New national debt data: It's growing about $3 million a minute, even during his vacation....

New national debt data: It's growing about $3 million a minute, even during his vacation....

Swallow all liquids in your mouth before reading any further.

Updated numbers for the national debt are just out: It's now $14,639,000,000,000.

When Barack Obama took the oath of office twice on Jan. 20, 2009, CBS' amazing number cruncher Mark Knoller reports, the national debt was $10,626,000,000,000.

That means the debt that our federal government owes a whole lot of somebodies including China has increased $4,247,000,000,000 in just 945 days. That's the fastest increase under any president ever.

Remember the day the Democrat promised to close the embarrassing Guantanamo Bay Detention Facility within one year? That day the national debt increased $4,247,000,000. And each day since that the facility hasn't been closed.

Same for the day in 2009 when Obama flew all the way out to Denver to sign the $787 billion stimulus bill that was going to hold national unemployment beneath 8% instead of the 9.1% we got today anyway? Another $4,247,000,000 that day. And every day since, even Obama golfing and vacation days.

Same sum for the day Obama flew Air Force One nearly four hours roundtrip to Columbus, Ohio for a 10-minute speech about how well the stimulus was working in the politically crucial Buckeye state. Ohio's unemployment rate just jumped to 9% from 8.8% anyway.

Or last week's three-day Midwestern tour in the president's new $1.1 million Death Star bus? National debt went up $16,988,000,000 while he rode around speaking and buying ice cream cones.

Numbers with that many digits are hard to grasp, even for a Harvard head. So, let's put it another way:

One billion seconds ago Bill Clinton was nearing the end of his two terms and George W. Bush's baseball collection was still on the shelves in the Austin governor's office.

The nation's debt increased $4.9 trillion under President Bush too, btw. But it took him 2,648 days to do it. Obama will surpass that sum during this term.

Now, how to portray a trillion, or 1,000 billions. One trillion seconds ago much of North America was still covered by ice sheets hundreds of feet thick. And the land was dotted by only a few dozen Starbuck's.

Obama is saying yes, we can get control of the national debt. But ominously every time he says that he adds that trillions of dollars in infrastructure repairs are badly needed across the country. And with interest rates so low, according to the thinking on Obama's planet, now is an excellent time to borrow even more money.

So, it looks like not too long before Americans learn what comes after 1,000 trillions.

It's quadrillion. But for Bernanke's sake, please don't tell anyone in Washington.

RELATED:

Americans downgrade Congress to historic low 13% job approval

31 months in, Obama says he expects to have his jobs plan in a month or so

Obama bus tour meme: Washington (not him) screwed up and we should spend more

-- Andrew Malcolm

$1.4 Trillion India’s Black Money Stashed in Swiss Banks...

$1.4 Trillion India’s Black Money Stashed in Swiss Banks..., what about others?

By iretire editor on 26 June,

According to the data provided by the Swiss bank, India has more black money than rest of the world combined. India topping the list with almost $1500 Billion black money in swiss banks, followed by Russia $470 Billion, UK $390 Billion, Ukraine $100 Billion and China with $96 Billion.

It’s embarrassing for any country to top the list of black money holders. The money which belongs to the nation and it’s citizens, is stashed in the illegal personal accounts of corrupt politicians, IRS, IPS officers and industrialists. An amount which is 13 times larger than the nations foreign debt. Every year this amount is increasing at a rapid speed but the Indian government seem to be silent over this matter from a very long time. The total black money accounts for 40% of GDP of India, if all the money comes back to India then that could result in huge growth burst for India.

A nation where more than 450 million live below the poverty line, which means they make less than $1.25/day and could probably use an easy cash advances from somebody. By bringing back the black money back to the country there is so much which can be done for the development of the nation and the people who live below poverty line. India will also be able to clear all their foreign debts in 24Hrs. Even if all the taxes are abolished, the government can maintain the country easily for 30 years.

It’s been found that about 80 thousand people travel to Switzerland every year of whom around 25 thousand travel frequently. Those travelling on regular basis must be doing it for some reason.

The Indian government needs to take some serious steps to get the money back to India which is stashed in Swiss banks. They should work to find out the names of account holders in Swiss banks and also pressurize Swiss bank to get the black money back to the country. This has also become a matter of pride of nation and if the government still keeps silence about this issue then they will only be making themselves a laughing stock for the entire world....

Wall Street's utterly corrupt Aristocracy Got $1.2 Trillion From Ben Shalom's Fed...

Wall Street's utterly corrupt Aristocracy Got $1.2 Trillion From Ben Shalom's Fed...

By Bradley Keoun and Phil Kuntz - Aug 22, 2011

Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits.

By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret.

Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.

“These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.”

(View the Bloomberg interactive graphic to chart the Fed’s financial bailout.)

Foreign Borrowers

It wasn’t just American finance. Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS AG (UBSN), which got $77.2 billion. Germany’s Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees.

The largest borrowers also included Dexia SA (DEXB), Belgium’s biggest bank by assets, and Societe Generale SA, based in Paris, whose bond-insurance prices have surged in the past month as investors speculated that the spreading sovereign debt crisis in Europe might increase their chances of default.

The $1.2 trillion peak on Dec. 5, 2008 -- the combined outstanding balance under the seven programs tallied by Bloomberg -- was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

Peak Balance

The balance was more than 25 times the Fed’s pre-crisis lending peak of $46 billion on Sept. 12, 2001, the day after terrorists attacked the World Trade Center in New York and the Pentagon. Denominated in $1 bills, the $1.2 trillion would fill 539 Olympic-size swimming pools.

The Fed has said it had “no credit losses” on any of the emergency programs, and a report by Federal Reserve Bank of New York staffers in February said the central bank netted $13 billion in interest and fee income from the programs from August 2007 through December 2009.

“We designed our broad-based emergency programs to both effectively stem the crisis and minimize the financial risks to the U.S. taxpayer,” said James Clouse, deputy director of the Fed’s division of monetary affairs in Washington. “Nearly all of our emergency-lending programs have been closed. We have incurred no losses and expect no losses.”

While the 18-month U.S. recession that ended in June 2009 after a 5.1 percent contraction in gross domestic product was nowhere near the four-year, 27 percent decline between August 1929 and March 1933, banks and the economy remain stressed.

Odds of Recession

The odds of another recession have climbed during the past six months, according to five of nine economists on the Business Cycle Dating Committee of the National Bureau of Economic Research, an academic panel that dates recessions.

Bank of America’s bond-insurance prices last week surged to a rate of $342,040 a year for coverage on $10 million of debt, above where Lehman Brothers Holdings Inc. (LEHMQ)’s bond insurance was priced at the start of the week before the firm collapsed. Citigroup’s shares are trading below the split-adjusted price of $28 that they hit on the day the bank’s Fed loans peaked in January 2009. The U.S. unemployment rate was at 9.1 percent in July, compared with 4.7 percent in November 2007, before the recession began.

Homeowners are more than 30 days past due on their mortgage payments on 4.38 million properties in the U.S., and 2.16 million more properties are in foreclosure, representing a combined $1.27 trillion of unpaid principal, estimates Jacksonville, Florida-based Lender Processing Services Inc.

Liquidity Requirements

“Why in hell does the Federal Reserve seem to be able to find the way to help these entities that are gigantic?” U.S. Representative Walter B. Jones, a Republican from North Carolina, said at a June 1 congressional hearing in Washington on Fed lending disclosure. “They get help when the average businessperson down in eastern North Carolina, and probably across America, they can’t even go to a bank they’ve been banking with for 15 or 20 years and get a loan.”

The sheer size of the Fed loans bolsters the case for minimum liquidity requirements that global regulators last year agreed to impose on banks for the first time, said Litan, now a vice president at the Kansas City, Missouri-based Kauffman Foundation, which supports entrepreneurship research. Liquidity refers to the daily funds a bank needs to operate, including cash to cover depositor withdrawals.

The rules, which mandate that banks keep enough cash and easily liquidated assets on hand to survive a 30-day crisis, don’t take effect until 2015. Another proposed requirement for lenders to keep “stable funding” for a one-year horizon was postponed until at least 2018 after banks showed they’d have to raise as much as $6 trillion in new long-term debt to comply.

‘Stark Illustration’

Regulators are “not going to go far enough to prevent this from happening again,” said Kenneth Rogoff, a former chief economist at the International Monetary Fund and now an economics professor at Harvard University.

Reforms undertaken since the crisis might not insulate U.S. markets and financial institutions from the sovereign budget and debt crises facing Greece, Ireland and Portugal, according to the U.S. Financial Stability Oversight Council, a 10-member body created by the Dodd-Frank Act and led by Treasury Secretary Timothy Geithner.

“The recent financial crisis provides a stark illustration of how quickly confidence can erode and financial contagion can spread,” the council said in its July 26 report.

21,000 Transactions

Any new rescues by the U.S. central bank would be governed by transparency laws adopted in 2010 that require the Fed to disclose borrowers after two years.

Fed officials argued for more than two years that releasing the identities of borrowers and the terms of their loans would stigmatize banks, damaging stock prices or leading to depositor runs. A group of the biggest commercial banks last year asked the U.S. Supreme Court to keep at least some Fed borrowings secret. In March, the high court declined to hear that appeal, and the central bank made an unprecedented release of records.

Data gleaned from 29,346 pages of documents obtained under the Freedom of Information Act and from other Fed databases of more than 21,000 transactions make clear for the first time how deeply the world’s largest banks depended on the U.S. central bank to stave off cash shortfalls. Even as the firms asserted in news releases or earnings calls that they had ample cash, they drew Fed funding in secret, avoiding the stigma of weakness.

Morgan Stanley Borrowing

Two weeks after Lehman’s bankruptcy in September 2008, Morgan Stanley countered concerns that it might be next to go by announcing it had “strong capital and liquidity positions.” The statement, in a Sept. 29, 2008, press release about a $9 billion investment from Tokyo-based Mitsubishi UFJ Financial Group Inc., said nothing about Morgan Stanley’s Fed loans.

That was the same day as the firm’s $107.3 billion peak in borrowing from the central bank, which was the source of almost all of Morgan Stanley’s available cash, according to the lending data and documents released more than two years later by the Financial Crisis Inquiry Commission. The amount was almost three times the company’s total profits over the past decade, data compiled by Bloomberg show.

Mark Lake, a spokesman for New York-based Morgan Stanley, said the crisis caused the industry to “fundamentally re- evaluate” the way it manages its cash.

“We have taken the lessons we learned from that period and applied them to our liquidity-management program to protect both our franchise and our clients going forward,” Lake said. He declined to say what changes the bank had made.

Acceptable Collateral

In most cases, the Fed demanded collateral for its loans -- Treasuries or corporate bonds and mortgage bonds that could be seized and sold if the money wasn’t repaid. That meant the central bank’s main risk was that collateral pledged by banks that collapsed would be worth less than the amount borrowed.

As the crisis deepened, the Fed relaxed its standards for acceptable collateral. Typically, the central bank accepts only bonds with the highest credit grades, such as U.S. Treasuries. By late 2008, it was accepting “junk” bonds, those rated below investment grade. It even took stocks, which are first to get wiped out in a liquidation.

Morgan Stanley borrowed $61.3 billion from one Fed program in September 2008, pledging a total of $66.5 billion of collateral, according to Fed documents. Securities pledged included $21.5 billion of stocks, $6.68 billion of bonds with a junk credit rating and $19.5 billion of assets with an “unknown rating,” according to the documents. About 25 percent of the collateral was foreign-denominated.

‘Willingness to Lend’

“What you’re looking at is a willingness to lend against just about anything,” said Robert Eisenbeis, a former research director at the Federal Reserve Bank of Atlanta and now chief monetary economist in Atlanta for Sarasota, Florida-based Cumberland Advisors Inc.

The lack of private-market alternatives for lending shows how skeptical trading partners and depositors were about the value of the banks’ capital and collateral, Eisenbeis said.

“The markets were just plain shut,” said Tanya Azarchs, former head of bank research at Standard & Poor’s and now an independent consultant in Briarcliff Manor, New York. “If you needed liquidity, there was only one place to go.”

Even banks that survived the crisis without government capital injections tapped the Fed through programs that promised confidentiality. London-based Barclays Plc (BARC) borrowed $64.9 billion and Frankfurt-based Deutsche Bank AG (DBK) got $66 billion. Sarah MacDonald, a spokeswoman for Barclays, and John Gallagher, a spokesman for Deutsche Bank, declined to comment.

Below-Market Rates

While the Fed’s last-resort lending programs generally charge above-market interest rates to deter routine borrowing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time.

The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland’s RBS Citizens NA unit with $10 billion, Fed data show.

JPMorgan Chase & Co. (JPM), the New York-based lender that touted its “fortress balance sheet” at least 16 times in press releases and conference calls from October 2007 through February 2010, took as much as $48 billion in February 2009 from TAF. The facility, set up in December 2007, was a temporary alternative to the discount window, the central bank’s 97-year-old primary lending program to help banks in a cash squeeze.

‘Larger Than TARP’

Goldman Sachs Group Inc. (GS), which in 2007 was the most profitable securities firm in Wall Street history, borrowed $69 billion from the Fed on Dec. 31, 2008. Among the programs New York-based Goldman Sachs tapped after the Lehman bankruptcy was the Primary Dealer Credit Facility, or PDCF, designed to lend money to brokerage firms ineligible for the Fed’s bank-lending programs.

Michael Duvally, a spokesman for Goldman Sachs, declined to comment.

The Fed’s liquidity lifelines may increase the chances that banks engage in excessive risk-taking with borrowed money, Rogoff said. Such a phenomenon, known as moral hazard, occurs if banks assume the Fed will be there when they need it, he said. The size of bank borrowings “certainly shows the Fed bailout was in many ways much larger than TARP,” Rogoff said.

TARP is the Treasury Department’s Troubled Asset Relief Program, a $700 billion bank-bailout fund that provided capital injections of $45 billion each to Citigroup and Bank of America, and $10 billion to Morgan Stanley. Because most of the Treasury’s investments were made in the form of preferred stock, they were considered riskier than the Fed’s loans, a type of senior debt.

Dodd-Frank Requirement

In December, in response to the Dodd-Frank Act, the Fed released 18 databases detailing its temporary emergency-lending programs.

Congress required the disclosure after the Fed rejected requests in 2008 from the late Bloomberg News reporter Mark Pittman and other media companies that sought details of its loans under the Freedom of Information Act. After fighting to keep the data secret, the central bank released unprecedented information about its discount window and other programs under court order in March 2011.

Bloomberg News combined Fed databases made available in December and July with the discount-window records released in March to produce daily totals for banks across all the programs, including the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, Commercial Paper Funding Facility, discount window, PDCF, TAF, Term Securities Lending Facility and single-tranche open market operations. The programs supplied loans from August 2007 through April 2010.

Rolling Crisis

The result is a timeline illustrating how the credit crisis rolled from one bank to another as financial contagion spread.

Fed borrowings by Societe Generale (GLE), France’s second-biggest bank, peaked at $17.4 billion in May 2008, four months after the Paris-based lender announced a record 4.9 billion-euro ($7.2 billion) loss on unauthorized stock-index futures bets by former trader Jerome Kerviel.

Morgan Stanley’s top borrowing came four months later, after Lehman’s bankruptcy. Citigroup crested in January 2009, as did 43 other banks, the largest number of peak borrowings for any month during the crisis. Bank of America’s heaviest borrowings came two months after that.

Sixteen banks, including Plano, Texas-based Beal Financial Corp. and Jacksonville, Florida-based EverBank Financial Corp., didn’t hit their peaks until February or March 2010.

Using Subsidiaries

“At no point was there a material risk to the Fed or the taxpayer, as the loan required collateralization,” said Reshma Fernandes, a spokeswoman for EverBank, which borrowed as much as $250 million.

Banks maximized their borrowings by using subsidiaries to tap Fed programs at the same time. In March 2009, Charlotte, North Carolina-based Bank of America drew $78 billion from one facility through two banking units and $11.8 billion more from two other programs through its broker-dealer, Bank of America Securities LLC.

Banks also shifted balances among Fed programs. Many preferred the TAF because it carried less of the stigma associated with the discount window, often seen as the last resort for lenders in distress, according to a January 2011 paper by researchers at the New York Fed.

After the Lehman bankruptcy, hedge funds began pulling their cash out of Morgan Stanley, fearing it might be the next to collapse, the Financial Crisis Inquiry Commission said in a January report, citing interviews with former Chief Executive Officer John Mack and then-Treasurer David Wong.

Borrowings Surge

Morgan Stanley’s borrowings from the PDCF surged to $61.3 billion on Sept. 29 from zero on Sept. 14. At the same time, its loans from the Term Securities Lending Facility, or TSLF, rose to $36 billion from $3.5 billion. Morgan Stanley treasury reports released by the FCIC show the firm had $99.8 billion of liquidity on Sept. 29, a figure that included Fed borrowings.

“The cash flow was all drying up,” said Roger Lister, a former Fed economist who’s now head of financial-institutions coverage at credit-rating firm DBRS Inc. in New York. “Did they have enough resources to cope with it? The answer would be yes, but they needed the Fed.”

While Morgan Stanley’s Fed demands were the most acute, Citigroup was the most chronic borrower among the largest U.S. banks. The New York-based company borrowed $10 million from the TAF on the program’s first day in December 2007 and had more than $25 billion outstanding under all programs by May 2008, according to Bloomberg data.

Tapping Six Programs

By Nov. 21, when Citigroup began talks with the government to get a $20 billion capital injection on top of the $25 billion received a month earlier, its Fed borrowings had doubled to about $50 billion.

Over the next two months the amount almost doubled again. On Jan. 20, as the stock sank below $3 for the first time in 16 years amid investor concerns that the lender’s capital cushion might be inadequate, Citigroup was tapping six Fed programs at once. Its total borrowings amounted to more than twice the federal Department of Education’s 2011 budget.

Citigroup was in debt to the Fed on seven out of every 10 days from August 2007 through April 2010, the most frequent U.S. borrower among the 100 biggest publicly traded firms by pre- crisis market valuation. On average, the bank had a daily balance at the Fed of almost $20 billion.

‘Help Motivate Others’

“Citibank basically was sustained by the Fed for a very long time,” said Richard Herring, a finance professor at the University of Pennsylvania in Philadelphia who has studied financial crises.

Jon Diat, a Citigroup spokesman, said the bank made use of programs that “achieved the goal of instilling confidence in the markets.”

JPMorgan CEO Jamie Dimon said in a letter to shareholders last year that his bank avoided many government programs. It did use TAF, Dimon said in the letter, “but this was done at the request of the Federal Reserve to help motivate others to use the system.”

The bank, the second-largest in the U.S. by assets, first tapped the TAF in May 2008, six months after the program debuted, and then zeroed out its borrowings in September 2008. The next month, it started using TAF again.

On Feb. 26, 2009, more than a year after TAF’s creation, JPMorgan’s borrowings under the program climbed to $48 billion. On that day, the overall TAF balance for all banks hit its peak, $493.2 billion. Two weeks later, the figure began declining.

“Our prior comment is accurate,” said Howard Opinsky, a spokesman for JPMorgan.

‘The Cheapest Source’

Herring, the University of Pennsylvania professor, said some banks may have used the program to maximize profits by borrowing “from the cheapest source, because this was supposed to be secret and never revealed.”

Whether banks needed the Fed’s money for survival or used it because it offered advantageous rates, the central bank’s lender-of-last-resort role amounts to a free insurance policy for banks guaranteeing the arrival of funds in a disaster, Herring said.

An IMF report last October said regulators should consider charging banks for the right to access central bank funds.

“The extent of official intervention is clear evidence that systemic liquidity risks were under-recognized and mispriced by both the private and public sectors,” the IMF said in a separate report in April.

Access to Fed backup support “leads you to subject yourself to greater risks,” Herring said. “If it’s not there, you’re not going to take the risks that would put you in trouble and require you to have access to that kind of funding.”

TAPI deals nudge pipeline nearer reality, Putin ignores gathering economic storm....

TAPI deals nudge pipeline nearer reality, Putin ignores gathering economic storm....
By Robert M Cutler

MONTREAL - Negotiations this month have opened the way to conclusion of a Gas Sales Price Agreement for the Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline, despite a number of obstacles still remaining.

On August 18, a Turkmenistan-Afghanistan meeting at the level of technical experts from the two countries' competent ministries reached agreement on a number of implementation and construction issues, also including their economic provisions, according to reports by the State News Agency of Turkmenistan.

Agreement has also been reached bilaterally between Turkmenistan and India over the price of the former's natural gas to the latter. India had proposed a price of US$460 per thousand cubic meters (tcm) to Ashgabat, which had counter-offered $505-$525/tcm. New Delhi did not want to pay a price making TAPI gas more expensive than the liquefied natural gas (LNG) that it already imports, mainly from Qatar. Natural gas represents only 6% of India's total energy consumption, and the country is keen to increase that proportion.

The four countries signed in Ashgabat last December 11 an intergovernmental agreement that was complemented by a framework document approved by the respective energy ministers. According to Turkmenistani sources, it confirmed that the 1,735-kilometer pipeline would be built in Afghanistan alongside the road from Herat to Kandahar (and at least partly underground to deter terrorist attacks), then routed by way of Quetta and Multan in Pakistan to reach the Indian border town of Fazilka.

The pipeline would carry 33 billion cubic meters per year (bcm/y) of gas, and the approximately $7.6 billion cost would be one-third financed by the Asian Development Bank (ADB), which is willing to provide a large part of Pakistan's equity in the project. The country desperately need to import energy to satisfy growing domestic demand.

The framework document foresaw that Turkmenistan would hold three bilateral meetings with each of the other participating states to discuss prices, transit tariffs and other supply conditions. Following those consultations, another joint meeting of the four was planned to coordinate all the sales and purchase contracts and sign them together.

The bilateralism of the preliminary consultations has given a certain advantage to Turkmenistan. Afghanistan, India, and Pakistan had continually sought a uniform price deal from Turkmenistan, which wanted to negotiate individually with each of the other three. Pakistan in particular asserted it would cause political problems for Islamabad if there were different prices for different countries.

Now that Turkmenistan and India have reached a bilateral agreement, unnamed top officials in Pakistan have told the Islamabad news agency The News that "it seems Turkmenistan is not inclined [to sell] gas to Pakistan at the same price at which it is selling to India", so they have informed Turkmenistan "Pakistan will match the lowest gas price between the seller and buyer country". Bilateral talks scheduled earlier this week in Ashgabat have been postponed for a month.

There is still wiggle room, as Turkmenistan has announced that it will have to build a plant to take sulfur out the gas that it produces before the gas enters the pipeline (otherwise corrosion becomes a greater risk over the longer term), and that as a result the prices to all parties will be increased.

It was originally thought that the gas for TAPI would come from Turkmenistan's Dauletabad deposit, but last year Ashgabat informed its partners that gas would instead come from the newer South Yolotan-Osman field that is already also supplying gas to China. This facilitates an eventual decision for Turkmenistan to participate in the planned Nabucco natural gas pipeline (from Azerbaijan through Turkey to southeast and central Europe), because it frees up product from Dauletabad in Turkmenistan's southeast to transit the 900-kilometer domestic East-West Pipeline (EWP) that Ashgabat is now rebuilding and which ends close to the country's Caspian Sea coastline.

The EWP, projected to carry a volume of 30 bcm/y, could be connected up to an eventual undersea Trans-Caspian Gas Pipeline (TCGP). Good progress has been made over the past two years in TCGP negotiations with Azerbaijan, particularly since Turkmenistan's President Gurbanguly Berdimuhamedow declared last December in Baku that he did not think permission for its construction was required from any other Caspian Sea littoral states. The TCGP would in turn contribute to Nabucco's volumes.

Separately from the TAPI project, Turkmenistan has built a gas processing plant on its Caspian Sea coastline to handle 5-10 bcm/y from an offshore block that has been developed by the Malaysian firm Petronas. Turkmenistan's state media reported early last week that this gas will soon be exported, although it has not specified the route.

Candidates include the Azerbaijan-Georgia-Romania Interconnector (AGRI) project across the Black Sea for LNG and a separate compressed natural gas (CNG) project across the Black Sea to Bulgaria, in addition to the eventual Nabucco pipeline.

By Pavel K Baev

The volatile turbulence that battered the world economy last week should have passed Russia by, but it did not. Indeed, Russia is not burdened by a massive debt, is spared political feuds about budget cuts and is not even exposed to the looming Greek default; nevertheless, its stock exchange fell deeper than most.

In the United States, the Dow Jones Industrials Average opened this Monday on about the same level it was a week ago, while in Moscow the RTS slipped from the plateau of about 11,600 to a low of 9,600 and barely bounced to 9,900 on Friday. Certainly, the speculative games are only a symptom, and not necessarily a reliable one, of the real economic trends, but statistics suggest that Russia's economic growth slowed down in the second quarter, and experts argue that the country is entering into the new phase of turmoil, for which it is no better prepared than it was in mid-2008.

Most world leaders frequently hold emergency sessions of their cabinets and try to convince opposition parties to accept austerity packages, but Prime Minister Vladimir Putin remains supremely relaxed. He made a few headlines with a loose remark about US "parasitism" on the global economy and advised scared markets to calm down, but obviously sees no burning need in his trademark "manual management".

It was his diving in the Black Sea that received most media attention, when he discovered two ancient amphorae in a shallow bay that had been thoroughly searched by archeologists and combed by the security service, a feat that has given much joy to Russian bloggers. Perhaps playing these PR-games is indeed the best Putin could do in a situation where the US dollar and the euro are seriously unstable, but the rouble is "unpatriotically" depreciating against both.

It is exactly Putin's confident steering that has made the Russian economy so vulnerable to the swings of markets' moods because he took particular pride in rising pensions and other social programs, which has made the budget seriously over-loaded with irreducible obligations.

In the next few years, steep increases of funding for law enforcement and rearmament are earmarked, but the stagnation of revenues guarantees the execution of severe cuts in populist and militarist commitments, which could hardly be postponed longer than a few months after the presidential elections in spring 2012.

The foreboding in the middle classes translates into the deepening and widening urge to move away from the crumbling "stability". It also drives the discontent with the too generous federal funding for the North Caucasus where the smoldering civil war has become a profitable business for local elites.

Russian corporate debt is now higher than it was in 2008, and the reserve fund is depleted, so the solvency is entirely a function of high-and-rising petro-revenues, which are in fact flat with a tendency to fall. Russian oil companies are bracing for lower profit margins, but it is the almighty Gazprom that feels threatened by the shrinking demand in Europe and the falling prices on the spot market.

Sticking to the letter of its treasured long-term contracts, Gazprom has shown so little flexibility on prices that now even its trusted German partner E.ON is taking it to court for abusing its monopolistic position. Desperate demands for price cuts come also from Ukraine, where former prime minister Yulia Timoshenko is even behind bars for signing an allegedly detrimental gas deal with Russia in January 2009.

Moscow is not impressed with this politicized investigation, and the meeting between President Dmitry Medvedev and Ukraine's President Viktor Yanukovych in Sochi last week brought no compromise. Russia has no interest in pushing Ukraine to bankruptcy and it is not even pressing Putin's proposal for Gazprom's "big-brotherly" takeover of Ukrainian Naftogaz; it appears to pursue the simple aim of revenue maximization.

This reduction of the political agenda to securing the inflow of petro-dollars shows that Russian rulers believe that in the dawning era of market volatility and "quantitative easing" of major currencies the value of oil and gas as secure assets is set to grow. This goes against Medvedev's "modernization" discourse based on the lesson from the painful contraction of 2008-2009, which pointed to the unacceptable risk of over-dependency upon energy exports.

The key pre-condition for modernization is investment, but entrepreneurs showed only superficial enthusiasm for Medvedev's "innovations", while strategically moving their money out of Russia. In the last week, this trickling-out turned into a current, as investment funds evacuated from the Russian market more than $400 million.

Even in the energy sector, modernization is not happening, and the failed attempt to build the "Bolshoi Petroleum" alliance between the BP and Rosneft, torpedoed by vicious business-political intrigues, testifies to that.

Anxiety about Russia's entry into a new phase of economic crisis is inevitably influenced by the reflections on the collapse of the USSR, because this week marks the 20th anniversary of the military putsch that sought to rescue the imploding super-power and instead precipitated its demise.

Public opinion remains divided and more sour than celebratory about that event, and Putin is hardly going to orate about it, but it has definitely left a deep scar on the national psyche. The shock from seeing tanks in Moscow streets has long been erased by impressions from too many other tanks burning in the squares of Grozny or rolling towards Tbilisi, but the sinking feeling of living through a state failure is back.

It was the military-industrial complex that bankrupted the oil-based Soviet economy in the 1980s, and now it is the corrupt bureaucracy that proceeds along the same track. Putin is both the master and the servant of this system that has extracted from Russia value exceeding the limits of economic self-reproduction, and he is set to preside over the unraveling.

Dr Pavel K Baev is a senior researcher at the International Peace Research Institute, Oslo.

SEC Has Shredded Documents for Decades to Cover Up Wall Street Fraud, Corruption at the top leads to lawlessness...

SEC Has Shredded Documents for Decades to Cover Up Wall Street Fraud, Corruption at the top leads to lawlessness by the people.....

The Real Reason the SEC Has Been Shredding Documents For Decades...

SEC Attorney Reveals that Agency Has Shredded Documents for Decades to Cover Up Wall Street's monstrous Fraud...

What should we make of the new revelations by Securities and Exchange Commission attorney Darcy Flynn (background here, here and here) that the SEC has been shredding documents for decades?

As many commentators have noted, the SEC did this to cover up fraud on Wall Street.

The Entire Government Strategy Is To Cover Up Fraud

William K. Black - professor of economics and law, and the senior regulator during the S & L crisis - says that that the government's entire strategy now - as during the S&L crisis - is to cover up how bad things are:

The entire strategy is to keep people from getting the facts.

Top Government Officials Created the Conditions In Which Fraud Would Flourish

last year:

It is not only a matter of covering up fraud that has already happened. The government also created an environment which greatly encouraged fraud.

Here are just a few of many potential examples:

• The government-sponsored rating agencies committed massive fraud
• The Treasury department allowed banks to "cook their books"
• Business Week wrote on May 23, 2006:

"President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations."

• Regulators knew of and allowed the use of debt-hiding accounting tricks by the big banks
  

• Tim Geithner was complicit in Lehman's accounting fraud, and pushed to pay AIG's CDS counterparties at full value, and then to keep the deal secret. And as Robert Reich notes, Geithner was "very much in the center of the action" regarding the secret bail out of Bear Stearns without Congressional approval. William Black points out: "Mr. Geithner, as President of the Federal Reserve Bank of New York since October 2003, was one of those senior regulators who failed to take any effective regulatory action to prevent the crisis, but instead covered up its depth"
  

• The former chief accountant for the SEC says that Bernanke and Paulson broke the law and should be prosecuted

• Freddie and Fannie helped to create the epidemic of mortgage fraud

• The government knew about mortgage fraud a long time ago. For example, the FBI warned of an "epidemic" of mortgage fraud in 2004. However, the FBI, DOJ and other government agencies then stood down and did nothing. See this and this. For example, the Federal Reserve turned its cheek and allowed massive fraud, and the SEC has repeatedly ignored accounting fraud. Indeed, Alan Greenspan took the position that fraud could never happen

• Bernanke might have broken the law by letting unemployment rise in order to keep inflation low

• Paulson and Bernanke falsely stated that the big banks receiving Tarp money were healthy, when they were not

• Arguably, both the Bush and Obama administrations broke the law by refusing to close insolvent banks

• Congress may have covered up illegal tax breaks for the big banks

• Of course, deregulation by Larry Summers, Robert Rubin, Phil Gramm and many other high-level politicians and regulators also helped to grease the skids for fraud

Economist James K. Galbraith wrote in the introduction to his father, John Kenneth Galbraith's, definitive study of the Great Depression, The Great Crash, 1929:

The main relevance of The Great Crash, 1929 to the great crisis of 2008 is surely here. In both cases, the government knew what it should do. Both times, it declined to do it. In the summer of 1929 a few stern words from on high, a rise in the discount rate, a tough investigation into the pyramid schemes of the day, and the house of cards on Wall Street would have tumbled before its fall destroyed the whole economy. In 2004, the FBI warned publicly of "an epidemic of mortgage fraud." But the government did nothing, and less than nothing, delivering instead low interest rates, deregulation and clear signals that laws would not be enforced. The signals were not subtle: on one occasion the director of the Office of Thrift Supervision came to a conference with copies of the Federal Register and a chainsaw. There followed every manner of scheme to fleece the unsuspecting ....

This was fraud, perpetrated in the first instance by the government on the population, and by the rich on the poor.

***

The government that permits this to happen is complicit in a vast crime.

In other words, the fraud started at the very top with Greenspan, Bush, Paulson, Negraponte, Bernanke, Geithner, Rubin, Summers and all of the rest of the boys.

As William Black told me today:

In criminology jargon: they created an intensely criminogenic environment. I have no knowledge whether the national security aspects played any role, but the anti-regulatory dogma was devastating.

(Here's the definition for criminogenic.)

last month:

Fraud caused the Great Depression and it has caused the current financial crisis. But fraud is not not being prosecuted, and so it will occur again and again, and prevent a sustainable economic recovery.

Numerous economists have been saying this for years. :

Nobel prize winning economist George Akerlof has demonstrated that failure to punish white collar criminals - and instead bailing them out- creates incentives for more economic crimes and further destruction of the economy in the future. Indeed, William Black notes that we've known of this dynamic for "hundreds of years".

Now mainstream journalists are starting to catch on.

Market Watch senior columnist Brett Arends writes:

No one has been punished. Executives like Dick Fuld at Lehman Brothers and Angelo Mozilo at Countrywide, along with many others, cashed out hundreds of millions of dollars before the ship crashed into the rocks. Predatory lenders and crooked mortgage lenders walked away with millions in ill-gotten gains. But they aren’t in jail. They aren’t even under criminal prosecution. They got away scot-free. As a general rule, the worse you behaved from 2000 to 2008, the better you’ve been treated. And so the next crowd will do it again. Guaranteed.

Gretchen Morgenson and Louise Story point out in the New York Times that:

As the financial storm brewed in the summer of 2008 ... Federal prosecutors officially adopted new guidelines about charging corporations with crimes — a softer approach that, longtime white-collar lawyers and former federal prosecutors say, helps explain the dearth of criminal cases despite a raft of inquiries into the financial crisis.

Though little noticed outside legal circles, the guidelines were welcomed by firms representing banks. The Justice Department’s directive, involving a process known as deferred prosecutions, signaled “an important step away from the more aggressive prosecutorial practices seen in some cases under their predecessors,” Sullivan & Cromwell, a prominent Wall Street law firm, told clients in a memo that September.

***

“If you do not punish crimes, there’s really no reason they won’t happen again,” said Mary Ramirez, a professor at Washburn University School of Law and a former assistant United States attorney. “I worry and so do a lot of economists that we have created no disincentives for committing fraud or white-collar crime, in particular in the financial space.”

(This appears to be true on both sides of the Atlantic.)

And Frank Rich reports in a much-discussed piece in the New Yorker:

What haunts the Obama administration is what still haunts the country: the stunning lack of accountability for the greed and misdeeds that brought America to its gravest financial crisis since the Great Depression. There has been no legal, moral, or financial reckoning for the most powerful wrongdoers. Nor have there been meaningful reforms that might prevent a repeat catastrophe. Time may heal most wounds, but not these. Chronic unemployment remains a constant, painful reminder of the havoc inflicted on the bust’s innocent victims. As the ghost of Hamlet’s father might have it, America will be stalked by its foul and unresolved crimes until they “are burnt and purged away.”

After the 1929 crash, and thanks in part to the legendary Ferdinand Pecora’s fierce thirties Senate hearings, America gained a Securities and Exchange Commission, the Public Utility Holding Company Act, and the Glass-Steagall Act to forestall a rerun. After the savings-and-loan debacle of the eighties, some 800 miscreants went to jail. But those who ran the central financial institutions of our fiasco escaped culpability (as did most of the institutions). As the indefatigable Matt Taibbi has tabulated, law enforcement on Obama’s watch rounded up 393,000 illegal immigrants last year and zero bankers. The Justice Department’s bally­hooed Operation Broken Trust has broken still more trust by chasing mainly low-echelon, one-off Madoff wannabes.

***

Those in executive suites at the top of that chain have long since fled the scene with the proceeds, while bleeding shareholders, investors, homeowners, and ­cashiered employees were left with the bills. The weak Dodd-Frank financial-reform law that rose from the ruins remains largely inoperative ....

Utter fraud is Wall Street's business model, which is being supported by the government:

Nobel prize-winning economist George Akerlof demonstrated that if big companies aren't held responsible for their actions, the government ends up bailing them out. So failure to prosecute directly leads to a bailout.

Moreover, last month:

Fraud benefits the wealthy more than the poor, because the big banks and big companies have the inside knowledge and the resources to leverage fraud into profits. Joseph Stiglitz noted in September that giants like Goldman are using their size to manipulate the market. The giants (especially Goldman Sachs) have also used high-frequency program trading (representing up to 70% of all stock trades) and high proportions of other trades as well). This not only distorts the markets, but which also lets the program trading giants take a sneak peak at what the real traders are buying and selling, and then trade on the insider information. See this, this, and this.

Similarly, JP Morgan Chase, Bank of America, Goldman Sachs, Citigroup, and Morgan Stanley together hold 80% of the country's derivatives risk, and 96% of the exposure to credit derivatives. They use their dominance to manipulate the market.

Fraud disproportionally benefits the big players (and helps them to become big in the first place), increasing inequality and warping the market.

[And] Professor Black says that fraud is a large part of the mechanism through which bubbles are blown.

***

Finally, failure to prosecute mortgage fraud is arguably worsening the housing crisis. See this.

The government has not only turned the other cheek, but aided and abetted the fraud.

***

And this environment is ongoing today. .

***

Even when the government has prosecuted financial crime (because public outrage became too big to ignore), the government has settled for pennies on the dollar [as a way to quietly bail out the big banks].

Corruption At the Top Leads to Lawlessness By The People

Corruption at the top leads to lawlessness by the people.

Unfortunately, the lawlessness by those at the top will lead to lawlessness by the people. This will lead to the break down of the economy and the financial system ... and society as a whole.

Talk junk, get junk....
By Reuven Brenner

Between 1826 and1830, Spain, Mexico and Brazil defaulted on their debt. Between the 1890s and 1900, Argentina, Brazil , Venezuela and Portugal defaulted on theirs. To get back some of their investment, the French and German fleets went down to Caracas in 1902, and bombarded it for a week. Then they put a chain up and charged a tax on each ship going into Caracas harbor. Between 1931 and 1940, Brazil, Mexico, Chile and Peru have again defaulted on their debt.

The debt crises between the two world wars started with the 1929 default of Bolivia, but it was in Central Europe in 1931 that the biggest collapse took place. The German run came next, with devastating effects.

The crisis was caused by German fears of political instability (in 1930 both Nazis and communists performed well during the elections), and resulted in a massive capital flight. British and American bankers thought that the situation would calm, did not withdraw their loans, and then saw their accounts frozen.

Germany's inability to repay war reparations led to the breakdown of the multilateral system of free trade. The United States introduced tariff restrictions in the Hawley-Smoot Act, which further deteriorated the situation around the world.

The Germans blamed the banks and - what's new? - Jewish financiers for conspiracy. It then advocated default in the name of race and patriotism. After the Nazis came to power, they used the foreign assets locked in Germany to induce Switzerland and Britain to adopt less hostile policies toward the new German government. Frozen debt (call it blackmail) turned out to be an effective tool in preventing the West from getting its act together.

In Vietnam , the local currency debts of the South Vietnamese regime were repudiated when the communists took control in 1975. The new rulers considered the debts illegitimate. The Russian communists took a similar line in 1917.

Argentina defaulted again in 1982. Inflation ran rampant for many years, and the government, to borrow in its own currency, had to promise to pay interest rates above the inflation rate. It did so by printing more money. The government decided to abrogate the contracts. In 2002, Argentina defaulted again.

Ecuador's announcement in March 1987 that it was suspending interest payments for the rest of the year on its US$8.2 billion foreign debt was the continuation of a sequence of misjudgments. It began in August 1982, when Mexico announced it could not pay debts. It then continued with Brazil in February 1987, which first suspended interest payments on $67 billion of medium and long-term debt, then froze repayment of $15 billion it owed foreign banks.

The total losses from loans to developing countries from 1970s to 1990s, mainly to governments and as "foreign aid", have been estimated in the $1 trillion range.

Lessons from these events are relevant today because they point to the roles "intellectuals' jargons and theories" - real junk (racism having been just one of them) - have played. Today misguided Keynesian theories and the jargon of aggregates wreak havoc.

To show how, 17th-century Spain offers another good example. Spain's empire during the 16th and 17th centuries supplied its kings with silver and gold, and helped fight for European dominance in the Netherlands, France and Italy.

When spending was more than revenues, credit was either raised by banks in southern Germany and Genoa, or swapped from short-term high interest rate loans for "eternal" bonds with lower interests. Why did the bankers do that? No, not because hope is eternal.

The bankers were given offers they could not refuse. In 1576, when conquering Antwerp, the Spanish troops forced the Augsburg house of Fugger to advance a "loan" of 8 million Rhenish guilden (about $500 million to $800 million today, though such comparisons are tenuous). This Spanish paper did not pay debts.

Neither did others. By 1598, the King of Spain gave the church's hierarchy the role to renegotiate the debt. The king thought that only they could rationalize default by using theological arguments, making a financial issue sound like a moral one, which the lenders could not oppose.

The idea of using the veil of language to make the other side pay was borrowed by both the Nazis and Latin American dictators. However, by then "morality" had to do with race and patriotism rather than the traditional religious vocabulary.

Today, macroeconomics and its jargon, with its strange, simplistic view of both monetary and fiscal policy, with utter disregard to institutional details, are the new religion. The fact that economics departments at universities teach it as "science" should have long been taken with grains of salt: astrology was perceived as science too for 100 years, before disappearing in a puff.

By now, morality, ethics, or any notion of honor has lost their association with religion, race, or patriotism. Policies became rationalized by armies of subsidized academics and think tanks. Subsidies to universities and "academic" publications have turned the resulting output into what I often call "the sciences of political lies".

These subsidies themselves have been an unintended consequence of the 1958 National Defense Education Act of 1958. The government threw so much money to the quick expansion of US universities that it vastly exceeded the talent pool. Aldous Huxley quickly identified the devastating long-term impact on universities back in 1963:

A large number of young people take up scientific research as a career these days, but few are impelled into it by a passionate curiosity as to the secrets of nature. For the vast majority it is a job like any other job. It is not generally realized outside of academic circles how far a mediocre research worker can get.

In commerce and industry there are those who are exceptionally endowed with brilliance, ruthlessness or luck and achieve proportionate success; then come the vast majority who somehow manage to get through, and the minority who go under.

The proportion of scientists who actually go under is probably much lower and the weeding process is correspondingly less effective. Indeed, the relative security and stability of the research career are probably more attractive to mediocrities than the romance of inquiry to the brilliant ones.

Getting rid of the incomprehensible aggregate jargons used today to both describe the situation and look for remedies for the present crisis would quickly bring attention to details about present institutional arrangements and be forced to ask: What's behind these big numbers? How much bureaucracy? How much money really goes to the destitute, the sick, to education - and how much to the "poverty, health and education bureaucracies" (including their generous pension plans)? Is the way the central banks and the banking sector operate today, a source of stability or instability? Why is "democracy" as practiced now unable to correct mistakes more quickly?

What the US has to do is simple in principle - which does not imply that it is easy to execute. It must create massive equity bottom up. Only old-fashioned "entrepreneurial capitalism" can do the trick. To achieve that the language of the debate must be drastically changed. The tools and jargons of macroeconomics and of monetary policies pursued simply mislead.

Reuven Brenner holds the Repap Chair at McGill University 's Desautels Faculty of Management.

Chavez Nationalizes Venezuela's Gold Industry, Scramble for Physical Gold From JP Morgan and Others may follow...

Chavez Nationalizes Venezuela's Gold Industry, Scramble for Physical Gold From JP Morgan and Others may follow...



Chavez Nationalizes Venezuela's Gold Industry, Recalls Hundreds of Tons of Gold Held Abroad, May Cause a Scramble for Physical Gold From JP Morgan and Others....OTC Sells Gold it does NOT have!


The two biggest stories of the day - in case you missed them - were that Venezuelan president Chavez is nationalizing the country's gold industry, and he's recalling hundreds of tons of gold held in European banks back to Venezuela.

As Zero Hedge notes:


As the WSJ reported earlier, "The Bank of England recently received a request from the Venezuelan government about transferring the 99 tons of gold Venezuela holds in the bank back to Venezuela, said a person familiar with the matter. A spokesman from the Bank of England declined to comment whether Venezuela had any gold on deposit at the bank." That's great, but not really a gamechanger. After all the BOE should have said gold. What could well be a gamechanger is that according to an update from Bloomberg, Venezuela has gold with, you guessed it, JP Morgan, Barclays, and Bank Of Nova Scotia. As most know, JPM is one of the 5 vault banks. The fun begins if Chavez demands physical delivery of more than 10.6 tons of physical because as today's CME update of metal depository statistics, JPM only has 338,303 ounces of registered gold in storage. Or roughly 10.6 tons. A modest deposit of this size would cause some serious white hair at JPM as the bank scrambles to find the replacement gold, which has already been pledged about 100 times across the various paper markets. Keep an eye on gold in the illiquid after hour market. The overdue scramble for delivery may be about to begin.

Both developments could be bullish for gold prices, as nationalizing Venezuela's gold means less gold available in the free market, and the scramble for physical gold to make good on Venezuela's recall demand could challenge the 100-to-1 leverage levels of paper gold derivatives to physical gold.



OTC Sells Gold it does NOT have!



http://www.youtube.com/watch?feature=player_embedded&v=BfCn8NlLHko

Pakistan Seeks Local Funds for Iran Gas Deal Opposed by Zioconned U.S.A.....

Pakistan Seeks Local Funds for Iran Gas Deal Opposed by the utterly corrupt and criminal Zioconned U.S.A.....

By Haris Anwar

Pakistan plans to borrow $300 million from local banks to build a pipeline that will carry natural gas from neighboring Iran, easing its worst energy crisis that is curbing economic growth.

Local state-owned companies will provide about $210 million in equity for the $1.3 billion pipeline, said Mobin Saulat, acting managing director of Inter State Gas Systems Ltd., the agency responsible for the project. Pakistan may approach foreign companies including OAO Gazprom, International Petroleum Investment Co. and China National Petroleum Corp. for the rest of the financing, he said.

“We’ve done the market testing to see the appetite among local banks,” Saulat said in an interview Aug. 11. “The signal we’ve got is that around $300 million can be raised from a local consortium.”

Domestic funding is crucial because U.S. and international sanctions against Iran, imposed over concerns that the country is trying to build nuclear weapons, are likely to block Western and multilateral funding.

Pakistan is pursuing the Iranian gas deal as its ties with the U.S. have come under strain this year following a seven-week standoff over Pakistan’s detention of an American CIA contractor who had killed two Pakistanis, and the May assault by American forces that killed al-Qaeda leader Osama bin Laden in the Pakistani town of Abbottabad.

Fuel Shortages

“The biggest question mark on this project is still the availability of funding,” said Hasan-Askari Rizvi, a Lahore- based analyst. “There are signs that the Americans are softening their opposition to this project given the severity of the energy crisis in Pakistan.”

Fuel shortages in Pakistan have forced the government to ration supplies, cutting power for as much as half the day in major cities and triggering street protests against the government of Prime Minister Yousuf Raza Gilani.

Inter State Gas, based in Islamabad, is responsible for completion of the pipeline by 2014, a deadline agreed on by the two countries last year after political and security concerns delayed the project by a decade. Under an accord signed in June 2010, Iran will provide about 21.5 million cubic meters of gas a day to Pakistan for 25 years. The deal can be extended by five years and volumes may rise to 30 million cubic meters a day.

The U.S. last year tightened its sanctions, which target Iran’s energy sector, and the administration of President Barack Obama has publicly supported an alternative gas pipeline project, from Turkmenistan to Afghanistan, Pakistan and India, that would bypass Iran.

Sanctions

Economic sanctions by the United Nations, the EU and the U.S. over Iran’s nuclear programhave discouraged investment in the Persian Gulf country. Royal Dutch Shell Plc, Europe’s biggest oil company, and Repsol YPF SA of Spain pulled out of a project in Iran’s South Pars gas field last year.

China National Petroleum, known as CNPC, replaced Total SA at the field in 2009 after the French company postponed an investment citing Iran’s strained relations with the West.

“So far, the sanctions primarily focus on development of the fields,” Saulat said. “Iran is currently engaged in exporting gas to Turkey through a pipeline and importing gas from Turkmenistan. There was never a pipeline-specific sanction.”

State-owned companies that may collectively buy a majority stake in the planned pipeline include Government Holdings Ltd., Sui Southern Gas Co. and Sui Northern Gas Pipeline (SNGP), he said. Pakistan is seeking $900 million in debt and $400 million in equity funding for the project.

Overseas Companies

Gazprom, the Russian gas-export monopoly, International Petroleum Investment, an arm of the Abu Dhabi government, and CNPC have all shown interest in the venture, Saulat said. Gazprom may fund and help build the 780-kilometer (485-mile) pipeline, he said, declining to elaborate.

Liu Weijiang, Beijing-based director of CNPC’s international department, didn’t answer three calls to his office and mobile phones. Calls and an e-mail to an IPIC spokesman yesterday after business hours in the Ramadan holy month weren’t immediately returned. A press officer at Gazprom, who couldn’t be identified in line with company policy, declined to say whether the company is interested in the project.

Pakistan’s gas shortfall is forecast to reach 2.22 billion cubic feet a day in the fiscal year that began July 1, according to government data. The shortage has forced the government to ration supplies to cars that run on compressed natural gas, while the biggest cities have faced blackouts for as long as 12 hours a day.

Energy Mix

Last year, 53 percent of Pakistan’s energy came from natural gas, 30 percent from oil and the rest from coal, nuclear and hydropower, according to data from BP Plc. Pakistan produced 39.5 billion cubic meters of gas in 2010, or 3.8 billion cubic feet a day, according to BP.

Inter State Gas invited banks last month to help arrange the funding and plans to seek bids for construction next month, Saulat said.

The pipeline will carry gas from the South Pars field via Baluchistan province in southwest Pakistan to an off-take point in Nawabshah. South Pars, which extends from Qatar’s North Field, is the largest known gas deposit in the world.

“We are doing things in parallel for the expeditious completion of this project,” Saulat said. “There is a huge shortfall and we need to work on many options to meet that growing demand.”

Vladimir Putin sets sights on Eurasian economic union...

Vladimir Putin sets sights on Eurasian economic union...

Twenty years after the Soviet Union collapsed, Vladimir Putin, the Russian prime minister, may not, as is sometimes alleged, be trying to recreate it. But he is pursuing a different project – to build a “quasi-European Union” out of former Soviet states.

A customs union he launched a year ago between Russia, Belarus and Kazakhstan has already removed tariffs and customs controls along the three states’ internal borders.

Come January this is due to expand into a “common economic space”, ensuring free movement of goods, services and capital across a single market of 165m people – 60 per cent of the former Soviet population.

At a Moscow summit this month, prime ministers of the three states set an even more ambitious target – turning the grouping into a “Eurasian economic union” by 2013. There is even talk, down the line, of a common currency.

Full article here