Tuesday, July 10, 2012

532 Dollar/renminbi peg is akin to Gold Standard of 1930s, preventing solution of economic problems - Hugh Hendry

Dollar/renminbi peg is akin to Gold Standard of 1930s, preventing
solution of economic problems - Hugh Hendry

(1) Dollar/renminbi peg is akin to Gold Standard of 1930s, preventing
solution of economic problems - Hugh Hendry
(2) Russian energy diplomacy challenges US regional strategies in Asia
and the Middle East
(3) Hillary apology to Pakistan opens way for transit to Afghanistan
(4) India paying for Iran Oil with Euros not Rupees
(5) Samsung, LG's key display technologies leaked by Israeli firm
(6) India is Riskier than China - Stephen Roach
(7) India exports food while nearly 320 million of its people go hungry

(1) Dollar/renminbi peg is akin to Gold Standard of 1930s, preventing
solution of economic problems - Hugh Hendry


Hugh Hendry: Investment Outlook (April 2012)

April 30th, 2012 by ZeroHedge.com

Hugh Hendry is back with a bang after a two year hiatus with what so
many have been clamoring for, for so long — another must read letter
from one of the true (if completely unsung) visionary investors of our

"I have not written to you at any great length since the winter of 2010.
This is largely because not much has happened to change our views. We
still see the global economy as grotesquely distorted by the presence of
fixed exchange rates, the unraveling of which is creating financial
anarchy, just as it did in the 1920s and 1930s. Back then the relevant
fixes were around the gold standard. Today it is the dual fixed pricing
regimes of the euro countries and of the dollar/renminbi peg."

(2) Russian energy diplomacy challenges US regional strategies in Asia
and the Middle East

A Russia House on the Indian Ocean

By M K Bhadrakumar


The building blocks of the historic visit by Russian President Vladimir
Putin to Pakistan in September have begun arriving in Islamabad. It is a
poignant moment in the region's history and politics. This will be the
first time a Russian president visits Pakistan since its birth in 1947.

The Russians are fabricating some hardy bricks for the mansion they hope
to build in the region which forms a beachhead on the Indian Ocean - a
mansion large enough for their friends in Pakistan and in the
neighboring countries of India, Iran and Afghanistan to consort with them.

But then, the very sight of the Russian bricks infuriates the United
States. The point is, this Russia House will stand bang on the way of
the New Silk Road that the US has been planning, which also needs to run
through Pakistan. If the access is blocked, it becomes problematic for
the US to keep together the body and soul of the tens of thousands of
its troops who were hoping to settle down in the Hindu Kush and Central
Asia as pioneers in the "Wild West" of China's Xinjiang and on the "soft
underbelly" of Russia.

In sum, the battle is joined for influencing Pakistan's future. The
stakeholders are many and a keen struggle lies ahead, since at the core
of it lies a host of other issues of profound consequence to world
politics - energy security of the two big power-houses of Asia (China
and India), the future of the New Middle East, and of course, the US
strategy to contain Russia and China.

Moscow deputed a talented and vastly experienced diplomat to visit
Pakistan in May to make an estimation of the lay of the land. He was a
surveyor of great experience whose reputation is the stuff of legends in
the Hindu Kush mountains - Ambassador Zamir Kabulov, Russia's point
person for Afghanistan. By the choice of Kabulov, Moscow also gently
stated its broad intentions as regards its architectural design, namely,
that it is a mansion with Afghan characteristics.

Following up on Kabulov's visit, Russian experts began arriving in
Pakistan. The proposals they brought are of momentous significance to
the long-term security and stability of the region. Moscow has zeroed in
on energy cooperation as the fulcrum of its nascent cooperation with

A six-year old idea reappears ...

This is a shrewd decision by Moscow since energy security is a key issue
in Pakistan's political economy today, no less important than terrorism.
Much of Pakistan gets only a few hours' electricity in a day and the
people's rancor is visible. Moscow has assessed that energy security is
integral to Pakistan's capacity to maintain "strategic autonomy" as a
South Asian power of standing and, therefore, by assisting that country
in this sphere, Russian geopolitical interests in a vast swathe of the
Greater Middle East stretching from the Persian Gulf to China's
Autonomous Region of Xinjiang would also be served.

Besides, in immediate terms, mutual understanding with Pakistan is
becoming an imperative need for Russia in the post-2014 scenario in
Afghanistan, where the Western powers would have withdrawn the bulk of
their troops but are nonetheless establishing an open-ended, sizeable
military presence of tens of thousands of combat troops.

Russia and Pakistan are joined in their opposition to the long-term
occupation of Afghanistan by the West; Russia hopes to influence
Pakistani policies with regard to Afghanistan's future and, in turn,
cooperation with Pakistan enhances the overall Russian resilience to
play an effective role in the stabilization of Afghanistan and in
providing security to Central Asia; and, equally, a strong relationship
with Pakistan - in the field of energy security, in particular - can
provide yet another underpinning for Russia's strategic ties with other
key regional powers, especially China, India, Iran and Saudi Arabia.

Last but not the least, Pakistan is a valuable interlocutor for Russia
with regard to the activities and movements of the militants operating
in North Caucasus.

Having said that, Russia weighs its options carefully and is averse to
embarking on Soviet-era adventures that might be a drain on its
resources. The priority of the Russian leadership lies in regenerating
and innovating the economy and building the national strength, and in
the case of Pakistan, Moscow estimates there could be an interesting
partnership of much economic value to Russia and of mutual benefit.

All in all, Moscow's strategy is to develop new sinews of cooperation
with Pakistan that are sustainable, durable, and which dovetail with
Russia's vibrant strategic partnerships with China, India and Iran.

Put differently, the Russian approach becomes a necessary
regional-policy "adjustment" or even a pre-requisite to the impending
admission of Pakistan and India into the Shanghai Cooperation
Organization (SCO) as full members. Putin is an action-oriented
statesman and the unhappy part is that six long years have passed since
he first proposed at the SCO summit in Shanghai in June 2006 the setting
up of an energy club within the regional grouping comprising the energy
producing countries of Russia, Iran and the Central Asian countries and
the three big energy consuming countries of China, India and Pakistan.

It was at the very same Shanghai summit of the SCO that Putin came out
openly for the first time to say that Russia's energy leviathan Gazprom
was willing to take part in the construction of the Iran-Pakistan-India
gas pipeline. Putin said in his address, "Gazprom is ready to take part
and provide technological and, if necessary, financial assistance, and
we are willing to provide an unlimited amount of it, especially for a
project that is certain to take off."

Putin's idea is that the oil and gas exporters within the SCO have been
competing for promising markets (such as China or India), and to
coordinate the moves SCO needs an energy club, which will act as a
coordination center uniting both energy producers and the three key

One major Central Asian player who has stayed out of the SCO so far has
been Turkmenistan, and it is a bit awkward to speak of an energy club in
the region that doesn't include such a large-scale gas producer. Russia
also has some gas disputes with Turkmenistan - with which, however China
has a warm relationship built around energy cooperation.

A little-noticed development of great significance was that Chinese
President Hu Jintao invited the Turkmen president to visit Beijing at
the time of the SCO summit last month - and the latter accepted. Suffice
to say, China is keen to harmonize its regional policies with Russia and
would even lend a hand to Moscow's efforts to coordinate the impulses of
energy security amongst and within the SCO member countries and observer

A stunning thing is that the proposals brought by the Russian experts in
the past week to Islamabad essentially pick up the threads of Putin's
2006 proposal. According to the details available so far, Moscow has
made the following proposals to Islamabad:

• Russia can offer financial and technical assistance for Pakistan's
multi-billion dollar gas and power import projects that are in the pipeline.
• Specifically, Russia is interested in participating in the two big gas
pipeline projects on the anvil, namely, the TAPI
(Turkmenistan-Afghanistan-Pakistan-India) and the IP [Iran-Pakistan].
Russia prefers that the cooperation is negotiated at the governmental
level through direct negotiations rather than through bidding.
• Russia is also keen on participation in the Central Asia and South
Asia (CASA) project, which was originally floated in 2006, to bring to
Pakistan via transmission lines across eastern Afghanistan 1,000-1,300
megawatts of surplus energy during the summer months from Tajikistan and
Kyrgyzstan. (The project has the backing of the World Bank and the
Islamic Development Bank.)
• Russia will be willing to cooperate in the exploration of oil, gas and
minerals in Pakistan.

Unsurprisingly, Islamabad has eagerly responded to the Russian
proposals. The following understanding seems to have been reached at the
talks, which concluded in Islamabad on Wednesday:
• Pakistan welcomes the Russian proposals;
• Specifically, Pakistan is agreeable to negotiate the contracts with
the state-owned Russian energy companies on a government-to-government
basis and will be willing to amend its public procurement rules accordingly;
Steps will be taken to conclude a memorandum of understanding to move
ahead with the identified projects during Putin's visit;
• As regards the IP, Pakistan has already floated the tenders for
awarding contracts for the pipeline procurement and construction work
for the US$1.5 billion project. Russia's Gazprom may also participate.
Pakistan proposes to give weight to bids that have a financial package
attached. (China and Iran have also shown interest in the project.)
• Meanwhile, Pakistan will hand over to Russia by mid-July a draft
agreement for financial and technical assistance from the latter for the
IP project.
• Russia has agreed to finance the rehabilitation of the Guddu and
Muzaffargarh power plants.

... which infuriates the overlord

These developments constitute a daunting challenge to the US' regional
strategies in Asia and the Middle East. The ramifications are quite
far-reaching. First and foremost, Pakistan's "defection" from the
Western camp all but amounts to a crippling blow to the US' New Silk
Road Initiative aimed at rolling back the Russian and Chinese influence
in Central Asia. Along with that, the US' dreams of getting access to
the vast mineral resources of Central Asia and Afghanistan would also
suffer setback.

On a practical plane, Pakistan's geography has been the lynchpin of the
US regional strategies in Afghanistan and Central Asia, and without
Pakistan's cooperation no viable (non-Russian, non-Iranian)
communication link with those regions is sustainable, which in turn,
jeopardizes the plans for the establishment of a permanent US and North
Atlantic Treaty Organization (NATO) military presence in the region in
the "Eurasian heartland".

Indeed, energy security is the Achilles heel of Pakistan's political
economy, and it debilitates Pakistan's capacity to develop a strategic
autonomy that safeguards its vital interests and core concerns and,
conversely, the current level of acute energy deficiency makes Pakistan
very vulnerable to US pressures. Therefore, the helping hand from
Russia, even if it is self-seeking, would have serious geopolitical
implications for the US regional strategies insofar as it results in
augmenting Pakistan's independence and resilience and creating space for
it to navigate its way through a particularly difficult and dangerous
corridor of time when it is beset with existential problems.

Again, a coming together of the energy producing and energy consuming
countries of Asia is the ultimate nightmare scenario for the US, which
fears exclusion from the ensuing matrix of regional cooperation
involving countries that happen to be spearheading the fastest-growing
region in the world economy. The entire US strategy in the post-Soviet
era had aimed at forestalling such a catastrophic eventuality that might
put paid to the US efforts to get embedded in the "Eurasian heartland",
which includes or overlooks some of the major regional powers in the
coming decades - Russia, China, Kazakhstan, India, Pakistan and Iran.
(Turkey's admission as a "dialogue partner" of the SCO - at China's
behest - at the Beijing summit last month further unnerves the US.)

To be sure, a host of other issues also arise. The Russian moves in
Pakistan effectively outflank the US' policies to isolate Iran. If
hostilities erupt between the US and Iran, Washington faces almost
near-total isolation in the region between the Persian Gulf and Malacca
Strait. On the other hand, the IP project (which seems a priority for
Russia and China alike) would have a devastating impact on the US' Iran
policy, as it would manifoldly enhance Iran's strategic prowess. The US
will factor in that it is a matter of time before China gets connected
to the IP gas pipeline. These communication links effectively help China
also to reduce its dependence on the Malacca Strait.

Worst of all, Washington is unsure of India's approach to the emergent
geopolitical shift that Russia is triggering. India and Russia have
traditionally enjoyed mutual trust and confidence. India and Iran also
enjoy fundamentally strong ties, which have even withstood the US
pressure. India is independently working on the normalization of its
ties with China, and the two countries have made appreciable headway in
this direction. (Curiously, the Indian and Chinese state-sector energy
companies recently concluded a memorandum of understanding agreeing not
to outbid each other in third countries and to cooperate
across-the-board including in the two countries' domestic sector.)

Most important, energy security is becoming a gnawing worry for the
Indian leadership as the economy expands rapidly and the need for
assured access to reasonably priced energy sources is becoming an
all-consuming passion in the country's external policies. (India's
External Affairs Minister S M Krishna is heading for Tajikistan, which
is the energy source of the CASA project, on Tuesday.)

The US' diplomatic and politico-military options to counter the Russian
moves in Pakistan would lie principally in the direction of influencing
the policies of Pakistan and India. The US is pursuing a mixed approach
toward Pakistan, alternating soft signals with a flexing of muscle that
is vaguely assuming threatening overtones already. At one point
recently, it all but seemed that the US would render an apology of sorts
for the massacre of Pakistani troops in a US military strike last
November on the Afghan-Pakistan border following which the reopening of
the Pakistani transit routes for the NATO convoys could be expected
within the month of June.

However, following the Russian-Pakistani confabulations, the US line has
hardened. Another attack has taken place on Monday on Pakistani troops
(18 of whom were brutally beheaded) by militant groups of obscure
background operating from "safe havens" inside Afghanistan. It doesn't
need much ingenuity to work out that the US forces in Afghanistan prefer
to look away from what these militants are doing right beneath their
nose. (Curiously, these militant "safe havens" also happen to be in the
region through which the CASA transmission lines from Tajikistan will
have to pass.)

At any rate, on Wednesday, the US' commander in Afghanistan, John Allen,
came down to the Pakistani army headquarters in Rawalpindi to propose to
the Pakistani army chief Parvez Kayani that the two sides could
undertake "joint operations" against the militants operating along the
Afghan-Pakistan border.

This is indeed going to be a cat-and-mouse game. The signs are ominous.
The relentless drone attacks through the recent months have destabilized
Pakistan's tribal areas adjacent to the border with Afghanistan. The
drones are causing a lot of civilian casualties, so much so that the
United Nations officials begin to wonder if these wanton killings would
constitute "war crimes".

The drone attacks infuriate the people who live in the tribal areas and
in turn are fueling anti-government sentiments, while Islamabad looks
helpless in stopping the US from violating the country's territorial
integrity. Quite obviously, Pakistan is hunkering down, and the US won't
allow that to continue. The indications are that the US will step up
pressure on Pakistan and escalate the tensions in a calibrated way.

A paradigm shift

The heart of the matter is that Pakistan's "strategic defiance" has
taken the US by surprise. The US always counted on the perceived
comprador mentality of the Pakistani elites and has been somewhat thrown
off balance in discovering that those very same elites (the military
leadership, in particular) are no longer what they were supposed to be.

Of course, this is a flawed perspective and at the root of it lies
Washington's unwillingness to countenance an honest appraisal as to why
this paradigm shift has occurred at all. The US doesn't have to look far
to realize the complexities. The latest survey by the Pew Global
Attitudes Project, released on Wednesday, shows that 74% of Pakistanis
"hate" the US and hold President Barack Obama in exceptionally low
esteem. Interestingly, the most popular Pakistani politician today is
Imran Khan (70%), whose main plank is that Pakistan should pull out of
the war in Afghanistan and demand that the US troops should pack up
their gear and leave the region for good with their war machinery.

The US faces a more complicated challenge with regard to India.
Washington has audaciously complimented New Delhi recently by naming
India as the "lynchpin" in its Asia-Pacific strategies. But to the
discomfiture of the US, India's response has so far been one of
deafening silence, while demonstratively distancing itself from any
perceived "ganging-up" against China. On the other hand, a crucial mass
is steadily accruing in the Sino-Indian normalization. Equally, India
has been carefully sequestering its dialogue process with Pakistan from
the chill and vagaries of the US-Pakistan standoff. Even with regard to
Iran, India has drawn a bottom line and made it clear that it won't be
pushed around - and the current signs are that Washington has finally
got the point.

Having said that, the US will endeavor to butt into the India-Pakistan
dialogue and try to turn its focus away from a broad-based approach in a
constructive spirit to the highly emotive issues of Pakistan's support
of terrorism and the fidayeen attacks on Mumbai in November 2008, which
deeply scarred the Indian psyche and still arouse Indian suspicions
regarding Pakistani intentions.

With regard to energy security, the US has encouraged Saudi Arabia to
offer a big hand to India, with the hope of encouraging it to reduce its
dependence on Iranian oil and in overall terms to wean India away from
the IP gas pipeline project. Ideally, Washington would seek a cozy
three-way embrace between the US, India and Saudi Arabia, which would
keep the Indians away from the alluring thoughts of an SCO energy club.

But the US is unsure, as the Indians also have their preferences and a
passion for keeping their thoughts to themselves while making
independent choices about how to go about realizing their national
objectives in a complicated regional scenario.

Ambassador M K Bhadrakumar was a career diplomat in the Indian Foreign
Service. His assignments included the Soviet Union, South Korea, Sri
Lanka, Germany, Afghanistan, Pakistan, Uzbekistan, Kuwait and Turkey.

(3) Hillary apology to Pakistan opens way for transit to Afghanistan


US and Pakistan end standoff over Afghan supply routes

By Peter Symonds

6 July 2012

Under intense pressure from Washington, the Pakistani government has
lifted a seven-month ban and reopened NATO supply routes through
Pakistan to Afghanistan. The decision follows a limited apology on
Tuesday by US Secretary of State Hillary Clinton over the killing of 24
Pakistani border guards in US air strikes last November. The stand-off
was ended after weeks of behind-the-scenes negotiations over the exact
terms. The Obama administration had previously refused to acknowledge
any responsibility for the deaths and had cut off military aid to Pakistan.

The Pentagon claimed, without providing any evidence, that a US-Afghan
special forces team operating at night near the border with Pakistan had
been fired upon and called in air support. US helicopter gunships
strafed two Pakistani border posts. The Pakistani military refuted this
account, branding the attack as a deliberate act of aggression on two
posts whose coordinates were well known to US forces.

The killings provoked public outrage in Pakistan, compounding widespread
hostility over the US military’s flouting of Pakistani sovereignty to
carry out drone attacks on alleged insurgents inside the country.
Hundreds of civilians have died as a result of the ongoing attacks. The
assassination of Osama bin Laden by US Special Forces deep inside
Pakistan last year further inflamed public opinion. In order to deflect
this anger, the Pakistani government insisted on a US apology and
threatened to raise the transit fee for NATO supplies to $5,000 per truck.

In her phone call to Pakistani Foreign Minister Hina Rabbani Khar on
Tuesday, Clinton did not use the word “apology” or refer directly to the
US airstrikes, declaring only: “Foreign Minister Khar and I acknowledged
the mistakes that resulted in the loss of Pakistani military lives. We
are sorry for the losses suffered by the Pakistani military.” The Obama
administration also agreed to release around $1.1 billion in aid to the
Pakistani military, but the transit fee remains fixed at $250 per truck.
The US is likely to give the green light for a new International
Monetary Fund loan for Pakistan.

The US made these minor concessions in order to reopen land routes
through Pakistan that are vital to supply the US and NATO occupation of
Afghanistan, and for the planned withdrawal of troops and military
hardware by the end of 2014. For the past seven months, the Pentagon had
to rely on northern supply routes through Russia and Central Asia that
were costing an extra $100 million a month.

Washington’s decision to mend relations with Islamabad reflects concerns
about being too dependent on the northern routes. While the US has
agreements with Russia and several Central Asian republics to ship
non-lethal materiel into Afghanistan, it is still negotiating terms for
using these routes for the withdrawal. Moreover, Russian legislator,
Alexey Pushkov, chairman of the international affairs committee of the
State Duma, warned recently that Moscow could halt NATO supplies into
Afghanistan unless differences with the US were resolved over plans for
a NATO missile defence shield.

The US administration also feared that the diplomatic breach with
Pakistan over the supply routes could affect broader relations with
Islamabad. “Obviously [transport] cost was a factor, but more
importantly was the need to get the relationship back on track so we can
cooperate on a range of important issues including reconciliation and
counterterrorism,” an Obama administration official told the Wall Street

Pakistani President Asif Ali Zardari and the Pakistan People’s Party
(PPP)-led government maintained the support for Washington’s
neo-colonial war in Afghanistan given by former military strongman
General Pervez Musharraf from 2001. Islamabad has turned a blind eye to
the US drone attacks on its territory and launched major military
operations to suppress anti-US insurgents in areas bordering Pakistan.
The US will undoubtedly renew its demands for the Pakistani military to
take action against the Haqqani network based in North Waziristan. Last
month, US Defence Secretary Leon Panetta soured negotiations over the
supply routes by declaring that Washington was “reaching the limits of
our patience” with Islamabad for not cracking down on Islamist
militants. “It is difficult to achieve peace in Afghanistan as long as
there is safe haven for terrorists in Pakistan,” he said. As part of its
wider geostrategic aims, the US was also seeking to ensure that China
did not use the standoff over supply routes to strengthen its
longstanding economic and military ties with Pakistan. Since coming to
office, the Obama administration has escalated efforts throughout Asia
to undermine Chinese influence, and reinforce US diplomatic and military

For its part, the Pakistani government could not afford to back down
without some form of apology from Washington, no matter how limited.
Anti-US sentiment in Pakistan is deepening. A survey by the Pew Research
Centre, released last month, found that 74 percent of respondents
regarded the US as an enemy, up from 69 percent last year and 64 percent
three years ago. ...

(4) India paying for Iran Oil with Euros not Rupees


India Said to Pay in Euros for Iran Oil Due to Rupee Hurdles

By Pratish Narayanan and Anto Antony on July 05, 2012

India is using euros to clear most of its purchases of Iranian oil
through a Turkish bank because of hurdles in making rupee payments,
according to three people with knowledge of the transactions.

While some payments have been made in rupees, they are more difficult
after India barred Tehran-based Parsian Bank from opening a branch in
Mumbai and because the rupee can’t be directly converted overseas to
other currencies, the people said, asking not to be identified because
the information is confidential.

The euro payments are continuing even as the U.S. and the European Union
seek to limit oil revenue in Iran, which they say is developing nuclear
weapons. The payments also mean Iran won’t be handicapped by
difficulties in converting rupees, the worst performer among Asian
currencies over the past 12 months.

“If the Indian companies need to buy the euro, then this would be a
negative for the rupee, especially if the payments are large,” said Chin
Loo Thio, a senior analyst at BNP Paribas SA in Singapore. India
imported about $9.4 billion worth of oil from Iran in the year ended
March 2011, according to data from India’s Department of Commerce.

The Indian rupee weakened 0.9 percent to 54.98 per dollar as of 12:37
p.m. in Mumbai, the biggest drop in almost two weeks, according to data
compiled by Bloomberg.

Global Sanctions

The international measures against Iran include an EU ban on its crude
exports, which became effective on July 1. A law enacted Dec. 31 cuts
off international banks from the U.S. financial system if they settle
Iranian oil trades.

India and Turkey received exemptions from the U.S. financial
restrictions after they cut crude imports from Iran. That allowed the
South Asian nation to continue routing payments through Ankara-based
Turkiye Halk Bankasi AS (HALKB), the people said. Before getting the
exemptions, the Turkish lender told Indian refiners it may no longer be
able to act as an intermediary when European sanctions take effect, four
people with knowledge of the matter said Jan. 10.

Officials at Halk Bank in Ankara declined to comment. R.C. Joshi, a New
Delhi-based spokesman for India’s oil ministry, didn’t return two calls
to his mobile phone. Mohsen Qamsari, the head of international affairs
for National Iranian Oil Co., didn’t immediately return a phone call to
his office in Tehran.

Import Cuts India will cut crude purchases from Iran by 11 percent in
the year that began April 1 to 15.5 million metric tons as the nation
seeks to diversify its supply sources, Junior Oil Minister R.P.N. Singh
said on May 15. The planned reduction followed U.S. Secretary of State
Hillary Clinton’s visit to New Delhi earlier in the month. She urged
India to cut oil imports from Iran and said U.S. officials will help the
nation find alternative sources.

Indian processors using the Islamic Republic’s crude are receiving
shipments through Iranian tankers on a cost-insurance- and-freight
basis, two of the people said. This means Iran is responsible for
delivering the crude to the South Asian nation.

The EU ban on the purchase, transportation, financing and insurance of
Iranian oil affects Asian importers because 95 percent of the world’s
tankers are insured by the 13 members of the London-based International
Group of P&I Clubs. That means fewer ships may be available to load the
cargoes from the Organization of Petroleum Exporting Countries’
second-largest producer.

Rupee Difficulties

India’s rupee has weakened 19 percent against the U.S. dollar in the
past year, according to data compiled by Bloomberg. It is also the only
Asian currency to drop against the euro in the same period, sliding 7

UCO Bank (UCO), an Indian government-run lender, has been approved for
taking deposits of as much as 45 percent of refiners’ crude payments in
rupees, which will then be transferred to Iran.

A Mumbai branch for Iran’s Parsian Bank would have made such
transactions easier, two people with knowledge of the matter said May 7.
India barred the lender from opening a branch in the country because of
U.S. pressure, they said.

While India proposed paying for oil in rupees, Iranian officials sought
partial payment in yen because they are concerned that they may not get
sufficient value from the currency, three people with knowledge of the
talks said Jan. 23.

Iran’s economy has deteriorated as international measures against the
nation were announced. Its currency has weakened, pushing up costs that
were already surging after the government started removing energy and
food subsidies a year and a half ago. Inflation accelerated to 22.2
percent in the 12 months ended May 20, the central bank said June 9.

Oil for August delivery slid as much as $1.16 to $86.50 a barrel in
electronic trading today on the New York Mercantile Exchange. Prices are
down 12 percent this year.

To contact the reporters on this story: Pratish Narayanan in Mumbai at
pnarayanan9@bloomberg.net; Anto Antony in Mumbai at aantony1@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski
at akwiatkowsk2@bloomberg.net

(5) Samsung, LG's key display technologies leaked by Israeli firm


Yonhap News, Korea

2012/06/27 16:29 KST

SEOUL, June 27 (Yonhap) -- Key technologies to manufacture advanced
flat-panel displays at Samsung Mobile Display and LG Display have been
leaked by an local unit of an Israeli company, local prosecutors said
Wednesday, raising concerns the leakage could pose a major threat to the
national interest.

The Seoul Central District Prosecutors' Office indicted under
physical detention three employees at the local unit of an Israeli
inspection equipment supplier, including a 36-year-old man surnamed Kim,
on charges of leaking key local technologies used to produce
active-matrix organic light-emitting diode (AMOLED) displays and white
organic light-emitting diode (White OLED) displays.

They also indicted without physical detention three other employees
and the local unit, the prosecutors said, without identifying the
Israeli firm.

According to the prosecution, the indicted employees photographed
circuit diagrams of yet-to-be-released 55-inch AMOLED television panels
when they were let into Samsung and LG's manufacturing factories to
check defects of inspection equipment from November of last year to
January of this year.

They stored the images on portable memory cards and slipped them
into their shoes, belts and wallets to avoid suspicion, prosecutors said.

AMOLED displays have a faster response time then their passive-matrix
OLED counterparts and are more power-efficient, and the advantages make
them well suited for growingly popular portable electronics devices.
Samsung and LG are by far the leading makers of AMOLED displays, for
which the global market is estimated to be worth 90 trillion won
(US$77.8 billion). South Korea rigorously prohibits leakage of the
technologies as it tags them as the nation's core industrially strategic

Prosecutors said the stolen information was likely relayed to the
Israeli headquarters and Chinese and Taiwanese display-making rivals,
including the biggest Chinese panel manufacturer BOE.

"It is very likely that the stolen technologies have been given by
the Israeli firm to foreign rivals," a prosecution official said. "This
may expectedly deal a massive economic blow to the entire nation and can
cause a sea change in the landscape of the global display market."

According to industry watchers, Samsung spent nearly 1.4 trillion
won in developing its AMOLED technologies with LG funneling nearly 1.3
trillion won into its research and development.

Prosecutors pledged to launch a probe into the Israeli headquarters
to prevent further tech leakages.


(6) India is Riskier than China - Stephen Roach

Why India is Riskier than China

Stephen S. Roach

Stephen S. Roach was Chairman of Morgan Stanley Asia and the firm's
Chief Economist, and currently is a senior fellow at Yale University’s
Jackson Institute of Global Affairs and a senior lecturer …Full profile

Dec. 27, 2011


NEW HAVEN – Today, fears are growing that China and India are about to
be the next victims of the ongoing global economic carnage. This would
have enormous consequences. Asia’s developing and newly industrialized
economies grew at an 8.5% average annual rate over 2010-11 – nearly
triple the 3% growth elsewhere in the world. If China and India are next
to fall, Asia would be at risk, and it would be hard to avoid a global

In one important sense, these concerns are understandable: both
economies depend heavily on the broader global climate. China is
sensitive to downside risks to external demand – more relevant than ever
since crisis-torn Europe and the United States collectively accounted
for 38% of total exports in 2010. But India, with its large
current-account deficit and external funding needs, is more exposed to
tough conditions in global financial markets.

Yet fears of hard landings for both economies are overblown, especially
regarding China. Yes, China is paying a price for aggressive economic
stimulus undertaken in the depths of the subprime crisis. The banking
system funded the bulk of the additional spending, and thus is exposed
to any deterioration in credit quality that may have arisen from such
efforts. There are also concerns about frothy property markets and
mounting inflation.

While none of these problems should be minimized, they are unlikely to
trigger a hard landing. Long fixated on stability, Chinese policymakers
have been quick to take preemptive action.

That is particularly evident in Chinese officials’ successful campaign
against inflation. Administrative measures in the agricultural sector,
aimed at alleviating supply bottlenecks for pork, cooking oil, fresh
vegetables, and fertilizer, have pushed food-price inflation lower. This
is the main reason why the headline consumer inflation rate receded from
6.5% in July 2011 to 4.2% in November.

Meanwhile, the People’s Bank of China, which hiked benchmark one-year
lending rates five times in the 12 months ending this October, to 6.5%,
now has plenty of scope for monetary easing should economic conditions
deteriorate. The same is true with mandatory reserves in the banking
sector, where the government has already pruned 50 basis points off the
record 21.5% required-reserve ratio. Relatively small fiscal deficits –
only around 2% of GDP in 2010 – leave China with an added dimension of
policy flexibility should circumstances dictate.

Nor has China been passive with respect to mounting speculative excesses
in residential property. In April 2010, it implemented tough new
regulations, raising down-payments from 20% to 30% for a first home, to
50% for a second residence, and to 100% for purchases of three or more
units. This strategy appears to be working. In November, house prices
declined in 49 of the 70 cities that China monitors monthly.

Moreover, it is a serious exaggeration to claim, as many do today, that
the Chinese economy is one massive real-estate bubble. Yes, total fixed
investment is approaching an unprecedented 50% of GDP, but residential
and nonresidential real estate, combined, accounts for only 15-20% of
that – no more than 10% of the overall economy. In terms of floor space,
residential construction accounts for half of China’s real-estate
investment. Identifying the share of residential real estate that goes
to private developers in the dozen or so first-tier cities (which
account for most of the Chinese property market’s fizz) suggests that
less than 1% of GDP would be at risk in the event of a housing-market
collapse – not exactly a recipe for a hard landing.

As for Chinese banks, the main problem appears to be exposure to
ballooning local-government debt, which, according to the government,
totaled $1.7 trillion (roughly 30% of GDP) at the end of 2010.
Approximately half of this debt was on their books prior to the crisis.

Some of the new debt that resulted from the stimulus could well end up
being impaired, but ongoing urbanization – around 15-20 million people
per year move to cities – provides enormous support on the demand side
for investment in infrastructure development and residential and
commercial construction. That tempers the risks to credit quality and,
along with relatively low loan-to-deposit ratios of around 65%, should
cushion the Chinese banking system.

India is more problematic. As the only economy in Asia with a
current-account deficit, its external funding problems can hardly be
taken lightly. Like China, India’s economic-growth momentum is ebbing.
But unlike China, the downshift is more pronounced – GDP growth fell
through the 7% threshold in the third calendar-year quarter of 2011, and
annual industrial output actually fell by 5.1% in October.

But the real problem is that, in contrast to China, Indian authorities
have far less policy leeway. For starters, the rupee is in near
free-fall. That means that the Reserve Bank of India – which has hiked
its benchmark policy rate 13 times since the start of 2010 to deal with
a still-serious inflation problem – can ill afford to ease monetary
policy. Moreover, an outsize consolidated government budget deficit of
around 9% of GDP limits India’s fiscal-policy discretion.

While China is in better shape than India, neither economy is likely to
implode on its own. It would take another shock to trigger a hard
landing in Asia.

One obvious possibility today would be a disruptive breakup of the
European Monetary Union. In that case, both China and India, like most
of the world’s economies, could find themselves in serious difficulty –
with an outright contraction of Chinese exports, as in late 2008 and
early 2009, and heightened external funding pressures for India.

While I remain a euro-skeptic, I believe that the political will to
advance European integration will prevail. Consequently, I attach a low
probability to the currency union’s disintegration. Barring such a
worst-case outcome for Europe, the odds of a hard landing in either
India or China should remain low.

Seduced by the political economy of false prosperity, the West has
squandered its might. Driven by strategy and stability, Asia has built
on its newfound strength. But now it must reinvent itself. Japanese-like
stagnation in the developed world is challenging externally dependent
Asia to shift its focus to internal demand. Downside pressures currently
squeezing China and India underscore that challenge. Asia’s defining
moment could be hand.

(7) India exports food while nearly 320 million of its people go hungry

Steve Campbell <callstevec2@gmail.com> 30 May 2012 02:39

"Silent Tsunami of Hunger" in Global Food Crisis.

Devinder Sharma 10/14/09

A hungry nation exports food. It can happen only in a democracy.

by Devinder Sharma at 10:07 PM MAY 26, 2012


At a time when the total food stocks are likely to swell to a record 75
million tonnes by June 1, out of which nearly 25 million tonnes of the
stocks will be piled up in the open for lack of storage space, the
demand for allowing exports is already growing. Ministry of Commerce has
already started an exercise to know how much quantity of wheat can be
allowed for exports.

It is a strange paradox of plenty. While on the one hand India is
overladen with mounting food stocks, on the other nearly 320 million
people go to bed hungry. The number of hungry and malnourished in India
almost equals the entire population of America. When it comes to
malnutrition, several studies have pointed out that nearly 50 per cent
of children are malnourished. India fares worst than even sub-Saharan
Africa. According to the 2011 Global Hunger Index India ranks 67 among
81 countries, sliding below Rwanda.

With the per capita availability of foodgrains – including cereals and
pulses – sliding to 441 grams per day in 2010, from a high of 480 grams
in 1991 when the economic reforms began, it is quite evident that the
extent of hunger is growing. Although an impression is being given that
as incomes are seeing a rising trend, more people have shifted from
cereals to nutritious foods like eggs, meat and fruits. This is however
not correct. According to a 2010 report of the National Sample Survey
Organisation (NSSO), the consumption of cereals as well as nutritious
foods like fruits, milk and eggs too is falling in urban and rural areas.

Continuously rising food inflation over the past several years has
certainly widened the gap between the haves and have nots. Experts agree
that for a large section of the population, buying two square meals a
day is now becoming more difficult. In other words, hunger is becoming
more acute. More and more people are going to bed hungry. I therefore
don’t understand the logic of exporting food at a time when millions are
living in hunger.

The mounting food surplus is essentially because the poor and needy are
unable to buy foodgrains even at below the poverty line prices.
Ironically, while the poor live in hunger, India is contemplating
exports. In 2011-12, with India’s rice exports touching 7 million
tonnes, it has emerged as the biggest exporter of rice in the world.
Opening up the export of wheat (it is banned at present) India will
certainly join the ranks of the major food exporters, and in the process
earn some foreign exchange. But the bigger question remains as to who
will feed the hungry living within the country?

There can be nothing more criminal for any hungry nation to export its
staple food. It is the primary responsibility of the government, as
enshrined in the Directive Principles, to ensure that every citizen is
well-fed. Unfortunately what is not being realised is the declining fall
in per capita availability of foodgrains matches the availability at the
time of Bengal famine in 1943. Isn’t it sad that even after 70 years of
Bengal famine, we still live in the shadow of hunger and starvation? How
can any sensible nation therefore justify food exports?

Food management essentially means distributing the available foodgrains
among the poor and hungry. Export of staple foods therefore must be
immediately stopped, and all out efforts have to be made to take the
foodgrains to the doors of the hungry millions. This is the primary
responsibility of every government. #

Posted by Devinder Sharma at 10:07 PM

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