Fed`s Bullard says policy to stay loose for awhile

(BULLARD, COULD, INDEPENDENCE, THINK, YIELDS, GOING)

By Alister Bull
PHILADELPHIA (Reuters) - St. Louis Federal Reserve Bank President James Bullard said on Tuesday that public anger over the U.S. financial crisis and subsequent bailouts could cause big problems if this escalated into a political challenge to the independence of the U.S. central bank.
"If that leads to some sort of erosion, or even the appearance of an erosion, of the independence of the Fed, I think that could be very counterproductive in this environment," he said after giving a talk about monetary policy to a Global Interdependence Center event.
The atmosphere between the Fed and the U.S. Congress has become very tense in the wake of last year`s crisis. Lawmakers are angry over the taxpayer-backed rescues of investment bank Bear Stearns and insurer American International Group, which led to a public outcry that could hurt them in the polls.
Fed Chairman Ben Bernanke also endured a hostile congressional grilling last week over the Fed`s role in Bank of America`s purchase of Merrill Lynch, and lawmakers have demanded Fed emails and questioned its accountability.
All of this is taking place against the background of a record U.S. budget deficit, and an unprecedentedly aggressive Fed purchase program of U.S. government debt.
"We`ve got very large fiscal deficits. We`ve got the appearance...that the Fed is monetizing the deficit, pushing up yields. Anything that is going to erode the independence of the Fed is going to feed that expectation and drive yields higher.
"So I think we are really in a delicate situation here as regards the independence of the Fed, and that is an important consideration going forward," he said in response to a question from the audience.
Bullard said that he did not believe the Congress really wanted to clip the Fed`s wings, but warned it would be easy for foreign investors to get the wrong message, and conclude that the Fed was going to finance the deficit by printing money.
"The Congress has thought over the last 100 years about how much independence to give the central bank. And when they really think about it, at the end of the day, they want the level of independence that we have. And so I think that will be the end outcome of this," he told reporters.
"I don`t think anyone involved intends to monetize the debt, but that is what it looks like to outsiders," he said.
EXIT STRATEGY
In earlier remarks, Bullard said that the Fed`s very accommodative monetary policy will remain in place for an extended period and a premature exit from this strategy could thwart U.S. economic recovery.
But Bullard said having a plan to shrink the monetary base after the Fed massively expanded it was important to control inflation expectations. And he said selling Fed-held assets was probably the most likely way it would choose to go.
"Without an exit strategy, expectations of high inflation may develop," Bullard said at the event, which was held at the Federal Reserve Bank of Philadelphia.
"If expectations of inflation feed into today`s long-term yields, those yields will rise today and hamper recovery prospects," he said in prepared remarks.  Continued...
Original article

Crisis far from over: World Bank chief

(WORLD, ZOELLICK, MARKETS, DEVELOPING, COUNTRIES, THERE)

By Lesley Wroughton
WASHINGTON (Reuters) - World Bank President Robert Zoellick said on Tuesday that financial markets are showing signs of stabilization, but warned that the global crisis was far from over in developing countries.
Speaking to reporters ahead of a meeting of finance ministers from Latin America, Zoellick said developing countries were only now feeling the full force of the global economic and financial crisis, which could quickly return to advanced economies where it began.
He said demand for World Bank financing was high and growing as credit markets remained shut to many developing market clients.
"There seems some opportunities for improvement on the financial market side, but there is still great uncertainty about the scope and timing of recovery," Zoellick told reporters on a conference call
"There are risks that could threaten the turnaround and I have emphasized the world needs to recognize that dangers will come in waves," he said. Zoellick was speaking ahead of a meeting of finance ministers from Latin America in Chile on July 2.
"A number of developing countries remain under significant stress," he added.
Zoellick said the strength of the recovery and the potential for setbacks depends a lot on how policy-makers cope with risks, including in banking systems, protectionism and financing of rollover debt of private-sector companies.
The World Bank estimated in March that well over $1 trillion in emerging market corporate debt and $2-3 trillion in total emerging market debt will mature in 2009, the majority of which reflects claims of major global banks extended across borders or through affiliates in emerging markets.
Zoellick said developing countries faced a total financing shortfall in the range of $350 billion to $635 billion, of which $178 is in Latin America.
He said demand for financing from the World Bank was increasing in part because developed countries have guaranteed so much debt that it is crowding out "good developing country" debt.
"Even if they can go to the markets and go sometimes to their domestic markets, it will crowd out their private sector," Zoellick said, "So, I remain quite cautious about the overall state of the recovery. I don`t think we`re remotely through this.
"We remain in a situation where we have to be very alert to dangers because there are significant risks out there, and we are finding that the demand for our resources from all of our different instruments ... remains high and growing," he added.
Zoellick said he would discuss with Latin American finance ministers ways to bolster the World Bank`s capital base. This could include possible early replenishment of money for the Bank`s facility that provides low-cost loans and grants to 78 of the world`s poorest countries, 39 of which are in Africa.
(Reporting by Lesley Wroughton; Editing by Dan Grebler)
Original article

Bank of America accused of anti-consumer practices

(CONSUMER, AMERICA, THEIR, WORKERS, CUSTOMERS, COMPLAINED)

By Jonathan Stempel
NEW YORK (Reuters) - Consumer and labor groups demanded Bank of America Corp and other lenders reform their sales practices so that workers under pressure to meet sales quotas do not saddle customers with costly and unnecessary products.
The whistleblowing campaign was announced Tuesday as the U.S. Treasury Department unveiled legislation to create a Consumer Financial Protection Agency, as part of the Obama administration financial regulation overhaul.
People, who said they were former Bank of America employees, alleged that their supervisors drove them to burden consumers with needless debt and fees, to fatten the bank`s earnings and the paychecks of senior executives, and threatened to retaliate if they complained. Some complained their salaries had been too low and that they had to hit quotas to earn needed bonuses.
"This is the kind of information that really needs to get out," said Representative Keith Ellison, a Minnesota Democrat who sits on the House Financial Services Committee. "Without a strong whistleblower law, we simply are not doing the things we need to do in order to manage risk properly."
He suggested that lending standards could be compromised by "the urgency to sell, sell, sell, sell, sell."
Groups conducting the campaign include the Service Employees International Union, which is trying to organize Bank of America workers; the National Association of Consumer Advocates, and the U.S. Public Interest Research Group.
Bank of America spokeswoman Anne Pace rejected the allegations, saying the SEIU misrepresented the largest U.S. bank`s relationship with its customers and associates.
She said the Charlotte, North Carolina-based bank is "pro-associate and believes that managers are well-equipped to respond to associates` needs," and is committed to ensuring that customer fees are "transparent and predictable."
Christopher Feener, who said he used to work in the bank`s credit card unit, was among the former workers who spoke out.
He complained that the bank regularly violated the Fair Debt Collection Practices Act, and sometimes pushed workers to falsely threaten legal action against customers. He said his team was sometimes pushed to call customers` neighbors about delinquent accounts, "to embarrass the customer and actually encourage the neighbor to bring over a message."
Shares of Bank of America rose 5 cents to $13.24 in early afternoon trading on the New York Stock Exchange.
(Reporting by Jonathan Stempel; Editing by Tim Dobbyn)
Original article

Soros predicts "stop-go" economy and higher rates

(SOROS, RATES, MARKETS, BUBBLE, REGULATORS, GOVERNMENT)

By Joseph A. Giannone and Jennifer Ablan
NEW YORK (Reuters) - Billionaire investor George Soros on Tuesday predicted a "stop-go" economy for the United States, saying fears of inflation will drive up interest rates and choke off growth.
Soros, one of the world`s most successful hedge fund managers who was speaking at a breakfast hosted by the Wall Street Journal, said borrowing costs are the major headwinds for the economy.
"As markets revive, fear of inflation will drive up interest rates, which will choke off recovery," he said.
Rising U.S. Treasury yields have driven mortgage rates back up, threatening a recovery in the housing market and a refinancing boom that has helped preserve the still-fragile health of recession-weary households and the banks that lend to them.
The rise in bond yields and mortgage rates may also act to check the huge recent rally in global stock markets of the past three months, with the Federal Reserve trying to end an 18-month recession and yet not spur inflation.
Soros went back into retirement earlier this year after leading his self-named firm through the 2008 crisis. He made about $1.1 billion last year, according to Institutional Investor`s Alpha Magazine.
SOROS ON `SUPER BUBBLE`
Soros, who made his fortune targeting currencies in tightly controlled markets, said international financial markets need global regulation, even while being critical of regulators and calling for minimal government intervention.
"The idea of self-correcting markets is a misconception," he said. What governments need to do, he said, is recognize they cannot prevent bubbles but instead try to control them from getting bigger.
"You cannot prevent bubbles from forming but prevent them from self-reinforcement," Soros said.
Soros, who has retired from active fund management, acknowledged that getting regulation right is not easy as he argued both for and against stricter supervision.
"The regulators will always be wrong," he said. "They should interfere as little as possible."
Regulators, he said, typically try to control money supply and then let free markets take care of everything else, but that is a fallacy.
By the same token, Soros said that efforts by regulators and governments to stop bubbles bursting for more than 25 years gave rise to the most recent "super bubble."
Soros cautioned that the U.S. government may be making some serious missteps in dealing with the current credit crunch and recession. Massive stimulus spending and bank bailouts have pumped up the U.S. government`s own balance sheet.  Continued...
Original article

Cisco may take on Microsoft`s Office

(CISCO, MICROSOFT, OFFICE, SERVICE, BUSINESS, ONLINE)

BOSTON (Reuters) - Cisco Systems Inc is considering offering Web-based alternatives to Microsoft Corp`s popular Office software as the networking giant expands on the Internet.
Cisco Senior Vice President Doug Dennerline said on Tuesday his company may develop a service that would allow business users to create documents they could draft and share through its WebEx meeting and collaboration service.
Internet-based alternatives to Microsoft Office cropped up about five years ago, but corporate users have yet to embrace them. If the approach does take off, it could become big business: Microsoft`s Office division rang up sales of $60 billion in the software company`s most recent fiscal year.
Google Inc sells Google Apps, an Internet-based alternative to Microsoft Office that includes a spreadsheet, word processor and presentation software.
Dennerline, who manages Cisco`s online collaboration products, said he is interested in getting into that area.
"That is an interesting space. We are certainly thinking about that," he said on Tuesday during an online news conference. He did not elaborate.
WebEx services currently includes online meetings, email and instant messaging.
He also said Cisco is not interested in competing with Salesforce.com Inc in selling online applications that companies use to manage sales and marketing activities.
Analysts have long speculated that Cisco planned into that business.
(Reporting by Jim Finkle; editing by Andre Grenon)
Original article

Gloomy U.S. consumers clip housing recovery hopes

(CONFIDENCE, SHOWED, MONTH, REPORT, PRICES, INDEX)

By Emily Kaiser
WASHINGTON (Reuters) - U.S. consumer confidence took an unexpectedly steep slide in June, figures released on Tuesday showed, suggesting the 18-month-long recession had yet to loosen its grip on the economy.
A separate report on April house prices in major cities offered some encouraging signs that the worst of the housing slump may be over, but that was not enough to lift investors` spirits, while another crop of economic data showed business activity in New York City and the Midwest remained weak and retail chains slogged through a rough June.
Billionaire investor George Soros added to the cautionary tone, saying fears of inflation would drive up borrowing costs and choke off growth once financial markets recover.
Major stock market indexes turned lower after the Conference Board`s consumer confidence index showed households felt gloomier about their current situation, and less optimistic about the eventual economic recovery.
Kevin Kruszenski, head of listed trading at Keybanc Capital Markets in Cleveland, said the confidence data "kind of took the wind out of things a little bit."
The confidence index fell to 49.3 in June from 54.8 in May. Economists polled by Reuters had expected a healthier reading of 55.0 for this month.
Standard & Poor`s/Case Shiller home price indexes showed prices of single-family homes declined in April from the prior month, but the pace of the slide moderated.
There were a few glimmers of hope as 13 of the 20 metropolitan areas tracked showed some improvement. The laggards included Las Vegas, Phoenix and Miami, which were among the cities that saw the biggest run-up in house prices in the middle part of this decade.
"While one month`s data cannot determine if a turnaround has begun, it seems that some stabilization may be appearing in some of the regions," said David Blitzer, chairman of the index committee at S&P. "We are entering the seasonally strong period in the housing market, so it will take some time to determine if a recovery is really here."
Bill Schultz, chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, said less-bad news was certainly a relief to investors, but their patience may soon start to wear thin.
"To get the markets moving to the next level you`re going to have to see prices stop falling and begin to rise here at some point in the not-so-distant future," he said.
In New York, the National Association of Purchasing Management-New York`s monthly measure of business activity showed conditions worsened in June, although the purchasing and supply managers surveyed felt a bit better about the six-month outlook.
The index of current business conditions tumbled to 44.8 in June from 61.3 in May, while the six-month outlook index rose to 58.3 this month from 56.1 a month earlier.
A similar report on activity in the U.S. Midwest in June showed some improvement from a month earlier, but still pointed to a weak economy.
Readings on the health of retailers were mixed. A report from the International Council of Shopping Centers and Goldman Sachs showed that chain store sales rose modestly last week from a year earlier, but a separate report from Redbook Research showed a sharp decline.  Continued...
Original article

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AIG says risk declining, new CEO likely soon

(GOVERNMENT, STAKE, WHICH, MEETING, LIDDY, COMPANY)

By Lilla Zuill and Paritosh Bansal
NEW YORK (Reuters) - American International Group Inc`s (AIG.N) chief executive said the government may never relinquish its 79.9 percent stake in the insurer, which has been rescued by $180 billion of federal bailouts.
Speaking at AIG`s annual meeting on Tuesday, CEO Edward Liddy nevertheless expressed optimism the insurer will be able to repay government loans as it tries to rebound from punishing losses tied to derivatives.
AIG lost $99 billion last year, largely because of its exposure to credit default swaps, and has been pilloried for bonuses awarded in its financial products unit, the source of much of its losses.
The bailouts have left the government with a 79.9 percent stake in the company, which is trying to sell assets to help repay $83 billion of government loans.
"I can give you no assurances that it will ever change," Liddy, installed as AIG`s chief executive by the government last September, said of the government stake. But he said there was "an excellent chance" the government will be repaid.
Last week, AIG said it planned to give the Federal Reserve Bank of New York stakes in two large life insurance units and eventually spin those units off, reducing debt to the government by about $25 billion.
On Tuesday, the company said it would sell its credit card business in Taiwan to Far Eastern International Bank. Liddy said AIG is trying to decide what to do with its aircraft leasing unit, International Lease Finance Corp.
Liddy said the financial products unit has nearly halved its derivatives exposure, to $1.4 trillion from $2.7 trillion, and by year-end "our risk will have been reduced substantially from its current status."
Shares of AIG, once the world`s largest insurer by market value, have traded below $2 nearly all year. In morning trading they were down 20 cents at $1.13.
RATS FLEEING SINKING SHIP
AIG held its annual meeting in a company building next door to its Wall Street headquarters, both of which it is selling.
It was the first public opportunity for shareholders to vent frustration since AIG`s financial implosion.
Even so, fewer than 200 people attended, a far lower number than a year earlier, and the meeting lasted less than an hour.
All of the company`s proposals were approved, except for one relating to the number of authorized shares; all shareholder proposals were rejected.
AIG had delayed its annual meeting, usually held in May, to give it more time to shuffle its board, which has been almost entirely reconstituted over the last year.  Continued...
Original article

Treasury sets wide scope for new consumer agency

(TREASURY, AGENCY, CONSUMER, PROTECTION, FINANCIAL, PRACTICES)

WASHINGTON (Reuters) - The U.S. Treasury on Tuesday sent Congress proposed legislation to create a new regulatory agency with sweeping powers to write and enforce tough new consumer protection rules for banks and other financial institutions.
The legislative language fleshes out plans for widespread changes to U.S. financial regulations the Obama administration released on June 17.
The proposed Consumer Financial Protection Agency aims to protect Americans from abusive practices widely employed during the recent housing and credit boom, such as deceptive and undocumented mortgage lending, poor loan disclosures, and unfair interest rate increases and "fee traps" on credit cards.
The Treasury`s proposal would consolidate consumer protection power in a single agency, giving the CFPA exclusive supervisory and examination authority for consumer compliance among banking institutions.
These responsibilities are now split among several agencies, including the Federal Reserve, which has taken criticism for failing to impose tougher restrictions on mortgage lenders.
"Consumer protection will have an impendent seat at the table in our regulatory system. By consolidating accountability in one place, we will reduce gaps in federal supervision and enforcement," U.S. Treasury Secretary Timothy Geithner said in a statement.
The new agency will have powers to write rules and enforce them, and can issue subpoenas, hold hearings and seek court orders to halt abusive practices for both banks and non-banks -- including mortgage lenders, which often fell through regulatory gaps in the current structure.
The Treasury said the agency could impose new rules on montage brokers to eliminate conflicts of interest and promote best practices, and ban unfair practices such as "yield spread premiums" -- side payments from lenders to brokers to push consumers into higher priced loans.
(Reporting by David Lawder; Editing by Padraic Cassidy)
Original article

Airlines lost $3 billion in first quarter

(GENEVA, AIRLINES, BILLION, CARRIERS, DETERIORATION, PRICES)

GENEVA (Reuters) - The world`s airlines lost more than $3 billion in the first quarter of 2009, the International Air Transport Association (IATA) said on Tuesday, maintaining its estimate for full-year losses of $9 billion.
In its latest snapshot on the industry, the Geneva-based lobby said weak travel demand and lower freight volumes in the global recession had bled revenues for major carriers, in "a significant deterioration from last year."
"This deterioration was before the recent rise in fuel prices," IATA said, warning the 30 percent increase in oil and jet fuel prices since early May would squeeze airline cash flows further in coming months.
Both oil and jet fuel prices have risen almost $20 a barrel in the past two months, and are now 75 percent higher than their low point at the end of 2008, the Financial Monitor report said.
"Airlines have not yet felt the full impact of this oil price rise," it said.
But it said it was not changing its previous 2009 loss forecast of $9 billion, which follows revised 2008 losses of $10.4 billion.
On Tuesday, U.S. crude traded around $72 per barrel.
IATA, which represents more than 200 airlines, also said carriers trying to fly fewer flights to save costs during the downturn have not managed to cut capacity in line with shrinking air transport demand.
Leading airlines have been seeking mergers and acquisitions to help build scale and shield themselves against continued market weakness until the global economy recovers.
Delta Air Lines (DAL.N) swallowed rival Northwest Airlines last year to create the world`s largest airline, and European carriers have also consolidated with Deutsche Lufthansa (LHAG.DE) agreeing to buy Austrian Airlines and Air France-KLM (AIRF.PA) scooping up Alitalia.
British Airways (BAY.L) is also in merger talks with Iberia (IBLA.MC), and Singapore Airlines (SIAL.SI) has said it is eyeing acquisitions in China and India.
(Reporting by Laura MacInnis; Editing by Stephanie Nebehay and Dan Lalor)
Original article

Stock futures point to a higher start

(REUTERS, HIGHER, PERCENT, SHARES, INDEX, RELEASE)

(Reuters) - Stock futures pointed to a higher start on Wall Street on Tuesday, with futures for the S&P up 0.4 percent, Dow Jones futures up 0.2 percent and Nasdaq 100 futures up 0.1 percent at 5 a.m. EDT.
In Europe, shares rose for a second straight session on Tuesday and were on track to post the biggest quarterly rise since late 1999, with banks advancing and commodity shares tracking higher crude oil and metals prices.
At 5 a.m. EDT, the FTSEurofirst 300 .FTEU3 index of top European shares was up 0.2 percent at 860.96 points after rising up to 864.27 points and falling to a low of 858.01. The index closed 1.8 percent higher in the previous session.
American International Group Inc (AIG.N), the insurer rescued by a series of federal bailouts, is set to pad out its shrinking board on Tuesday when a new slate of directors stands for election at its annual meeting.
At 8:55 a.m. EDT is the release of the Redbook weekly U.S. Retail Sales figures for June versus May. In the prior period, sales fell 4.4 percent.
New York NAPM releases June index of regional business activity at 9 a.m. EDT. In the previous month, the index read 361.6.
Standard & Poor`s releases its S&P Case/Shiller Home Price Index for April at 9 a.m. EDT. Economists in a Reuters survey expect a fall of 1.8 percent versus a 2.2 percent decrease in the previous month.
The Institute of Supply Management Chicago releases June index of manufacturing activity at 9:45 a.m. EDT. Economists in a Reuters survey forecast a reading of 39.0 in the month compared with 34.9 in May.
At 10 a.m. EDT the Conference Board releases June consumer confidence. Economists in a Reuters survey expect a reading of 55.0 compared with 54.9 in May.
Shares of H&R Block Inc (HRB.N) rose 5 percent after the market close on Monday after the tax preparation company beat expectations for its fourth-quarter results.
U.S. stocks rose on Monday as higher oil prices lifted shares of energy companies and fund managers snapped up this quarter`s winners to burnish their portfolios.
The Dow Jones industrial average .DJI gained 1.08 percent, the Standard & Poor`s 500 Index .SPX was up 0.91 percent and the Nasdaq Composite Index .IXIC was up 0.32 percent.
(Reporting by Joanne Frearson; Editing by Jon Loades-Carter)
Original article

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Magna-Opel deal in doubt

(TUESDAY, COULD, PORSCHE, REPORTED, MAGNA, STAKE)

By Anne Jolis and Christiaan Hetzner
BRUSSELS/FRANKFURT (Reuters) - Efforts to save two leading European carmakers took a twist on Tuesday that could change the ownership of both crisis-hit General Motors Corp`s Opel and German sportscar maker Porsche.
As GM readied for bankruptcy, the Financial Times reported Belgium-based holding company RHJ International, a former bidder for Opel, was back in the running and close to a deal that would strand Canadian-Austrian auto parts group Magna International.
Elsewhere, Qatar made an offer to the Porsche and Piech families that control the Porsche SE automotive holding that could help cut its debt mountain.
Porsche and Volkswagen have been in talks to create an "integrated" automotive group after Porsche`s 9 billion euro ($12.6 billion) debt burden forced it to drop plans for a full takeover of VW. But progress toward creating a combined company stalled after Porsche chief executive Wendelin Wiedeking sought investment from Qatar`s sovereign wealth fund.
RHJ-OPEL DEAL CLOSE?
The FT reported GM was close to a deal with RHJ to sell a stake in Opel, and a memorandum of understanding could be signed within days.
Talks on a stake in Opel between its parent, GM, and Magna -- going on since Magna clinched an agreement just before GM`s bankruptcy filing in May, pipping Fiat to the post at the time -- have hit snags, the paper said.
RHJ was named as a potential Opel buyer in media reports but never confirmed or denied it had made an initial bid let alone a second, improved one. But according to the Financial Times, RHJ has improved an earlier bid and is being taken "very seriously" by GM and a memorandum of understanding could be signed in days.
The FT reported RHJ`s new offer was said to be more sensitive to job losses in Germany, which is providing $2.1 billion of bridge financing to keep the carmaker afloat as GM goes through bankruptcy proceedings.
Another sticking point in negotiations with Magna is access to the Detroit carmaker`s global technology, which Magna wants to secure on behalf of Russian partners, the paper said. Magna has teamed up with GAZ and Sberbank for the bid.
RHJ and Magna declined to comment, as did Fiat whose chief executive Sergio Marchionne has said he wants to focus on Chrysler -- in which it has taken a 20 percent stake -- after the Italian automaker`s bid for Opel failed, and that its existing bid for Opel was the best it can do.
Back in the United States, GM is due to seek approval from a court on Tuesday to sell its assets to a "New GM" in a plan to reinvigorate the automaker under government ownership.
Also on Tuesday, Hyundai Motor Co offered to allow customers to lock in fuel prices for new vehicles in a sales promotion aimed at the economic anxieties of American consumers.
(Reporting by Reuters reporters; Writing by Helen Massy-Beresford; Editing by Dan Lalor)
($1 = 0.7143 euro)
Original article

Iraq launches historic oil and gas auction

(AUCTION, FIRMS, LARGEST, CONTRACTS, DEALS, WHICH)

By Missy Ryan
BAGHDAD (Reuters) - Iraq will auction off eight giant oil and gas fields on Tuesday in its first major tender since 2003, giving oil firms a foothold in a country that may hold some of the world`s largest untapped energy reserves.
Private jets flew representatives from leading global firms like Exxon Mobil (XOM.N) and Total (TOTF.PA) into Baghdad, a city still ringed by blast walls and gripped by violence, to place their bids for the 20-year development contracts.
The companies are wading into a morass of controversy surrounding the deals, which some Iraqi lawmakers condemn as illegal and which even some within the state-run oil industry have criticized for selling Iraq`s vast oil wealth short.
Over six years after Saddam Hussein`s ouster was supposed to unleash Iraq`s oil potential, the auction marks the first real center-stage moment for the Oil Ministry, under growing pressure to boost disappointing output around 2.4 million barrels a day.
Iraq has proven oil reserves of 115 billion barrels, the world`s third largest, but the true amount of black gold sitting beneath Iraq`s desolate deserts could be far greater.
The auction, delayed by a day by a sandstorm, will be broadcast live from a hotel in Baghdad`s fortified Green Zone in a process Iraqi oil officials insist will be fully transparent.
Firms from the countries that launched the 2003 invasion, which triggered years of chaos and bloodshed, will be neither favored nor disadvantaged, they say.
Six of Iraq`s largest oilfields, which are already producing, and two natural gas fields, which have barely been tapped, will be auctioned off one at a time over the course of the day, and the auction may stretch into Wednesday if necessary.
For oil firms, the allure may be more about getting a foothold in Iraq`s oil sector than about the amount of money they expect to make in these deals, which are fixed-fee service contracts rather than the production-sharing deals they prefer.
Winning firms must pay Iraq $2.6 billion in signature bonuses and cover Iraq`s 25-percent share of development costs, which it will pay back in oil.
It will take a great deal of money to reverse the decades of war, sanctions and neglect that have left Iraq`s oil sector rusting, out-of-date, and unable to leverage enviable resources.
Oil Minister Hussain al-Shahristani, a nuclear scientist, says the deals will bring Iraq $1.7 trillion over 20 years. He defended the contracts when he was summoned to parliament last week by skeptical lawmakers who insist the deals will be illegitimate unless they are sent to parliament for approval.
The contracts also came in for condemnation from minority Kurds, who have signed their own deals with foreign firms and who are warning they could make it difficult for companies to work around the disputed, oil-producing city of Kirkuk.
Parliament`s failure to pass new energy legislation due to disagreement between Kurds and Arabs, raises more questions for firms coming into Iraq, as do national elections scheduled for January that could bring upheaval to a fledgling democracy.
But oil majors appear willing to confront the risks, and ongoing violence, for a chance to work in a place with such large untapped reserves.  Continued...
Original article

Jury returns $1.67 billion drug verdict against Abbott

(ABBOTT, PATENT, JOHNSON, HUMIRA, REMICADE, SCHERING)

NEW YORK (Reuters) - A U.S. federal jury returned a $1.67 billion verdict against Abbott Laboratories (ABT.N) in a patent suit brought by Johnson & Johnson (JNJ.N) related to arthritis treatments, the drug companies said on Monday.
An Abbott spokesman said the company would appeal the verdict delivered in Marshall, Texas.
The case involves Humira, Abbott`s newer blockbuster drug that blocks tumor necrosis factor, or TNF, and which competes with Johnson & Johnson`s older blockbuster medication Remicade.
The company said in a statement it was pleased with the ruling, which showed its patent was "both valid and infringed." Remicade sales were $1.03 billion in Johnson & Johnson`s first quarter.
Abbott spokesman Scott Stoffel told Reuters: "We`re disappointed at this verdict, and we are confident in the merits of our case and that we will prevail on appeal."
Humira is a fully-human antibody, meaning it does not have any mouse components, Stoffel said. Remicade, on the other hand, is partly made from mouse DNA.
"Only when Humira was nearing its approval in 2002 did J&J amend the patent at issue in this litigation to claim it had discovered fully-human antibodies in 1994," Stoffel said.
"J&J acknowledged at trial that it did not start working on a fully human antibody until 1997 -- two years after Abbott discovered Humira and one year after Abbott filed its patent applications for Humira."
A spokeswoman for the Johnson & Johnson unit involved in the case, Centocor Ortho Biotech Inc, would not comment beyond the brief statement.
Schering-Plough Corp (SGP.N) has the overseas rights to Remicade. Merck & Co Inc (MRK.N) aims to buy Schering-Plough later this year, and to inherit those rights.
Johnson & Johnson, however, is battling Merck before an arbitrator, claiming it will gain overseas market rights to Remicade if Merck completes its acquisition of Schering-Plough.
Both Merck and Schering-Plough were not immediately available to comment on the implications of the jury`s verdict.
(Reporting by Ransdell Pierson and Jonathan Spicer)
Original article

Asia stocks gain as risk taking persists

(QUARTER, PERCENT, PRICES, MARKETS, INDEX, HIGHER)

By Kevin Plumberg
HONG KONG (Reuters) - Asian stocks and the Australian dollar rose on the last day of the second quarter, as investors kept adding to bets global economic activity is rebounding, having driven Chinese shares to the highest in a year.
The U.S. dollar slipped as momentum kept dealers rolling out of trades based on safety after a 7 percent drop on the quarter, keeping commodity prices supported. Oil prices rose above $73 a barrel, to new highs for the year.
Emerging markets have been the big winner so far this year, with the MSCI emerging markets equities index .MSCIEF up 32 percent so far in 2009 compared to a 6 percent rise on the all-country world index.
A tremendous shift by investors out of cash and low-yielding money market instruments into riskier assets, particularly in Asia, has been driving equity valuations and currencies in the region higher.
However, the third quarter could be a time of reckoning if higher raw materials prices snuff out a nascent recovery.
"Just how higher oil prices are a boon to the global economy when consumers are struggling to keep jobs and make payment on negative equity housing loans is a mystery. We are confident that threats to risk appetite and risk assets point clearly toward potential reversal, not extension of gains," said Patrick Bennett, Asia foreign exchange and rates strategist with Societe Generale said in a note.
So far this year, Chinese and Indian stock markets have been the hottest in the region.
The Shanghai composite .SSEC was up 0.3 percent on the day to the highest since June 2008, and has risen 63 percent so far this year.
India`s BSE index .BSESN has gained 52 percent in the first half, with most of it won after a decisive election victory by a Congress-led coalition in May.
Japan`s Nikkei share average .N225 rose 1.9 percent, with firms in the technology sector giving a boost to the index. Valuation of the Nikkei on a price-to-book basis has jumped to around 1.3 times, having spent the first quarter below a multiple of one.
That is still well below the average of the last decade of 1.9 times.
Hong Kong`s Hang Seng index .HSI climbed 1.5 percent, helped by a 5.8 percent jump in shares of refiner Sinopec (0386.HK) after China unexpectedly lifted domestic gasoline and diesel prices to their highest ever.
Oil rose sharply to 8-month highs, though a lack of news suggested dealers were focused on quarter-end activity.
U.S. crude for August delivery rose to an eight-month high of $73.38 a barrel, but later cooled to trade at $72.09, up $1.60 on the day.
London Brent, where trading volume in the front month contract surged much higher than normal, led the rally, gaining $1.93 a barrel to $72.92.  Continued...
Original article

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General Motors to seek approval to sell itself

(BANKRUPTCY, COURT, COMPANY, WOULD, PERCENT, CHRYSLER)

By Emily Chasan
NEW YORK (Reuters) - General Motors Corp is heading to bankruptcy court on Tuesday to seek approval to sell its assets to a "New GM" in a plan to reinvigorate the automaker under U.S. government ownership.
GM is seeking approval for the sale from U.S. bankruptcy Judge Robert Gerber just 30 days after filing for Chapter 11. Under the deal, brokered by the Obama administration`s autos task force, the company would sell its assets under Section 363 of the bankruptcy code to a "New GM" and continue to operate its best assets, like Chevrolet and Cadillac, while gaining access to billions in funding from the U.S. Treasury.
GM`s old assets would remain behind in bankruptcy court to be liquidated.
The deal faces several objections from bondholders and those concerned about the fate of its dealers, but no competing bidders have emerged as an alternative to the U.S. government`s $60 billion financing for GM, including a proposed equity investment of $50 billion that would give the U.S. Treasury a 60 percent ownership stake.
If the sale goes through it would mark the second big win this month for the Obama administration`s autos task force, which successfully brokered the sale of Chrysler LLC to a group led by Italy`s Fiat SpA. The U.S. Supreme Court cleared the way for that deal to go through on June 9.
"I think it is going even perhaps more smoothly than Chrysler, which is kind of interesting considering how much bigger GM is than Chrysler," said Stephen Lubben, a bankruptcy professor at Seton Hall Law School in New Jersey.
"Chrysler cleared the path for it and they`re using pretty much the same strategy," he added.
GM said in court documents that the sale would avoid a "systemic failure" for the U.S. auto industry and that it is the only way to provide "a genuine opportunity for the business to survive and thrive in an economically viable entity."
The company has shut 13 of its U.S. assembly plants for up to 11 weeks as part of a bid to cut production and run down inventory while it seeks approval of the sale in bankruptcy court.
The company plans to shed dealer contracts and has deals to sell brands like Hummer and Saturn that will not be carried over to the new company. It also plans to shed the Pontiac brand and GM said on Monday that it would cut operational ties with a Northern California auto plant it had operated in a joint venture with Toyota Motor Corp.
UPHILL BATTLE FOR CHALLENGERS
While dozens of objections have been filed in the bankruptcy case, some have already been resolved or withdrawn, and challengers to the deal could face an uphill battle since the same court has already approved the Chrysler sale.
"I think Judge Gonzalez kind of made life easier for Judge Gerber here," Lubben said, citing the New York bankruptcy judge who approved Chrysler`s sale and the several higher courts that backed his decision.
"People basically know the Second Circuit has already largely blessed this structure," he added.
GM has said more than 50 percent of its bondholders support the deal and also argued that the sale would maximize recovery for its stakeholders. Under the plan, the U.S. government would take a 60 percent stake in the newly formed company, the United Auto Workers union would have a 17.5 percent stake, the Canadian government would own about 12 percent, and GM bondholders are expected to get about 10 percent.  Continued...
Original article

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Japan props up Elpida with $1.7 billion in aid

(JAPAN, MAKER, ELPIDA, MEMORY, BILLION, LOANS)

By Mayumi Negishi
TOKYO (Reuters) - Japan pledged to prop up loss-making chip maker Elpida Memory Inc (6665.T) with up to $1.7 billion in public and private capital and loans, the country`s first capital injection in a company since the financial crisis.
The 160 billion yen ($1.7 billion) aid package includes a possible 20 billion yen capital injection from Taiwan Memory Company, which was set up by Taiwan to save its own chip sector and had chosen Elpida as a technology partner.
Elpida and other makers of dynamic random-access memory (DRAM) chips, used mainly in PCs, have tumbled into the red due to falling prices and weak consumer demand, compounded by the global recession.
Elpida, the world`s fourth-biggest maker of DRAM chips, becomes the first Japanese company to get aid under a scheme that makes public funds available to businesses hit by the global financial crisis.
"This shows that the government is determined to support the sector, that they are determined not to let Elpida fail," Hajime Kurabayashi, a strategist at Okasan Securities said on Tuesday.
Elpida is Japan`s last hope in PC memory chips in an industry dominated by South Korea`s Samsung Electronics Co Ltd (005930.KS) and Hynix Semiconductor Inc (000660.KS).
"Elpida is Japan`s only DRAM maker, and it has been hit by extremely severe conditions amid the global economic slump, despite its superior technology," Trade Minister Toshihiro Nikai told reporters.
Elpida`s shares gained 3 percent, having risen more than 60 percent over the past three months, helped by media reports on the government aid. The benchmark Nikkei average .N225 has added about 20 percent over the same period.
Elpida is scheduled to issue 30 billion yen in preferred securities to the state-owned Development Bank of Japan in August, which will also extend 10 billion yen in loans, Japan`s trade ministry said.
Private banks will also provide 100 billion yen in loans, the ministry said.
($1=96.06 Yen)
(Reporting by Mayumi Negishi and Taiga Uranaka; Editing by Edwina Gibbs and Anshuman Daga)
Original article

Oil spikes to 8-month high on brief Brent bid frenzy

(PRICES, BARREL, BRENT, MARKET, TRADERS, ASIAN)

By Fayen Wong
PERTH (Reuters) - Oil prices jumped more than 2 percent to an eight-month high above $73 a barrel on Tuesday, as a sudden spike in Brent buying pinned on fund positioning ushered out the market`s best quarterly gain since 1990.
While the rally drew support from fresh attacks on oil facilities in Nigeria as well as improving risk sentiment aided by rising equity markets, traders said those factors were secondary to the sudden big Brent bid orders that triggered the frenzy, overwhelming liquidity during the thin Asian day.
Trading volume in both Brent and U.S. crude oil futures surged to more than 10 times the norm for the Asian time zone as prices leapt more than $1.50 in under half an hour around 0200 GMT (10 p.m. EDT), the sort of move typically only seen in the event of hurricanes or other major disruptions.
"It feels like short-covering because of stop orders left overnight," said a trader with a global investment bank.
Both prices and volumes cooled slightly by midday, with U.S. crude for August delivery up $1.29 at $72.78 a barrel by 0405 GMT, off its earlier eight-month high of $73.38. August trade was 12,400 lots versus a few thousand lots normally.
The main focus was on London ICE Brent crude, with volume in the front-month August contract surging to more than 17,000 lots versus the less than 1,000 lots normally, and prices spiking to a peak of $73.50 a barrel. Traders said bids for 500 or 600 lot clips spooked a market accustomed to 10-20 lot bids.
By 0407 GMT, Brent was up $1.66 to $72.65 a barrel.
Trading activity in U.S. gasoline and heating oil, which expire at the end of the day, was minimal.
Most traders were quick to point the finger at one or several big funds, either closing out loss-making positions, dressing up returns by boosting prices at the end of the quarter or perhaps taking a position in anticipation of a Q3 influx of new funds.
"This could be end of quarter movement, and traders are trying to push prices higher and then selling before closing their books," said Mark Pervan, senior commodities analyst at ANZ Bank. "I haven`t seen any new catalyst on the news front."
Others were more blunt about the unexplained surge in volume, which seemed to be counter-productive given the fact that any sizeable bid would drive up prices due to thin Asian liquidity.
"The only reason to do that size at that time of day is to try to move the market or because you are an idiot," said one.
Some analysts pointed to Nigeria, where the main militant group said on Monday its fighters had attacked an oil facility belonging to Royal Dutch Shell (RDSa.L) days after President Umaru Yar`Adua proposed an amnesty.
Driven by hopes of a global economic recovery, oil prices are on track to post a near 50 percent jump in the second quarter, the highest quarterly percentage gain since 1990.
Oil has rallied on hopes for an improving economic outlook and a growing appetite for risk among investors, a factor given further impetus by Asian and U.S. stock market gains.  Continued...
Original article

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AIG shareholders to elect new directors at meeting

(BOARD, DIRECTORS, MEETING, STREET, SINCE, GOVERNMENT)

By Lilla Zuill
NEW YORK (Reuters) - American International Group Inc, the insurer rescued by a series of federal bailouts, is set to pad out its shrinking board on Tuesday when a new slate of directors stands for election at its annual meeting.
The nominees will help rebuild a board decimated in the past year by seven resignations, one retirement and three other directors not standing for re-election.
The meeting, to be held on Wall Street, will be the first public opportunity for shareholders to vent frustration since the insurer`s financial implosion last year.
Shareholders were all but wiped out as AIG recorded $99 billion in losses last year, largely stemming from a financial product unit`s foray into risky derivatives. Shares have plummeted to just above $1 following the dilutive effect of the government`s move to take majority ownership.
AIG had delayed its annual meeting, usually held in May, to allow time to reshuffle directors. The board that emerges will feature many new faces.
Apart from George Miles and Morris Offit, who have served as directors since 2005, the 11-member board will have been entirely elected within the last year.
Joining the board since 2008 were Suzanne Nora Johnson, a former Goldman Sachs vice-chairman; Dennis Dammerman, former General Electric Co finance chief, and Ed Liddy, chief executive and chairman, although he plans to stand down as soon as successors are found.
The rest of the board will be comprised of nominees: Harvey Golub, Laurette Koellner, Christopher Lynch, Arthur Martinez, Robert S. (Steve) Miller and Douglas Steenland.
GOVERNMENT MUSCLE
The new board reflects the muscle wielded by federal authorities since taxpayers ponied up billions of dollars to keep AIG afloat. Trustees appointed to have oversight of the government`s 80 percent stake in AIG wanted to shake up the board to raise corporate governance standards, they said last month.
At least seven of the new directors were recommended by either the U.S. Treasury or the trustees.
In a May statement, Liddy said "adding these individuals to the AIG Board will help AIG achieve its goals of maximizing the value of AIG`s core businesses and repaying U.S. taxpayers."
Dammerman, tapped by government officials to join AIG`s board last November, is leading the search for a new chairman and CEO.
AIG is to hold the shareholder meeting at its 72 Wall Street building, adjacent to 70 Pine Street headquarters. It recently agreed to sell both buildings, although it still occupies them for now.
Alongside prime real estate sales, AIG has been trying to find buyers for many of its businesses around the world. It needs to raise enough to pay off some $83 billion in federal loans.  Continued...
Original article

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Enterprise Partners to buy Teppco for $3.3 billion

(ENTERPRISE, PRODUCTS, TEPPCO, PIPELINE, NATURAL, WOULD)

By Steve James and Joshua Schneyer
NEW YORK (Reuters) - Enterprise Products Partners LP (EPD.N) said on Monday that Teppco Partners LP (TPP.N) had accepted a sweetened $3.3 billion takeover bid in a deal that will form the largest publicly-traded U.S. pipeline network.
The transaction, which requires the approval of Teppco unit-holders as well as regulatory clearance, is expected to close sometime in the fourth quarter, Enterprise said.
The announcement of the deal, which will form a 48,000-mile network of pipelines transporting crude, refined products and natural gas, sent Teppco units up 5 percent to close at $30.12 on the New York Stock Exchange. Enterprise Products slipped 1.3 percent to $24.96.
Both companies are master limited partnerships run by general partners owned by the same entity, Enterprise GP Holdings LP (EPE.N). Enterprise Products is controlled by Dan Duncan, Houston`s richest man, and a partnership controlled by Duncan bought a significant stake in Teppco in 2005.
Analysts said the merger is a step toward Duncan consolidating control over existing North American oil and gas pipeline networks.
"This reflects the growing importance of the oil and gas transportation industry," said Antoine Halff, vice president of research for the Newedge Group. "Oil and gas transport are increasingly linked to each other.
"Not just because some consumers are switching from oil to gas, but also because the oil industry itself has become a very large natural gas and natural gas liquids consumer."
Under an exchange of units, Enterprise will pay the equivalent of $31.36 per unit of Teppco, a premium of 9.3 percent over Friday`s closing price. In April, Teppco had rejected a proposed $2.75 billion takeover offer from Enterprise.
Unit holders of Teppco will receive 1.24 Enterprise common units for each of their units.
"It will become the largest partnership and with that it increases its scale of opportunities and will have a lower cost of capital," said analyst Ralph Pellechia with Fitch Ratings.
"The new partnership would transport a full range of products including oil. It will gain storage capacity, which has been profitable because of a contango in oil markets," he said. "Even when storage isn`t as profitable, the partnership will own pipelines to transport the crude."
William Eddleman, of Argus Research in Houston, said there was a 90-percent chance of the deal going through. "The only thing that might stand in the way ... is if the Department of Justice decides to look at it for antitrust issues.
"It really becomes a huge consortium. It would probably be bigger than Kinder Morgan (KMP.N) and the market would be made up of two giants," he said.
He noted Enterprise is primarily a natural gas and natgas liquids pipeline and storage company so this would expand it into the oil business and into refined chemicals too.
"It creates a giant with extensive penetration into the Northeast, Midwest and other regions," he said.  Continued...
Original article

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EU says making progress on gas loan to Ukraine

(UKRAINE, RUSSIA, EUROPE, EUROPEAN, SUPPLIES, RUSSIAN, POSSIBLE)

Delivering gas to Europe
A map of Russian gas suppliers to Europe via Ukraine
Russia resumes gas supplies to Ukraine
Russia Ukraine sign gas deal
BRUSSELS, June 29 (RIA Novosti) - The European Commission said Monday that progress has been made on the issue of giving Ukraine an international loan to pay Russia for natural gas.
The statement was issued after high-level talks involving representatives of gas companies Gazprom and Naftogaz, the World Bank, the IMF, the EBRD and the EU.
"The participants made good progress in identifying the key issues of concern and elements for possible solutions including possible financing arrangements," the representatives said in a joint statement.
The ex-Soviet state is seeking a syndicated loan of over $4 billion from European banks to pay it debts to Russian energy giant Gazprom until November 2009.
European Commission President Jose Manuel Barroso said in early June it would be difficult for the EU to help Ukraine keep up with its payments.
Russia, which supplies around one fifth of Europe`s gas, briefly shut down supplies via Ukraine`s pipeline system at the start of the year during a dispute with Kiev over unpaid debt.
The conflict was resolved in January, when Russian Prime Minister Vladimir Putin and his Ukrainian counterpart, Yulia Tymoshenko, agreed deals on deliveries to and gas transit through Ukraine for 2009.
Ukraine transits around 80% of Russia`s Europe-bound gas.
 
Original article

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Gazprom to buy 0.5 bcm of Azerbaijani gas annually from 2010

(AZERBAIJANI, GAZPROM, AZERBAIJAN, RUSSIAN, VOLUME, BILLION, SUPPLIES)

BAKU, June 29 (RIA Novosti) - Gazprom will buy 500 million cubic meters of natural gas from Azerbaijan annually from January 1, 2010, CEO Alexei Miller said on Monday.
The Russian energy giant, which has not so far bought Azerbaijani gas, signed an agreement with the State Oil Company of Azerbaijan Republic (SOCAR) earlier in the day.
"Gazprom will buy Azerbaijani gas from January 1, 2010. Initially we will buy 500 million cubic meters of Azerbaijani gas," Miller said, without disclosing either the price or the pricing formula.
"The agreement signed today fixes a basic price that is commercially attractive to our Azerbaijani partners," the Russian businessman said.
The agreed volume of deliveries from SOCAR is less than one tenth of one percent of the 549.7 billion cubic meters of gas Gazprom itself produced last year.
Azerbaijan plans eventually to increase gas supplies to Russia, Azerbaijani President Ilham Aliyev said.
"We plan in the future to increase supplies as the volume of Azerbaijani natural gas production goes up," Aliyev said on Monday after talks with Russian President Dmitry Medvedev in Baku.
According to the Gazprom CEO, Azerbaijani gas to be pumped via a pipeline running between the two countries will be used in south Russian territories. He also pledged that similar volumes of gas would be reserved for European consumers.
Miller added that Gazprom was listed as a potential buyer of gas from the Shakh Deniz field with some privileges reserved for the company.
"We are confident that Gazprom has very good negotiating positions regarding long-term cooperation in the purchase of Azerbaijani gas," he said.
Speaking in early June at an oil conference in Azerbaijan`s capital, Baku, U.S. Deputy Assistant Secretary of State for European Affairs Matthew Bryza said that in 2012-2015 Azerbaijan would supply Europe with 12 billion cu m of gas from its Shakh Deniz field alone, raising supplies to 15 billion by 2015, and increasing them further by 2015-2020.
 
Original article

AIG shareholders to elect new directors at meeting

(AIG, BOARD, NEW, DIRECTORS, MEETING, SINCE, BILLION)

By Lilla Zuill
NEW YORK (Reuters) - American International Group Inc (AIG.N), the insurer rescued by a series of federal bailouts, is set to pad out its shrinking board on Tuesday when a new slate of directors stands for election at its annual meeting.
The nominees will help rebuild a board decimated in the past year by seven resignations, one retirement and three other directors not standing for re-election.
The meeting, to be held on Wall Street, will be the first public opportunity for shareholders to vent frustration since the insurer`s financial implosion last year.
Shareholders were all but wiped out as AIG recorded $99 billion in losses last year, largely stemming from a financial product unit`s foray into risky derivatives. Shares have plummeted to just above $1 following the dilutive effect of the government`s move to take majority ownership.
AIG had delayed its annual meeting, usually held in May, to allow time to reshuffle directors. The board that emerges will feature many new faces.
Apart from George Miles and Morris Offit, who have served as directors since 2005, the 11-member board will have been entirely elected within the last year.
Joining the board since 2008 were Suzanne Nora Johnson, a former Goldman Sachs (GS.N) vice-chairman; Dennis Dammerman, former General Electric Co (GE.N) finance chief, and Ed Liddy, chief executive and chairman, although he plans to stand down as soon as successors are found.
The rest of the board will be comprised of nominees: Harvey Golub, Laurette Koellner, Christopher Lynch, Arthur Martinez, Robert S. (Steve) Miller and Douglas Steenland.
GOVERNMENT MUSCLE
The new board reflects the muscle wielded by federal authorities since taxpayers ponied up billions of dollars to keep AIG afloat. Trustees appointed to have oversight of the government`s 80 percent stake in AIG wanted to shake up the board to raise corporate governance standards, they said last month.
At least seven of the new directors were recommended by either the U.S. Treasury or the trustees.
In a May statement, Liddy said "adding these individuals to the AIG Board will help AIG achieve its goals of maximizing the value of AIG`s core businesses and repaying U.S. taxpayers."
Dammerman, tapped by government officials to join AIG`s board last November, is leading the search for a new chairman and CEO.
AIG is to hold the shareholder meeting at its 72 Wall Street building, adjacent to 70 Pine Street headquarters. It recently agreed to sell both buildings, although it still occupies them for now.
Alongside prime real estate sales, AIG has been trying to find buyers for many of its businesses around the world. It needs to raise enough to pay off some $83 billion in federal loans.  Continued...
Original article

Putin says Russia will continue cheap energy supplies to Belarus

(PRICE, BELARUS, PUTIN, 1000, RUSSIAN, AVERAGE, CUBIC)

NOVO-OGARYOVO, June 28 (RIA Novosti) - Russia will continue for the near future to sell oil and gas to Belarus at subsidized rates to support the country`s economy, Prime Minister Vladimir Putin said on Sunday.
"For the near future we intend to continue this, while bearing in mind the tendency toward switching to world price levels for hydrocarbons," Putin told leaders of factions in the State Duma, the lower house of parliament.
Putin`s pledge comes amid a dispute with Belarus over payments for Russian natural gas, which was massively discounted until 2007.
Gazprom announced on Friday it had sent Belarus a letter demanding it pay $244 million in gas debts, and warning that supplies could be cut if the sum is not cleared.
The debt has arisen due to differences between contract and average prices. In the first quarter Belarus paid $210 per 1,000 cubic meters, but by the end of the year this figure should have dropped to under $100. In line with verbal agreements the price should average out at $150 per 1,000 cubic meters.
Belarusian First Deputy Prime Minister Vladimir Semashko said on Friday that the government expects Russian gas prices to reach $166 per 1,000 cubic meters on January 1, 2010 if oil prices remain around the $70 per barrel mark this year. The rate is still well below the average rate Russia charges European Union countries for its gas.
The countries have in the past also clashed over Russian oil sales to Belarus, which had also been heavily discounted until the end of 2006. After Russia raised the oil price for Minsk, while keeping it below international prices, Belarus imposed a tariff on oil pipeline transit via its territory, triggering a temporary cut-off in early 2007.
 
Original article

Russian budget revenue to account for 16% of GDP in 2009 - Putin

(BUDGET, GDP, RUSSIA, 2009, REVENUE, PUTIN, WHICH)

NOVO-OGARYOVO, June 28 (RIA Novosti) - Federal budget revenue will account for about 16% of national GDP in 2009, and the same figure is expected in 2010-2012, Russian Prime Minister Vladimir Putin said on Sunday.
At a meeting with the heads of State Duma factions, Putin said that some estimates put this figure at 15.7%-16.5% of GDP.
"This is a normal and stable level of revenue, which we count on," he said, adding that budget revenue made up 23-24% of GDP in the pre-crisis years.
Russia has been hard hit by the global financial crisis, which has forced the government to review spending amid declining revenues, while maintaining social commitments.
The premier said that the budget deficit should not exceed 2-3% of GDP in the future.
In 2009, Russia is expected to post a budget deficit for the first time in recent years. Russia`s Finance Ministry expects the budget deficit to reach 7.5%-9% of GDP in 2009, and up to 10% of GDP in 2010 taking into account spending from the National Welfare Fund.
Putin said the yearly price of oil could average $50-55 per barrel in 2009, compared with the price of $41 projected in the federal budget.
The global financial crisis has forced Russia, which receives a large part of its revenue from oil exports, to gradually devalue the ruble amid capital flight and a fall in global oil prices, which declined from their peak of $147 per barrel in July 2008 to around $40 per barrel in early 2009, before climbing back in recent weeks to about $70.
Putin also said that Russia would continue its ban on imports of agricultural equipment this year and next year.
"We will not yield to pressure to open up our market for imported agricultural equipment," Putin said.
 
Original article

Total, Shell shortlisted for Yamal LNG project - Gazprom

(GAZPROM, YAMAL, PROJECT, NOVATEK, SHELL, MEDVEDEV, LNG)

MOSCOW, June 26 (RIA Novosti) - Total and Shell have made it onto the shortlist of participants in the Yamal liquefied gas project in northwest Siberia, a Gazprom deputy CEO said on Friday.
The Russian energy giant chose the Yamal Peninsula as a region of strategic interest in January 2002. The development of the Yamal fields, according to estimates, could produce annually up to 310-360 billion cubic meters (bcm) of natural gas by 2030.
"We have agreed to have Total and Shell shortlisted for the Yamal LNG [project]," Alexander Medvedev said, adding that Japan`s Mitsui and Mitsubishi were expected to obtain minority stakes in the project.
The two Japanese companies hold 12.5% and 10%, respectively, in the Sakhalin II oil and gas project being developed by Gazprom in the Russian Far East. Royal Dutch Shell controls a 27.5% stake.
The Gazprom official said if an investment decision is taken, the LNG plant would process resources from the Tambeiskaya group of fields, including the South Tambeiskoye field owned by Novatek, Russia`s largest independent gas producer.
"We have agreed to hold talks with Novatek to consider their proposals on developing the field, and we will work together," Medvedev said. Gazprom controls about 20% in Novatek.
Gazprom, which saw a 57% plunge year-on-year in gas exports to Europe in January-April, said earlier in June it was set to "increase the pace of producing and supplying liquefied natural gas."
 
Original article

Gazprom says could cut gas supplies to Belarus over unpaid debts

(BELARUS, PRICE, RUSSIAN, FIRST, AVERAGE, GAZPROM, SEMASHKO)

MOSCOW, June 26 (RIA Novosti) - Gazprom has sent Belarus a letter demanding it pay $244 million in gas debts, and warning that supplies could be cut if the sum is not cleared, the Russian energy giant`s CEO said on Friday.
"Belarus` debt totals $244 million, and we have sent a letter demanding that the debt be paid," Alexei Miller said.
Belarusian First Deputy Prime Minister Vladimir Semashko said Friday in parliament that his country would keep paying for Russian gas at the average annual price, and will start to repay the debt to Gazprom.
The debt has arisen due to differences between contract and average prices, in the first quarter Belarus paid $210 per 1,000 cubic meters, but by the end of the year this figure should have dropped to under $100. In line with verbal agreements the price should average out at $150 per 1,000 cubic meters.
"From August we will start repaying the debt and by November we should be paying in full the actual price," he said.
Semashko said Belarusian gas company Beltransgaz on March 20 handed Gazprom an addendum to the contract stipulating that Belarus pay the average annual price. "But the addendum has not been signed yet," he said.
He also said the Belarusian government expects Russian gas prices to reach $166 per 1,000 cubic meters on January 1, 2010 if oil prices remain around the $70 per barrel mark this year.
Semashko said Belarus has failed to pump 2 billion cu m of gas into storage facilities in the first half of this year, but added that Gazprom is not expected to take any action against Belarus for this.
"Incomplete gas samples are not a specific problem for Belarus. In the first quarter of this year the European Union failed to receive about 30% of the expected volume of Russian gas, and Ukraine 40%," he said.
 
Original article

Gas contracts with Ukraine will not be changed - Gazprom CEO

([FINANCIAL], UKRAINE, RUSSIAN, SUPPLIES, RUSSIA, GAZPROM, UKRAINIAN)

A map of Russian gas suppliers to Europe via Ukraine
MOSCOW, June 26 (RIA Novosti) - Gas contracts with Ukraine will not be revised, despite the Ukrainian president`s demands, the head of Russian energy giant Gazprom said at an annual meeting of shareholders on Friday.
Ukraine`s Viktor Yushchenko has called for a review of 10-year gas supply and transit contracts signed with Russia at the turn of 2009.
"The contracts should be implemented and are not subject to change," Miller said, adding that he "understood" the problems facing his Ukrainian partners.
Russian authorities have repeatedly voiced concerns that Ukraine will not have enough money to pay for gas supplies, which would cause difficulties for Russia and European gas consumers. The next payment is due on July 7.
Yushchenko said last Friday that Naftogaz was $2 billion short of being able to pump natural gas into its underground storage systems to prepare for winter. The ex-Soviet state is seeking a syndicated loan of over $4 billion from European banks to pay it debts to Gazprom until November 2009.
Ukrainian Prime Minister Yulia Tymoshenko said on Thursday Ukraine had pumped 1.1 billion cubic meters in June and pledged to pay $250 million for gas supplies in June on time.
Kiev paid some $500 million for 2.38 bcm of Russian natural gas in May, according to Naftogaz.
The Gazprom CEO urged Ukraine to come up with a comprehensive solution to the payments issue.
"The Naftogaz [financial] situation is considered serious. We hope international financial organizations will make the correct decision and that together with Russia they will be able to arrange Russian gas purchases for Ukraine," Miller said.
He also expressed hope that there would not be another gas crisis with Ukraine and pledged Gazprom would do "everything possible" to prevent it.
Russia, which supplies around one fifth of Europe`s gas, briefly shut down supplies via Ukraine`s pipeline system at the start of the year over Kiev`s unpaid debt.
The conflict was resolved in January, when the Russian and Ukrainian premiers agreed on $1.7 as a fee for transiting 1,000 cubic meters of natural gas per 100 km for 2009.
 
Original article

Russian firm pledges to deliver frigates to India on schedule

(FRIGATES, SHIPYARD, RUSSIA, THREE, KRIVAK, OFFICIAL, CLASS)

The 4th International Maritime Defense Show in St. Petersburg
ST. PETERSBURG, June 26 (RIA Novosti) - Russia will fulfill its obligations on schedule to supply three Project 11356 frigates to India by 2012, a shipbuilding industry official said on Friday.
Russia is building three Project 11356 Krivak IV class guided missile frigates for the Indian Navy at the Yantar shipyard in Russia`s Baltic exclave of Kaliningrad as part of a $1.6 billion contract signed in July, 2006.
"The contract`s deadline is 2012. We are not expecting any delays at this point," general director of the Yantar shipyard Igor Orlov said at the 4th International Maritime Defense Show in St. Petersburg.
The official said the hulls of all three vessels had been laid down at the shipyard.
"The first ship will be floated out this year, the second, probably, in spring 2010, and the third - a bit later," he said, adding that the Indian government had provided sufficient and timely project financing.
A delegation of Indian military officials, led by India`s deputy chief of the naval staff, Vice Adm. Raman P Suthan, visited the Yantar shipyard in October last year and said it was satisfied with the pace and the construction quality.
Russia previously built in 2004 three Krivak class frigates - INS Talwar, INS Trishul and INS Tabar - for India, but they all were delivered late.
All of the new frigates will be armed with eight BrahMos supersonic anti-ship cruise missile systems and not the Club-N/3M54TE missile system, which was installed on previous frigates.
The Krivak class frigate has deadweight of 4,000 metric tons and a speed of 30 knots, and is capable of accomplishing a wide range of maritime missions, primarily hunting down and destroying large surface ships and submarines.
 
Original article

Russia to take part in Indian diesel submarine tender

(SUBMARINE, CLASS, RUSSIA, AZIZOV, ST, 636, DIESEL)

The 4th International Maritime Defense Show in St. Petersburg
Russian naval task force completes exercise in the Atlantic
Nuclear submarine accident caused by fire-safety system
ST. PETERSBURG, June 26 (RIA Novosti) - Russia will participate in an expected tender to supply diesel-electric submarines to the Indian navy, the Russian state arms exporter said on Friday.
"We will offer India an export version of the Lada class diesel submarine - the Amur class vessel. We will take part in the Indian tender when it is announced with these submarines or vessels of another class," said Oleg Azizov, head of Rosoboronexport`s delegation at the International Maritime Defense Show 2009 in St. Petersburg.
"We have a bilateral cooperation agreement [in the military-technical sphere] until 2020, which includes the possibility of supplying submarines to this country," Azizov added.
The Project-677, or Lada class, diesel submarine, whose export version is known as the Amur 1650, features a new anti-sonar coating for its hull, an extended cruising range, and advanced anti-ship and anti-submarine weaponry, including the Club-S integrated cruise missile systems.
Azizov also said Vietnam and Egypt were studying the possibility of buying Russian Project 636 Kilo class diesel submarines.
"Vietnam is still studying various possibilities for the development of its submarine fleet. If they choose Project 636 submarines, offered by Russia, we will start talks on the issue," the official said, adding that the same approach applied to Egypt.
The Project 636 Kilo class submarine is thought to be one of the most silent submarine classes in the world. It has been specifically designed for anti-shipping and anti-submarine operations in relatively shallow waters.
Russia has built Kilo class submarines for India, China and Iran.
Azizov earlier said Russia could sell up to 40 fourth-generation diesel-electric submarines to foreign customers by 2015.
 
Original article