said it was likely to hold above

$1.2420, where bids were reported.“The main issue is whether the ECB will start buying

peripheral bonds ... We have been seeing a bit of short-covering in the euro over the last couple of weeks onfears of a big bazooka,” said Arne Lohmann Rasmussen,head of currency research at Danske Bank. “People arepricing out the risk that the euro zone will implode.”

Danske forecasts the euro will rise to $1.27 in threemonths as proactive policy from the ECB eases eurozone debt worries and leads investors to trim hefty betson the currency falling.

Euro declines but ECB optimismkeeps it near 7-week highThe euro slipped against the dollar on Wednesday, retreating from the seven-week high in

the prior session as investors bet the move was too far, too fast even as they remainedcautiously optimistic euro zone policymakers are readying action to stem the debt crisis

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