Archive for the ‘International Trade’ Category

No surprise: “Secret” technical evaluation in Indian MMRCA deal found on the street

January 4, 2011

The Times of India reports on the bizarre story of a confidential file found on the street:

Even as the race for the “mother of all defence deals” enters the last lap, two IAS (Indian Administrative Service) officers of the defence ministry are now under the scanner for the mysterious way in which a “secret” file connected to the $10.4 billion project to acquire 126 new fighters went missing and was then found by a roadside.

There is an intense battle currently in progress to win the $10 billion deal for 126 combat aircraft (MMRCA – medium multi-role combat aircraft) where the final decision is expected to be taken by March. As I have posted earlier, the technical and flight evaluations on the 6 contenders were conducted by the Indian Air Force and their highly confidential and secret report was submitted to the Ministry of Defence  by early November 2010. Many rumours circulated at the time and the word on the street was that the Eurofighter Typhoon had won the technical evaluation. However this evaluation is merely one (but important) stage in the decision making process. The strategic and financial evaluations are under way and political lobbying is building up.  Some of this lobbying is at the highest levels of government and no doubt the recent visits to India by Obama and Medvedev and Sarkozy were utilised fully.

For all the contenders the technical evaluation is what determines what is left to be done to win the contract. The details in the technical evaluation report are most important for a contender to know how to compensate for any perceived failings. I am quite sure that every contender has managed by now to obtain a copy of the technical evaluation report. (To obtain copies of confidential reports from Indian bureaucrats is not in the realm of the impossible. In my experience obtaining reports and confidential documents from clerks in government service is much more effective than any Freedom of Information application and are not subject to any redactions.) I am equally sure that all the six aircraft manufacturers would have by now developed their sales strategies and lobbying plans based on the their weaknesses as recorded in the report. But what may have been missed by some is that unofficial dissemination of the “confidential” report is an expected event. It may even have been a deliberate leakage of the report as part of the Government of India’s buying strategy.

The six are:

  1. Dassault, Rafale, France
  2. Eurofighter, Typhoon, UK, Italy, Germany and Spain
  3. Lockheed Martin, F-16IN Super Viper, US
  4. Boeing, F/A-18E/F Super Hornet, US
  5. Saab, JAS 39 Gripen, Sweden
  6. Mikoyan, MiG-35, Russia

Even though there are only 6 contenders, the number of lobbyists, sub-contractors and foreign embassy officials involved would have led to at least 100 copies of the report having been “sold” by various bureaucrats with access to the file. So I do not find it very surprising that one of the many “unsold” copies was abandoned somewhere. The value of such reports goes down sharply with time. It must have been at its most expensive immediately after it was submitted to government and before the many visits by various heads of state to Delhi. Again from my past experience of such things I would expect that the report probably had an initial “price” of around Rs 10 lakhs (about $20,000) but now some 2 months later, can probably be purchased for less than 1 lakh ($2,000).

Nobody is probably very bothered by this episode since the leakage of the report to the contenders is part of the game and already taken into consideration by the Government. In fact leakage of “perceived weaknesses” to a supplier is one of the best buying strategies to extract improvements in the supplier’s offer. The most senior bureaucrats in the Ministry of Defence are probably congratulating themselves for having managed to disseminate so many copies of the report before this particular slip-up.

But for now all the right noises will be made for public consumption. As the ToI reports:

Ordering an inquiry into the episode, defence minister A K Antony on Monday said he was “very clear that every officer has to be very careful at every stage” while dealing with the huge MMRCA (medium multi-role combat aircraft) project. “We have viewed the incident seriously…the inquiry is in progress,” he said. It was last week that the “secret” file, which was earlier submitted to the MoD by IAF, went missing and was then found later in the day near Khelgaon Marg in South Delhi.

MoD was tight-lipped about the incident but sources said the file was apparently lost by the bureaucrats, one an additional secretary-rank officer and the other a director, while being taken to the Bharat Electronics Limited guest-house on Khelgaon Marg. The file was found by a security guard who then got in touch with the authorities concerned.

No surprise: US diplomats acted as Boeing salesmen

January 3, 2011

It comes as no surprise that diplomats and government officials are heavily involved in lobbying and “advocacy” in favour of major corporations in international trade. This applies for sales of all defence equipment, commercial aircraft, major rail transport projects, nuclear and conventional power plant and -in short – virtually all large projects where jobs at the seller’s establishment are involved.

Virtually every visit of a head of government to another country reserves a great deal of time for commercial lobbying activities. Large companies look to such visits to bring purchasing decisions to a head and the months preceding such visits are periods of intense co-operation between commercial sales people, diplomats, bureaucrats and politicians in both countries. So called “agents” (essentially middle-men with “sticky” fingers) thrive on such activity.  During such periods I have seen how diplomats take directions from sales people at private companies or from the “agents”. The ability to access and trigger such “advocacy” is of huge competitive advantage for the companies involved. It is here that large international companies can bring factors outside the conventional sales criteria into play.

It is not just the US or just Boeing involved in such advocacy. Nearly every country indulges in this. The UK (British Aerospace for example), France (Areva and nuclear power or Alstom and High speed trains) or Germany (Siemens for power plants or trains or VW at car factories) are all engaged in similar advocacy. But the particular case of US diplomats acting as salesmen for Boeing is reported by the New York Times from the Wikileaks release of diplomatic cables and these reveal some of the “perks” and extra factors that are brought into play. Such as

The king of Saudi Arabia wanted the United States to outfit his personal jet with the same high-tech devices as Air Force One. The president of Turkey wanted the Obama administration to let a Turkish astronaut sit in on a NASA space flight. And in Bangladesh, the prime minister pressed the State Department to re-establish landing rights at Kennedy International Airport in New York. Each of these government leaders had one thing in common: they were trying to decide whether to buy billions of dollars’ worth of commercial jets from Boeing or its European competitor, Airbus. And United States diplomats were acting like marketing agents, offering deals to heads of state and airline executives whose decisions could be influenced by price, performance and, as with all finicky customers with plenty to spend, perks.

To get the interest of their own politicians and governments every large corporation knows that the magic key is being able to link the sale being pursued to jobs in the home-country and especially in the constituency of the home-politician. “Job creation” is the magic mantra that no politician can resist or can afford to ignore. The use of dubious agents or the use of “undue” influence or the flow of a few percent of the contract value  through some side-channels or the provision of some “perks” to politicians and bureaucrats through the entire chain from supplier to purchaser become critical and pervasive.

When the potential of job creation is involved, questions of ethics are rarely raised and the system of high level corruption is perpetuated.

NYT report

China and the use of rare earth elements trade as a tool for diplomacy

December 28, 2010

Currently China produces about 97% of the global demand for “rare earth elements” used industrially but China has only about 36% of the world’s resources. In the last few months the Chinese have created a “crisis” both by throttling exports and by sharp price increases which have alarmed the auto and electronics industry. Japanese industry has been particularly disturbed. But it would seem that China had very clear diplomatic goals for their trade actions.

The 17  “rare earth elements” are not rare at all.

Rare Earth Elements: graphic ggg.gl

 

From Wikipedia: http://en.wikipedia.org/wiki/Rare_earth_element

Despite their name, rare earth elements (with the exception of the highly unstable promethium) are relatively plentiful in the Earth’s crust, with cerium being the 25th most abundant element at 68 parts per million (similar to copper). However, because of their geochemical properties, rare earth elements are not often found in concentrated and economically exploitable forms. Instead, they are usually found in rare earth minerals. It was the very scarcity of these minerals (previously called “earths”) that led to the term “rare earth”. The first such mineral discovered was gadolinite, acompound of cerium, yttrium, iron, silicon and other elements. This mineral was extracted from a mine in the village of Ytterby,  Sweden; many of the rare earth elements bear names derived from this location.

A table listing the seventeen rare earth elements, their atomic number and symbol, the etymology of their names, and their main usages is provided here. Some of the rare earths are named for the scientists who discovered or elucidated their elemental properties, and for their geographical discovery.

Z Symbol Name Etymology Selected Usages
21 Sc Scandium from Latin Scandia (Scandinavia), where the first rare earth ore was discovered. Light Aluminium-scandium alloy for aerospace components, additive in Mercury-vapor lamps.
39 Y Yttrium for the village of Ytterby, Sweden, where the first rare earth ore was discovered. Yttrium-aluminum garnet (YAG) laser, YBCO high-temperature superconductors, yttrium iron garnet (YIG) microwave filters.
57 La Lanthanum from the Greek “lanthanein”, meaningto be hidden. High refractive index glass, flint, hydrogen storage, battery-electrodes, camera lenses, fluid catalytic cracking catalyst for oil refineries
58 Ce Cerium for the dwarf planet Ceres. Chemical oxidizing agent, polishing powder, yellow colors in glass and ceramics, catalyst for self-cleaning ovens, fluid catalytic cracking catalyst for oil refineries
59 Pr Praseodymium from the Greek “prasios”, meaningleek-green, and “didymos”, meaningtwin. Rare-earth magnets, lasers, core material for carbon arc lighting, colourant in glasses andenamels, additive in Didymium glass used in welding goggles, ferrocerium firesteel (flint) products.
60 Nd Neodymium from the Greek “neos”, meaning new, and “didymos”, meaning twin. Rare-earth magnets, lasers, violet colors in glass and ceramics, ceramic capacitors
61 Pm Promethium for the Titan Prometheus, who brought fire to mortals. Nuclear batteries
62 Sm Samarium for Vasili Samarsky-Bykhovets, who discovered the rare earth oresamarskite. Rare-earth magnets, lasers, neutron capture, masers
63 Eu Europium for the continent of Europe. Red and blue phosphors, lasers, mercury-vapor lamps
64 Gd Gadolinium for Johan Gadolin (1760–1852), to honor his investigation of rare earths. Rare-earth magnets, high refractive index glass or garnets, lasers, x-ray tubes, computer memories, neutron capture
65 Tb Terbium for the village of Ytterby, Sweden. Green phosphors, lasers, fluorescent lamps
66 Dy Dysprosium from the Greek “dysprositos”, meaning hard to get. Rare-earth magnets, lasers
67 Ho Holmium for Stockholm (in Latin, “Holmia”), native city of one of its discoverers. Lasers
68 Er Erbium for the village of Ytterby, Sweden. Lasers, vanadium steel
69 Tm Thulium for the mythological northern land ofThule. Portable X-ray machines
70 Yb Ytterbium for the village of Ytterby, Sweden. Infrared lasers, chemical reducing agent
71 Lu Lutetium for Lutetia, the city which later became Paris. PET Scan detectors, high refractive index glass

As long as China’s own industry was not sufficiently developed to use these materials there was no crisis and production from resources in many other countries (rare earth elements are quite plentiful around the globe and not “rare” at all) were discontinued in the face of Chinese competition. The current crisis comes about because Chinese industry is now sufficiently advanced to make use of these elements and its industrial volume is large enough to absorb a large part of the production. This allowed China to use of reduction of exports and increase of prices to send strong diplomatic signals. Firstly to counter the US pressure to revalue the Yuan and second to warn Japan regarding their territorial dispute.

But this “crisis” can only be short-lived. The price increase has already led to production of rare earth elements being restarted in the US and many other countries are now planning to start production (Sweden, India, Vietnam and countries in Central Asia for example). China is no doubt well aware that their manufactured “rare earth elements” crisis will only accelerate the production of these elements from alternate sources. But what it shows is that China has the economic muscle and the willingness to now use “trade wars” as a weapon in diplomacy. But what is also a new development is the concerted response from many countries in acting together to find alternate sources and counter the Chinese might.

That Japan feels particularly vulnerable is to be expected since it does not have its own resources and is a major user. The Asahi Shimbun writes:

One reason for China’s dominance in production is the cheap cost of labor. But the country also has an advantage because deposits there can be extracted through relatively rough methods. In southern China, the weathering of a particular type of granite containing large amounts of rare earths has progressed to the right degree. Unwanted substances have been washed away in the rain, leaving soil with high concentrations of rare earth metals exposed on the surface.

“Erosion proceeds quickly in places that are warm and have a high rainfall, but if there is too much rain, erosion proceeds too quickly,” said Mitsuya Hirokawa of Japan Oil, Gas and Metals National Corp. “The necessary conditions are the existence of granite that contain lots of rare earths and the right amount of rainfall.” Southern China fulfills these conditions.

Japan has the right type of granite, but it has not eroded at the proper pace. But environmental concerns are arising from the cheaper method of extraction in China. In normal mines, rare earths are extracted by chemically processing ore that has already been removed from the ground. But in the method used in southern China, the mine itself becomes a processing factory. Acidic liquid is poured on the ground, and the dissolved rare earths are recovered from the liquid that oozes out. If the toxic liquid leaks into rivers, it could have serious consequences for the environment. “There are paddy fields in the vicinity, and there are concerns about the impact on human health,” said a researcher who observed the procedure in southern China.

This is the context under which China cites environmental concerns as the reason for restricting exports of rare earth metals. But this cheaper method of extraction is one reason why production is concentrated in China. Many mines in the United States and elsewhere could not afford to continue operating and were closed down.

Apparently, similar “convenient” deposits exist in Vietnam. Studies are under way, but production there has not yet started.

The Wall Street Journal analyses the Chinese use of trade flows as a tool of diplomacy:

Beijing’s decision earlier this year to stop shipments of rare earth minerals to Japan apparently as part of a territorial dispute raised a lot of concerns about the strategic implications of China’s growing economic strength. And well it should. Up to now, Beijing has worked hard to separate economics from politics on the world stage as part of a strategy to minimize global unease with its rise. That it is now willing to use an economic lever in a political matter suggests that approach is changing in ways that could cause trouble for the rest of the world and for China itself……..

……….Before now, trading partners were willing to take the temporary hit to trade, since they knew the episode would quickly blow over. This time, though, all major trading partners are seriously contemplating alternatives to Chinese markets in rare earth supplies. Japan, naturally, has been most active in looking for alternative sources, signing agreements with Vietnam and Australia to develop new mines or renewing production in existing mines.

Sarkozy pushes nuclear, arms deals on India visit

December 5, 2010
The Indian Air Force has the second largest fl...

IAF Mirage 2000H: Image via Wikipedia

Domainb.com reports on the French President’s 4 day visit to India soon after the visits by President Obama and the Russian Prime Minister. The Chinese Premier is due next.

Close on the heels of India’s environment ministry clearing the last hurdle for French nuclear company Areva to supply six third-generation pressurised water reactors for a project worth Rs95,000 crore ($22 billion), French president Nicolas Sarkozy today kicked off a four-day visit to the country, pitching for new nuclear energy and arms contracts.

However, villagers in Jaitapur in Maharashtra, where the plant will come up, today staged a protest. Reports said at least 10,000 people turned up at the site to oppose the project.

Sarkozy, heading a large delegation of 7 ministers as also 60 business leaders, including the heads of aircraft-makers Dassault Aviation and EADS and Areva, to lobby for multibillion-dollar contracts for fighter jets and nuclear equipments, also stressed India’s increased stature in world affairs.

Although Indian officials said no defence deals will be signed during Sarkozy’s visit, French aircraft maker Dassault is hoping to secure a $1.2-billion contract to upgrade 56 Mirage-2000 aircraft that India bought from France in the 80s.

Dassault and EADS are vying with US and Swedish rivals for an Indian Air Force purchase order for 126 warplanes, for an estimated $11 billion.

“We all know how critical it is for India to ensure its energy security,” Sarkozy said in a speech at the Indian Space Research Organisation at India’s technology hub Bangalore.

Swedish 3rd Quarter GDP growth up to “Asian” levels at 6.9%

November 29, 2010

Sweden continues to show strong GDP growth and in the 3rd quarter of 2010 was significantly higher than the 5.2% forecast earlier by the Riksbank and reached  “Asian” levels at 6.9%. Unemployment is down and expected to continue to reduce slowly and is currently at about 8%. The growth is primarily export led and exports to Asia and Latin America are particularly strong.

Freely translated from Svenska Dagbladet:

Today came the news that Sweden’s GDP landed at 6.9 percent for the third quarter of this year. The positive figure may accelerate interest rate increases. “It’s a really good figure. This is well above the Riksbank’s assessment “said Annika Winsth, chief economist at Nordea Bank. The Riksbank believed that the increase in GDP would end up at 5.2 percent for  the third quarter and Nordea’s forecast was forjust 6.2 percent. This shows that Sweden’s economy is growing across the board, among households and businesses as well as in the state, according to Nordea’s chief economist Annika Winsth. “This means that there is still so much spare capacity left in companies, that there is a belief in the future. They dare to invest, “she says.

Robert Bergqvist, chief economist at SEB was surprised at the growth figure of 6.9 percent. “It’s a long way from what we thought. What strikes me is that the sun is shining so brightly in Sweden, while many countries in Europe have huge problems to contend with. Industry and employment have recovered remarkably quickly, although we are not 100 percent back yet”, he says. The main reasons for this is, according to Robert Bergqvist, that taxes and the krona exchange rate has made household purchasing power strong, helped the export industry and given strong public finances. The latter means that Sweden can avoid drastic tax increases, he says.

According to Annika Winsth  Sweden’s economy is almost back to a “normal” economic level. “There is little left to do on the employment side “, she says. “We went  stronger into the economic crisis than many other countries, and that means that we do not get hit as hard” she says.

But Nordea’s Chief Economist worries about the the crises in a number of European countries and believes growth will be slightly weaker in 2011. “Countries with large deficits lead to our exports declining”, she said.
SEB also believes in lower growth for 2011 at around 3.5 percent. Nordea and SEB’s assessment is that the strong growth will lead to the Riksbank raising the key bank rate by 0.25 percentage points in December and again in February and April. 

“The Swedish krona will strengthen compared with current levels, and then the interest rate will have to go up. We must be prepared”, says Robert Bergqvist.

Coal India looking to acquire mines in US, Australia and Indonesia

November 13, 2010

Reuters

State-run Coal India (COAL.BO) is in talks to buy mines from U.S.-based Peabody Energy and Massey Energy , according to a media report citing the company’s chairman. “They expressed interest in offering certain mines to us and we are looking at that,” Partha Bhattacharyya said in a report by the Associated Press carried in the Economic Times newspaper on Saturday. “The discussions are continuing,” the report quoting him as saying. He declined to provide further details.

The Economic Times:

Coal India has budgeted $1.2 billion to buy assets in the US, Indonesia and Australia during the year ending March as it battles a widening gap between domestic coal supply and demand. The company, which last month raised $3.4 billion in the nation’s biggest-ever initial public offering, has near-monopoly control of India’s coal market. Indian companies are increasingly turning to the US to secure vital commodities to fuel the nation’s breakneck growth.

This year, Reliance Industries — India’s most valuable company by market value — bought stakes in three US shale gas companies for a combined $3.4 billion, the largest Indian investment in the US ever made. In 2007, India’s Essar Group acquired Minnesota Steel and is investing over $1 billion to build two plants and run its iron ore mine near Nashwauk, in northern Minnesota. This March, the company spent $600 million to acquire US-based Trinity Coal with mines in Kentucky, West Virginia.

St Louis, Missouri-based Peabody Energy says it is the world’s largest private sector coal company, with 9 billion tonnes of reserves. Richmond, Virginia-based Massey Energy says it is the largest coal producer in the Central Appalachian region, which accounted for 20% of United States coal production in 2007.

US shale gas challenges Russian natural gas in Europe

November 12, 2010
Natural gas pipelines from Russia to Europe.

Natural gas pipelines from Russia to Europe: image via Wikipedia

“Peak gas”  like “peak food” and “peak resources” and like all “peak scenarios” keeps getting postponed. The US is awash with shale gas and has started re-exporting LNG it had contracted for to Europe challenging the dominance of Russian supplies of natural gas.

Money control reports:

The United States may play a role this winter in loosening Russia’s grip on the European market for natural gas by shipping liquefied natural gas across the Atlantic. Awash with domestic shale gas and with little need to import extra fuel, the United States has started re-exporting LNG cargoes, which firms had previously imported under contract, to countries where gas prices are much higher.

Such shipments could contribute to a growing pool of cheaper LNG going to Russia’s biggest export market this winter. In the longer term, U.S. plans to build plants to liquefy shale gas could create another rival to Russian pipelines. The first re-export cargo from the United States to Britain — a key access point for LNG into northern Europe via an Interconnector pipeline to Belgium — is set to sail over the weekend. “It is a landmark shipment,” said Zach Allen at NATS LNG analysts in Raleigh North Carolina. “LNG has, through the Interconnector, played a major role in reducing intake of Russian gas into western Europe.”

U.S. shale gas has already forced many LNG producers that had hoped to supply the North American market to find alternative buyers, with many cargoes ending up in Europe and driving spot gas prices below the price of oil-indexed Russian gas.

US re-exports to Europe are the latest sign that increases in shale gas production have transformed the global gas market. The International Energy Agency said on Tuesday that a decade-long period of oversupply was likely to push oil-indexed gas sellers to accept lower prices.

In February, Russian gas export monopoly Gazprom postponed it’s Shtokman LNG project because the United States, its target market, did not need more imports. Major European pipeline gas supplier Statoil has been forced to find alternative markets for LNG it had hoped to send to the United States, often selling it into Europe. Qatar, the world’s largest producer and exporter of LNG, has also pushed into both Norwegian and Russian markets by making large deliveries of cheap LNG into Britain and Belgium. US LNG imports have fallen to contractual minimums as gas prices have sagged, forcing importers whose terminals are sitting idle to change strategy and re-export to make the most of higher prices overseas.

US gas at USD 4.1 per million British thermal units (mmbtu) was about USD 3.3/mmbtu below UK prices on Tuesday and just under half the price of Russian gas in Europe in October, according to International Monetary Fund data. About 20 billion cubic feet of gas has already been re-exported from the United States this year, with some sent to Asia, where buyers have paid nearly USD 10 per mmbtu, and some to Latin America and the Middle East.

More of those US loaded cargoes could head to Britain over coming months, given that winter price increases are sharper in northern Europe than in the United States and that imports by South American and Middle Eastern buyers are usually confined to summer.

“US exports to Europe will remain rather exotic, but they underline once again the big risks for Russia of focusing some of its future projects on US markets,” said Valery Nesterov, energy analyst at Moscow-based Troika Dialog brokerage.

Cheniere Energy, operator of the Sabine Pass import terminal in Louisiana, announced plans in June to build a liquefaction plant at the terminal. It said on Tuesday that US bank Morgan Stanley hoped to secure some of its export capacity. Pending approval, the plant would export US-produced shale gas to markets all over the globe from 2015. It would be the first US LNG export plant in 40 years — following the old Kenai facility which supplies Asia from Alaska — and would be well placed to supply Europe. “LNG supplies from the United States can help lower gas prices in Europe and Asia and ultimately help lift prices in the States,” said Mikhail Korchemkin from Pennsylvania-based East European Gas Analysis.

G20 kicks off today and currency war fears dominate

November 11, 2010

As countries jostle to weaken their currencies to stimulate growth, this G20 meeting in Seoul, Korea may not achieve much new. All agree that other countries should not engage in currency manipulation but each country wants to retain the right to do so. My reading is that if currencies followed the actual situation on the ground then the Dollar and Chinese Yuan ought to appreciate, the Yen should depreciate and the Euro should stay roughly where it is balanced between the German strength and the Ireland effect. The Indian Rupee and the Brazilian Real are probably undervalued as well.

Alan Greenspan continues to have his unsettling effect on the world economy.

"YES" Currency symbols sculpture:

Reuters:

Rancorous debate over global economic imbalances and currency strains dogged the G20 as world leaders gathered for a summit in Seoul on Thursday despite U.S. efforts to shore up the group’s unity. Behind the scenes, negotiators squabbled over the language in a closing statement to be issued at the summit’s conclusion on Friday. The final version may not venture far beyond agreements reached by G20 finance ministers last month, yet it was still proving difficult to agree on the wording.

A major irritant in the run-up to the meeting was the U.S. Federal Reserve’s bond-buying spree to revive the economy. Former Fed Chairman Alan Greenspan stirred that pot, saying the United States was pursuing a policy of weakening the dollar.

“The U.S. will never do that,” U.S. Treasury Secretary Timothy Geithner shot back a few hours later in an interview with CNBC. “We will never seek to weaken our currency as a tool to gain competitive advantage or to grow the economy.”

China’s yuan, also known as the renminbi, rose 0.25 percent on Thursday and has climbed almost 3 percent since Beijing loosened its grip on the tightly managed currency in June. Washington has welcomed the slow-but-steady appreciation, although it has said more movement is needed.

China downgrades US bonds as trade surplus expands

November 10, 2010

The Telegraph:

One of China’s leading credit rating agencies has downgraded United States of America government debt in response to what it sees as deliberate devaluation of the dollar by quantitative easing and other means.

If China, now the second biggest economy in the world, stops buying US government bonds this could have a very negative effect on the global recovery. The Dagong Global Credit Rating Company analysis is highly critical of American attempts to borrow their way out of debt. It criticises competitive currency devaluation and predicts a “long-term recession”.

Dagong Global Credit says: “In order to rescue the national crisis, the US government resorted to the extreme economic policy of depreciating the U.S. dollar at all costs and this fully exposes the deep-rooted problem in the development and the management model of national economy.

The analysis concludes:  “The potential overall crisis in the  world resulting from the US dollar depreciation will increase the uncertainty of the U.S.  economic recovery. Under the circumstances that none of the economic factors  influencing the U.S. economy has turned better explicitly it is possible that the US will continue to expand the use of its loose monetary policy, damaging the interests the creditors.

“Therefore, given the current situation, the United States may face much unpredictable risks in solvency in the coming one to two years. Accordingly, Dagong assigns negative outlook on both local and foreign currency sovereign credit ratings of the United States.”

Max King, global investment strategist at Investec Asset Management, said: “Dagong is well respected as an independent credit rating agency which takes a more conservative view than better-known American credit rating agencies.

“It is interesting to see what people with money outside the American sphere of influence think.  Until recently, the US had been regarded as beyond reproach but now independent analysts say the position is deteriorating and likely to deteriorate further.

Meanwhile Xinhua reports the trade figures for October:

China’s exports rose 22.9 percent in October from a year earlier to 135.98 billion U.S. dollars, while imports increased 25.3 percent to 108.83 billion U.S. dollars, the General Administration of Customs (GAC) said Wednesday.

China’s trade surplus expanded sharply to 27.15 billion U.S. dollars last month from 16.88 billion U.S. dollars in September, making the October figure the second highest this year after July’s 28.73 billion U.S. dollars.

The higher-than-expected trade surplus would add pressure for the yuan’s appreciation and exacerbate the already grave inflation problem in China, said ANZ Bank economist Liu Ligang.

In the first 10 months, China’s trade surplus totaled 147.77 billion U.S. dollars, down 6.7 percent compared with the same period last year.

Foreign trade with the European Union, China’s largest trade partner, grew 32.9 percent year on year to 388.42 billion U.S. dollars in the first 10 months.

Trade with the United States climbed 29.8 percent to 310.71 billion U.S. dollars during the January-October period. China-Japan trade totaled 239.28 billion U.S. dollars, up 31.3 percent year on year.


Mount Merapi rumbles on while Anak Krakatau crater expands and Obama flies in to Jakarta

November 9, 2010
A closer look at Anak Krakatau

Anak Krakatau: Image via Wikipedia

Yogyakarta’s Adi Sutjipto domestic and international airport has been closed until at least next Monday Nov. 15, at which time another decision would be made. Despite the ban on civilian and commercial flights in and out of Yogyakarta, the Indonesian Air Force was still operating Hercules flights to deliver aid to the internally displaced.
More than 300,000 people are believed to be housed in government shelters.

Indonesian rescue workers resumed efforts to retrieve bodies of victims from an eruption of Mount Merapi in central Java on Nov. 5, after surface temperatures forced a halt to the search on Monday. More than 320,000 people are housed at evacuation centers outside the 20-kilometer safety zone in four regencies in Yogyakarta and Central Java provinces, the National Disaster Management Agency said in a statement on its Web site today. Evacuees reached 280,000 people yesterday.

“Volcanic activity is relatively stable this morning compared with yesterday,” said Oka Hamid, a spokesman at Red Cross Indonesia’s Yogyakarta branch. “We recovered two remains in one village but we have to leave another four as the field is hard to reach and they’re all covered with thick ash.”

Meanwhile -

The crater of Anak Krakatau in the Sunda Strait has expanded to a diameter of 25-26 meters, an Indonesian volcanologist says. The news comes as the frequency of eruptions of the volcano, once misidentified as Krakatoa, increases: On Friday there were 615 eruptions, on Saturday 623 eruptions, and on Sunday 668.
Anton S Pambudi, a official from Banten province monitoring the eruptions, said the eruptions over the past two weeks had changed the shape of the crater. Authorities have warned that several other volcanoes in Indonesia are showing increased signs of activity. These include Mount Karangetang on Siau Island in North Sulawesi and Mount Ibu on Halmahera Island in North Maluku.

Banten Governor Ratu Atut Chosiyah said she believed that Anak Krakatau did not pose a threat and that the eruptions, which can be seen from the western tip of Java Island, were interesting to observe.

Philippine Airlines Inc., Emirates, Eva Airways Corp. and Valuair Ltd. resumed flights to Jakarta on Monday after suspending them for two days, PT Angkasa Pura, the Soekarno-Hatta international airport operator said on its Web site. Singapore Airlines Ltd., Cathay Pacific Airways Ltd. and Japan Airlines Corp. restarted services on Sunday.

President Obama arrives in a few hours in Jakarta.


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