Saturday, May 29, 2010

Volcanic and Political ashes in Iceland and the maybe anarchist and possible mayor of Reykjavik

The Icelandic economy has past away and it´s dying wish was to have its ashes spread all over Europe

These and similar jokes we tell each other here in Iceland. And the Icelandic TV reporters who cover the Eurovision song-contest in Oslo at the moment tell us they have heard hundreds of volcano jokes whenever they are around other media people.

Now you in the rest of the world have heard a lot about the recent volcano-eruption over here and even more about the Icelandic bank-collapse and our Ice-Save troubles. Iceland was all over the world media in the last couple of years and more so in the last few weeks.

“We want cash, not ash,” said the British government.

I have a few questions of my own about the volcanic hype and the effects on air travel and if there isn´t indeed a cash-ash connection that has very little to do with our volcano and us. Though that´s a topic for another time.
Today I´d like to talk about the political ashes in our mouths and their after-effects on our political system.

Here are a few rather interesting tidbits you might not have heard about:

Last month the special investigation committee dealing with the banking collapse published their final reports in a press-conference, which just about everyone in Iceland watched life. Factories and offices closed down for an hour to allow their employees to get in front of the TV and listen to the main-speaker of the investigation committee to give a summary of their reports.

They talked about enormous corruption within the banks which was facilitated by the complicity of political leaders in this corruption and the incompetence and the ineffectiveness of the financial regulatory system.

Most of the facts had come out in bits and pieces even before this special press-conference, but hearing the compiled message in a such manner had an enormous impact on the Icelandic psyche.
People became very, very angry.

One thing that I noticed, however, is the way in which this investigation committee members went so obviously out of their way in laying the full burden of guilt on the Icelandic bankers, the rich Icelandic “Viking” investors who bought foreign assets on speculative credits and on the Icelandic politicians who received campaign contributions from the rich and the corrupt as well as on on the Icelandic financial regulators. The committe refused to mention the international system in which those acts tool place and the similarity of the behavior of the Icelandic speculators to the fraudulent speculatory deals going on in Europe and the US at the very same time. The difference was only that while American and European taxpayers now had to bail out the banks over their, Iceland just doesn´t have enough taxpayers to do the same.
Even when they mentioned fleetingly that indeed it were foreign corporations and financial entities which were involved and profited from these risky speculations which brought down the system in the end, even then committee told us in the next that often Icelanders were involved in those foreign entities.

The consequence of this putting the blame exclusively inside the country was, that now most Icelanders accept that Iceland as a country has to take on the burden of paying the Brits these Ice-Save debts, and be grateful if we only can get slightly better conditions than in the first contract.

But the other consequence came probably as a bit of a surprise to the political system.
Icelanders have decided that since it´s our crooks who are responsible and we are the country with the worst crooks ever, we need first get those economic crooks behind bars and throw away the key. Since they are our crooks we can actually do that, foreigners can escape but our own we can catch or at least we can get them extradicted from whereever they are hiding.
And secondly we won´t trust the political system any more, not any of those politicians, none of them.

Tomorrow are Municipality elections and in a pre-election poll done last week the majority of the citizens of Reykjavik told the pollsters they were going to vote for Jon Gnarr.

Jon Gnarr is a comedian an actor and a joker.

His party “Besti Flokkur” (“Best Party”) and its participation in the elections were supposed to be a joke.
The only pre-election promise Jon Gnarr ever made that his potential voters actually take serious is the one, where he promises that he will break every pre-election promise he made. So when he promises he will open tariff-lines and borders between Reykjavik and the next town in order to get revenues for the city, nobody is worried. Neither are they worried when he promises an ice-bear for the city park´s pet-zoo. And the citizens of Reykjavik aren´t afraid of the expenditures of building a puffin breeding rock in the middle of the municipal park either, neither are the ornithologists who know were puffins can and cannot breed.

“Besti Flokkur” started out with 2 percent of voter approval, but with the anger of the Icelandic people so grew its approval rate exponentially.
Jon Gnarr achieved this by holding a mirror to the Icelandic political system in all its cronyism, dishonesty, corruption, chauvinism as well as its patronizing attitude towards women, handicapped people and immigrants.

He also holds a mirror to the Icelandic voter who once used to fall for those political games every time.
And the people get it.
They understand exactly what Jon Gnarr is showing them, although he completely stays in his role and never explains himself.
He starts out with all the “right” slogans and promises, soft, nice and political correct, just like everybody else and then ruins them, in the second half of the sentence.

He plays the political imbecile in a way that´s pure genius (in my opinion anyway)

A few program points of the “Best Party”:

We want to abolish corruption……
by doing our own corruption in plain sight.

We want to have free bus-rides for children…
and cripples.

We want to have free entry into the public swimming-pools for students… and cripples and also a free towel for these kinds.

There are now so many foreigners in the country. They don´t even speak a decent Icelandic and they still have a voting right.
We are going to talk to them.
The trick is, you go to the places where these kinds work, like the fish-factory. And then you find the one who speaks Icelandic, especially if this is a woman and tell her to vote for you and then she will go and tell everyone else.

We want to listen to women and the elderly… and these kinds.
Everyone thinks they are always just rumbling something or other.
I (Jon Gnarr) think it is important to listen to them… these kinds.
And besides, if they think that I am actually interested in what they are rumbling about, they will vote for me.

Every party has values. Most parties have five to ten values. But “Besti Flokkurinn” has twelve. This is because “Besti Flokkurinn” is the best party in everything.

(Then the values are named, from self-sufficiency (named twice) over democracy to positive thinking, creativity, honesty, respect and charity (in the biblical sense of pure and unselfish love):

We show all our voters respect and Christian love. Then they will talk to others and tell them about “Besti Flokkurinn” and then they will become also voters and talk to others how “Besti Flokkurinn” is a party so full of love and how everyone is so happy when he votes for “Besti Flokkurinn”.
We are the only party in Iceland that has charity as a value, this is because love is so important. And then it is also so much easier in tricking people into voting for you, if they think you actually like them.

And then came the time when the media and the “real” politicians really got worried. In an interview on national TV Jon Gnarr was asked why he went on with it and how he could possibly be trusted to run the financial affairs of the Icelandic capital, when he himself had a bankruptcy behind him.
Jón Gnarr didn´t miss a beat:
He started by blaming his partner in the radio production firm they ran together.
Then he played it down: It was just a little bankruptcy.
And then, at the close of the interview he said:
Actually we always payed our debts, I really have no idea, why we went bankrupt.

The TV interviewer seemed not to get the joke, while most of the viewers, who had just in recent weeks watched the same game being played by the “real” politicians, quite obviously did.
After this interview Jon Gnarr´s approval rate soared to near 50%.

Of course the “real” parties are quite annoyed and not amused.

Their TV ads also sound quite desperate:

“The people of Reykjavik trust us. They trust our social system and educational system.”


“We have to show responsibility now.”

………..Says who?

the same people who irresponsibly supported and took money from the bankers who gambled away our children´s future?

Or the ones who sold out the rest of the economy and our national resources and infrastructure to foreign “investors”, committed us to debt-slavery forever and told us that our votes in a national referendum were irrelevant and therefor the people shouldn´t go voting at all?

This just about covers the whole political spectrum of “real” parties from right to left and middle and up and down, the pre-collapse government and the one we have now, the one Icelanders had put in office after their pots and pans revolution, just to be sold out by them to the British government and their banking overlords.
And Jon Gnarr, the comedian with anarchist tendencies, is everything we´ve got left here in Iceland.

Is Jon Gnarr really an anarchist?
Well, maybe, kind of, who knows:

I googled the part of the T-shirt I could read and found the rest of the quote. It says:

Anarchy is the radical notion, that other people are not your property

Well, I´m not an anarchist. Anarchists – according to an anarchist website – believe, that there should neither be enforcable rules and laws nor should there be morals and ethics in society.

I, however, believe in the need for some enforceable rules to protect society from murderers, rapists, child-molesters, investment-bankers and other sociopaths and predators. And I also believe in the necessity of ethics and morals which however should not be enforced by police action, but taught in words and more importantly in good examples.

But I do believe “in the radical notion, that other people are not my property” neither are they yours or anybody else´s.

Many people think there´s nothing he could do that could make anything worse than it already is. I agree and so I´ll vote for Jon Gnarr.
I hope the rest of the political spectrum won´t succeed in scaring Icelanders into changing their mind and voting “responsibly”.
It would be interesting to see what happens, if Jon Gnarr and his party of actors and comedians win.
He said if the chair (of mayor) is offered to him, he´ll take it. Otherwise it would be so impolite to not sit down when asked.

Despite Soaring National Debt, Congress Goes on Spending Spree

As the national debt clock ticked past the ignominious $13 trillion mark overnight, Congress pressed to pass a host of supplemental spending bills to, among other things, fund the continuing wars in Afghanistan and Iraq, ramp up security on the U.S.-Mexico border and prevent teacher layoffs.

Taken together, the Democratic-led U.S. Congress is trying to find a way to pass about $300 billion more in unfunded spending before Memorial Day -- a spending spree that rivals anything drunken sailors have been accused of.

The debt-fueled spending would only add to the $13 trillion national debt, which breaks down to $42,000 for the average American.

The spending spree comes three months after President Obama lifted the cap on the amount of money the U.S. can borrow from $12.4 trillion to $14.3 trillion to keep the nation from going into default.

But another intervention may be needed since the administration has projected a $1.56 trillion deficit for the budget year ending Sept. 30 -- a figure likely to grow in the wake of the current spending spree.

The underlying war funding measure that congressional leaders hope to pass by the end of the week would bring the amount provided by Congress for the Iraq and Afghanistan war efforts to $1 trillion.

But lawmakers in both parties are using Obama's war funding request to advance unrelated pet initiatives like a $500 million administration request for border security and an Education Department request for a $23 billion teacher bailout.

In the House, Obama's original $63 billion request for war funding, disaster relief and aid to nations like earthquake-ravaged Haiti and war-torn Afghanistan has swelled under a draft measure being readied for a key panel vote on Thursday.

Democrats such as House Appropriations Committee Chairman David Obey, D-Wis., are pushing $23 billion to help school districts avoid teacher layoffs, along with $6 billion to make up for a funding shortfall in Pell grants for low-income college students and lesser amounts to hire border patrol agents and help Mexico fight drug cartels.

Meanwhile, Senate Republicans are using a sleaker $58.8 billion version of Obama's war funding bill to try to add billions of dollars to boost security along the U.S.-Mexico border.

Since the war funding measure is the only appropriations bill likely to pass before fall, it's being eyed by lawmakers in both parties seeking to deal now with violence along the southern border, the Gulf oil spill disaster and a variety of domestic programs. But the pressure for more spending is running into resistance from lawmakers worried about out-of-control deficits and Congress' reputation for extravagant spending.

"Ninety-eight percent of this bill doesn't meet the requirements of being an emergency designation," said Sen. Tom Coburn, R-Okla., who along with Sen. John McCain, R-Ariz., are offering amendments to pay for the war funding bill.

Coburn said the bill is being described as an "emergency" to use the federal credit card rather than finding a way to budget for the expenses.

"We are going to borrow it from the children of the people who are in Afghanistan and Iraq who are fighting this war," he said."We can always rationalize away the ability to make hard choices. That is what we are doing."

Senate Majority Leader Harry Reid may not allow any votes on amendments in his quest to get the measure passed before the Memorial Day recess. Coburn says he intends to keep up his filibuster, and calls Reid an "obstructionist" for not allowing votes on amendments -- a label often used by Reid and other Democrats for Republicans.

The Senate measure, currently being debated on the floor, blends about $30 billion for Obama's 30,000-troop surge in Afghanistan with more than $5 billion to replenish disaster aid accounts, as well as funding for Haitian earthquake relief, and a down payment on aid to flood-drenched Tennessee and Rhode Island.

Because of the need to attract GOP votes, Democrats have kept the Senate bill fairly "clean," at least as emergency spending bills go. The measure comes in under Obama's requests and won unanimous support from the Appropriations panel this month.

Sen. John Cornyn of Texas is just one of several Republicans seeking to add money for border security. He's offered a $2 billion amendment to award grants to state and local law enforcement agencies, provide new unmanned surveillance aircraft, and hire hundreds of immigration and border agents, among other steps.

McCain offered an amendment to provide $250 million to send 6,000 National Guard troops to the Mexican border. Democrats will consider countering with a proposal of their own in the wake of a White House announcement that Obama would seek $500 million to send 1,200 guardsmen to the border and take other border security steps.

Lawmakers also have loaded up a separate bill that originally was intended to extend expired tax breaks and provide expanded unemployment benefits through the end of the year. The bill has grown into a nearly $200 billion grab bag of unfinished business that lawmakers hope to complete before Memorial Day.

The bill includes $1 billion for summer jobs programs, $1.5 billion in aid to farmers who had crops damaged by natural disasters and $4.6 billion to settle two long-running lawsuits against the government, one by black farmers claiming discrimination and one by American Indians over the government's management of their land.

In all, the bill would add $134 billion to the federal budget deficit, drawing opposition from Republicans and some Democrats. House leaders said Tuesday they were determined to pass the bill this week to avoid allowing jobless benefits to expire for thousands of people.

But the measure has been delayed while House leaders round up support, which could mean the Senate might have too little time to act before next week's Memorial Day recess.

Fox News' Trish Turner and The Associated Press contributed to this report.

Insider Trading Is Perfectly Legal – But Only For Members Of The U.S. Congress

Did you know that insider trading is perfectly legal in the United States? Well, not for 99.9% of the population. It is actually only a very small percentage of the population that can legally indulge in insider trading - the members of the United States Congress. In fact, a law that would ban insider trading by members of Congress has been stalled for years on Capitol Hill. So why wouldn't lawmakers in Washington D.C. want to apply the same rules to themselves that apply to the rest of us? After all, how are we supposed to respect the integrity of those "serving" in Congress when they are playing by an entirely different set of rules? The American people aren't stupid. They can see what is going on. The truth is that there is a reason why approval ratings for Congress are at an all-time low.
The sad thing is that this issue has gotten very little attention in the mainstream media. Nobody seems really that upset about it. But it is a travesty that our lawmakers can legally make trades in the open market based on inside information that they have gained by being in positions of authority. As the Wall Street Journal recently explained, they can generally make all the money they want off of insider information without any fear of prosecution because "insider-trading laws generally do not apply to lawmakers, leaving them free to trade on nonpublic information."
But members of the U.S. Congress are generally in a greater position to influence the fortunes of individual companies than almost anyone else. For example, certain members of the U.S. Congress may know that certain legislation is going to be introduced that would have a dramatic impact on the economic fortunes of a particular industry or corporation. What would stop those members of Congress from making very profitable trades in the marketplace based on that information?
Nothing. Nothing at all.
So, is there any evidence that members of Congress have been involved in this sort of activity?
Well, there is at least one study that seems to indicate that members of the U.S. Congress have been much more successful in the stock market than members of the general public....
A 2004 study of the results of stock trading by United States Senators during the 1990s found that that senators on average beat the market by 12% a year. In sharp contrast, U.S. households on average underperformed the market by 1.4% a year and even corporate insiders on average beat the market by only about 6% a year during that period. A reasonable inference is that some Senators had access to - and were using - material nonpublic information about the companies in whose stock they trade.
Of course Congress could stop all of this by simply passing a law that bans insider trading by our lawmakers.
But they refuse to do it.
Instead, it is likely that our "leaders" will continue to make millions of dollars by betting against the U.S. economy and very few people will even raise an objection.
In the upcoming Wall Street sequel, Gordon Gekko makes a statement that seems very appropriate for the world in which we now live....
"Someone reminded me I once said 'Greed is good' - now it seems it's legal"

Barack Obama to 'take charge' of Gulf of Mexico oil spill

President Barack Obama returns to the Gulf of Mexico coast today, insisting he's in charge of efforts to shut down what is now estimated as the worst oil spill in US history.

President Obama has promised to hold BP accountable in the catastrophic Gulf of Mexico oil spill
President Obama has promised to hold BP accountable in the catastrophic Gulf of Mexico oil spill Photo: REUTERS

Mr Obama seized ownership of what he called a "tremendous catastrophe," after weeks of allowing Cabinet members take the public lead as the crippled BP PLC well spewed millions of gallons of crude oil into the Gulf from nearly a mile (1,500 meters) below the surface.

"I take responsibility. It is my job to make sure that everything is done to shut this down," Mr Obama declared at a White House news conference dominated by the spill on Thursday.

Even at the lowest estimate – 18 million gallons (68 million litres) – the Gulf spill has far surpassed the size of the previous largest US oil spill, the 1989 Exxon Valdez disaster, in which a tanker ran aground in Alaska, spilling nearly 11 million gallons (42 million litres).

The oil has been spewing since the drilling rig Deepwater Horizon exploded on April 20, killing 11 workers.

The president was under mounting criticism – even from members of his own Democratic Party – for seeming aloof to what could be the biggest environmental tragedy in US history.

Asked about inevitable comparisons between his administration's handling of the disaster with his predecessor's response to Hurricane Katrina in 2005, which flooded New Orleans and other areas, Mr Obama said: "I'll leave it to you guys to make those comparisons... what I'm thinking about is how do you solve the problem?"

Comparisons to former President George W Bush's inadequate response to the Katrina have come mainly from opposition Republicans who are trying to made political gains in November congressional elections.

"I'm confident people are going to look back and say this administration was on top of what was an unprecedented crisis," he said. "We've got to get it right."

Mr Obama is struggling for high ground in the political wars raging in the months before the congressional elections, where his Democratic majorities in both House and Senate are in danger.

He appeared testy at times, reflecting, perhaps, the strain of coping with the Gulf spill as he oversees wars in Iraq and Afghanistan, tries to prevent an escalation of the crisis on the Korean peninsula and struggles with an economy and unemployment only slowly rebounding from the deepest recession in decades.

He has passed through bruising legislative sessions and took a notable battering from Republicans as he pushed through health care overhaul. Now he's struggling to keep congressional Democrats focused on financial regulatory reform while trying to smooth the Senate confirmation of his second Supreme Court nominee.

The president, who campaigned on a promise to change the way Washington does business, blasted a "scandalously close relationship" he said has persisted between the major oil companies and government regulators.

Conceding that "people are going to be frustrated" until the well is capped, Mr Obama said he would use the full force of the federal government to extract damages from BP.

"We will demand they pay every dime they owe for the damage they've done and the painful losses they've caused," Mr Obama said.

He spoke shortly after the head of the troubled agency that oversees offshore drilling resigned under pressure. The departure of Minerals Elizabeth Birnbaum, the Management Service Director, was announced just before Mr Obama's news conference began.

While making clear he was leading the response, Mr Obama acknowledged some things could have been handled better.

He said his administration didn't act with "sufficient urgency" prior to the spill to clean up the Minerals Management Service, accused of corruption and poor regulation of drilling rigs and wells.

While Mr Obama defended calling for an expansion of offshore drilling prior to the spill, he said he "was wrong" to believe that oil companies were prepared to respond to worst-case oil spills.

Mr Obama also said the administration took too long to make its own measurements of the size of the spill, and didn't push BP hard enough early on to release underwater footage

For everyone, the stakes grew even higher Thursday as government scientists said the oil has been flowing at a rate two to five times higher than what BP and the US Coast Guard initially estimated.

Two teams of scientists calculated the well has been spewing between 504,000 gallons (1.9 million litres) and more than 1 million gallons (3.8 million litres) a day. Even using the most conservative estimate, that means about 18 million gallons (68 million litres) have spilt so far. In the worst-case scenario, 39 million gallons (148 million litres) have leaked.

In another troubling discovery, marine scientists said they have spotted a huge new plume of what they believe to be oil deep beneath the Gulf, stretching 22 miles (35km) from the leaking well head northeast toward Mobile Bay, Alabama. They fear it could have resulted from using chemicals a mile below the surface to break up the oil.

Stupid Investment of the Week

Commentary: Don't gush over oil-spill stock plays

BOSTON (MarketWatch) -- BP PLC said Thursday it has slowed the flow of oil gushing from a ruptured well in the Gulf of Mexico, but not even a warning from regulators has quelled the gusher of money flowing into stocks that purportedly are going to clean up, financially speaking, from the crisis.

These are not investors making bets on oil prices or betting on (or against) the big-name energy companies, or the investors who have fallen in love with companies like environmental services biggie Clean Harbors Inc. /quotes/comstock/13*!clh/quotes/nls/clh (CLH 63.39, +2.00, +3.26%) or water-treatment operators like Nalco Holding Co. /quotes/comstock/13*!nlc/quotes/nls/nlc (NLC 22.66, -0.52, -2.24%) , both of which have gotten plenty of ink and play since the oil spill started in late April.

The real problem is investors who are diving into micro-cap stocks as murky as the oil-infected water itself, companies like MOP Environmental Solutions /quotes/comstock/11i!mopn (MOPN 0.10, -0.02, -14.78%) , ACT Clean Technologies /quotes/comstock/11i!aclh (ACLH 0.04, 0.00, 0.00%) , Green Bridge Industries /quotes/comstock/11i!grbg (GRBG 0.00, 0.00, 0.00%) and others where today's news is allowing stock promoters to profit, but is fleecing the little guy who has bought the Stupid Investment of the Week.

Oil benchmarks battle for supremacy

The battle rages on between Nymex's WTI crude futures and its rival ICE Brent. Critics say WTI is vulnerable to supply issues at delivery point Cushing, Oklahoma, while Nymex says fundamentals are transparent, and traders will vote with their feet.

Stupid Investment of the Week highlights the concerns and conditions that make securities less than ideal for average investors and is written in the hope that showcasing the danger in one scenario will make it easier for readers to spot and avoid trouble. While not a purchase recommendation, the column is not intended as an automatic sell signal.

In the case of oil-spill stocks, there is no denying the long-term promise of some of the technologies, but there are a lot of questions about whether they can get products to market, generate real sales and ultimately become a big winner.

Meanwhile, the discussions in chat rooms and message boards and in the emails and faxes some promoters are sending out include outrageous claims, so bad that the U.S. Securities & Exchange Commission and FINRA issued an alert to investors warning about oil-spill clean-up scams. Read the warning on FINRA's website.

Just this week, regulators suspended trading in ACT Clean Technologies because of claims being made about the stock, which included purported interest from BP to use a product with ties to ACT to cleanup the Gulf of Mexico, as well as purported test results finding that the products would be effective in cleaning up the spill.

No such action was taken against MOP Environmental Solutions, which made similar claims about an endorsement from BP /quotes/comstock/13*!bp/quotes/nls/bp (BP 42.95, -2.43, -5.35%) and the U.S. Coast Guard. A report on the stock at the site notes that "MOP is promoting itself diligently by saying that its patented product is the ultimate solution for protecting ecosystems along the coastline from hazardous oil spills."

Lots of companies promote all kinds of claims, and stock promoters -- with or without the knowledge of corporate executives -- can take public statements and twist them in a myriad of ways.

But just because it sounds good doesn't make it a worthy investment.

Many of the stocks getting mentions as potential oil-spill plays really have nothing to gain from the mess in the Gulf. Stocks like Alternate Energy Holdings /quotes/comstock/11k!aehi (AEHI 0.58, -0.02, -2.85%) or Renewal Fuels /quotes/comstock/11i!rnwf (RNWF 0.00, 0.00, -29.73%) -- where there's no real direct connection or promise to be made -- have gotten some play from promoters, under the basic idea that the oil spill will generate a surge of interest in every type of alternative.

Just about any microcap stock mentioned as an oil-spill play has horrible numbers --provided you can actually get a look at them; they are in the back of the class, with a financial health grade of "F" from Morningstar. They're all traded on the OTC Bulletin Board or on the Pink Sheets, where the listing and reporting requirements are significantly less than on the larger exchanges.

And in some cases, the stock price is less than a penny. Stock promoters don't need a lot of victims, they just need a few people who say "I'd like to try this just once, and it's not much money to risk," so they invest in a stock without thinking that their odds of winning with it are only slightly better than in picking the daily lottery number.

There are good companies that trade on the pinks -- this is far from a blanket indictment of small stocks or those exchanges -- but some of the issues there don't trade very often, and make big jumps when they do move. In short, think of it like your money could be here today and gone tomorrow, because the guys pushing these stock ideas are waiting for your money to move the price so that they can capture the quick hit.

It's hardly the first time that regulators have taken a broad-brush approach to a group of stocks hyped by the headlines. There were hurricane stocks in 2005. In fact, this column looked at both hurricane stocks at that time and "swine-flu plays" last year; in the latter case, many stocks got a small temporary bump from the headlines, but actually had some real potential there and proved that perhaps they did not deserve being described as poor picks.

That is part of the reason why investors are willing to take a chance on the oil plays. Even when the Gulf spill is cleaned up, energy is a story that never goes away.

Alas, the same can be said for self-serving traders pimping stocks based on whatever crisis or catastrophe is in the news.

Chuck Jaffe is a senior MarketWatch columnist. His work appears in many U.S. newspapers.

North Korea 'is exporting nuclear technology'

Leaked UN report says Pyongyang is using front companies to export nuclear and missile technology to Iran, Syria and Burma

South Korean president Lee and Wen Jiabao

South Korean president Lee Myung-bak (left) and Chinese premier Wen Jiabao. The revelations came just hours before Wen arrived in South Korea for a three-day visit. Photograph: Jo Yong-Hak/Reuters

International efforts to avert a full-blown crisis on the Korean peninsula were given greater urgency today after a leaked UN report claimed that North Korea is defying UN sanctions and using front companies to export nuclear and missile technology to Iran, Syria and Burma.

The report, by a panel that monitors sanctions imposed after Pyongyang conducted nuclear weapons tests in 2006 and 2009, said the regime was using shell companies and overseas criminal networks to export the technology.

The revelations came just hours before the Chinese premier, Wen Jiabao, arrived in South Korea for a three-day visit certain to be dominated by mounting tensions between Seoul and Pyongyang.

At a meeting today, Wen told the South Korean president Lee Myung-bak that China would not "harbour" anyone over the sinking of a South Korean warship in March, in which 46 soldiers died.

But he added that China has not yet concluded that North Korea was responsible. Pyongyang has denied involvement

According to a South Korean official, Wen said: "China objects to and condemns any act that destroys the peace and stability of the Korean peninsula."

China, the North's closest ally and main benefactor, has so far refused to condemn the Pyongyang regime after a multinational investigation concluded that a North Korean torpedo sank the Cheonan.

Analysts say Beijing is unlikely to support any UN security council moves against North Korea, but might be persuaded to abstain on a resolution rather than wield its veto.

Wen and Lee will continue talks tomorrow, at a three-way summit that will also include the Japanese prime minister, Yukio Hatoyama. A spokesman for Lee said South Korea was "fully concentrating on diplomatic efforts to hold North Korea responsible".

However, experts said China's options were limited, given its desire to defuse tensions and avoid sparking a political and humanitarian crisis in its own backyard.

"China has its own strategic stake in the Korean peninsula, and if North Korea is further isolated or sanctioned, that would escalate tensions and risk serious instability," said Prof Wei Zhijiang of Zhongshan University in southern China.

The sanctions report, leaked to journalists in New York, said UN bans on nuclear and ballistic missile technology, and on all arms exports and most imports, were having an effect. But it conceded the North had found ways to circumvent sanctions using companies and individuals who are not subject to asset freezes and travel bans.

The 47-page report contains a long list of sanctions violations reported by UN member states, including four cases of arms exports.

Pyongyang, the panel said, had used "a number of masking techniques," including falsely labelling the contents of shipping containers and giving inaccurate information about their origin and destination.

North Korea was using "multiple layers of intermediaries, shell companies and financial institutions" to get around sanctions, it added.

An unnamed western diplomat based at the UN said: "The details in the report are not entirely surprising. Basically it suggests that North Korea has exported nuclear and missile technology with the aid of front companies, middlemen and other ruses."

The report said the regime had tried to conceal arms exports by sending items in kit form to be built at their destination, and called on recipient countries of North Korean cargo to act with "extra vigilance".

Pyongyang is also suspected of using overseas criminal groups to transport and distribute "illicit and smuggled cargoes", possibly including parts for weapons of mass destruction.

In response to the sinking, South Korea froze trade with the North, resumed propaganda broadcasts across the border and announced joint naval exercises with the US.

The North retaliated by severing ties with its neighbour, expelling South Korean officials from a joint industrial venture and banning the country's aircraft from its airspace. It also ditched an agreement designed to prevent naval clashes and threatened to attack any South Korean vessel entering its waters.

BP used cheaper casing on oil well to save money, Congress papers show

Fire aboard the mobile offshore drilling unit Deepwater Horizon
(EPA) The gas that forced itself into the drill pipe caused a massive explosion that killed 11 on the Deepwater Horizon rig

The explosion on the Deepwater Horizon rig that precipitated the vast Gulf of Mexico oil spill came after the well was capped with a relatively cheap type of casing, BP papers have revealed.

The decision to use the riskier method to finish its Macondo well was taken partly on cost grounds, according to the document.

In the days before the blast, the oil giant selected a casing that provided only a single layer of protection to prevent gas from leaking into the well, according the details obtained by The New York Times from a Congressional investigator.

Workers on the rig and from BP have said that gas bubbled into the well and was a key factor in causing the April 20 blowout, which killed 11 people.

BP described the approach to finishing the well as the “best economic case” in the document, which has appeared following Congressional hearings into the cause of the accident.

News of the decision emerged as Douglas H. Brown, chief mechanic on the Deepwater Horizon rig, testified yesterday that a disagreement took place on the rig between one of the six BP engineers overseeing the operation and employees of Transocean, the owner of the rig, just a few hours before the blast took place.

Mr Brown told the hearing that the “skirmish” followed BP’s decision to withdraw heavy drilling mud from the well that was helping to control pressure inside it and to replace it with lighter saltwater before the well was capped with a final dollop of cement.

“Well, this is how it’s going to be,” the BP official said, according to Mr Brown.

BP has declined to comment about accusations made in the hearing.

Workers on the Deepwater Horizon rig, which BP was paying over $530,000 per day to lease, were running behind schedule when the accident took place.

The rig had originally been scheduled to drill another well in a different location by March 7.

Later today, the Obama Administration is expected to suspend exploratory drilling in the Arctic Ocean until next year as BP faces a defining day in the disaster with an attempt to plug the leak with mud.

In a report to be delivered to the White House today Ken Salazar, the Interior Secretary, is expected to say that he will not consider applications for permits to drill in the Arctic for at least seven months.

President Obama ordered Mr Salazar to conduct a review of America’s offshore oil drilling safety after the BP oil spill that began last month. If the suspension goes ahead, it will disturb plans by Shell Oil to begin exploratory drilling on leases as far as 140 miles (225 km) offshore.

The US gave Shell the green light for exploratory drilling in Alaska in October last year, despite environmental concerns. The area is home to large numbers of endangered bowhead whales and polar bears, as well as walruses, ice seals and other species. Critics also said that any oil spills would be impossible to clean up amid the Arctic’s broken sea ice.

The oil drilling industry has come under increased scrutiny over the past month following the explosion of the Deepwater Horizon rig on April 20.

The suspension in Alaska could signal a sea change in administrative attitudes to drilling permits. This week, Mr Obama said the Government would clamp down on companies that sidestep regulations and safeguards meant to protect the environment. He said a new review of environmental safeguards would be required before oil and gas development goes forward.

“For too long, for a decade or more, there’s been a cosy relationship between the federal agency that permits them to drill,” he said. “It seems as if permits were too often issued based on little more than assurances of safety from the oil companies. That cannot and will not happen anymore.”

Yesterday evening BP launched a risky deep-sea procedure using drilling mud known as “top kill” to plug the leak that has been spewing oil into the Gulf of Mexico for five weeks.

BP said today: “The procedure is intended to stem the flow of oil and gas and ultimately kill the well by injecting heavy drilling fluids through the blow out preventer on the seabed, down into the well.” The operation could take two days.

The fractured pipe from Deepwater Horizon has been spouting oil into the gulf for 36 days, creating a massive slick, washing up along the Louisiana coastline and threatening birds, animals and plants.

Oil from the giant slick has now soiled more than 100 miles of Louisiana coastline, State Governor Bobby Jindal said yesterday, more than doubling the previous estimate.

Just after 6pm GMT yesterday BP began pumping heavy mud into the leaking well. Last night executives said that everything was going as planned. BP hopes the mud could overpower the steady stream of oil, but chief executive Tony Hayward said that it would be at least 24 hours before officials knew whether the attempt had been successful. The company wants to eventually inject cement into the well to permanently seal it.

The scheme had a 60 to 70 per cent chance of success, said BP, though some experts were less optimistic. It has never before been done at this depth.

Failure would not only provoke fresh outrage at BP, but increase pressure on the White House to take control of the effort from the company. “If the thing is not fixed today, the President doesn’t have a choice, and he’d better go in and completely take over, perhaps with the military in charge,” said Senator Bill Nelson, of Florida. “The perception is that we’re fumbling.”

Under the US Clean Water Act, BP could be fined up to $4,300 (£3,000) for every barrel of oil gushing into the Gulf. With the disaster said to exceed the Exxon Valdez tanker spill of 1989, which involved 11 million gallons (50 million litres), that would mean a fine of at least $47 billion.

Mr Obama said that if it were successful, BP’s plan to cap the well should greatly reduce or eliminate the flow of crude. “We will not rest until this well is shut, the environment is repaired and the clean-up is complete,” he said. He added that the country could not “sustain this kind of fossil fuel use”.

Yesterday, the US Coast Guard recalled all 125 commercial fishing vessels working on cleaning up the oil spill in Breton Sound, Louisiana after four crew members reported feeling ill, with severe headaches, dizziness, nausea and chest pains.

BP has paid $29 million in interim compensation to people claiming economic losses from the spill. About 25,000 claims have been submitted and 12,000 cheques issued so far. The average payout is $2,416. No claim has yet been refused, the company said.

The handouts do not preclude victims from suing. More than 130 lawsuits have been filed against BP, which leased the rig; Transocean, which drilled and operated the well; and Halliburton, hired by BP to cement the well after drilling was completed last month.

(LEAD) S. Korea's military reviewing further measures against North

SEOUL, May 28 (Yonhap) -- South Korea is preparing to take additional measures against North Korea as it sees the possibility of limited violence by the North amid escalating tensions over Pyongyang's sinking of a Seoul warship, a senior military official said Friday.

"Following the rhetoric of threats, we expect that North Korea could actually carry out a military, non-military provocation," Major Gen. Ryu Je-seung, a senior official at the South Korean defense ministry's policy and planning division, told retired generals and admirals.

"So, our military is preparing to take additional military, non-military measures depending on North Korea's response and attitude," Ryu said.

An attack by the North would be possible if the South sets up loudspeakers along their heavily armed border and starts blaring anti-Pyongyang broadcasts, Ryu said, adding it will take some two weeks to set up the loudspeakers. Ryu didn't elaborate on what the South's additional measures would be.

Ryu confirmed that South Korea and the U.S. raised their alert system on North Korea, called watch condition, to the second-highest level on Wednesday.

Military tensions on the Korean Peninsula have escalated since an international investigation concluded last week that a North Korean submarine fired a torpedo and sank the South's corvette Cheonan near the tense Yellow Sea border on March 26, killing 46 crew members.

South Korea announced Monday a flurry of military, diplomatic and economic measures to punish the North for the sinking, one of the worst provocations by the North since the 1950-53 Korean War.

Military measures included a resumption of psychological warfare operations, joint naval drills with the United States and banning the North's ships from sailing through the South's waters.

Since Monday, South Korea's military has started anti-North radio broadcasts. The four-hour program titled "Voice of Freedom" is being aired three times a day.

North Korea, repeated its denial in the sinking, and threatened a war if it was punished.

As the South staged its own anti-submarine drill off its west coast Thursday, Pyongyang's military warned it would scrap all inter-Korean accords to prevent accidental naval clashes and block border traffic.

Banning cross-border traffic would endanger the safety of some 800 South Korean managers and employees at an inter-Korean industrial park in the North's border town of Kaesong, the last-remaining major economic project between the two sides, said analysts.

On Saturday, Seoul's top military commanders will hold a meeting to discuss countermeasures against further aggression by North Korea, military officials said.

The meeting agenda is expected to include Seoul's response if South Korean civilians at the Kaesong complex are taken hostage, according to the officials.

The meeting will be led by Lee Sang-eui, chairman of South Korea's Joint Chiefs of Staff, the officials said.

Time for law abiding American citizens to stop paying taxes, start a new government? 2 of 13

David Degraw has written an outstanding comprehensive explanation of what’s really happening in the US economy. He’s given me permission to reprint it here. I also recommend his site "For Our Economy" for citizen grass-roots activism for economic justice.

Regarding the title of Americans starting a new government, I remind readers of the Declaration of Independence; our core American principles of government. The below links document that US political “leadership” is not even close to following our constitutional limitations and therefore are “leading” unlawfully. Americans with an oath to defend the US Constitution against all enemies, foreign and domestic, should choose to either honor their oath or admit allegiance to the current fascist imposter of the greatness this nation is on paper and in our ideals.
Another excellent summary is economist James Galbraith’s recent expert testimony to the US Senate Judiciary Committee of what will become “emperor has no clothes” obvious: the US economy is a rigged casino. Here is my best pitch to explain and document the fraud. Here is my best explanation of the obvious solutions. Here are my comprehensive resources to understand the US oligarchy in all its unlawful infamy in unlawful wars, war lies, torture and indefinite detention (including against Americans), and our controlled economic demolition.
I’ll present David’s documentation and analysis in 13 segments; each with his introduction. Use the “previous” and “next” buttons under the title to navigate to the different segments. Please share broadly with the understanding that all our economic problems really exist on paper only. They are propagandized and managed frauds; solved almost instantly by an economic structure designed for the public good rather than designed for an oligarchy. I stake my professional reputation on the factual reality of these statements and prove their objective existence in the data in the above links.
I appreciate David Degraw’s leadership to research and communicate the facts, and help us all embrace the terrible truth of US fascism that We the People must expose and end in order to unleash humanity and build a brighter future for all of us.
Look and verify for yourself. Res ipsa loquitur.

Is It Time for Law Abiding American Citizens to Stop Paying Their Taxes and Start a New Government?
By David DeGraw, AmpedStatus Report
The evidence is now overwhelming. The United States government has facilitated the theft of trillions of dollars of national wealth and 99% of the US population no longer has political representation.
Now that I have your attention, I want to make it clear to you that I am being rational and serious when I ask this question: Is it time for law abiding American citizens to stop paying their taxes and start a new government?
Before you roll your eyes and dismiss me as some “extremist,” let me explain the situation to those who are unfamiliar with my past reports. In my report on the Economic Elite Vs. The People of the United States, I lay out the case proving that our economy and tax system has become an organized criminal operation. I defy anyone who spends time researching and analyzing the facts and overwhelming evidence to support this claim to prove otherwise. I invite anyone who thinks I’m wrong to a debate on national television. I’m talking to you, Tim Geithner, Ben Bernanke, Larry Summers, Lloyd Blankfein, Jamie Dimon and President Obama!
I torturously spend 60 plus hours a week researching this and the torrent of devastating news and evidence is mounting by the minute. The staggering level of theft continues unabated. As I am watching this unfold, I am horrified thinking about the severe consequences that have only just begun to reap their toll. Our nation is being raped and pillaged. Our future is going up in flames and our government isn’t even making the slightest effort to put out the fire. In fact, they are purposely pouring gasoline all over it.
“There’s a time when the operation of the machine becomes so odious—makes you so sick at heart—that you can’t take part. You can’t even passively take part. And you’ve got to put your bodies upon the gears and upon the wheels, upon the levers, upon all the apparatus, and you’ve got to make it stop. And you’ve got to indicate to the people who run it, to the people who own it that… the machine will be prevented from working at all.” – Mario Savio
So let me take a deep breath and back up for a minute… and explain the urgent gravity of our current crisis.
II: Off-the-Books, Off-the-Record
Did you happen to catch the underreported news about the Lehman Brothers’ bankruptcy? Turns out that Lehman Brothers’ was playing Enron-style accounting games and hid BILLIONS of dollars of debt using a “gimmick” called “repo 105″ to keep losses off their balance sheet.
If you haven’t read the 2000 page report yet, you might want to, because the Lehman Brothers scandal is not an isolated incident by any means. It is a revealing look into “standard” and “routine” accounting practices used by all the large politically-connected Wall Street firms. It is standard operating procedure in this organized criminal enterprise that poses as free enterprise - a rigged market that pretends to be a free market.
The theory that people didn’t know about Lehman’s accounting scam is, to put it kindly, not based in reality. Financial reporter Max Keiser revealed Wall Street’s accounting scams, back in July of 2008, in a report titled, “Peek-A-Boo Accounting and the Crash of Financial Stocks on Wall Street.” Here’s how Max put it almost two years ago:
“Since it was discovered that Enron was hiding debt off their balance sheet to make their earnings, stock and stock options go up, Wall Street has decided they can’t get enough of this neat trick and every quarter we see more of it.
It’s peek-a-boo accounting where debts are removed from the balance sheet during the period when disclosure is needed (for quarterly earnings reports) and the debt is temporarily parked back onto the company’s balance sheet, or parked on another bank’s balance sheet with an implied reciprocal agreement. (Enron had hundreds of shell companies that served as ‘debt parking lots’ to avoid having to include any liabilities on their quarterly earnings statement).
Lehman Brothers looks like they are trying to out-Enron Enron in the peek-a-boo accounting department.”
Eliot Spitzer, once known as the Sheriff of Wall Street, and white-collar crime expert William Black released a report calling the accounting tricks on Wall Street a three card Monte scam for suckers. While calling for an “immediate Congressional investigation,” they explained:
“Our investigations have shown for years that accounting is the ‘weapon of choice’ for financial deception…. As our December co-author Frank Partnoy recently explained as part of a major report of the Roosevelt Institute, ‘Make Markets Be Markets’, such abusive off-balance accounting was and is endemic. It was a major cause of the financial crisis, and it will lead to future crises….
The Valukas report also exposes the dysfunctional relationship between the country’s main regulatory bodies and the systemically dangerous institutions (SDIs) they are supposed to be policing. The NY Fed, the regulatory agency led by then FRBNY President Geithner, has a clear statutory mission to promote the safety and soundness of the banking system and compliance with the law. Yet it stood by while Lehman deceived the public through a scheme that FRBNY officials likened to a ‘three card monte routine’.…
The FRBNY remained willing to lend to an institution with misleading accounting and neither remedied the accounting nor notified other regulators who may have had the opportunity to do so.
The Fed wanted to maintain a fiction that toxic mortgage products were simply misunderstood assets, so it allowed Lehman to maintain the false pretense of its accounting.”
Here’s another highly important fact that has been left out of media reports concerning Lehman’s scam: The Federal Reserve not only hid the information on the massive scam, they most likely taught these companies how to do it! A very important piece of this puzzle was revealed to me in a discussion I had with Larry Park, the founder of The Foundation for the Advancement of Monetary Education (FAME). Former Federal Reserve Chairman Paul Volcker wrote a book called “Changing Fortunes” back in 1993. In the book, Volcker talks about inventing this same scam by manipulating the Bank of Mexico’s books:
“… it was a matter of buying time. In an effort to hold things together psychologically, we agreed with considerable unease to extend overnight swap credits once or twice to the Bank of Mexico to bolster the month end figures for their dollar reserves. We would transfer the money each month on the day before the reserves were added up, and take it back the next day. Our unease did not arise from any fear of financial loss, but because the ‘window dressing’ disguised the full extent of the pressures on Mexico from the bank lenders and from the Mexicans themselves.”
So there you have it, another devil child spawn from the Federal Reserve… “peek-a-boo” voodoo accounting.
By the way, Bank of (Zero Taxes) America also used “peek-a-boo” voodoo to hide debt. So to sum this up in plain English, the government looks the other way as they illegally hide massive debt and then doesn’t even bother collecting any taxes from them. Did you get that, people? Just burn your mortgage and credit card bills, get one of your close friends (Ernst and Young) to say the debt on them doesn’t exist and then you won’t have to pay off any of your debt or have to pay any taxes. In fact, just incorporate yourself and tell the government to give you a couple billion in tax dollars. It works for the thieves on Wall Street!
Before moving on, I must also mention that Bank of (Zero Taxes) America has been caught robbing people and committing fraud repeatedly, as Gary Null revealed, they have spent “$14.9 billion to settle 15 [court] cases.” Which is just part of the “over $430 billion [that] has been paid to parties by Wall Street firms in over 1500 cases.”

Click here to find out more!

DPRK Holds 1st Press Briefing on "Cheonan" Incident

The military of the Democratic People's Republic of Korea (DPRK) held its first press briefing Friday on the "Cheonan" incident, warning South Korea not to provoke it.

Pak Rim Su, head of the Policy Bureau of the DPRK's National Defense Commission (NDC), told the briefing that investigation results released by South Korea on the incident could not be "objective and fair" due to the composition of the investigation team.

On March 26, South Korean warship "Cheonan" sank near the maritime border with the DPRK after an explosion, killing 46 sailors. On May 20, South Korea announced that based on results of an investigation led by a multi-national team including South Korean, U.S., British and Australian members, the warship was sunk by a DPRK torpedo attack.

But Pak said that since the United States is still in "a state of war" with the DPRK, and that Britain and Australia had taken part in the Korean War, results of the investigation could not be creditable.

He also said civilian members of the team had only limited access to the main work of the investigation and some investigators who expressed different opinions were even driven out of the team.

Pak said that there are a lot of contradictions in South Korea's claim over the time, spot and witnesses of the incident. Videos were also played at the briefing to challenge evidence provided by South Korea.

Pak even said South Korean authorities faked the investigation results to serve multiple objectives, including proving the correctness of its anti-DPRK policy, keeping the presence of U.S. forces in South Korea and diverting the responsibility of the sinking of the warship.

He said the DPRK will defend itself if South Korean authorities "dare to launch provocation."

It was not the first time that the DPRK denied investigation results issued by South Korea on the incident. On May 20, the NDC rejected South Korea's claim in a statement, and indicated that the DPRK is willing to send a team to South Korea to verify material evidence. But that proposal was rejected by Seoul.

On Monday, South Korea halted trade with the DPRK, banning merchant ships of the DPRK from entering South Korean waters, and suspending its humanitarian aid for DPRK children.

South Korean President Lee Myung-bak vowed that his country would resort to measures of self-defense in case of "further military provocation" by the DPRK and called for sanctions against Pyongyang.

Dollar Primed for Collapse by End June: Charts

The dollar's recent strength has been explained by most market analysts as a result of the euro weakness rather than any fundamental support for the greenback. In fact, a closer look at the dollar's chart - particularly the dollar index - suggests the currency may be primed for a collapse.

The dramatic dollar index rise from $0.81 to $0.87 in recent weeks shows the chart's developed a dramatic and possibly dangerous parabolic trend. This trend has four important features.

Dollar Index Weekly Chart

The first is the way it captures an acceleration in behavior. The trend starts slowly and then gathers speed, rapidly moving up with increasing volatility.

The second feature is the shape of the curved parabolic trend rise. This is not a true parabolic curve because as the trend accelerates the curve changes shape until it becomes vertical. It’s the vertical section of the curve which is most useful because it provides a exact date when the trend will inevitably collapse.

This type of trend line curve was first identified in the 1930’s and it was mistakenly called a parabolic curve. We continue to use the name, even though it is not an accurate description. In the 1930’s this was a rare behavior. In the last decade this curve has become increasingly common as volatility has increased in modern markets. This type of trend should not be confused with the parabolic Stop and Reverse indicator.

The third feature of the parabolic trend line centers on the candles that build the pattern. Every day a new candle is added to the right of the previous days candle. Eventually, and inevitably, a candle will move to the right of the vertical section of the parabolic trend line and signal and end to the trend. The trend has a final ending date that can be calculated in advance using the vertical section of the trend line.

The fourth feature of the parabolic trend line is the high probability of a very rapid collapse in the trend. A good example is the parabolic trend in the oil market in 2008. When this trend collapsed the price dropped from $145 to $90 in 13 weeks.

The dollar index suggests the greenback will continue to stengthen until the end of June, with a target near $0.89-$0.91, before it collapses to a downside target of $0.81.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders – . He is a regular guest on CNBC's Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe.

If you would like Daryl to chart a specific stock, commodity or currency, please write to us at We welcome all questions, comments and requests.

CNBC assumes no responsibility for any losses, damages or liability whatsoever suffered or incurred by any person, resulting from or attributable to the use of the information published on this site. User is using this information at his/her sole risk.

© 2010 CNBC, Inc. All Rights Reserved

China Signs $23 Billion Oil Deal With Nigeria

China has signed a $23 billion deal with the new government of Goodluck Jonathan in Nigeria to build three oil refineries and a petrochemical plant. Goodluck Jonathan came to power on May 6 after the death of the former president, Umaru Yar’Adua.

The new government declared that it had signed a memorandum of understanding with China State Construction Engineering Corporation on May 13. The three refineries are to be built in Lagos, the commercial capital, in Kebbi state in the remote northeast, and Bayelsa, Jonathan’s home state within the Niger Delta. The refineries would have a combined capacity of 900,000 barrels per day (bpd), double the expected domestic demand of 450,000 bpd by the time they are due to be completed in five years.

Nigeria currently imports around 85 percent of its refined fuel needs because of the disrepair of the four state-owned refineries. The cost of the state subsidy for this imported fuel is currently running at $4 billion a year, a large proportion of total domestic expenditure. This state of affairs is common to many poor countries with large oil reserves, and guarantees that they do not develop as competitors to the major transnational corporations.

China’s growing presence in Nigeria had previously surfaced in February with the privatisation of the state-owned telecoms company NITEL, which was sold to the New Generation Telecoms Company, a consortium including Hong Kong-based China Unicom. Chinese groups won a small number of oil concessions between 2005 and 2007, and secured a stake in Nigerian production when the China National Petroleum Corporation (Sinopec) took over Addax Petroleum in June 2009 at a cost of $7.2 billion. Sinopec Group is the parent of the Hong Kong-listed China Petroleum and Chemical Corp, which has been pursuing oil assets overseas for several years.

Plans by the state-owned China National Offshore Oil Corporation (CNOOC) to buy up to six billion barrels of Nigerian reserves became public last year. Yar’Adua, the president at the time, received a letter from the Chinese state-owned oil company CNOOC expressing an interest in the 23 prime offshore fields where Shell, Total, Chevron and ExxonMobil currently operate. If this were to succeed, it would double China’s oil reserves in sub-Saharan Africa and mark a significant change in policy for the Nigerian government. Yar’Adua rejected China’s initial bid, but when the letter was leaked to the press, it confirmed that negotiations were ongoing. The price of the deal is reported to be between $30 billion and $50 billion.

China has already used a similar infrastructure-for-resources exchange to gain access to numerous African countries from which it had been previously excluded. These include Angola and Sudan. In the Democratic Republic of Congo, China’s attempts to get an oil deal were thwarted by the countermeasures of the United States and the International Monetary Fund.

The US has been doing its best to wield its influence in Nigeria, which is its third largest supplier of crude oil.

The failed attempt of Nigerian student Umar Farouk Abdulmutallab to blow up a plane over Detroit, and the US reaction to it, led to a marked deterioration of relations with Nigeria. The US was supported by Britain, the former colonial power. High Commissioner Bob Dewar called for “clarification on leadership” when Yar’Adua returned to Nigeria. Prior to Jonathan’s rise to power, the US had been joined by France, Britain and the European Union in issuing a statement “commend[ing the] determination to address the current situation through appropriate democratic institutions. Nigeria’s continued commitment and adherence to its democratic norms and values are key to addressing the many challenges it faces…”.

Shortly after this statement was issued, the National Assembly, with the support of the state governors, declared Jonathan acting president. On the same day, Jonathan was visited by US Assistant Secretary of State for African Affairs Johnnie Carson. Even though the legality of Jonathan’s elevation was questionable, the US immediately praised Nigeria’s “democratic handover”.

The lessening of tensions between the US and the new regime was also visible in Jonathan’s choice of vice president. Namadi Sambo is a protégé of the former military dictator Ibrahim Babangida, who brutally enforced US/IMF interests when he was in power from August 1985 to August 1993. Johnnie Carson and US Ambassador to Nigeria Robin Sanders visited Babangida for discussions while Yar’Adua was receiving medical treatment in Saudi Arabia. A State Department official then clarified that the US does not view Babangida as a “former military dictator…[but] as a former head of state [and an] influential leader in the northern part of the country”.

The Chinese deal may well lead to further tensions with the US, even though Jonathan seems to be working closely with Babangida. Jonathan has also taken steps to assert his control over the state oil company. He has sacked the boss of the Nigerian National Petroleum Corporation and called in a firm of auditors to go through the books. He plans to introduce a sweeping package of reforms that will result in the privatisation of this state-owned company. While this is in line with US demands, it will inevitably open up further opportunities for China.

Around 140 new platforms for deep-water exploration are expected to be set up this year. The exploration of these deep-water fields is partly motivated by the depletion of more accessible fields, partly by the local opposition to the oil companies’ operations in the Niger Delta. Despite their move into deeper waters, the oil companies still require use of Lagos for onshore activities and are pushing for more government actions to quell the local opposition. The oil companies are also concerned that the long-delayed Petroleum Industries Bill will increase the cost of their operations in Nigeria.

Nigerian politics are made more complex by the upcoming presidential elections. It is looking unlikely that the ruling People’s Democratic Party (PDP) will continue with its usual eight-year rotation of the presidency between northern and southern candidates. Yar’Adua was from the north of the country, and would normally be followed by another candidate from the north for another four-year term.

However, indications are that Jonathan will stand as the PDP candidate, even though he is from the south. It is yet to be seen how this will affect the unstable equilibrium between rival factions of the Nigerian elite. The degree of factional tensions can be gauged both by the difficulty with which the crisis over Yar’Adua’s illness was resolved, and by the scale of communal violence in Plateau State, in which several hundred people were killed, and which was likely to be connected with attempts by the different factions to shore up support.

Western policy on Nigeria is driven by the super-profits generated from the extraction of oil and its processing. While publicly the US and its allies proclaim the need for democracy and openness, this is window dressing. Anything that impedes their drive for profits, whether from local opposition or from a rival nation, will be dealt with ruthlessly when required. The latest moves by China will have caused consternation in the boardrooms of the big oil companies, and countermeasures are all but inevitable.

Global Research Articles by Trevor Johnson