Communications over the world wide doesnt depend on sytax or eloquence or rethoric or articulation but on the emotional context in which the message is being heard.
People can only hear you when they are moving toward you and they are not likely to when your wordss are pursuing them
Even the choices words lose their powe when they are used to overpower.
Attitudes are the real figures of speech '-Friedman

Saturday, May 30, 2009

Obama names ambassador nominees: Goodbye to Mr Wayne and Welcome to Vilma Martinez

Vilma S. Martinez, Nominee for Ambassador to Argentina
Ms. Martinez has been a Partner at Munger, Tolles & Olson since 1982, where she specialized in federal and state court commercial litigation. Currently, her practice focuses on providing advice to companies enhancing their equal employment opportunity policies and building diversity and inclusion initiatives into their business plans. She served as President and General Counsel of the Mexican-American Legal Defense and Educational Fund (MALDEF) for nine years. Previously, she was a litigation associate at Cahill, Gordon & Reindel in New York and also a staff attorney with the NAACP Legal Defense Fund. Ms. Martinez was Chair and a Member of the University of California Board of Regents. She also chaired the Pacific Council’s Study Group on Mexico and served on the advisory boards of Columbia Law School and the Asian Pacific American Legal Center of Southern California. Ms. Martinez holds a B.A. from the University of Texas in 1964 and a LL.B. from Columbia Law School.

May 27, 2009

Ambassador Wayne offered on May 27 a farewell reception to the Argentine media as he prepares to conclude his term and depart the country. Ambassador Wayne and Press Officer Mara Tekach who is also concluding her mission in Argentina gave some brief remarks highlighting the fundamental role of a free and responsible press as the foundation of democracy and thanked journalists for their contributions to the strengthening of bilateral relations.

“Our interaction with all of you has contributed significantly to the strengthening of the bilateral relation. I am very thankful for your contribution.” said Ambassador Wayne at the farewell reception in his honor.

Ambassador Wayne underscored the role of the press as the guard dog for democracy. “Democracy functions better when the public is well informed.” Press Officer Mara Tekach, quoting Walter Cronkite, one of the greatest American journalists said: “Freedom of the press is not just important; it is democracy.”

Following the event, the Ambassador took the opportunity to tell the guests about his next destination at the U.S. Embassy in Kabul, Afghanistan, where he will serve as Coordinating Director of Development and Economic Affairs for civil aid programs.

Mara Tekach will continue her foreign service career as U.S. Spokeswoman at the United Nations in New York.

Ambassador's Speech

May 27, 2009

Welcome, and thank you all for being here on the occasion of my departure from Argentina.

As you know, after almost three years as ambassador to this beautiful country, the time has come for the normal rotation of Ambassadors and, in my case, assuming some new functions. I will continue my career in the U.S. Foreign Service in one of the priority regions for the foreign policy of my President and my country, serving as Coordinating Director of Development and Economic Affairs at our mission in Afghanistan. I will be in charge of coordinating the United States’ non-military assistance programs. In this capacity, I have committed to provide my utmost efforts to achieve the goals of President Obama and Secretary of State Clinton in this sensitive region.

As I face this challenge, I appreciate deeply my years in Argentina, when I have enjoyed the warmth, talent and creativity of the Argentine people, and worked with my colleagues in the Embassy to strengthen the relationship between our two countries.

One lesson I have learned here is that Argentines, like Americans, like to talk about their values. I have tried to share as much as possible about my country’s values, in both words and deeds while showing full respect for the rich traditions of Argentina. It is no secret that my most satisfying work has been supporting Argentines who are working for the advancement of the disadvantaged in their country. And during my time here we have been diligent in informing you about steps we have taken to advance bilateral relations whether it be in the fight against drugs or in providing more scholarships for young people to study English.

Last week, President Obama delivered a wonderful speech about the values and ideals of American society. He talked about enlisting the power of our most fundamental values – as engraved in the Declaration of Independence, the Constitution, and the Bill of Rights – the foundation of liberty and the balance of powers in our country. President Obama made clear that our values are not simply a matter of idealism to cherish, but a practical guide for democracy, since doing what is right strengthens our country. Putting our values into practice protects the ideals that generations of Americans have fought for, some in the fields, others in the courts, and still others on the printed page.

One critical value in my country is our appreciation for free and responsible media. This Embassy’s relationship with the media has been one of my highest priorities.

Just as the media in a healthy democracy require government respect for freedom of speech, the public depends on the media to exercise that freedom in a balanced, responsible manner -- upholding the highest standards of professional ethics, maintaining its independence, operating transparently, aggressively ferreting out the good and the bad and exposing wrongdoing in all of its forms. And there is much to be said for striving for balance -- trying to portray both sides of the story as fairly and objectively as possible so the citizen can judge. In turn, governments must honor and respect the loyal watchdog role of the journalists in a democracy. The public's right to be well informed depends upon it. Democracy functions best when the public is well informed.

When I came to Argentina, I was able to tell you I had worked as a journalist; that I have been in your shoes. And I invited you to put yourselves in mine, to look at the United States through fresh perspectives and to open yourselves to the values we all know our two countries share.

We pulled together a hard-working team in our Press Office under the tireless, round-the-clock leadership of our press attaché, Mara Tekach, to promote transparency and accuracy. Mara, as many of you know, will leave this July to the press spokesperson for the U.S. Mission to the United Nations in New York. Mara is leaving Argentina for two reasons: first, because she’s the right woman for a very important job, and second, because I’m leaving Argentina, too. Otherwise, I would never permit her to leave this post! She is one of the very best we have in our diplomatic service and as most of you know, a wonderful individual.

As Mara and I worked with our other Embassy colleagues and you, our colleagues in the press, the U.S. experience with the First Amendment to our Constitution was our inspiration. As Abraham Lincoln said, “Let the people know the facts, and the country will be safe." John Kennedy also saw a secure democracy in freedom of the press, when he urged “We must know all the facts and hear all the alternatives and listen to all the criticisms.” When reporting misrepresented the facts, we engaged with you in a constructive and positive way. And I believe we achieved a healthy and invaluable relationship with the media in Argentina.

My personal relationship with journalists and the media in Argentina has been enriching. Many ofyou have been my teachers and often a key source of insight on this fascinating country, and you are our prime intermediary with the Argentine public. What we gained from you allowed the Embassy to fulfill our diplomatic function: to solve problems, help to build mutual understanding, and discover opportunities for cooperation between our two countries. In sum, the interaction between all of you and us at the Embassy has contributed importantly to strengthening the bilateral relationship. I am so grateful for your contribution.

I’m pleased to observe that the relationship between the United States and Argentina is at a good point. We have established an important, solid foundation. I believe the relationship is poised to grow stronger, as cooperation deepens and as work to pursue a common agenda internationally, as our leaders did in the Summit of the Americas and the G-20 Summit.

As we work to restore robust growth in the economy, , to address energy, security, climate change challenges, to eliminate poverty and to enhance the security of our citizens, there is much that Argentina and the u.S. can do in partnership.

I would like to emphasize the enormous pleasure I had in working with you during these years. My experience with the Argentine media has been a unique and unforgettable part of my diplomatic career. You have a tremendously important role to play in Argentina’s democracy.

I say good-bye to Argentina, carrying memories of the great creativity and kindness of your people; the beauty and richness of your landscape; and of the good progress we made to further improve the close ties of friendship and mutual understanding between our peoples and between our governments.

Now, I invite you to join me in this toast, as Mara and I bid farewell to you, the professionals we have greatly appreciated and admired during our time in Buenos Aires.

About Vilma S Martinez

Vilma S. Martinez was born October 17, 1943 in San Antonio, Texas. During her childhood, much of Texas was openly segregated.

“We weren’t allowed to go into some of the parks,” Ms. Martinez recalls. “When we went to the movies, we had to sit in the back of the theater.”

At the age of 15, she had the opportunity to work as a volunteer in the firm of a local Hispanic lawyer, Alonso Perales.

“I was very much impressed with the way he was able to help people as a lawyer,” says Ms. Martinez. The experience led her to focus her sights on becoming a lawyer.

“Many people at school tried to discourage me,” she explains, “but I was very stubborn.”

After graduating from high school, Ms. Martinez enrolled at the University of Texas at Austin, earning a B.A. degree in 1964. She went on to Columbia University School of Law, receiving her L.L.B. degree in 1967.

Ms. Martinez began her career as a staff attorney with the NAACP Legal Defense Fund in 1967.

“I joined the staff at the NAACP Legal Defense Fund when Title VII was new and I worked on Title VII cases throughout the South and an early Northern school desegregation case in Denver, Colorado,” says Ms. Martinez.

In 1970, she became Equal Employment Opportunity Counsel for the New York State Division of Human Rights in New York City and in 1971, she joined the firm of Cahill, Gordon & Reindel in New York as a litigation associate.

Ms. Martinez was one of the first two women elected to the Board of Directors for the Mexican-American Legal Defense and Educational Fund, Inc. (MALDEF). In 1973, she was selected president and general counsel. She served in that capacity from 1973-1982.

During her tenure at MALDEF, Ms. Martinez worked on a number of issues. She is proud of MALDEF’s major victory in Plyer v. Doe which guaranteed undocumented children the right to a public school education. She was also instrumental in MALDEF’s effort to expand the Voting Rights Act to Mexican-Americans in 1975. They had not been included when the legislation was passed in 1965.

Since 1982, Ms. Martinez has been a partner at the Los Angeles law firm of Munger, Tolles & Olson, where she specializes in federal and state court litigation, including defense of wrongful termination and employment litigation and other commercial litigation. In 1994, she was hired by the Los Angeles Unified School District to challenge that portion of Proposition 187 which denied a public school education to California’s undocumented migrants. While her suit filed in the state courts successfully won a restraining order, a similar case was filed soon afterwards in the federal courts by MALDEF and other civil rights groups. The federal class action suit, Gregorio v. Wilson, ultimately resulted in nearly all provisions of Proposition 187 being declared unconstitutional in 1998.

Ms. Martinez is currently a board member of the Los Angeles Philharmonic Association and several major corporations, including Anheuser-Busch Companies, Inc., Shell Oil Company, and Burlington Northern Santa Fe Corporation. She served on the President's Advisory Committee on Trade Policy & Negotiations from 1994 to 1996 and was Chair of the University of California Board of Regents from 1984-1986, a board she served on from 1976 to 1990. She has been a member of the Council on Foreign Relations, the U.S. Hispanic-Mexican Government International Commission, the Presidential Advisory Board on Ambassadorial Appointments, and the California Federal Judicial Selection Committee.

Ms. Martinez has been awarded the American Bar Association’s Margaret Brent Award, the Medal for Excellence from Columbia Law School, the Distinguished Alumnus Award from the University of Texas, the Lex Award from the Mexican-American Bar Association, and the Jefferson Award from the American Institute for Public Service.

Ms. Martinez suggests that those considering a legal career today “persevere and work hard on their grades and on improving to the maximum extent possible their test-taking ability.” Admission to law schools today is very much influenced by grades and scores on the Law School Admissions Test, she points out, “so it’s important to do the very best you can.”

Reflecting on the challenges she faced and overcame, she has one other piece of advice for young people: “Don’t give up on your dream.”

Thomas A. Shannon, Nominee for Ambassador to the Federative Republic of Brazil
Mr. Shannon has served as the Assistant Secretary of State for Western Hemisphere Affairs since October 2005. A career member of the Senior Foreign Service, Mr. Shannon entered the Foreign Service in 1984. Mr. Shannon also served as Special Assistant to the President and Senior Director for Western Hemisphere Affairs at the National Security Council from 2003 to 2005. From 2002 to 2003, he was Deputy Assistant Secretary of Western Hemisphere Affairs at the Department of State, where he was Director of Andean Affairs from 2001 to 2002. He was U.S. Deputy Permanent Representative to the Organization of American States (OAS) from 2000 to 2001. He served as Director for Inter-American Affairs at the National Security Council from 1999 to 2000; as Political Counselor at the U.S. Embassy in Caracas, Venezuela from 1996 to 1999; and as Regional Labor Attaché at the U.S. Consulate General in Johannesburg, South Africa from 1992 to 1996. During his career as a Foreign Service Officer, Mr. Shannon also served as Special Assistant to the Ambassador at the U.S. Embassy in Brasilia, Brazil from 1989 to 1992; as Country Officer for Cameroon, Gabon, and Sao Tome and Principe from 1987 to 1989; and as the Consular/Political Rotational Officer at the U.S. Embassy in Guatemala City, Guatemala from 1984 to 1986. Mr. Shannon holds a Doctorate and a Master's degree in Politics from Oxford University, and a B.A. in Government and Philosophy from the College of William and Mary.

President Obama this evening announced a slew of nominations for high-profile ambassador posts, including those to Britain, France, India, and Japan.

The nominees:

Michael A. Battle, Sr., ambassador to the African Union. Battle is president of the Interdenominational Theological Center in Atlanta.

Vilma S. Martinez, ambassador to Argentina. Martinez is a lawyer and president of the Mexican-American Legal Defense and Educational Fund.

Thomas A. Shannon, ambassador to Brazil. Shannon is assistant secretary of state for Western hemisphere affairs.

Laurie S. Fulton, ambassador to Denmark. Fulton is a Washington lawyer.

Charles H. Rivkin, ambassador to France. Rivkin is a former president and CEO of the Jim Henson Co.

Louis B. Susman, ambassador to the United Kingdom. Susman is a retired vice chairman of Citigroup, a Chicago fund-raiser for Obama, and was national finance chairman for Senator John F. Kerry's 2004 presidential campaign.

Robert S. Connan, ambassador to Iceland. Connan is a minister for commercial affairs to the US mission to the European Union.

Timothy J. Roemer, ambassador to India. Roemer is a former congressman from Indiana who also served on the commission that investigated the Sept. 11, 2001, terrorist attacks.

John V. Roos, ambassador to Japan. Roos is a Silicon Valley lawyer.

Christopher William Dell, ambassador to Kosovo. Dell is a career Foreign Service officer who is now deputy chief of mission at the US embassy in Afghanistan.

Patricia A. Butenis, ambassador to Sri Lanka. Butenis is deputy chief of mission at the US embassy in Baghdad.

Miguel H. Díaz, ambassador to the Vatican. Diaz is a Cuban-American theologian at the College of Saint Benedict and Saint John's University in Collegeville, Minn. who advised Obama's presidential campaign.

If confirmed, Diaz would be the first Latino in the posting. He would replace Mary Ann Glendon, a Harvard University professor who turned down the University of Notre Dame's top honor, the Laetare Medal, after the Catholic school invited Obama to give the commencement address earlier this month and awarded him an honorary degree.

“Catholics United is thrilled to learn that Dr. Miguel Diaz has been nominated as U.S. ambassador to the Holy See. Dr. Diaz is a devout Catholic, a respected theologian, a leader in the Catholic Latino community, and a dedicated husband and father of four children. We have full confidence that he will serve our nation well and we invite all Catholics to join us in celebrating this historic nomination,” Chris Korzen, the group's executive director, said in a statement.

“The Administration and the Holy See share many common concerns, such as protecting the environment, fostering peace in the Middle East, disarming nuclear arsenals and cultivating international development, especially for the poorest nations of the world. Dr. Diaz’s ability to work constructively for common ground makes him a superb choice for this position."

“I am grateful that these distinguished Americans have agreed to help represent the United States and strengthen our partnerships abroad at this critical time for our nation and the world. I am confident they will advance American diplomacy as we work to meet the challenges of the 21st century. I look forward to working with them in the years and months ahead,” Obama said in a statement.

CHAVEZ : his intention of nationalization TECHINT ARGENTINE companies without agreement created a big issue between both countries & Brazil alerts

By, Guido Braslavsky*
May 25, 2009. The Venezuelan government has pledged “just compensation” following the nationalization of three steel firms from the Buenos Aires-based multinational, Grupo Techint. In the face of protests from many Argentine business groups, the government of Hugo Chávez sought to calm tensions by recalling last year’s nationalization of Sidor (a Techint subsidiary) for which it paid 1.97 million dollars following negotiations with the government of Cristina Kirchner.

In statements to the Buenos Aires newspaper “Clarín”, Venezuelan government sources confirmed Venezuela’s decision, citing at the same time the official Argentine response to “respect sovereign decisions” of the country. As with the Sidor negotiations, the most recent nationalizations have initiated a long negotiation to determine the price of the firms.

The idea of “just compensation” has been a main feature of the conversations between Argentine Foreign Minister Jorge Taiana and his Venezuelan counterpart, Nicolás Maduro. The meeting of the ministers, which took place two days ago, was the first official conversation following Hugo Chávez’s announcement.

Chávez announced the nationalization of six steel firms on Friday. Techint is the owner of two of the companies, Tubos de Acero de Venezuela (Tavsa) and Materiales Siderúgicos (Matesi). Techint also has a controlling interest in a third firm, Complejo Siderúrgico de Guayana (Consigua).
Chávez’s decision to nationalize the firms came a week after his visit to Argentina where he spent a day in El Calafate as a guest of the Kirchners, though he did not mention plans, according to two cabinet ministers in an interview with “Clarín”.

When asked about Chávez’s visit, Interior Minister Florencio Randazzo stated “he did not mention anything” to President Fernández de Kirchner, adding that the political opposition “is making a big deal of this in the midst of a political campaign.”

Randazzo also stressed that Chávez’s decision was not completely unforeseen. At a press conference during his most recent visit to Argentina he was asked whether or not he planned to continue with nationalizations. Chávez responded, in English, with an enthusiastic, “Yes!”.

Randazzo also emphasized the government’s position, “We will respect the sovereign decision of the Venezuelan government and we will do all that we can to protect our national interests, as we did in the case of Sidor.”

“Clarín” also consulted with other official sources regarding the impact of the nationalizations in the context of the upcoming mid-term elections. Though the nationalization of Sidor forms part of a broader nationalization strategy of the Venezuelan government, the context of that deal was very different. There were strong indications that Néstor Kirchner negotiated directly with Chávez.

For his part, the Venezuelan leader announced the nationalization of Sidor after Cristina Fernández de Kirchner had assumed the presidency and long before the current electoral season, which diminished the impact that the announcement could have had for the Argentine government, which maintains a “privileged relationship” with Venezuela.

In response to the concerns of Argentine business groups opposed to the nationalizations, the government sought to re-position itself by stating that it would not nationalize.

However, the government clarified that the firms that have been nationalized—Argentine Airlines and Argentine Water and Sewage (AySA)—were directly related to concrete consumer service concerns.

*Edited by "Clarín", Buenos Aires, Argentina.

Nationalization of Argentine companies
Massa says government will 'back' Techint

The government suggested it would increase pressure on Venezuela, after it announced the nationalization of three Argentine companies. Cabinet Chief Sergio Massa asserted the government would "back" Techint, after the Hugo Chávez administration announced it would nationalize three companies that are owned by the Argentine consortium.

"The government must back Techint, because it is a national company," said Massa during an interview to a local radio station. "There is no place for nationalizations," he said.

Massa dismissed that the dispute over the nationalization of three companies, including giant steel-manufacturer Ternium, might strain diplomatic relations with Venezuela, ruled by the Socialist Chávez administration. "Venezuela is an important country for international trade, but it's not the only one," he added.

Yesterday, Interior Minister Florencio Randazzo said the government would press Venezuela to pay "a fair price" for the companies. The nationalization was announced on Friday, in a move create a state-run steel conglomerate.

Venezuela Expropriations: Chávez Talks Himself into Trouble with Argentina's Fernández de Kirchner
Chávez has depicted Fernández de Kirchner as an ally and soulmate in his bid to build a regional alliance to counter what he sees as the undue influence and power of the United States in Latin America. But his peremptory takeover of steelmaker Sidor and his tendency to talk off the top of his head may well have put her in between the proverbial rock and a hard place at home.

Fernández de Kirchner is said to have telephoned Chávez asking him to explain his nationalization program and how it affected other countries’ interests. Chávez has “expropriated” a 60% controlling stake held by Argentine engineering group Techint in steelmaker Sidor.

But it’s said that compensation terms have yet to be settled, and that Techint and the government are still far apart on that issue. Furthermore, Chávez is talking of taking over three subsidiary companies in which Techint has interests. The companies are Tavsa and Matesi, where Techint is the majority shareholder, and Comsigua, in which it has a minority stake.
The spark for the conversation sought by Fernández de Kirchner was a remark Chávez is reported to have made in private to Brazilian President Inacio Lula da Silva. That remark, it’s said, was to the effect that Venezuela was on course to take over foreign companies except for Brazilian ones.
In Caracas, the Foreign Ministry tried to dismiss the statement, saying Chávez had spoken in jest. If that were the case, it might have been better to have left it at that.

Instead, an official statement released by the Foreign Ministry went on to rail at considerable length against “a ferocious campaign of defamation against Venezuela” by the Argentine media, which it claimed was out to mislead the Argentine public into seeing Venezuela as a threat to their interests.

The French news agency, AFP, had already reported the humorous nature of Chávez’ remark, noting that it had prompted “jocularity” among those present at the time, the statement said.

The Argentine media had set out to misrepresent the motives which had led to a “sovereign and legally made decision” by the Venezuelan government,” the statement fumed.

The statement insisted that the takeover procedure had “guaranteed” Techint “just and prompt compensation for the shares that now return to be the property of the Venezuelan people, after having been unjustly and fraudulently privatized during the long and dark neoliberal night.” Once again, the ministry’s press officers primarily had their eyes on domestic consumption.
But a report by the Argentine state news agency Telam, which had reached the public domain several hours before the Foreign Ministry acted, put a rather different interpretation on events.

Telam’s report if anything pre-emptively undermined the ministry’s retrospective rationalization had Chávez had only been joshing with the guys. In fact, its version of events was severely at odds with what the ministry was to say later on.

Telam said that Chávez denied to Fernández de Kirchner having made any such statement to Lula. At which point, she is said to have told him to issue a public denial to that effect. Presumably, the Foreign Ministry eventually took that one on board, albeit after nary a word from the presidential palace, Miraflores.

As reported by Telam, the tone of Fernández de Kirchner’s response to Chávez’ denial, and much of what was to follow, suggested a lady who was not best pleased. It’s unlikely that, as the official news agency, Telam would have misconstrued her words – even if, as the ministry claimed, the rest of the Argentine press industry was.

Fernández de Kirchner was further said to have told Chávez that she would be keeping an eye on statements before saying anything herself from then on. Whether this was an attempt to get Chavez to rein himself in remains to be seen.

Telam quoted her as having said that any such statement as he was supposed to have made to Lula would imply “a degree of discrimination” in Chávez’s approach to nationalizations. This, she added, would impinge upon the sovereignty of individual nations.

That, she was said to have continued, would be “an unacceptable attitude” and an “absolute contradiction” of agreements signed by Argentina and Venezuela. She and Chávez have signed a string of cooperation agreements.

Ahead of the telephone conversation, Argentine Foreign Minister Jorge Taiana had announced that he was to meet next Monday with his Venezuelan counterpart, Nicolás Maduro, to discuss the plan to take over the three other companies linked with Techint.

“We are going to express the interest which the Argentine government assigns to the respect of the rights of a company, but within the framework that we have also to respect the sovereignty of other countries,” Taiana pointedly remarked.

The two ministers are due to thrash this out when they meet at the General Assembly of the Organization of American States (OAS) in San Pedro Sula in Honduras between May 31 and June 3. Noting that he and Maduro had spoken about these issues before, Taiana expressed hope that the two ministers would be able to sort things out.

In Buenos Aires, Fernández de Kirchner was under mounting pressure from the Argentine business community, where dislike of Chávez and all that he stands for would seem to be mounting by the day.

A director of Techint warned last week that he intended to raise the company’s case with Fernández de Kirchner. Since then, the pressure on her to take a stand on the takeover has steadily mounted as Argentine business leaders focus their sights on Chávez.

They have now homed in on one of Chávez’ pet aspirations – that Venezuela should join Mercosur, the economic bloc formed by Argentina, Brazil, Paraguay and Uruguay.

To date, this idea has met with an at best mixed reception from the business and political communities in those countries. Now, Argentine business leaders are said to have called on Mercosur not to admit Venezuela.

Tuesday, May 26, 2009


MOST YOUNG Russians dream of a job at Gazprom, according to a recent poll that signals a vote of domestic confidence in the world's biggest gas company. But the global financial crisis is casting a shadow on the Russian gas monopoly's expansion strategy. The poll, conducted by the Public Opinion Foundation, found that one in five Russians aged under 26 would prefer to work for Gazprom than a private-sector firm. Another 8% looked to a career at Rosneft, the national oil company, to provide stability amid the global financial crisis.

But in the short term at least, Gazprom's outlook is highly uncertain. As recently as last summer, Gazprom boasted it would, by 2015, be the world's biggest company in terms of market capitalisation with a value of $1 trillion. Since then, its market capitalisation has fallen from a peak of near $300bn to around $90bn. And export earnings are set to fall this year, as European gas prices, pegged to world oil prices with a time lag of six to nine months, decline in the second quarter – the price of oil has fallen by 64% in the last nine months.

While a year ago Gazprom was battling a gas-supply crunch, it now faces a drop in demand at home and in Europe, says Jonathan Stern, head of gas research at the Oxford Institute of Energy Studies. "Suddenly, Gazprom is living in a completely different reality," says Stern.

Alexander Burgansky, an oil analyst at Renaissance Capital in Moscow, says European gas demand fell sharply in the first quarter, but will revive once prices drop. Consumption in Russia is down by about 5%. However, "if oil prices stay low, some aspects of Gazprom's investment programme will appear luxurious and will have to be cut," he claims.

Meanwhile, Gazprom's image as a reliable gas supplier is at an all-time low following January's price dispute with Ukraine, which led to the worst supply disruptions seen in Europe (PE 2/09 p4). Vladimir Putin, Russia's prime minister, estimated that the supply cuts cost Gazprom $1.1bn in lost revenues at a time when the company can least afford it.

But Gazprom's long-term planning department appears unruffled by the crisis. Russia could boost gas production to 0.876-0.981 trillion cubic metres a year (cm/y) by 2030, according to a draft plan submitted to the energy ministry in March. A significant portion of the incremental output will feed domestic markets, where consumption is expected to rise to 0.550-0.613 trillion cm/y over the coming two decades. Exports are also set to soar, by between 69% and 80%, to 415bn-440bn cm/y, as Gazprom expands its presence in Europe and captures new markets in Asia-Pacific and the US.

Fulfilling these plans will require more than $0.5 trillion of capital investment, largely in the exploration and development of new reserves in the Arctic offshore and western Siberia.

Underscoring Gazprom's Arctic ambitions, the Russian Security Council released a strategy document in March calling for an increased military presence in the Arctic to ensure the transformation of the region into Russia's "main strategic resource base". Russian officials estimate the Arctic seabed, also claimed partly by Canada, Denmark, Norway and the US, could hold between 9bn and 10bn tonnes of oil equivalent, about the same as Russia's total known oil reserves – 6.4% of the world total.

Gazprom has quietly postponed, until 2010, a final decision on the timetable for the launch of the 3.8 trillion cm Shtokman gasfield development in the Barents Sea – its flagship Arctic offshore project – saying more time is needed to study the technical challenges. Yuri Komarov, chief executive of the Gazprom-led Shtokman Development group, says the delay will not prevent production starting in 2013. But the global financial crisis will prevent the partners – Gazprom (51%), Total (25%) and StatoilHydro (24%) – from raising the $15bn required for the first phase of the project.

Delays at high-cost Arctic projects will intensify pressure on Gazprom to secure gas supplies from neighbouring former-Soviet states.
Alexei Miller, chairman of Gazprom, and Rovnag Abdullayev, president of Azerbaijan's state-owned Socar, signed a memorandum of understanding in March calling for Russia to begin importing Azerbaijani gas in 2010. The project would involve the reversal of a Soviet-built pipeline that formerly carried gas from Russia to Baku.

It maintains a private army, employs a half million people and runs entire cities around Russia. Now, the power of Gazprom has struck Europe with its full force, as the continent shivers under the firm's decision to shut off gas to its biggest and most lucrative customers.

Russia first closed the taps to Ukraine on New Year's Day, leading within days to severe disruptions in 18 European countries, which rely on pipelines that cross Ukraine to deliver most of their Russian gas supplies. EU efforts to mediate the conflict have failed. Government officials and the leadership of the state-run gas companies inside Russia and Ukraine continue to trade accusations over who is to blame.

Gazprom insists that the dispute is purely commercial. Squabbling over price, the two sides failed to sign a contract for 2009, leaving no choice for this "business" but to shut off the taps.

Yet most observers think otherwise. A look at Gazprom's leadership and murky history, particularly since Vladimir Putin rose to power nearly a decade ago, shows just how politicized the company is.

"To a large extent, Gazprom is almost a proxy for the government," said Chris Weafer, chief strategist at UralSib, a Russian investment bank. "It is the state's company and its most important asset."

Many inside Russia don't even call it a company. When the Soviet Union collapsed, its Gas Ministry became Gazprom. A partial privatization left the state with 40 percent ownership of the company, which in 2004 it boosted to a controlling stake of just over 50 percent.

Soon after Putin assumed the presidency in early 2000, a little known bureaucrat named Dmitry Medvedev was elected chairman of the Gazprom board. Medvedev -- who later became Putin's chief of staff -- remained chairman until ascending to the country's presidency in May 2008, after receiving Putin's endorsement.

Today, Putin's first deputy prime minister, Viktor Zubkov, holds the chairmanship. The CEO is Alexei Miller, an associate of Putin's from his days in the St. Petersburg government in the early 1990s. Miller has no gas industry experience, and it is said that he is merely a figurehead.

Nearly a dozen top Gazprom managers served in the KGB or its main successor agency, the FSB, including its deputy chairman, Valery Golubyov.

"The relationship is very close" between the company and the state, said Dmitry Peskov, Prime Minister Putin's press secretary. "Although Gazprom is an international corporation, the largest shareholder is the Russian state. There is nothing strange in the fact that the relationship between the government and Gazprom is really very close."

That's a different line than the Kremlin was spinning in early 2001, when Gazprom led a forceful takeover of NTV, a popular television channel that was openly critical of the government. One satirical program it ran, Kukly (Dolls), was said to particularly irk Putin. The station's owner, oligarch Vladimir Gusinsky, agreed to sell to Gazprom following a campaign of armed searches by the FSB, a brief arrest and back tax claims. Gusinsky now lives in self-exile in Spain.

These days the station dutifully runs state-friendly coverage. Its takeover was seen by many as the beginning of the end for independent media in Putin's Russia.

Beyond its media holdings, Gazprom now has over 150 wholly or partially owned subsidiaries, including assets focusing on banking, satellite communications, hotels and spas, electricity and agriculture.

It is a sprawling behemoth that employs at least 500,000 people, finances schools and hospitals in the bleak region of Siberia and essentially subsidizes the Russian economy by providing industry and homes with cheap gas.

A move to liberalize domestic gas prices was curtailed late last year, as the financial crisis -- and the effects of an internationally unpopular war in Georgia -- hit Russia hard in September.

"It has many of the attributes of a company, like outside shareholders. It files accounts. It talks to investors. But the economics of what it does has very little resemblance to a profit maximizing firm," says Ian Hague, co-founder of Firebird Asset Management, a New York-based fund that invests in Russia.

Hague, a longtime investor in Gazprom, says he sold off his fund's holdings in the firm throughout 2008. "They have no ability to generate consistent positive returns for minority investors," he says. "They don't care. That's not their business."

"It is the deepest trough in the barnyard," he adds. "For employees of Gazprom, for people in the administration charged with supervising Gazprom."

Sergei Kupriyanov, the gas giant's spokesman, denies that. "Absolutely not. If someone has something to complain about, let them show us the proof," he says.

One man who sought to expose the lack of transparency inside Gazprom was William Browder, an American who heads Hermitage Capital Management, once Russia's largest portfolio investor. Browder was denied entry into the country in November 2005, on suspicion he posed a threat to national security. He has not been able to receive a visa since, and now lives in London.

Gazprom is by far Russia's biggest company, bringing in $70 billion in revenue in 2007 and taking a $14 billion profit. Yet it is also heavily indebted, to the tune of $49.5 billion and was included on a list of firms eligible for a state bailout.

Some analysts say this is, in part, what drove the firm to seek a substantially higher fee from Ukraine, prompting the dispute that left 18 countries freezing at the start of 2009.

Yet Gazprom still has enough money to run a private army. Kupriyanov acknowledges that the force exists, but declines to name its number.

It also has a sense of its own power. Gazprom officials have a favorite joke they like to tell on New Year's Eve. "Come round to our offices in the morning," they say. "We'll serve you Champagne. But Ukrainian style -- no gas."

Nabucco nightmare

A Russian gas alliance with Azerbaijan could fatally undermine the EU-backed, 31bn cm/y Nabucco gas-pipeline project to import Caspian gas across the Caucasus and Turkey, and reduce dependence on Gazprom for supplies. Azerbaijan is the only country with the reserves and infrastructure in place to supply the pipeline (PE 2/09 p5). And despite the credit crunch, Gazprom is pressing ahead with plans to build its South Stream gas pipeline, across the Black Sea to southern Europe, which would head off competition from Nabucco.

But at the same time, Russia has delayed finalisation of a project to build a new pipeline to import extra gas from Turkmenistan, another Caspian producer targeted by Nabucco. Turkmenistan's president Gurbanguly Berdymukhamedov signed a number of economic agreements during a three-day official visit to Moscow in March, but left without finalising plans to build the Prikaspysky pipeline. Stern claims Gazprom might have difficulty absorbing even the 50bn cm of gas it has contracted to import from Turkmenistan this year.

Despite market weakness, Russia has not softened its approach to European gas customers. An EU proposal to help Ukraine modernise its aged gas-transit network, which carries 80% of Russian gas exports to Europe, was slammed by the Kremlin as "an unfriendly act" in March, as Putin threatened to end government-to-government talks with Ukraine unless Russia was included in the project.

The EU, the World Bank, the European Investment Bank and the European Bank for Reconstruction and Development have proposed to invest €2.5bn to improve the safety of the transit pipeline if Ukraine reforms the management of the system to eliminate corruption and red-tape bureaucracy. Ukraine wants investors to help increase capacity in the pipelines to underpin its long-term role as a strategic transit route to Europe. But after more than a decade of wrangling with Ukraine over gas prices and transit terms, Gazprom's policy is to build new export routes to bypass the country altogether.

The March delivery to Japan of a first cargo of liquefied natural gas from the Gazprom-led Sakhalin Energy project, in Russia's far east, provided a bright spot on the otherwise bleak short-term trading horizon. The shipment marked Gazprom's entry to Asian gas markets, a landmark in its plans to globalise its gas-trading business.

Saturday, May 23, 2009


The economic crises has swept not only the financial commitments of the people but has also gifted the swallow of sorrows. From the very ancient times, there is a big connection between the feelings and sleep. The more relaxed you are the more sleep you can earn is the basic thumb rule. If you see the industrial growth of last some month, it has developed drastically in the downside and see the stress growth it has crossed all the borders and probably all time high of many years.

As stress from economic anxiety mounts, the Better Sleep Council (BSC) and the Council for Responsible Nutrition (CRN) have joined forces for Better Sleep Month in May to help consumers enjoy a stress-less, good night’s sleep. In order to get the best rest possible and help relieve stress, the BSC and CRN say it’s essential for Americans to make a commitment to a healthy lifestyle.

Stress is a leading culprit that is robbing Americans of sleep, according to sleep researchers. While it is well known that stress can negatively impact sleep, new research from Oklahoma State University (OSU) confirms that cyclically poor sleep can elevate stress.

The OSU study, “Back Pain, Sleep Quality and Perceived Stress Following Introduction of New Bedding Systems,” published in the March 2009 Journal of Chiropractic Medicine, also suggests that improved sleep quality not only reduces stress, but also helps us manage everyday stress.

When you’re stressed, and similarly when you are tired, every aspect of your waking life is affected, from work to personal relationships and even concentration,” says BSC spokesperson and lifestyle
expert Lisa Coffey. “Controlling stress and getting a good night’s rest start by evaluating your lifestyle and creating a healthy daily regimen that you can stick to. This includes adequate sleep, balanced diet, daily vitamins and healthy exercise.”

The Sleep Escape
The OSU study also reveals that the mattress plays a critical role in the sleep-stress relationship and quality of sleep. In fact, the OSU study found that significant decreases in stress paralleled reports of a good night’s sleep on a new mattress, compared to one that is five years or older.

“People across the country are facing hardships from job losses and money woes,” adds Coffey. “A mattress that cradles you with comfort can go a long way to help reduce stress. It provides a good night’s rest so that you can perform your best during the day, even in tough times.”
The BSC advises consumers to take time during Better Sleep Month to evaluate their mattress for optimum comfort and support and consider replacing it every five to seven years.

Investing in Your Wellness
Getting a good night’s sleep on a supportive mattress is just one part of investing in a healthy lifestyle. Being active and eating healthy also play a large role. And with health
care costs and unemployment rates increasing, CRN says that now, more than ever, it’s important to think about taking an integrative approach to preventive healthcare.

Studies show that healthy individuals tend to engage in many healthy habits-eating a healthy diet, taking supplements, exercising regularly and getting adequate amounts of sleep-as an integrative approach to wellness,” says Douglas MacKay, N.D., vice president, scientific and regulatory affairs, CRN. Dr. MacKay, a licensed naturopathic doctor, says certain supplements, including melatonin, magnesium and calcium, may help individuals relax or promote healthy sleep patterns.
Herbals and other dietary supplements can be safe and effective ways to help individuals achieve quality sleep,” says Dr. MacKay. “You should consult a doctor or healthcare professional to determine which supplements are the best regimens for your lifestyle.”
Absorb the best suiting to you and implement them in order to cherish a good sleep. Remember, the more you get a sound sleep, the more you are stress free and the more stress free you are the more concentrative you can be to the financial issues. The ease of financial issue will minimize or even kill the stress and earn you a permanent sound sleep for you. So, get a stress free sleep…

How important is doing SPORTS than exercises ?

This is a point of view, different in our times , like doing exercises means all that people can develop and work out for having a good healthy life .
But , there is a big difference when people can practise SPORTS , no matter how talent they are , but this implies many other aspects, that are significant : entertainment, socializing in groups not individual , different rutines, concentration , brain works in different way , play as game not as a rutine or like a hard work and the diversity of sports allows to open different skills and explore more about the insight and outsight of oneself , generating psicological effects that reduce the stress if it is taken as an entertainment .

Exercise is physical activity that is planned, structured, and repetitive for the purpose of conditioning any part of the body. Exercise is utilized to improve health, maintain fitness and is important as a means of physical rehabilitation.

Physical exercise is any bodily activity that enhances or maintains physical fitness and overall health. It is performed for many different reasons. These include strengthening muscles and the cardiovascular system, honing athletic skills, weight loss or maintenance and for enjoyment. Frequent and regular physical exercise boosts the immune system, and helps prevent the "diseases of affluence" such as heart disease, cardiovascular disease, Type 2 diabetes and obesity.It also improves mental health and helps prevent depression. Childhood obesity is a growing global concern and physical exercise may help decrease the effects of childhood obesity in developed countries.

Physical exercise is important for maintaining physical fitness and can contribute positively to maintaining a healthy weight, building and maintaining healthy bone density, muscle strength, and joint mobility, promoting physiological well-being, reducing surgical risks, and strengthening the immune system.
Exercise also reduces levels of cortisol, thereby benefiting health. Cortisol is a stress hormone that builds fat in the abdominal region, making weight loss difficult. Cortisol causes many health problems, both physical and mental.
Frequent and regular aerobic exercise has been shown to help prevent or treat serious and life-threatening chronic conditions such as high blood pressure, obesity, heart disease, Type 2 diabetes, insomnia, and depression.

Strength training appears to have continuous energy-burning effects that persist for about 24 hours after the training, though they do not offer the same cardiovascular benefits as aerobic exercises do.

There is conflicting evidence as to whether vigorous exercise (more than 70% of VO2 Max) is more or less beneficial than moderate exercise (40 to 70% of VO2 Max). Some studies have shown that vigorous exercise executed by healthy individuals can effectively increase opioid peptides (a.k.a. endorphins, naturally occurring opioids that in conjunction with other neurotransmitters are responsible for exercise-induced euphoria and have been shown to be addictive), positively influence hormone production (i.e., increase testosterone and growth hormone benefits that are not as fully realized with moderate exercise.

Exercise has been shown to improve cognitive functioning via improvement of hippocampus-dependent spatial learning, and enhancement of synaptic plasticity and neurogenesis

In addition, physical activity has been shown to be neuroprotective in many neurodegenerative and neuromuscular diseases

For instance, it reduces the risk of developing dementia.Furthermore, anecdotal evidence suggests that frequent exercise may reverse alcohol-induced brain damage

Physical activity is thought to have other beneficial effects related to cognition as it increases levels of nerve growth factors, which support the survival and growth of a number of neuronal cells.
Both aerobic and anaerobic exercise also work to increase the mechanical efficiency of the heart by increasing cardiac volume (aerobic exercise), or myocardial thickness (strength training). Such changes are generally beneficial and healthy if they occur in response to exercise.

Sport is an activity that is governed by a set of rules or customs and often engaged in competitively.

Sports commonly refer to activities where the physical capabilities of the competitor are the sole or primary determinant of the outcome (winning or losing), but the term is also used to include activities such as mind sports (a common name for some card games and board games with little to no element of chance) and motor sports where mental acuity or equipment quality are major factors. Sport is commonly defined as an organized, competitive and skillful physical activity requiring commitment and fair play. Some view sports as differing from games based on the fact that there are usually higher levels of organization and profit (not always monetary) involved in sports.

This genetic variation in improvement from training is one of the key physiological differences between elite athletes and the larger population.

The term sports is sometimes extended to encompass all competitive activities in which offense and defense are played, regardless of the level of physical activity. Both games of skill and motor sport exhibit many of the characteristics of physical sports, such as skill, sportsmanship, and at the highest levels, even professional sponsorship associated with physical sports.
Sports that are subjectively judged are distinct from other judged activities such as beauty pageants and bodybuilding shows, because in the former the activity performed is the primary focus of evaluation, rather than the physical attributes of the contestant as in the latter (although "presentation" or "presence" may also be judged in both activities).
Sports are most often played just for fun or for the simple fact that people need exercise to stay in good physical condition

Why a GM Bankruptcy Would Be a Disaster

By William J Holstein
President Obama is nearing the most important decision a President has made in modern times regarding the American economy. On or about June 1, he will push General Motors (GM), the nation's largest industrial company, into bankruptcy.

The key trigger may be on May 26, when GM's offer to bondholders to accept 10¢ on the dollar fails to win acceptance from 90% of them, a criterion that Obama has set for continued loans to GM.
But there's a strong probability the decision to push GM into bankruptcy will be disastrous. The mere threat of bankruptcy caused GM's U.S. sales to fall by 50% in the first quarter from already depressed levels. If GM were to declare Chapter 11 bankruptcy, sales would decline even further.

The reality—which the investment bankers and bankruptcy lawyers guiding Obama don't seem to understand—is that the auto industry is unique in the way it is built on long-term confidence. Buying a vehicle is second only to home buying as the most important financial decision people make, and Americans want to know that the company making their vehicle will exist for at least five more years, that their dealer will continue in business, that their auto loan won't be summarily revoked, and that parts and servicing will be available.

That is a fundamentally different psychology from when a consumer buys a ticket from a bankrupt airline or purchases electronics or clothing from a bankrupt retailer. In those instances, there is an expectation of onetime or short-term use.

Suppliers Hanging by Fingernails
Then there are the thousands of suppliers, organized in multiple tiers, that support GM. This system depends on a vast, delicately balanced series of contracts and long-term relationships. Many of these suppliers are already hanging by their fingernails.

The longer the uncertainty of bankruptcy lasts, the more likely they are to delay making crucial parts and the more likely it is that some will simply go out of business. In cases where alternate suppliers are not available, GM's assembly lines could start experiencing difficulty or even be forced to shut down.
The risk of liquidation would then loom large because the financial losses would mount. The dislocation would cascade through the economy, not just the Midwest. GM, with its suppliers, represents a full 1% of the economy. It is the largest private-sector purchaser of information technology, so Silicon Valley will feel it; and Madison Avenue will feel the collapse of its advertising spend. Any hopes that the U.S. economy has stabilized would take a beating—there would be another sickening lurch downward. Obama isn't just ruling on the fate of a single company; he is about to pull the trigger on a wide swath of the same economy he is attempting to stabilize.

The Obama camp seems to believe that the Chrysler bankruptcy is a template for what it wants to achieve at GM, but that's a critical mistake. Chrysler was a shell of a company, having been stripped of engineering and design talent by Daimler (DAI) and then mismanaged by private equity owner Cerberus Capital Management. The arrangement is to give the United Auto Workers 55% of Chrysler's shares and to give management control to Italy's Fiat (FIA.MI) group. This may work in political terms, but it's not a real-world business arrangement. The supposedly rescued Chrysler is, in fact, a house of cards that almost certainly will come tumbling down.
GM, in contrast, has invested heavily in product development and new technologies, such as the lithium ion battery for the Chevrolet Volt. It was in the late stages of a transformation effort when the U.S. economy collapsed last fall.

Obama should not force such a company into bankruptcy because it cannot be "surgical" or "controlled," as some in the Administration are stating. Bankruptcy lawyers are arguing that GM can emerge within 60 days, but that is highly suspect. Even a Section 363 bankruptcy, in which GM would be allowed to park bad assets like dealer franchise agreements and bonds in a "bad" GM that stays in bankruptcy, then reemerge as a "good" unencumbered GM is highly complex. The reasons are the sheer size of the company, its extensive global operations that account for more than half its sales, and the range of interest groups that will fight tenaciously for their piece of the pie.

Huge Fees for Bankruptcy Lobby

The real precedent in this situation is Delphi, GM's largest parts supplier, which went into bankruptcy in 2005 and now faces probable liquidation. The bankruptcy lobby does not want to acknowledge this failure—they are too busy anticipating the huge fees from the mother of all bankruptcies at GM.

Obama has arguably achieved a large measure of what any government would want in this situation—it has ousted Chief Executive Rick Wagoner and pressured successor Fritz Henderson into implementing the tough restructuring plan that the company's critics have long advocated. The United Auto Workers apparently has just accepted management's latest very tough restructuring plans.

Obama should now bring the full weight of his Presidency on all the remaining stakeholders and create the best possible solution outside of bankruptcy court.

Then the government should get out of the way and let management execute on its plan, with continued loans for a period of months, not years.

Obama should proclaim that, in view of the dramatic progress that management and the union have achieved, the threat of bankruptcy has been lifted and that it's time for Americans to at least consider buying GM cars in view of their dramatic improvements in quality, cost, and design. He should be helping to create confidence in the future of GM, not destroying it. If he sincerely wants GM to be in position to help him achieve the fuel-emission goals he has established, he must not allow GM to get bogged down in a protracted bankruptcy.

But if the decision to push GM into bankruptcy is inevitable, as it appears to be, Obama should take a deep breath and recognize that once he makes the decision, it will be too late to reverse course. History will regard his decision as an unambiguous indicator of whether Obama knew what he was doing or actually compounded the economic crisis he inherited

William J. Holstein is the author of Why GM Matters: Inside the Race to Transform an American Icon (Walker & Co., 2009). For more of his work, visit

Thursday, May 21, 2009

Volkswagen Polo Blue Motion launches in argentina

Volkswagen presented the most advanced BlueMotion Technologies to the visitors with a variety of real components and multimedia tools. Based on Volkswagen’s mature, world-leading and widely-applied powertrain technologies, BlueMotion Technologies is an expanded package of advanced energy-saving and environmental-friendly technologies that significantly reduces fuel consumption and CO2 emission. These technologies are now gradually being applied in Volkswagen locally produced models. The two BlueMotion models displayed at the Volkswagen booth, Golf BlueMotion and Lavida BlueMotion concept, took the spotlight at the show.

The new B-segment cars comes in three- and five-door tailgate flavors with a scope of gas and diesel engines, but the chief of the cram is the BlueMotion mode with 96 g/km of CO2 emissions. VW showed a thought for the next-gen BlueMotion mode that will launch in 2010 and expected to come to the US market in the next couple of years.

The BlueMotion notion uses an efficient 1.2L three cylinder TDI diesel, with 74 hp. Combining with 15-crawl low rolling resistance tires, a blanked off trellis, extensive rocker panels for worse drag, automated vault sojourn, and brake energy regeneration. The base lined is 71.3 mpg (US) and 87 g/km of CO2 emissions. That makes the new BlueMotion the most effective five passenger home combustion car on the street.

The Volkswagen Automobile Company, also known as Volkswagen Passenger Cars or just VW, is an automobile manufacturer based in Wolfsburg, Germany, and is the original brand within the Volkswagen Group, as well as the largest brand by sales volume.

Volkswagen means "people's car" in German, in which it is pronounced . Its current tagline or slogan is Das Auto (in English The Car). Its previous German tagline was Aus Liebe zum Automobil, which translates to: Out of Love for the Car, or, For Love of the Automobile.

Struggle Escalates

A dispute between German automakers Volkswagen and Porsche is casting doubt on their merger plans and fuelling concern about Porsche's financial soundness. Their shares fell on Monday, with Porsche down as much as 6 percent.

Shares in Volkswagen and Porsche fell sharply on Monday following a row between the two companies that has thrown their merger plans into doubt.

Porsche has abandoned plans to take over its much larger rival VW and the two firms are now embroiled in a dispute over merger terms.

VW shares dropped two percent and Porsche as much as six percent after VW cancelled a round of merger talks scheduled for Monday, May 18. "The bottom line is that the weekend news reinforces misgivings about the financial situation of Porsche," wrote DZ Bank analyst Michael Punzet in a research note.

Bild newspaper reported that Porsche has only two weeks left to prolong credit lines totalling more than €1 billion. The financial crisis thwarted Porsche's attempt to buy the far larger VW.Porsche called off its takeover bid after it ran up €9 billion ($12.2 billion) of debt acquiring VW stock. It currently owns 51 percent of VW, not enough for control of Europe's largest automaker.

The two companies had planned to meet on Monday to develop plans for a tie-up. But VW supervisory board chief Ferdinand Piech, who also owns stock in Porsche, pulled out of the talks.

"We recognized at the end of the week that Porsche is lacking several fundamental conditions for the discussions," a spokesman for VW said on Sunday, according to the Reuters news agency.

The spokesman added that Porsche did not have a strategy for a merger of the two companies and needed to sort its plans out internally.

Porsche, by contrast, said negotiations were continuing as normal and that only the Monday round of talks had been cancelled. "Subsequent dates have been agreed," a spokesman said.

Media reports said Porsche's management was incensed by comments from Piech who last week appeared to talk down a possible purchase price for Porsche and also cast doubt on Porsche financial soundness.

Asked if the value of €11 billion for Porsche would be the correct price, Piech told reporters at a car launch in Italy last week: "That's definitely a couple billion too high. 'Couple' capitalized." He also spoke openly about possible financial difficulties at Porsche.

Piech had said VW couldn't take on the financial risks Porsche had built up in its bid to buy VW. "I can't imagine that VW would take on these risks," said Piech, a member of the Porsche/Piech clan that owns Porsche.

On Saturday, German news agency DPA cited unnamed VW company sources as saying Porsche's management had completely misinterpreted the situation and that the financial situation of Porsche was "extremely dicey."

Porsche's supervisory board is due to meet in Stuttgart on Monday to discuss the situation. Thousands of Porsche workers demonstrated against a merger with VW.

Wednesday, May 20, 2009

Rebuilding the banks

A tamer banking industry is already emerging from the debris of the old, failed one, says Andrew Palmer

BANKING is the industry that failed. Banks are meant to allocate capital to businesses and consumers efficiently; instead, they ladled credit to anyone who wanted it. Banks are supposed to make money by skilfully managing the risk of transforming short-term debt into long-term loans; instead, they were undone by it. They are supposed to expedite the flow of credit through economies; instead, they ended up blocking it.

The costs of this failure are massive. Frantic efforts by governments to save their financial systems and buoy their economies will do long-term damage to public finances. The IMF reckons that average government debt for the richer G20 countries will exceed 100% of GDP in 2014, up from 70% in 2000 and just 40% in 1980

Despite public rage over bank bail-outs, the industry has also comprehensively failed its owners. The scale of wealth destruction for shareholders has been breathtaking. The total market capitalisation of the industry fell by more than half in 2008, erasing all the gains it had made since 2003 (see chart 1).

Employees have scarcely done better. The popular perception of bankers as Porsche-driving sociopaths obscures the fact that many of the industry’s staff are modestly paid and sit in branches, information-technology departments and call-centres. Job losses in the industry have been savage. “Being done” used to refer to hearing about your annual bonus. Now it means getting fired. America’s financial-services firms have shed almost half a million jobs since the peak in December 2006, more than half of them in the past seven months. Many have gone for good.

The pain is nowhere near over. The credit crunch has been a series of multiple crises, starting with subprime mortgages in America and progressively sweeping through asset classes and geographies. There are now some glimmers of optimism in the investment-banking world, where trading books have already been marked down ferociously and credit exposures to the real economy are more limited. But most banks are hunkering down for more misery, as defaults among consumers and companies spiral. In its latest Global Financial Stability Report, the IMF estimates that the total bill for financial institutions will come to $4.1 trillion

With so much red ink still to be spilled, it may seem premature to ask, as this special report does, what the future of banking looks like. For most industries, failure on this scale would mean destruction, after all. Banks, notoriously, are different. The most seismic event of the crisis to date, the bankruptcy of Lehman Brothers last September, demonstrated the costs of letting a big financial institution collapse. Trust evaporated and credit dried up. “October was the most uncomfortable moment in my career,” recalls Gordon Nixon, the boss of Royal Bank of Canada (RBC). “There was a possibility that the entire global banking system could go under.”

Concerted actions by governments since then, first in the form of capital injections and liability guarantees, and more recently via schemes to buy or guarantee loans, have signalled their determination to stabilise and clean up their big banks.

Politics notwithstanding, the commitment of governments to defend their banking systems removes the existential threat to the biggest institutions (or, more precisely, transfers it to sovereign borrowers). Bank bosses have learnt not to pronounce too confidently about the future. If the IMF’s loss predictions turn out to be accurate, there is still too little capital in the system. But most think that the chance of another Lehman-style blow-up has been greatly reduced.

There is still great uncertainty about the nature and extent of the support that governments will end up offering to their banks. But governments are now deeply embedded in banking systems. They are guaranteeing far more retail deposits than before the crisis. They are guaranteeing the issuance of new debt. They own preferred shares in many banks, common equity in others and stand ready to inject capital in others still. Banks that have not taken a scrap of government money still benefit from their stabilising presence. “We all exist at the largesse of the government right now,” says a bank boss.

The types of losses that banks now face have also changed. The huge writedowns on trading-book assets that defined the first phase of the crisis were horribly unpredictable. The complexity of structured finance made it difficult to know how losses would cascade down the ladder of investors in securitised assets. The patchy credit histories of subprime and low-documentation borrowers made it hard to model default rates accurately. And mark-to-market accounting meant that banks were valuing illiquid assets at prices which reflected a lack of buyers as much as underlying credit quality (accounting-standards bodies have since been bullied into allowing bankers to exercise more judgment in how they classify and value such assets).

Although the losses that banks face in their loan books are ugly, they should be more predictable. Shocks are still likely: for instance, the size of the bubble and scale of the bust may overturn historic relationships such as that between unemployment rates and credit-card losses. But losses on loans can be recognised in the accounts more slowly. And the assets that are now under scrutiny may be much bigger than their subprime predecessors but they are also better understood. “The scale of the recession is unprecedented but it is more familiar terrain,” says John Varley, the chief executive of Barclays.

The forgotten art

With government backing assured and impending losses somewhat more predictable, the big banks are slowly starting to lift their heads from the floor. Meetings with investors have been dominated for the past 18 months by discussions about banks’ balance-sheets and, in particular, the amount of capital that banks had. “This is my first experience of the quarterly-earnings game where no one has cared about earnings,” says Bob Kelly, the boss of Bank of New York Mellon.

That is changing. Even the biggest victims of the crisis expect to return to profitability this year. Galling as it may be to contemplate the returns that will once again accrue to banks, the rest of us badly need them to make money. Just as the prospect of continuing losses is what has stopped private capital from entering the system, the prospect of future profits is what will lure investors back in to replace governments. Profitability is also critical to the ability of banks to cover future losses without calling on further government cash. The situation is fluid but analysts at Barclays Capital reckoned in March that cumulative pre-tax and pre-provision income at the top 20 American banks for this year, 2010 and 2011 will be $575 billion, just enough to cover their estimates of losses in that period of $415 billion-$560 billion.

Profits need to be sustainable, of course. They may be the first line of defence against trouble but they disappeared all too quickly during this crisis, wiped out by writedowns and by the implosion of business models. “The discounted future profit streams of financial institutions went from quite something to almost nothing in an instant,” says Andy Haldane, head of financial stability at the Bank of England.

Banks recognise this as much as regulators do. There is a striking degree of convergence between the thrust of planned regulatory reforms and the new strategic thinking of many institutions. Greater resilience is a shared objective. Banks are reducing their dependence on wholesale funding and increasing their reliance on “stickier” deposits. They are reducing the amount of risk they take, which means reducing their proprietary trading and concentrating more on clients and activities that consume less capital. They are rapidly shrinking their balance-sheets. “The banking industry got it so wrong and destroyed so much value that it is difficult to sit in front of investors and say we are going to carry on as before,” says Richard Ramsden, an analyst at Goldman Sachs.

The future looks different to different types of banks. For smaller ones that fall outside the comforting embrace of the state or have less diversified loan portfolios, the outlook is bleaker. American regional banks and Spanish savings banks, or cajas, are among those coming under increasing pressure as commercial-property portfolios suffer. Mike Poulos of Oliver Wyman, a consultancy, expects the number of banks in America, currently some 8,000 or so, to drop by 2,000 or more as a result of the crisis.

Banks in many emerging markets will suffer as the economic climate deteriorates but they need to deleverage less. There is also less need for regulatory change. The Asian banks kept their exposure to cross-border funding flows under control, for example, unlike their peers in eastern Europe. The scale of structural change that these institutions face is relatively limited.

But for those banks at the heart of the crisis, the household names of Western finance, the landscape is different. Their future is secure enough for them to be able to plan beyond survival. Their failures have been big enough for them to know that everything they do, from the way they manage their balance-sheets to the way they pay their managers, has to change. But in seeking to work out what the new normality will be for banks, the first question to ask is how quickly and on what terms governments will disentangle themselves from the industry.

it's unremarkable that a committee of City grandees chaired by the former chairman of Citigroup Sir Win Bischoff wants the UK government to take a leading role in shaping new EU rules, and is opposed to the idea of forcing banks to slim down and specialise.

City workers, London

If there's any kind of controversy about the proposals, I guess it will stem in part from the following excerpt, which is one of the committee's arguments against breaking up banking conglomerates: "The provision of housing finance for individuals or pensions for tomorrow, or of insurance against potential risks for businesses or finance at cost effective rates for their expansion might require the synergies of the combined models."

On housing finance, think subprime and collateralised debt obligations - and ask yourself whether innovation by banking conglomerates has added or detracted from human welfare in recent years.

Here's the thing. The committee was set up by the Chancellor, Alistair Darling. And there's therefore an implication that he endorses what they want.

Which matters. Since it demonstrates that he disagrees with the governor of the Bank of England - who says there is a case for breaking up banks into separate retail and investment operations

And it might suggest Mr Darling concedes that recently the UK hasn't perhaps done enough to shape EU financial proposals, especially those seeking to constrain hedge funds and private equity firms.

But what on earth does it imply about Mr Darling's attitude to tax - since it was only last month that he announced an increase in the top rate of tax and a reduction in relief on pension contributions for high earners, or measures seen in the City as damaging the competitiveness of their industry.

As for what kind of Christmas banks can expect this year, well it's all looking a lot less gloomy than they would have expected a few months ago.

Their shares have trebled and quadrupled over the past few weeks.

Statements today by Barclays and Lloyds indicate that banks should be over the worst.

In the case of both, recession-generated losses on lending to vulnerable companies and individuals are rising - as is inevitable.

But in the case of Lloyds, it has more than enough capital and insurance protection from taxpayers to cope (even though losses generated by corporate lending by HBOS, which it bought in those fraught and controversial circumstances, are still rising in a wince-making way).

Lloyds' core tier one capital ratio is a super-strong 14.5%, which should be enough to withstand anything but economic Armageddon.

For Barclays - as for a number of global banks in investment banking and wholesale banking - it's difficult to see in its figures that the global economy is in a spot of bother.

Its pre-tax profits have risen 15% to £1.4bn in the first three months of the year, even though the contribution from retail and commercial banking has fallen 45%.

However, the early months of this year have been a boom time for investment banks and for banks that help the very biggest companies to raise money.

Barclays has done trebly well, having had the gumption to buy Lehman's US operations for next to nothing last autumn (after the US investment bank collapsed with such damaging consequences for almost everyone on the planet).

Any minute now we'll start to hear complaints not that our banks are almost bust, but that they're making far too much.

Actually, we're not there yet.But in another year or two - after the removal of excess capacity, a widening of margins and a fall in loan losses - banking will again be a very very profitable business.

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Alan Boyle Science editor

Alan Boyle Science editor
As's science editor, Alan Boyle runs a virtual curiosity shop of the physical sciences and space exploration, plus paleontology, archaeology and other ologies that strike his fancy. Since joining in 1996, Boyle has won awards from the National Academies, the American Association for the Advancement of Science, the National Association of Science Writers, the Society of Professional Journalists, the Space Frontier Foundation, the Pirelli Relativity Challenge and the CMU Cybersecurity Journalism Awards program. He is the author of "The Case for Pluto," a contributor to "A Field Guide for Science Writers," the blogger behind Cosmic Log: Bacteria can walk on 'legs' — and an occasional talking head on the MSNBC cable channel. During his 33 years of daily journalism in Cincinnati, Spokane and Seattle, he’s survived a hurricane, a volcanic eruption, a total solar eclipse and an earthquake. He has faith he'll survive the Internet as well.

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