Brief: Chinese Foreign Exchange Holdings Diversified - SAFE Chief
March 9, 2010 1415 GMT
Applying STRATFOR analysis to breaking news
The U.S. Treasury provides the world's biggest public debt market and is important to the Chinese, according to Yi Gang, the chief of China's State Administration of Foreign Exchange (SAFE), who spoke at the annual session of the National People's Congress (NPC). Yi addressed a number of the most pressing concerns regarding China's maintenance of its $2.4 trillion in foreign exchange reserves, much of which it invests into U.S. public debt. Yi said that China did not want to see its investments in the United States become politicized, and that China's massive investments in the United States was mutually beneficial. He rejected the notion that gold could be an alternative investment for China's foreign exchange reserves, being short of supply. He argued that China's foreign exchange holdings were diversified among euro and yen assets as well as some developing countries' currencies, as well as companies and international organizations. Yi also addressed expectations that China would allow its currency, which is pegged to the U.S. dollar, to appreciate in 2010. He said foreign direct investment was increasing along with the inflow of foreign cash, creating pressure to allow the yuan to strengthen, especially because speculation was taking place and a "carry trade" was forming in which market players held Chinese yuan but borrowed in foreign currencies.
Somalia: Government Would Welcome U.S. Air Support
March 9, 2010 1355 GMT
Somali President Sharif Ahmed said March 9 that his government would welcome U.S. air support in its upcoming offensive against al Shabaab militants meant to remove the group from some of its strongholds in Somalia, Reuters reported, citing a statement the president gave during a visit to the United Kingdom. Ahmed said that international aid will be needed for reconstruction on any areas retaken during the offensive, which is expected in the coming weeks.
Togo: Demonstrators Face Tear Gas - Witnesses
March 9, 2010 1351 GMT
Police fired tear gas into and dispersed a crowd of about 1,000 on March 9 in Lome, Togo, Reuters reported, citing witnesses. The demonstrators were protesting the recent presidential election, which the main opposition party has called fraudulent. Permission to congregate had been denied.
India: Pakistani Officers Tied To Militants' Training - Prosecutor
March 9, 2010 1339 GMT
A prosecutor in a special court in Mumbai said members of the Pakistani army and a serving major general oversaw the training of Lashkar-e-Taiba militants who carried out the deadly Mumbai attacks, Press Trust of India reported March 9. Special Public Prosecutor Ujjwal Nikam said in his final arguments that it could be inferred that the attack was state-sponsored.
Brief: Ukraine's Coalition Law Passed
March 9, 2010 1336 GMT
Applying STRATFOR analysis to breaking news
The Ukrainian parliament passed a law March 9 that eases the rules required to form a majority coalition in parliament, with 235 deputies voting to approve the measure, exceeding the majority 226 votes needed. The new law allows individual deputies to form a coalition, which changes the previous rule of only allowing factions (or a majority of a party) to participate in a coalition. This change is a significant boon for newly elected President Viktor Yanukovich. The incoming president's party, the Party of Regions (171 seats) has the support of the Communists (27 seats) and Lytvyn Bloc (20 seats), but likely would have fallen short of the majority. Neither of the two larger parties in parliament -- the Our Ukraine-People's Self-Defense Bloc (OU-PSD) of former President Viktor Yushchenko (71) and the eponymous party of defeated presidential candidate Yulia Timoshenko who was ousted as prime minister in a vote of no confidence -- were very likely to join Yanukovich's coalition, so the new president needed the rules changed so that individual OU-PSD deputies willing to partner with the new president could legally join his coalition. While it appears that Yanukovich may now be able to form the coalition he needs and begin filling important positions with his own appointees, the OU-PSD has vowed to challenge the ruling in the country's Constitution Court, so further political remains a possibility. If this prevents Yanukovich from forming a majority coalition, then early parliamentary elections will be called.
Afghanistan: President To Meet With Pakistani Leaders
March 9, 2010 1325 GMT
Taliban reintegration, the extradition of Mullah Abdul Ghani Baradar, and the status of kidnapped Afghan diplomat Abdul Khaliq Farahi are among topics likely to be discussed March 10-11 when Afghan President Hamid Karzai visits Pakistan, Dawn News reported March 9. Karzai is due to meet with Pakistani President Asif Ali Zardari and Prime Minister Yousaf Raza Gilani.
Brief: Germany, France Move To Curb Financial Derivatives
March 9, 2010 1315 GMT
Applying STRATFOR analysis to breaking news
According to German daily Suddeutsche Zeitung on March 9, the German and French governments are moving to curb or possibly ban use of certain financial derivatives in the wake of the Greek debt crisis. According to government sources from Berlin and Paris, Germany and France will ask European Commission President Jose Manuel Barroso to limit trading on such devices as credit default swaps (CDS), which act as a form of insurance policy against possible defaults (Although unlike insurance policies, they can be owned and traded by individuals with no exposure to the security or instrument the CDS covers.) The apparent union between Paris and Germany on this question indicates that the Europeans are united in blaming "speculative attacks" of investors as one of the underlying reasons for the current economic crisis hitting Europe -- and particularly the ongoing imbroglio in Greece. This also means that the governments will use the supposed excesses of the financial industry as a way to deflect criticism of high budget deficits incurred while fighting the crisis -- or in some countries, incurred over years of mismanaged public finances.
Brief: Czech Republic Warned Of Lower Credit Rating
March 9, 2010 1301 GMT
Applying STRATFOR analysis to breaking news
Credit rating agency Moody's Investor Service warned on March 9 that Czech Republic's A1 credit rating may be at risk if Prague again fails to elect a clear majority in its parliament come May 28-29. Czech Republic is infamous for its evenly split parliament, which consistently fails to give either of the major parties -- the center-right Civic Democratic Party and center-left Social Democratic Party -- a majority. A June 2006 election left the parliament unable to form the government for seven months, with Prime Minister Mirek Topolanek resigning after just 38 days on the job, only to later reform a tenuous government. Topolanek eventually resigned in the midst of the country's EU Presidency in March 2009 under pressure from coalition allies and the opposition over Topolanek's support for the planned U.S. ballistic missile defense installations in the country and the government's handling of the economic crisis sweeping Central Europe. A caretaker government made up of technocrats was eventually put into place to keep the country going until the elections. Czech Republic needs, however, a firm government that will be able to enact and implement budget austerity measures to curb its forecast budget deficit of 5.3 percent for 2010 to below 3 percent by 2013. A repeat of Czech tradition for political indecision could come at an inopportune time, making it difficult for a new government to handle the crisis if the gridlock leads to higher financing costs through credit downgrades.
Iran: Former President Barred From Leaving Country
March 9, 2010 1246 GMT
Former Iranian President Mohammed Khatami is not allowed to leave the country, Fars News Agency reported on March 9.
Turkey: Outcome Of Armenian Resolution Needed First - PM
March 9, 2010 1241 GMT
Turkish Prime Minister Recep Tayyip Erdogan said Ankara won’t send its ambassador back to Washington until there is a "clear signal" about the outcome of a U.S. resolution backing Armenian claims of genocide, Bloomberg reported March 9, citing broadcaster NTV.
Syria, Israel: Turkey To Mediate, Talks Beginning Soon - PM
March 9, 2010 1234 GMT
Israel has agreed to have Turkey serve as mediator in Israeli-Syrian negotiations, and talks may begin soon, Turkish Prime Minister Recep Tayyip Erdogan said March 9 while in Saudi Arabia, Today's Zaman reported, citing NTV.
Georgia: Russian Defense Ministry To Hold Talks About Base
March 9, 2010 1228 GMT
Russian President Dmitri Medvedev on March 9 instructed Moscow's Defense Ministry to negotiate with South Ossetia about establishing a Russian military base there, RIA Novosti reported.
Brief: Germany Calls For U.S. To Redraw Military Competition Format
March 9, 2010 1217 GMT
Applying STRATFOR analysis to breaking news
Germany's top government official in charge of aerospace matters, Peter Hintze, urged on March 9 the U.S. government to redraw the competition format for the U.S. Air Force tanker plane project, valued at $35 billion. This follows the March 8 decision by the European Aeronautic Defense and Space Co. (EADS), parent company of Airbus, to withdraw from the competition for supplying the U.S. Air Force with refueling planes because the U.S. Defense Department allegedly restructured the competition to favor Boeing. EADS had originally entered -- and won -- the competition, with U.S.-based Northrop Gunman using its Airbus 330 plane as the platform for the refueling tanker. But heavy lobbying from Boeing managed to convince the U.S. Congress to reverse the decision in June 2008. German Economy Minister Rainer Bruederle has stated that the decision to restructure the competition format is protectionism and that it clearly favors Boeing. With EADS already mired in a 763 million euro loss ($1.04 billion) in 2009 due to cost overruns in its A400M military transport project, withdrawal from the sizable U.S. Air Force competition will spell trouble for the European manufacturer that employs people all over Europe, but particularly in the big three EU countries of France, Germany and Spain. This will only further sour relations between Berlin and Washington, already poor due to pressure on Berlin to contribute more troops to Afghanistan and last year's debacle over GM's control of German auto-manufacturer Opel. This time around, however, a U.S. government move will also impact France and Spain, uniting the Europeans against the decision.
U.S.: Israel Urged To Take Risks For Peace
March 9, 2010 1141 GMT
U.S. Vice President Joseph Biden told Israel that the United States is willing to stand by those who will "take risks for peace," AP reported March 9. Biden told Israeli Prime Minister Benjamin Netanyahu that he was confidant Israel was prepared to take such risks. Israelis and Palestinians face a "moment of real opportunity" to make peace after agreeing to resume American-brokered talks, Biden said as he launched the highest-level visit by an Obama administration official to Israel.
Russia: U.N. Lacks Draft Iran Resolution
March 9, 2010 1104 GMT
Russian Foreign Minister Sergei Lavrov said the U.N. Security Council so far has no draft resolution on Iran, Itar-Tass reported March 9. Lavrov said the "three plus three" group is now discussing the issue, adding that Western countries are discussing ideas that might make up a core of the would-be resolution on Iran. According to Lavrov, the time for sanctions arrives when all other possibilities for the settlement of "this or that problem" are exhausted.
Romania: President To Visit Japan
March 9, 2010 1055 GMT
Romanian President Traian Basescu will visit Japan March 9-11 on an invitation from Emperor Akihito, Romania's Act Media reported March 9. Basescu is scheduled to hold official meetings with Emperor Akihito and Empress Michiko, with the Japanese prime minister and the speakers of the two chambers of the Japanese Diet.
Turkey: FM To Visit Ireland
March 9, 2010 1020 GMT
Turkey's Foreign Minister Ahmet Davutoglu will visit Ireland March 9-11, according to a Turkish Foreign Ministry media release March 9. Davutoglu will discuss Turkish-Irish bilateral relations as well as Turkey’s EU membership process, regional issues and current international developments with the Irish Minister for Foreign Affairs Michael Martin and other Irish officials. He will also meet with President Mary McAleese and address the Joint Committee on European Affairs of the Irish Parliament.
Syria: Nuclear Energy Development Sought
March 9, 2010 1010 GMT
Syrian Deputy Foreign Minister Faysal Mekdad said his country would like to pursue nuclear power to meet its growing energy needs, AP reported March 9. Mekdad said the peaceful application of nuclear energy should not be monopolized by the few that own this technology but should be available to all. He stated that Syria is looking at "alternative energy sources, including nuclear energy" to meet the increasing demand for energy in his country, noting Syria's growing population. Mekdad spoke at a nuclear conference in Paris.
Russia: Jordanian King To Visit Moscow
March 9, 2010 0956 GMT
An official from the Jordanian Embassy in Russia said King Abdullah of Jordan will visit Moscow March 10-11 to hold talks with the Russian leadership, Itar-Tass reported March 9.
India: No U.S. Word On Iran Fuel Sale
March 9, 2010 0933 GMT
The United States has not raised the issue of gasoline sales by Reliance Industries to Iran, but New Delhi told the U.S. government that issues with Tehran should be settled by talks, not sanctions, Reuters reported March 9. India's junior oil minister said India conveyed to the U.S. government that sanctions on Iran have proved to be counterproductive and that all differences with Iran should be resolved through dialogue and negotiations. He added that Reliance last supplied gasoline to Iran in April and May 2009.

South Korea: FM Summons Russian Ambassador
March 9, 2010 0924 GMT
South Korea's Foreign Ministry summoned Russian Ambassador to Seoul Konstantin Vnukov to file an official complaint over recent crimes against South Koreans in Russia, Yonhap reported March 9. Vice Foreign Minister Shin Kak Soo summoned Vnukov to urge swift investigation into recent crimes against South Koreans in Russia and efforts to prevent the recurrence of such incidents, according to a ministry official. He added that Seoul hopes the Russian government will realize the seriousness of the incidents and take complete and swift measures to prevent the recurrence of such crimes.
Pakistan: Bomb Evidence Shows Foreign Link
March 9, 2010 0914 GMT
The Punjab police chief claimed to have substantial evidence with regard to foreign involvement in the recent Lahore bomb attack, ARY News reported March 9. During his visit of the bombing site in Model Town Lahore, the police chief stated that investigators found evidence indicating a foreign link to the bombing.
Japan, U.S.: Secret Pacts Confirmed
March 9, 2010 0859 GMT
A Japanese Foreign Ministry panel concluded that secret pacts on nuclear arms and other issues were reached by Japan and the United States in the Cold War era, AP reported March 9. Among the secret pacts acknowledged by the expert panel was "a tacit agreement" that emerged during the revision of the Japan-U.S security treaty in 1960, which led to Japan effectively allowing port calls by U.S. vessels carrying nuclear weapons without prior consultation. Foreign Minister Katsuya Okada stated that Japan will stick to the three non-nuclear principles, first declared in 1967 by then Prime Minister Eisaku Sato.
Iran: Ahmadinejad To Visit Afghanistan
March 9, 2010 0850 GMT
Iranian President Mahmoud Ahmadinejad is scheduled to visit Afghanistan March 10, DPA reported March 9. Foreign Ministry spokesman Ramin Mehmanparast said Ahmadinejad would discuss bilateral and international issues with Afghan President Hamid Karzai in Kabul.
Turkey: Man Shot Outside Ukrainian Embassy
March 9, 2010 0845 GMT
Private NTV television stated that a security officer guarding the Ukrainian Embassy in Istanbul shot a man who claimed to be armed and carrying a bomb, AP reported March 9. It was not immediately clear if the man was killed. NTV said the man tried to enter the embassy building.
Nepal: 6 Injured In Explosion
March 9, 2010 0839 GMT
At least six people were injured when a bomb went off in front of a medical health post at Ramgunj, Belgadiya in Nepal's Sunsari district, news website eKantipur reported March 9. There have been no claims of responsibility for the explosion.
Australia: Passport Linked To Dubai Killing
March 9, 2010 0831 GMT
A fourth Australian appears to have had his identity stolen by the team alleged to have carried out the assassination in Dubai of a Hamas commander, The Australian reported March 9. Interpol named the 27th suspect in the case -- Joshua Aaron Krycer -- as they issued arrest warrants over the January murder. The real Joshua Krycer lives in Israel, having moved from Melbourne three years ago. Australian Foreign Minister Stephen Smith said the passport presented in Dubai was fraudulently duplicated, as was the case with the initial three Australian passports.
Thailand: Migrants Punished At Political Rallies
March 9, 2010 0823 GMT
Thailand will imprison and hand out heavy fines to any migrant workers who attend mass anti-government rallies in Bangkok this weekend, AFP reported March 9. Labor Minister Phaitoon Kaeothong said migrants would be subject to a five-year jail term and fines of up to 100,000 baht ($3,100) if found among protesters. He added that employers will also be fined up to 100,000 baht for each migrant worker and the migrant's work permit will be cancelled immediately.
Israel: Nuclear Energy Development Sought
March 9, 2010 0813 GMT
Israel's National Infrastructure Minister Uzi Landau said he plans to announce his country's interest in developing nuclear power at an international nuclear energy conference in Paris, AP reported March 9. Landau's office said no specific plans to set up a nuclear power plant have been drawn up.
Yemen: Separatists Talks Offered
March 9, 2010 0805 GMT
Yemen's president, following a security crackdown in south, offered to hold talks with separatists and said the state would listen to their grievances, Reuters reported March 9. President Ali Abdullah Saleh said in an address at a military academy that the "hand of dialogue" is extended without having to resort to violence or blocking roads or raising the flag of separation. Saleh stated that he is certain the flags of separation will burn in the days and weeks ahead, but said Yemen has one flag that was voted on with free will. He welcomed any political demands and encouraged dialogue.
Pakistan: Gilani To Visit Brussels
March 9, 2010 0755 GMT
The Pakistani Foreign Office announced that Prime Minister Yousuf Raza Gilani would travel to Brussels next month to attend a summit with European leaders, Dawn News reported March 9. Foreign Office spokesman Abdul Basit said Gilani will represent Pakistan at the second Pakistan-EU summit in Brussels on April 21.
Indonesia: Bali Bomber Killed In Shootout
March 9, 2010 0747 GMT
Indonesian militant Dulmatin, a suspect in the deadly Bali bombings in 2002, was killed by police during a shootout near Jakarta, AP reported March 9. There was no immediate confirmation by the police as Dulmatin's body is currently being identified at a police hospital in East Jakarta. Earlier, Brig. Gen. Tito Karnavian, head of Indonesia's elite antiterrorism squad Detachment 88, told reporters that the man killed in the shootout was a "big fish." The shootout occurred in an Internet cafe in Tangerang, a suburb of Jakarta.
Israel: Short-Term Diplomacy Remains For Iran
March 9, 2010 0738 GMT
Israeli Deputy Foreign Minister Danny Ayalon stated that four to eight weeks remain to test the option of diplomatic engagement as means for stopping Iran’s nuclear program before sanctions will likely be imposed, the Jerusalem Post reported March 9. Ayalon said the “time is not yet lost” but it is "of the essence" to stem Iran’s nuclear ambitions. He warned that Iran could try to sabotage sanctions by inflating international oil prices and raising energy costs for China, but alternative energy providers like Saudi Arabia are available. Ayalon said the only way to stop Iran is through a unified diplomatic position.
Thailand: Cabinet Approves Internal Security Act
March 9, 2010 0711 GMT
The Thai Cabinet endorsed a proposal to impose the Internal Security Act from March 11-23, giving the armed forces greater authority during a planned mass anti-government protest this weekend, Dow Jones reported March 9. Government spokesman Panitan Wattanayagorn said under the act, the military can search protesters for weapons and use force in case of any violence.
South Korea: OPCON Transfer On Schedule
March 9, 2010 0703 GMT
The South Korean Defense Ministry said Seoul's planned retaking of wartime command of its troops from the United States will proceed as scheduled, Yonhap reported March 9. Spokesman Won Tae Jae stated that measures for the transition -- called OPCON -- are proceeding without any changes.
North Korea: Special Missile Division Set Up
March 9, 2010 0655 GMT
A spokesman for the South Korean Defense Ministry said North Korea is believed to have a military unit charged with operating intermediate-range ballistic missiles, AP reported March 9. However, spokesman Won Tae Jae declined to confirm whether the unit is an independent military division as an earlier news report said. The earlier report quoted a government source stating that the separate unit indicates North Korea's intention to produce new IRBMs. The source added that the weapon poses a threat to the security of the Korean Peninsula as well as the U.S. 7th Fleet, based in Yokosuka, Japan.
China: SAFE Is Wary On Gold
March 9, 2010 0641 GMT
Yi Gang, head of China's State Administration of Foreign Exchange (SAFE), said on a 30-year horizon gold was not a great investment, Reuters reported March 9. Yi stated that it is impossible for gold to become a major investment channel for China's foreign exchange reserves, adding that Beijing has 1,000 tons now, and even if China doubled that holding, according to current prices, that would be about $30 billion. Yi said SAFE had appropriately spread its holdings, with the euro and yen as well as some emerging market currencies in China's portfolio.
China: U.S. Treasuries Deemed Important
March 9, 2010 0630 GMT
Yi Gang, head of China's State Administration of Foreign Exchange (SAFE), said the U.S. Treasury market is the world's largest government bond market, Reuters reported March 9. Yi stated that China's foreign exchange reserves are "huge," making the U.S. Treasury market important to Beijing. Yi expressed hope that China's presence in the U.S. Treasury market would not become a political football. China, he stressed, was not in the game of short-term currency speculation, adding that it is market investment behavior, and shouldn't be politicized. Yi said China is a responsible investor and can surely achieve a win-win result in the process of investing.
China: Yuan Faces Appreciation Pressure
March 9, 2010 0622 GMT
Yi Gang, head of China's State Administration of Foreign Exchange (SAFE), said speculative capital is flowing into China disguised as foreign direct investment and trade accounts through “underground money shops,” Bloomberg reported March 9. The spread between China’s one-year deposit rate and its U.S. equivalent reached 1.43 percentage points today, compared with parity on May 6 last year. SAFE stated that China’s relatively high interest rates and some yuan appreciation expectations may attract cross-border arbitrage capital. Yi said companies increasingly prefer to hold yuan assets while borrowing in foreign currencies.
Myanmar: First Election Law Details Provided
March 9, 2010 0602 GMT
Myanmar's ruling junta will appoint the commission that will have final say over the country's first elections in two decades, AP reported March 9. The laws will set out the mechanisms and rules for the election and campaigning, and the conditions under which parties may participate. The Union Election Commission Law stipulates that the junta will appoint a commission with a minimum of five members. Decisions of the body would be final. Members, who cannot be members of political parties, must be persons "deemed prominent and reputable" by the junta. Details of the remaining four laws will soon be released.