Patriot Coal Files for Bankruptcy Protection in New York

By Tiffany Kary and Dawn McCarty - Jul 10, 2012 5:03 AM GMT+0700

Patriot Coal Corp. (PCX) filed for bankruptcy after milder winters and a shift to natural gas sent coal demand to a 24-year low.

The company’s Chapter 11 petition listed $3.57 billion in assets and $3.07 billion in debts. The filing in U.S. Bankruptcy Court in Manhattan said dozens of the company’s units would join in the filing.

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July 9 (Bloomberg) -- Carol Massar reports Patriot Coal Corp. has filed for bankruptcy after milder winters and a shift to natural gas has sent coal demand to a 24-year low. She speaks on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

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U.S. coal use in the first quarter was the lowest for that period since 1988, according to the Energy Information Administration. Photographer: Gary Gardiner/Bloomberg

“The coal industry is undergoing a major transformation and Patriot’s existing capital structure prevents it from making the necessary adjustments to achieve long-term success,” Patriot Chief Executive Officer Irl F. Engelhardt said in a statement that cited lower thermal coal prices, canceled customer contracts and rising costs for environmental liabilities for increasing pressure on the company in recent months.

Patriot already has a loan to finance operations in bankruptcy and expects its mining operations and customer shipments to continue through the case, the company said in its statement. The $802 million loan, which still requires court approval, is through Citigroup Global Markets Inc., Barclays Bank Plc, and Merrill Lynch, Pierce, Fenner & Smith Incorporated as joint lead arrangers.

Pay, Benefits

The company will also seek court approval to pay employees and continue health care and other benefits, according to the statement.

Patriot has 13 active mining complexes in Appalachia and the Illinois Basin and controls an estimated 1.9 billion tons of coal reserves, according to its website. It sells thermal coal to electricity generators and metallurgical coal to steel and coke producers.

Wilmington Trust Company, and U.S. Bank National Association were among Patriot’s largest unsecured creditors, according to court papers. The filing listed BlackRock Inc., State Street Corporation and The Vanguard Group Inc. as entities that control 5 percent or more of the voting stock in the company.

Shares closed at 61 cents after falling from an intraday high of $2.09 today in New York Stock Exchange composite trading. They tumbled 73 percent this year through July 5.

The company’s $250 million in 8.25 percent notes due 2018 traded at 34 cents on the dollar as of 5:17 EST today, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Its $200 million in 3.25 percent notes due 2013 last traded at 26 cents on the dollar at 5:20 EST today.

Coal Use

U.S. coal use in the first quarter was the lowest for that period since 1988, according to the Energy Information Administration. Utilities have switched some power plants to cheaper natural gas as regulations restricting emissions make coal costlier to burn. Gas fell to a decade low in April amid a surplus of the fuel.

This year, Patriot has reduced thermal coal production by more than 4 million tons, trimmed costs and laid off 1,000 employees or contractors, according to a May 9 filing with the U.S. Securities and Exchange Commission.

Patriot has worked to refinance debt since at least May, when it said it hired Blackstone Group LP while meeting with lenders to complete loan and credit facilities. Also that month, Engelhardt took over as Patriot’s chief executive officer after Richard M. Whiting resigned.

Forecast Cut

The company postponed closing a $625 million, 9.5 percent five-year loan after saying May 14 that a key customer might default on a contract for coal that had fallen as much as $30 a ton below the original contracted price. The same day, the company cut a 2012 forecast for sales of steelmaking coal.

On June 1, Patriot filed a complaint in federal court in Charleston, West Virginia, alleging that Fort Meyers, Florida- based Keystone Industries LLC breached a contract to buy “hundreds of thousands of tons” of coal. Later that month, Principal Accounting Officer Christopher Knibb resigned and was replaced by Chief Financial Officer Mark Schroeder, according to filings with the SEC.

Patriot got 87 percent of its 2011 revenue from coal mined in the Central Appalachian region of the U.S., which includes Kentucky and West Virginia. Its operating costs in Appalachia were $71.06 a ton last year while the average price of Central Appalachian coal futures was $75.86.

The bankruptcy case is In re Patriot Coal Corp.; 12-bk- 12900; U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Tiffany Kary in New York at tkary@bloomberg.net; Dawn McCarty in Wilmington, Delaware at dmccarty@bloomberg.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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Patriot Said to Get Funding Ahead of Possible Bankruptcy

By Beth Jinks, Krista Giovacco and Jeffrey McCracken - Jul 10, 2012 4:04 AM GMT+0700

Patriot Coal Corp. (PCX), the U.S. fuel producer that has lost more than $7 billion in value, has lined up financing ahead of a bankruptcy filing that may come as soon as today, said two people with knowledge of the matter.

The so-called debtor-in-possession financing is being provided by Citigroup Inc., Barclays Plc and Bank of America Corp., said the people, who asked not to be identified as the process is private.

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Patriot mining operations. Photographer: Douglas Graham/Roll Call via Getty Images

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U.S. coal use in the first quarter was the lowest for that period since 1988, according to the Energy Information Administration. Photographer: Gary Gardiner/Bloomberg

Patriot is the biggest casualty so far of the slump in the U.S. coal industry, which has seen tens of millions of tons of production cutbacks this year. Patriot, which owns mines in Kentucky and West Virginia, this year idled some of its mines, reduced a 2012 forecast for sales of steelmaking coal, and warned of a potential default by a key customer.

Coal miners are struggling because of a combination of a warm winter, utilities switching some generating capacity to cheaper natural gas and regulatory moves to curb emissions from coal-burning power plants. U.S. coal use in the first quarter was the lowest for that period since 1988, according to the Energy Information Administration.

The miner’s shares fell 72 percent to 61 cents by 4:15 p.m. New York time. Spun off five years ago by Peabody Energy Corp. (BTU), Patriot has tumbled 93 percent this year. The company’s market value peaked at $7.5 billion in 2008.

Patriot’s $250 million of 8.25 percent notes due in April 2018 dropped 7.9 cents to 34.1 cents on the dollar as of 4:57 p.m., according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. The bonds are yielding 36 percent, Trace data show.

Working on Loans

Patriot, Citigroup, Barclays and Bank of America didn’t immediately return phone calls seeking comment.

The St. Louis-based company said in May it hired Blackstone Group LP as it worked with lenders to arrange $625 million of loans and credit facilities to refinance other debt. A commitment letter from Citigroup, Barclays and Natixis expired July 6.

Chairman Irl Engelhardt took over as Patriot’s chief executive officer on May 29 after Richard M. Whiting resigned.

Patriot last month sued Keystone Industries LLC over claims it broke a purchase contract for “hundreds of thousands of tons” of coal.

To contact the reporters on this story: Beth Jinks in New York at bjinks1@bloomberg.net; Krista Giovacco in New York at kgiovacco1@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net; Jeffrey McCracken at jmccracken3@bloomberg.net; Faris Khan at fkhan33@bloomberg.net

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Iran-Oil Sanctions Risk Biggest OPEC Export Loss Since Libya

By Ewa Krukowska - Jul 2, 2012 2:31 AM GMT+0700

European Union sanctions on Iran entered into full force yesterday after exemptions on some contracts and insurance ended, boosting crude prices and pressure on the Persian Gulf nation to halt its nuclear- enrichment program.

The reduction in Iranian exports may become the biggest supply disruption from a member of the Organization of Petroleum Exporting Countries since an armed rebellion all but halted pumping in Libya last year, according to the International Energy Agency. It also comes as a strike by Norwegian workers is curbing flows from North Sea fields.

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A petrol station in central Tehran. Iran, the second-biggest producer in OPEC after Saudi Arabia, was producing about 3.3 million barrels a day in May. Full implementation of sanctions will remove about 1 million barrels a day during the second half of the year as buyers disappear and Iranian storage tanks become full, the Paris-based IEA forecast in a June 13 report. Photographer: Behrouz Mehri/AFP/Getty Images

“We expect Brent oil prices to be supported by Iranian oil sanctions and potential loss of supplies from the North Sea,” Gordon Kwan, the head of regional energy research at Mirae Asset Securities based in Hong Kong, said in a June 28 report. “The imminent EU insurance ban on tankers carrying Iranian crude could drive up demand for Brent and Dubai crude.”

Brent futures fell below $90 a barrel on June 21 for the first time in 18 months as concern that Europe’s debt crisis would spread sapped the outlook for fuel use worldwide. Now, the Iran embargo and Norwegian strike are stoking speculation about a rebound in prices, according to analysts such as Kwan and Ole Hansen at Saxo Bank A/S. Brent for August settlement surged 7 percent on June 29 to close at $97.80 a barrel on the ICE Futures Europe exchange.

Unsold Barrels

Iran, the second-biggest producer in OPEC after Saudi Arabia, was producing about 3.3 million barrels a day in May. Full implementation of sanctions will remove about 1 million barrels a day during the second half of the year as buyers disappear and Iranian storage tanks become full, the Paris-based IEA forecast in a June 13 report.

Mohammad Ali Khatibi, Iran’s governor to OPEC, warned yesterday that the EU would bear “the consequences of politicizing the market,” without specifying what he meant, the state-run Iranian Students News Agency reported.

Mahmoud Bahmani, Iran’s central bank governor, said his nation “isn’t sitting by idly” and has a “very suitable” $150 billion in foreign currency reserves to help weather the latest trade and financial curbs. “We have programs to fight the sanctions, and we will confront hostile policies,” Bahmani said yesterday, according to the state-run Mehr news agency.

Emergency Meeting

Iran urged OPEC to call an emergency meeting to address the group’s production in excess of its targeted 30 million barrels a day, Mehr reported June 30, citing Oil Minister Rostam Qasemi. Disregard of the limit by some OPEC members “will negatively impact oil prices in the international market,” Qasemi said. The 12-member organization, which decided on June 14 to retain its daily ceiling of 30 million barrels, pumped about 1.6 million barrels more than that in May, according to data compiled by Bloomberg.

The EU agreed in January to ban oil imports from Iran, offering a five-month phase-in period for existing contracts to let member states such as Greece find alternative supplies. An exemption on tanker insurance restrictions for the worldwide shipping industry also ran out today.

Foreign ministers from the 27-nation bloc decided on June 25 the exemptions shouldn’t be extended after talks between Iran and the world’s powers about the nuclear program failed to reach a breakthrough since they started in April. Iran denies that it is developing nuclear weapons.

‘Toughest Measures’

“These are the toughest measures the EU has adopted against Iran to date,” U.K. Foreign Secretary William Hague said yesterday in a statement. “It is in the power of the Iranian leadership to end Iran’s current isolation, but unless they change course, the pressure will only increase.”

The EU ban on insurance for ships carrying Iranian oil affects 95 percent of the world’s tankers because they’re covered by the 13 members of the London-based International Group of P&I Clubs, which is adhering to the EU rule.

In an effort to retain an important Asian customer, Iran offered to supply oil to South Korea using its own tankers, a government official in Seoul said June 29, asking not to be identified because the matter is confidential.

Complementing the European sanctions, a U.S. law enacted Dec. 31 cuts off international banks from the U.S. financial system if they settle oil trades with Iran. The U.S. rule gave importing nations, including China, India and Japan, until June 28 to demonstrate they had “significantly reduced” their purchases of Iranian oil in order to qualify for exemptions.

Crude Dependence

Oil and its derivatives account for nearly 80 percent of Iran’s exports and about half of government revenue, according to the U.S. Energy Information Administration, which estimates the country’s 2010 net oil export revenues at $73 billion.

Iran’s oil exports may “gradually” decline by 20 percent to 30 percent after sanctions start and amid field maintenance work, Deputy Oil Minister Ahmad Qalebani said on June 26.

Such acknowledgement hasn’t erased tensions over the sanctions. Iran warned it can strike any target in the Strait of Hormuz and the Gulf and will soon equip ships with missiles capable of firing more than 300 kilometers (186 miles), Mehr reported June 29, citing a commander of the Islamic Revolutionary Guards Corps. Tankers carrying about a fifth of globally traded oil exit the Gulf though the Hormuz chokepoint.

Iranian ‘Playground’

“The Strait of Hormuz and the Persian Gulf is Iran’s playground and no one else’s,” Mehr cited Admiral Ali Fadavi as saying. “Any issues related to the Strait of Hormuz will be a very big story that will have consequences on the price of oil.”

A survey of 42 analysts on June 28 showed that 16, or 38 percent of them, predicted crude futures will increase in the week starting today, citing the new sanctions. Among the remainder, 12 forecast little change in prices and 14 expected a decline.

“That is the wildcard, the Iranian situation,” Torbjoern Kjus, an oil analyst at Oslo-based bank DnB ASA, said by phone on June 29.

“Nobody can be totally certain how it’s really going to affect the market,” he said. “There’s probably been huge inventory builds in Iran, and this could pose a bearish effect for next year or the second half of this year if there is a resolution.”

To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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Oil Rises Most in a Week in New York on Greek Election Optimism

By Ben Sharples - Jun 18, 2012 6:31 AM GMT+0700

Oil rose to the highest in a week as projections showed Greece’s two largest pro-bailout parties winning enough seats to forge a parliamentary majority, easing concern Europe’s debt crisis will worsen and crimp fuel demand.

Futures gained as much as 1.9 percent in New York. The New Democracy and socialist Pasok parties won a combined 163 seats in the 300-member legislature, according to estimates from the Interior Ministry based on partially counted returns from voting yesterday. The prospect that anti-bailout party Syriza would gain control had rattled markets concerned Greece may quit the 17-nation Euro currency union.

Oil for July delivery advanced as much as $1.57 to $85.60 a barrel in electronic trading on the New York Mercantile Exchange, the highest intra-day price since June 11. It was at $84.73 at 9:36 a.m. Sydney time. The contract increased 12 cents to $84.03 on June 15, the highest close since June 8. Prices are down 14 percent this year.

Brent oil for August settlement rose 89 cents, or 0.9 percent, to $98.50 a barrel on the London-based ICE Futures Europe exchange. The front-month price for the European benchmark contract was at a premium to West Texas Intermediate of $13.53, up from $13.28 on June 15.

Syriza received 26.6 percent and 71 seats, the results showed. The vote forced Greeks, in a fifth year of recession, to choose open-ended austerity to stay in the euro or reject the terms of a bailout and risk the turmoil of exiting the 17-nation currency.

Crown Prince

The death of Crown Prince Nayef bin Abdulaziz Al Saud in Saudi Arabia, the world’s largest oil exporter, raised the issue of succession for the second time in less than a year.

Nayef, who also served as the kingdom’s interior minister for more than three decades, was interred yesterday in Mecca in an unmarked grave. King Abdullah, who is in his late 80s, attended the ceremony.

Nayef’s death leaves Prince Salman bin Abdulaziz as a leading contender for the crown prince position, as the kingdom grapples with high youth unemployment, security issues including the threat of al-Qaeda militants and unprecedented political change in the Middle East.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net

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Oil Falls From Eight-Month Low Before OPEC Meets on Production

By Ben Sharples - Jun 14, 2012 8:58 AM GMT+0700

Oil fell from the lowest close in eight months in New York before OPEC meets to discuss production quotas amid speculation the group won’t cut output as the global economy weakens.

Futures declined as much as 0.4 percent today, dropping for the fifth time in six days. The Organization of Petroleum Exporting Countries, which meets in Vienna today, will probably maintain its output ceiling as concern that global growth is shrinking outweighs calls for supply cuts to stem sliding crude prices, three of the cartel’s oil ministers said. U.S. retail sales fell and Spain’s debt rating was cut by Moody’s Investors Service.

“OPEC is the top news at the moment and that’s going to be the driver,” Michael McCarthy, a chief market strategist at CMC Markets Asia Pacific Pty in Sydney, said in a telephone interview. “OPEC is opaque at times and one of the issues that they grapple with, given that they are such a large and global organization, is compliance with quotas.”

Oil for July delivery slid as much as 35 cents to $82.27 a barrel in electronic trading on the New York Mercantile Exchange. It was at $82.37 a barrel, down 25 cents, at 11:55 a.m. Sydney time. The contract fell 0.8 percent yesterday to $82.62, the lowest close since Oct. 6. Prices are down 17 percent this year.

Brent oil for July settlement, which expires today, slipped 23 cents to $96.90 a barrel on the London-based ICE Futures Europe exchange. The more-actively traded August future slid 37 cents to $96.31. The European benchmark contract’s premium to West Texas Intermediate was at $14.52, from $14.51 yesterday.

OPEC Output

Ministers from Ecuador, Kuwait and Nigeria said yesterday that OPEC is set to keep its 30 million barrel-a-day limit. Venezuela, Iran, Iraq, Angola, Ecuador and Libya have argued that crude supplies are excessive.

While an increase of as much as 1 million barrels a day suggested by some Gulf Arab countries would help Europe weather its slowdown, the 12-member group will probably settle on the status quo, according to two Middle Eastern delegates who declined to be identified because a decision hasn’t been made.

The International Energy Agency reduced its forecast for 2012 crude consumption to 89.9 million barrels a day, the Paris- based energy adviser said yesterday. That’s revised down by 100,000 barrels from May and reflects an increase of 820,000 barrels from last year.

U.S. retail sales fell 0.2 percent in May, matching the revised decrease for April, Commerce Department figures showed yesterday in Washington. Spain was cut three steps to Baa3 from A3 by Moody’s, which cited the nation’s increased debt burden, weakening economy and limited access to capital markets.

Oil Stockpiles

U.S. crude-oil supplies dropped 191,000 barrels last week, a report from the Energy Department showed yesterday. They were forecast to slip 1.5 million barrels, according to the median estimate from 12 analysts in a Bloomberg News survey.

Gasoline stockpiles declined 1.7 million barrels, the report showed. They were projected to rise 1.4 million barrels, according to the survey. Distillate inventories, a category that includes heating oil and diesel, slid 63,000 barrels compared with a forecast 1.2 million barrel gain.

Companies operated refineries at 92 percent of capacity last week, up 1 percentage point from the prior week and the highest level since August 2007, the report showed.

Demand for fuels averaged 18.7 million barrels a day over the past four weeks, the Department reported. That’s down 1.9 percent from a year ago. This is “reflecting the ongoing weakness in macro data,” according to a report yesterday from Michael Wittner, global head of oil market research at Societe Generale SA in New York.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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Oil Trades Near Weekly Low as U.S. Supplies Seen Rising

By Ben Sharples - May 30, 2012 9:13 AM GMT+0700

Oil fell for a second day, heading for the biggest monthly drop in two years, before a report that may show stockpiles climbed to the highest level since 1990 in the U.S., the world’s biggest crude user.

Futures slid as much as 0.5 percent. U.S. inventories rose 800,000 barrels to 383.3 million last week, according to the median estimate of eight analysts in a Bloomberg News survey before the Energy Department report tomorrow. Prices dropped yesterday after Spain’s credit rating was cut and BNP Paribas SA reduced its 2012 forecast for West Texas Intermediate oil.

“Demand out of the U.S. and the euro zone has been very soft,” David Lennox, an analyst at Fat Prophets in Sydney, said in a telephone interview. “For the foreseeable future, barring any supply-side shocks, oil will stay around $90 a barrel. If there’s going to be any movement, it’s not likely to be up.”

Crude for July delivery decreased as much as 45 cents to $90.31 a barrel in electronic trading on the New York Mercantile Exchange, and was at $90.34 at 12:07 p.m. Sydney time. The contract yesterday slid 10 cents to $90.76, the lowest close since May 24. Prices are down 14 percent this month, the biggest drop since May 2010.

Brent oil for July settlement fell 43 cents, or 0.4 percent, to $106.25 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate was at $15.91, from $15.92 yesterday.

Fuel Supplies

Oil in New York has long-term technical support at $89.83 a barrel, according to data compiled by Bloomberg. On the weekly chart, that’s the 50 percent Fibonacci retracement of the drop to $32.40 in December 2008 from an intraday record high of $147.27 in July that year. Buy orders tend to be clustered near chart-support levels.

U.S. gasoline stockpiles probably fell 250,000 barrels last week, according to the Bloomberg survey before tomorrow’s Energy Department report. Distillate supplies, a category that includes heating oil and diesel, will likely remain unchanged at 119.5 million barrels, the survey shows.

The American Petroleum Institute will release separate inventory data today. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

U.S. gasoline at the pump fell below year-earlier levels for the sixth straight week, the Energy Department said in a weekly retail report yesterday. The national average price for regular gasoline dropped 4.5 cents to $3.669 a gallon from a week earlier, it said.

Oil Forecast

BNP Paribas cut its 2012 price forecast for New York crude by $7 to $100 a barrel, and its estimates for Brent by $4 to $115 a barrel, as Europe’s debt crisis worsened, according to an e-mailed report. Prices will still advance in the third quarter because of sanctions against Iran and shrinking spare production capacity in the Organization of Petroleum Exporting Countries, the bank said.

Oil fell yesterday as the euro slid toward an almost two- year low after Egan-Jones Rating Co. cited a deteriorating economic outlook in Spain for its decision to lower the nation’s sovereign credit rating to B from BB-. A weaker European currency increases the cost of crude priced in dollars.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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Oil Slips From Near Four-Week High; Hedge Funds Cut Bullish Bets

By Ben Sharples - Apr 30, 2012 8:47 AM GMT+0700

Oil slid from the highest close in almost four weeks, trimming a monthly gain, as investors speculated that recent price gains may be unsustainable.

Futures fell as much as 0.3 percent after climbing for a second week. Oil’s advance halted after it failed to surpass its 50-day moving average, a technical resistance level at which traders typically sell. Hedge funds cut bullish crude bets last week, the Commodity Futures Trading Commission said. Output by the Organization of Petroleum Exporting Countries climbed to the highest level in more than three years in April. A report this week may show U.S. employment rose this month.

“The market has decided to get ahead of itself and that’s effectively what we’re seeing,” said Jonathan Barratt, chief executive of Barratt’s Bulletin, a commodity-markets newsletter in Sydney. “There are areas or pockets which are holding the price of crude up when oil should be a lot lower. Employment will be the key this week.”

Crude for June delivery fell as much as 27 cents to $104.66 a barrel on the New York Mercantile Exchange and was at $104.69 at 11:11 a.m. Sydney time. The contract advanced 38 cents, or 0.4 percent, to $104.93 on April 27, the highest close since April 2. Prices are 1.6 percent higher this month and up 6 percent this year.

Brent oil for June settlement was at $119.58 a barrel, down 25 cents, on the London-based ICE Futures Europe exchange. Prices are down 2.7 percent this month, heading for the first monthly decline since December. The European benchmark contract’s front month premium to West Texas Intermediate was at $14.89, from $14.90 on April 27.

Technical Resistance

Oil in New York has technical resistance along its 50-day moving average, at $105.17 a barrel today, according to data compiled by Bloomberg. Futures have closed below this indicator every day since April 4.

Crude’s trading range in April is the tightest for any month in 17 years as concern eased that supplies would be disrupted and reports showed slower U.S. economic growth. This month’s price has ranged from $100.68 to $105.49 a barrel, a difference of 4.8 percent. That’s the smallest since February 1995, when the price ranged from $18.13 to $18.98.

New York futures rose to $110.55 a barrel on March 1 as Western nations prepared sanctions against Iran, then slipped as tension eased. U.S. gross domestic product growth slowed to a 2.2 percent rate in the first quarter, according to the Commerce Department.

Hedge Funds

Money managers, including hedge funds, cut bullish oil wagers by 2,878, or 1.4 percent, to 196,426 futures and options combined in the seven days ended April 24, according to the Commodity Futures Trading Commission’s Commitments of Traders report on April 27.

OPEC production increased 305,000 barrels, or 1 percent, to an average 31.405 million barrels a day in April from a revised 31.1 million in March, according to a Bloomberg News survey of oil companies, producers and analysts. Output increased to the highest level since October 2008. The March total was revised 10,000 barrels a day lower.

Payrolls climbed by 165,000 workers after a 120,000 gain in March, according to the median forecast of 64 economists surveyed by Bloomberg News before Labor Department data due May 4. Manufacturing and services grew at a slower pace, other reports may show.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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Iran Says It May Halt Nuclear Program Over Sanctions

By Stepan Kravchenko and Henry Meyer - Apr 26, 2012 2:32 AM GMT+0700

Iran is considering a Russian proposal to halt the expansion of its nuclear program in order to avert new sanctions, the country’s envoy in Moscow said.

“We need to study this proposal and to establish on what basis it has been made,” Ambassador Mahmoud-Reza Sajjadi said in an interview at the Iranian embassy in Moscow today. The Russian plan, announced by Deputy Foreign Minister Sergei Ryabkov last week, would let Iran avoid a European Union ban on its crude that is scheduled to come into force in July.

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Tugboats escort the BP Plc British Pride oil tanker into the harbor in Long Beach, California. Photographer: Jonathan Alcorn/Bloomberg

Iran will ensure it maintains its right to produce nuclear energy, Sajjadi said. The U.S. and European Union allege Iran is seeking to build a bomb, not just make fuel for electricity production and medical research, as the country maintains.

The EU is planning on July 1 to impose an embargo on crude from Iran, which accounts for about 4 percent of the world’s supply, as it works with the U.S. to ratchet up pressure on the Persian Gulf state. Oil prices retreated from a one-week high, dropping more than $1 today on the report.

In Washington, State Department spokeswoman Victoria Nuland dismissed Sajjadi’s remarks, saying the Iranian is “not a central player” in international talks over Iran’s nuclear program. “Frankly, what’s most important is what Iran says and does at the negotiating table,” Nuland said at briefing with journalists.

The U.S. and EU have imposed financial sanctions on Iran and are pressuring nations including China to buy less of its oil as they seek to curtail its nuclear activities.

Mutual Concessions

Ryabkov, who leads Prime Minister and President-elect Vladimir Putin’s delegation to the Iran talks, said the Russian proposal would be the first in a series of mutual concessions designed to end in an accord that would remove suspicions about Iranian intent regarding atomic weapons.

Iran might also be willing to ratify the so-called Additional Protocol, a step urged by the United Nations Security Council that includes more thorough inspections of Iranian facilities, as part of a wider settlement, Sajjadi said.

Under the Russian proposal, Iran would stop building centrifuges, machines used to enrich uranium, and mothball ones that haven’t been put into use yet.

“At that stage, as part of the step-by-step approach, the other side could announce that it will refrain from introducing new sanctions,” Ryabkov said April 17 after the latest round of talks in Istanbul between Iran and the five permanent Security Council members -- the U.S., U.K., China, Russia and France -- plus Germany. Those talks were the first Iran held with the so- called 5+1 group in 15 months. The next round, in Baghdad, is scheduled for May 23.

The EU will complicate efforts to resolve the feud if the 27-nation bloc goes ahead with the oil ban, Sajjadi said.

‘Not Serious’

“If they actually impose the embargo, it will mean that they’re not serious about resolving the nuclear issue,” the Iranian ambassador said. “How can they want to pursue nuclear talks on the one hand and introduce sanctions on the other? What meaning will these talks have then?”

The UN’s nuclear watchdog said in February that the number of centrifuges at Iran’s underground Natanz facility had grown 14 percent to 9,156 from 8,000 in November, of which 8,808 were operating. Iran began enriching uranium with more than 300 centrifuges at a different underground site, Fordo, the International Agency for Atomic Energy said in a Feb. 24 report.

The IAEA report said Iran had tripled monthly output of enriched uranium from November to 31 pounds (14 kilograms). The country may be able to produce bomb-grade uranium in a matter of months, Olli Heinonen, the IAEA’s former top inspector for Iran, said on April 12.

‘A Big Step’

“The proposed plan will keep the capacity to enrich uranium at the current level,” said Elena Sokova, executive director at the Center for Disarmament & Non-Proliferation in Vienna, by e-mail. “Thus it helps to avoid the expansion of enrichment but not to scale it back. In other words, no buildup of the program in exchange for no new sanctions.”

If Iran then ratified the Additional Protocol to the Nuclear Non-Proliferation Treaty it would be “a big step forward as it would allow for much better transparency of the Iranian nuclear program and for the IAEA to carry out rather intrusive inspections,” Sokova said.

The Iranian nuclear program is an “imaginary threat,” Sajjadi said, adding that he was astonished by comments made by Nikolai Makarov, head of the Russian military’s General Staff, warning about the risk of a nuclear-armed Iran in an interview with state broadcaster RT.

Won’t Benefit

Russia won’t benefit by cooperating with the U.S. and Europe, and the threatened EU oil embargo will damage the world economy by squeezing global supplies, the ambassador said.

Iran’s oil production, currently about 3.4 million barrels a day, may decline by as much as 950,000 barrels a day by the middle of this year as EU and U.S. embargoes take effect, the International Energy Agency said in its monthly Oil Market Report on April 12.

Crude oil for June delivery slipped 22 cents to $103.33 a barrel at 11:27 a.m. on the New York Mercantile Exchange. The contract earlier touched $104.49, the highest intraday level since April 18. Brent oil traded 31 cents lower at $117.83 in London after reaching $119.25.

Tensions over the Iranian program, including Israel and the U.S. leaving open the possibility of a military attack, helped drive Brent crude prices to about $125 a barrel last month, the highest level in more than 3 1/2 years. Prices fell more than 2 percent on the next trading day after the April 14 talks in Istanbul, which the U.S. and EU said made progress.

“There are two ways we can proceed after the Istanbul talks,” said Sajjadi. “Either the West understands that it’s pointless to use the language of force with Iran or their flexibility is a temporary phenomenon. I hope the first is true as we would like to see a resolution.”

To contact the reporters on this story: Stepan Kravchenko in Moscow at skravchenko@bloomberg.net Henry Meyer in Moscow at hmeyer4@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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North Korea Breaks Off Nuclear Accord as Food Aid Halted

By Sangwon Yoon and Nicole Gaouette - Apr 19, 2012 3:25 AM GMT+0700

North Korea broke off an agreement to halt testing of nuclear devices and long-range missiles after the U.S. canceled food assistance to the totalitarian regime in response to its botched rocket launch last week.

North Korea is now “free” to take “necessary retaliatory measures” after the U.S. withdrew its offer of 240,000 tons of food, the Foreign Ministry said in a statement today carried by the official Korean Central News Agency. U.S. lawmakers responded to the statements and the launch, denouncing what they called the “wicked” regime as well as “insane” diplomatic engagement efforts by successive U.S. presidents.

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North Korean leader Kim Jong-Un. Photographer: Ed Jones/AFP/Getty Images

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April 16 (Bloomberg) -- Jasper Kim, founder and chief executive officer of Asia-Pacific Global Research Group, talks about North Korea's third-generation dictator Kim Jong Un and the nation's failed rocket launch. North Korea won’t be bullied by its nuclear-armed enemies, Kim Jong Un said in his first public address at a military parade yesterday as South Korea warned that his regime may conduct an atomic test. Jasper Kim speaks from Seoul with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

There now will be a “period where the U.S. and North Korea exchange criticisms and shift blame on the other,” said Yang Moo Jin, a professor at the University of North Korean Studies in Seoul. “Depending on China’s role in that process, this could turn to dialogue or additional provocation by North Korea.”

The North said it’s prepared to wage a “holy war” against South Korean President Lee Myung Bak’s government and would take “special action” against targets that could include central Seoul, an unidentified spokesman of the supreme command of the Korean People’s Army said in a separate statement carried by KCNA. The regime often issues statements threatening war.

In Washington, a congressional hearing elicited denunciations from lawmakers, who said the regime abused food aid it was given in the past. Communist North Korea has chronic food shortages, with millions of children suffering stunted growth while limited supplies go to the nation’s military and political elite.

Nuclear Test

Regional specialists testifying before the House Foreign Affairs Committee said further North Korean provocation is likely, either another missile test or the first underground nuclear test since May 2009. A South Korean intelligence report warned a week ago that recent activity at the North’s Punggye-ri nuclear testing site is consistent with preparations for previous atomic device detonations.

“Historical patterns would suggest they will do a nuclear test,” said Michael Green, a senior adviser at the Center for Strategic and International Studies and a former National Security Council official. He said the North Koreans may test a uranium-fueled device for the first time, after past plutonium- fueled blasts in 2006 and 2009.

Food Aid

Frederick Fleitz, managing editor of the Langley Intelligence Group Network and a former CIA analyst, said he thought chances of a nuclear test soon are “50-50.”

“I think there will be a nuclear test when North Korea is technically ready and prepared to endure the enormous amount of isolation,” Fleitz said.

Lawmakers criticized both the regime and the policies of U.S. administrations, particularly in sending food aid. The Obama administration, attempting to avoid a repeat of past difficulties with aid diverted by the regime, had insisted on measures to ensure that food reached ordinary Koreans.

The U.S. pressed unsuccessfully for North Korea to cancel the launch of a rocket -- which disintegrated minutes after liftoff April 13 -- saying it would nullify the Feb. 29 accord to provide food following the suspension of nuclear and missile tests.

“It just seems like our government, not just Democrats, but Republicans as well, we reached out trying to negotiate with these guys,” said Representative Dan Burton, an Indiana Republican. “I don’t see where we’ve gained a thing.”

‘Serious Violation’

North Korea’s foreign ministry said the U.S. was abusing the United Nations Security Council by “imposing its brigandish demand,” a reference to the 15-member body’s censure issued this week. U.S. Ambassador Susan Rice is the council president this month.

The Security Council’s April 16 statement called the launch a “serious violation” of existing resolutions that ban North Korea from using its ballistic missile technology. The council also said it would update its list of sanctioned goods.

The UN body moved more quickly than in the past to censure North Korea, and China’s approval signals that the North’s only ally “might be taking a firmer stance against the North,” Yang said. China is a permanent veto-wielding member of Security Council.

Kim Jong Un, who took power in December following the death of his father Kim Jong Il, used his first public speech on April 15 to say the world can’t threaten or blackmail North Korea’s “undefeated” 1.2 million-strong military.

Two UN resolutions are already in place after North Korea detonated atomic devices in 2006 and 2009. The measures call for stepped-up inspection of suspect air and sea cargo and seek to block funding for nuclear, missile and proliferation work.

To contact the reporters on this story: Sangwon Yoon in Seoul at syoon32@bloomberg.net; Nicole Gaouette in Washington at ngaouette@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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Argentina Seizes Oil Producer YPF, as Repsol Gets Ousted

By Rodrigo Orihuela - Apr 17, 2012 5:40 AM GMT+0700

Argentine President Cristina Fernandez de Kirchner seized control of YPF (YPF) SA, the nation’s largest crude producer, ousting Spanish owner Repsol YPF SA (YPFD) after a dispute over slumping oil output and investments.

Argentina took over management of YPF with immediate effect, replacing Chief Executive Officer Sebastian Eskenazi with Planning Minister Julio De Vido, Fernandez said yesterday in a speech in Buenos Aires. The government will also send a bill to Congress to take a 51 percent stake in YPF, she said.

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A poster calling the government to nationalize YPF SA, Argentina's biggest energy company, is seen in Buenos Aires on March 21, 2012. Photographer: Bill Faries/Bloomberg

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Argentine President Cristina Fernandez de Kirchner during the Summit of the Americas family photo session, in Cartagena, Colombia, on April 15, 2012. Photographer:Eitan Abromovich AFP/Getty Images

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Argentine Planning Minister Julio De Vido, seen here, in Buenos Aires, will run YPF, Presdient Cristina Fernandez de Kirchner said April 16, 2012. Photographer: Diego Giudice/Bloomberg News

The takeover follows more than two months of increasing government pressure on YPF after fuel imports doubled to $9.4 billion last year. The country sought to block YPF dividends and backed provincial governments when they revoked 15 oil field licenses. Fernandez also seized a $24 billion pension fund and airline Aerolineas Argentinas SA since taking office in 2007.

“They are going to be closing the country as an investment destination,” Anish Kapadia, an analyst at Tudor Pickering Holt & Co. in London, said yesterday in a telephone interview from the city. “What’s surprising is that they are expropriating assets rather than going through a fair market means to get hold of a stake in the company. That sets a terrible precedent.”

Argentina, which defaulted on a record $95 billion of debt in 2001, needs to regain control of Buenos Aires-based YPF to avoid becoming “an unviable country,” after oil production slumped, Fernandez said to the accompaniment of cheers from supporters at the presidential palace. Compensation for the seizure will be determined by the National Appraisal Tribunal, Fernandez said, without giving more details.

Shale-Oil Reserves

Argentina will manage YPF “professionally,” Fernandez said, adding that the country is one of the few that doesn’t control its own oil. Deputy Economy Minister Axel Kicillof will help De Vido to run the company, according to Fernandez.

The stake in YPF gives the government control of Argentina’s shale oil reserves. YPF said in February that an independent survey showed the Vaca Muerta formation in southern Argentina holds at least 23 billion barrels of oil, of which at least 13 billion barrels belong to YPF.

Argentina is expropriating YPF for the “public good,” a government official said in yesterday’s speech.

‘Hostile Decision’

YPF American depositary receipts tumbled 11 percent to $19.50 before being halted yesterday in New York. Earlier, they plunged as much as 21 percent to $17.41.

Yields on YPF’s dollar bonds due in 2028 fell 16 basis points to 9.94 percent. The bond’s prospectus says that a nationalization of the company is considered a default event in which bondholders may request expedited repayment.

The takeover was announced after Spain’s markets closed yesterday. Repsol gained 0.06 percent to 17.48 euros in Madrid.

The decision is “a hostile decision against Repsol and therefore against Spain and the Spanish government and the government will act in consequence,” Spanish Industry Minister Jose Manuel Soria told reporters yesterday in Madrid.

“The Spanish government is working on measures that will be announced in the coming days,” he said. “They will be clear and decisive measures.”

Retaliation by the European Union would risk Argentina exports to its single-biggest trading partner outside of Latin America. Argentina sold about $14.3 billion in goods to the EU last year, up 28 percent from 2010, the national statistics agency said. Spain was the biggest destination in the EU, accounting for 3 percent of Argentina’s sales abroad.

Argentina’s action “could prove harmful for long-term private investment,” Fitch Ratings said in a statement.

Paris Club Debt

Fernandez has also said she wants to resolve about $9 billion in defaulted debt with the Paris Club group of creditor nations. Negotiations with the group will be more complicated after the YPF decision, Claudio Loser, a former head of Western Hemisphere Affairs at the International Monetary Fund, said yesterday in a telephone interview from Miami.

Calls to YPF were referred to De Vido’s spokesman.

YPF’s output accounted for about 34 percent of the nation’s production in 2011, according to energy secretariat data. The company is also the country’s largest fuel retailer and refiner, with about 50 percent of refining capacity.

Energy demand grew over the past decade as Argentina recovered from a financial crisis. South America’s second- largest economy expanded an average 7.8 percent since 2003, including 8.9 percent growth last year.

As economic growth spurred demand for fuel, oil output declined. Since 1999, the year Repsol acquired its controlling interest in YPF, production dropped 32 percent to 33.2 million cubic meters last year, according to data compiled by the Buenos Aires-based Argentine Oil and Gas Institute.

‘International Isolation’

“This expropriation is madness and its only result will be international isolation,” opposition lawmaker Julian Obliglio said in an e-mailed statement. “The President has broken a history of tradition, respect and solidarity that link us to Spain.”

Argentina sold most of YPF, which had been owned by the state, to private investors in the early 1990s. The government retained a 0.2 percent stake and a so-called golden-share that entitles it to make certain decisions, including the veto of takeovers.

After acquiring control of YPF, Repsol sold a 15 percent to Argentina’s Eskenazi family in 2008 and a further 10 percent last year. Until today’s announcement, Repsol owned 57.4 percent of YPF.

Eskenazi Stake

The Eskenazis received two bank loans and two loans from Repsol to finance the acquisitions. The last installment of the first bank loan is due in May. They must start repaying the first Repsol loan next year.

Under the terms of the Eskenazi acquisitions, YPF paid dividends of 90 percent of net income in two semi-annual payments. The government representative on the board voted against the dividends twice in 2011 and again this year.

The government requested at a March 8 board meeting that, instead of paying dividends, the money should be invested in production and exploration.

As governor of the southern oil-producing province of Santa Cruz, Fernandez’s late husband and predecessor Nestor Kirchner sought to acquire 5 percent of YPF’s shares on the New York Stock Exchange in the 1990s in an attempt to gain a seat for the province on the board, Fernandez said in a March 1 speech to Congress.

Kirchner had to stop buying the shares once Repsol took over YPF, she said.

To contact the reporter on this story: Rodrigo Orihuela in Rio de Janeiro at rorihuela@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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Clinton Joined by Gemba in Warning North Korea on Launch

By Sangwon Yoon and Nicole Gaouette - Apr 11, 2012 6:29 AM GMT+0700

The Group of Eight foreign ministers meeting in Washington this week should deliver “a very strong message” against North Korea’s plans to launch a satellite within days, U.S. Secretary of State Hillary Clinton said.

“We share a strong interest in stability on the Korean peninsula,” Clinton told reporters after meeting in Washington with Japanese Foreign Minister Koichiro Gemba yesterday. “And we believe that strength and security will not come from more provocations but from North Korea living up to its commitments and obligations.”

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A North Korean soldier stands guard in front of the Unha-3 rocket at Tangachai-ri space center, North Korea, on April 8, 2012. China, South Korea and Japan expressed concern over North Korea’s plan to put a satellite into orbit with a long-range rocket between April 12 and 16, which the U.S. says would scuttle a food aid deal. Photographer: Pedro Ugarte/AFP/Getty Images

North Korea has completed assembling a rocket, and officials of the country’s Space Development Department told reporters in Pyongyang that work is on target for a launch between April 12 and April 16, the Associated Press reported. Concern the event is a cover for a missile test drew warnings from the U.S. and allies.

“It’s necessary for us to issue a really strong message,” Gemba said in a press conference with Clinton. A launch by North Korea “would obviously be a violation of United Nations resolutions,” he said.

China and South Korea also have expressed concern over North Korea’s plan to put a satellite into orbit with a long- range rocket. The launch, which will mark the 100th anniversary of the birth of state founder Kim Il Sung, comes less than four months after Kim Jong Un succeeded his father as head of state.

Nuclear Test Prospect

Debate also has centered on the prospect that North Korea may follow any launch with a nuclear test. Activity at North Korea’s Punggye-ri atomic testing site is consistent with preparations for previous detonations in 2006 and 2009, according to a South Korean intelligence report obtained April 9 by Bloomberg News.

Analysts said the totalitarian state may be seeking to sway the outcome of today’s parliamentary elections in South Korea across the demilitarized zone.

“The timing is impeccable,” said Park Young Ho, senior research fellow and director at the Korea Institute for National Unification. “Kim Jong Un is taking advantage of the domestic North Korean celebrations of Kim Il Sung to aggressively influence South Korean elections.”

Polls indicated South Korea President Lee Myung Bak’s party may lose control of parliament to an opposition coalition that has pledged to improve ties with its northern neighbor. Opposition lawmakers accused the government of using the intelligence report to influence the elections.

North Korea’s ruling Workers’ Party meets today and may appoint Kim Jong Un the new party chief in one of the final steps marking his succession after the Dec. 17 death of his father, Kim Jong Il.

Aid Threatened

The Obama administration has said firing the rocket would breach a February agreement with North Korea to halt nuclear and missile tests and end uranium enrichment at its facility in Yongbyon, which was to be followed by 240,000 tons of U.S. food aid.

“It would be impossible to imagine” the U.S. would follow through on the food aid if North Korea proceeds with the launch, Jay Carney, President Barack Obama’s spokesman, told reporters.

Launching the missile “would represent clear and serious violations” of UN resolutions and the U.S. will work with its partners in negotiations with North Korea on a response, Carney told reporters traveling with Obama yesterday to an event in Florida.

North Korea’s government says it is putting a “peaceful” satellite into orbit and that doesn’t violate the deal. Ryu Kum Chol, a North Korean space official, dismissed as “nonsense” assertions that the satellite launch is aimed at developing missile technology, the AP said. Ryu said the communications satellite is fitted with a camera to monitor weather conditions.

Bargaining for Food

Kim’s government may be using the prospect of a follow-up nuclear test as a bargaining chip to keep the food-aid deal from falling apart, analysts including Koh Yu Hwan said.

“The likelihood of a third nuclear test depends on whether the U.S. decides to keep the Feb. 29 food-aid deal following the missile launch,” said Koh, a professor of North Korean Studies at Dongguk University in Seoul. “With the nuclear preparations, North Korea is waving its nuclear card at the U.S. and telling them to make a choice.”

The North Korean rocket is expected to fly south over the Yellow Sea toward the Philippines, South Korea’s transportation ministry said in a March 20 statement on its website. The first stage of the fuselage is expected to fall 180 kilometers (112 miles) away from the South’s western coast and the second stage near the Philippines’ northeastern-most island, the ministry said.

UN Resolution

Following the 2009 test, the UN Security Council passed a resolution condemning the move and strengthening sanctions that include letting cargo suspected of containing weapons be inspected. It also ordered the regime to admit International Atomic Energy Agency inspectors, something North Korea agreed to in February.

In November 2010, North Korea showed its Yongbyon facility to visiting U.S. scientists, including Stanford University’s Siegfried S. Hecker, who said he saw more than 1,000 centrifuges. While North Korea claims its nuclear facility is intended to generate electricity, it can be easily converted to produce highly enriched uranium for bombs, Hecker wrote in a report on the university’s website after his North Korea trip.

South Korea’s main opposition Democratic United Party said intelligence officials may have leaked the information about potential nuclear-test preparations to influence the parliamentary elections.

Timing ‘Questionable’

“It is questionable as to why the intelligence service is pointing this out to the people and the press now,” Park Yong Jin, spokesman of the DUP, said in an e-mailed statement.

The DUP, which calls for greater engagement with the North and has yet to issue its position on the satellite plan, is fatally “weak on national security” at a time when threats of a third nuclear test loom, ruling National Frontier Party spokesman Jeon Kwang Sam said in an e-mailed statement.

To contact the reporter on this story: Sangwon Yoon in Seoul at syoon32@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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Iran Agrees to Restart Nuclear Talks With U.S., Allies

By James G. Neuger and Ladane Nasseri - Apr 9, 2012 5:28 AM GMT+0700

The U.S. and its European allies will press Iran for tangible action to curb its nuclear program when talks with the government in Tehran restart later this week after a 15-month hiatus.

Nuclear negotiations between Iran and the five permanent United Nations Security Council members plus Germany will take place starting April 14 in Istanbul, European Union spokesman Michael Mann said yesterday. In Washington, State Department spokeswoman Laura Seal confirmed the plans.

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April 3 (Bloomberg) -- Former New Mexico Governor Bill Richardson talks about Iran and North Korea's nuclear ambitions. Richardson, also former U.S. energy secretary, talks about China's energy diversification, and the price of crude oil and its effect on the global economy. He speaks with Bloomberg's Stephen Engle at the Boao Forum for Asia. (Source: Bloomberg)

“We have agreed to launch talks in Istanbul on April 14,” Mann said. “We hope that this first round will produce a conducive environment for concrete progress. We are of course aiming at a sustained process.”

The U.S. and its allies are seeking to avoid a repeat of the previous meeting in January 2011, also in Istanbul, when talks broke down after Iran demanded a lifting of UN sanctions as a condition for discussing the nuclear program. Iran is under increasing economic pressure from trade, financial and energy sanctions, including U.S. and EU measures to cut oil purchases from Iran.

In a joint statement March 8, the U.S. and its five partners in the talks -- China, France, Germany, Russia and the U.K. -- said they wanted sustained discussions with Iran and for the Persian gulf nation to allow UN inspectors into its secret Parchin military installation.

Israeli Defense Minister Ehud Barak said the six powers should demand that Iran stop enriching uranium to 20 percent and give up any material already processed to that level. Iran also must shut down the Fordo underground enrichment facility near Qom, Barak said in an interview broadcast yesterday on CNN’s “Fareed Zakaria GPS” program.

Enriching Uranium

The U.S. and its allies say their concern is that Iran can use enrichment, which can be used to generate energy, to further process uranium to 90 percent for weapons-grade material.

Demands to give up a stockpile of material that Iran considers strategic raise the question of what the U.S. would be willing to offer in return, such as easing of sanctions, said Trita Parsi, the founder and president of the National Iranian American Council.

“If there are no concessions given, I find it very unlikely that the Iranians would agree to those demands, however justifiable those demands would be,” said Parsi, the author of “A Single Roll of the Dice: Obama’s Diplomacy with Iran.” “It doesn’t just seem very likely that the Iranians would agree to give up a strategic asset and still wait for oil sanctions to kick in.”

‘Maximalist Demands’

Both sides in the negotiations have shown a repeated pattern of pushing the other to “maximalist demands,” said Parsi, whose Washington-based group advocates diplomacy with Iran.

“Every time, that has ended up being a miscalculation,” he said. “Neither side is going to capitulate.”

Iran denies Western suspicions that it is pursuing a weapons capability, saying it wants nuclear power to provide energy for a growing population and to conduct medical research.

Iranian President Mahmoud Ahmadinejad said yesterday that Iran, a signatory to the nuclear Non-Proliferation Treaty, will retain its right to scientific progress in its atomic program. He also attacked Israel and its allies for having nuclear weapons and threatening his country.

“Certain countries in the region not only possess nuclear technology but also have the atomic bomb,” Ahmadinejad said in an address to industry officials on the occasion of Iran’s nuclear technology day. “However there is no mention of them and no one is bothering them.”

Nuclear Israel

Iranian officials often have condemned what they see as a double standard because none of the three nuclear-weapons powers in the region -- Israel, Pakistan, and India -- has signed the nuclear Non-Proliferation Treaty. Israel hasn’t acknowledged having nuclear weapons.

The U.S. has sought to bring Russia and China on board with international efforts pressing the Iranians to curb uranium enrichment. Russian Deputy Foreign Minister Sergei Ryabkov said March 30 that Iran is breaching UN resolutions and “expanding” the scale of its nuclear program.

Earlier this month, Iranian officials said Turkey wouldn’t be a suitable location for nuclear talks in light of its sympathies for the opposition movement in Syria, an Iranian ally.

Iranian Foreign Minister Ali Akbar Salehi had suggested China and Iraq as potential venues. The secretary of Iran’s Expediency Council, named Baghdad, Damascus or Beirut as more suitable locations than Istanbul.

Turkish Response

Turkish Prime Minister Recep Tayyip Erdogan rebuked Iranian official as being “dishonest,” saying they were proposing alternative locations they knew the U.S. and its European allies wouldn’t find acceptable.

The Turkish government once blamed officials in Washington for the continuing U.S.-Iran conflict, thinking leaders in Tehran hadn’t been approached properly, said Karim Sadjadpour, an associate at the Carnegie Endowment for International Peace, a policy research group in Washington.

Turkey was soon frustrated with its own efforts to find agreement with the Iranian regime over the nuclear issue and on Syria, Sadjadpour said yesterday in an e-mail. The result is that Iran risks isolating itself with few allies other than North Korea, Cuba, Venezuela and the regime of President Bashar al-Assad in Syria, he said.

“There are increasingly few locales in the world today which both the U.S. and Iran consider neutral diplomatic terrain,” he said.

To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; Ladane Nasseri in Dubai at lnasseri@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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Egypt’s Secularists Criticize Brotherhood Presidency Run

By Tarek El-Tablawy - Apr 3, 2012 12:34 AM GMT+0700

Egyptian secular groups and politicians accused the Muslim Brotherhood of seeking to monopolize power after the Islamist group reversed course and nominated a candidate for the presidential vote.

The nomination of Khairat el-Shater, a millionaire businessman who supports free-market policies, comes at a time when disputes between the ruling military, the Brotherhood and other groups vying to shape the country’s future are stymieing efforts to revive the economy.

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Khairat el-Shater of the Muslim Brotherhood waves as he arrives to al-Galaa court in Cairo on Dec. 10, 2007. El-Shater is a leader in the Brotherhood’s Guidance Council, its main decision-making body. Photographer: Khaled Desouki/AFP/Getty Images

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Khairat el-Shater of the Muslim Brotherhood waves as he arrives to al-Galaa court in Cairo on Dec. 10, 2007. El-Shater is a leader in the Brotherhood’s Guidance Council, its main decision-making body. Photographer: Khaled Desouki/AFP/Getty Images

Net international reserves fell to $15.1 billion at the end of March, down over 50 percent since the start of the uprising that toppled Hosni Mubarak, according to central bank data released today. A $3.2 billion International Monetary Fund loan is also still pending amid criticism from the Brotherhood and others over the government’s economic program.

The presidential race in May will be the first since Mubarak’s ouster from power last year, and the entry of el- Shater makes him a frontrunner among a wide group of candidates, including two other Islamist candidates.

El-Shater’s nomination, announced on March 31, “was not surprising” after the Brotherhood indicated it would “follow in the footsteps” of the former ruling National Democratic Party in seeking to control decision-making, Ahmed Saeed, the head of the secular Free Egyptians Party, said in an e-mailed statement today.

“Who will truly govern Egypt if el-Shater takes on the post of head of state? Would he govern in the name of the people or under orders from the Muslim Brotherhood,” Saeed said.

The Wafd Party said the Egyptian people “would pay a hefty price” for the decision, the official Middle East News Agency reported, citing the party’s head.

‘Threats to the Revolution’

The Brotherhood, whose Freedom and Justice political party holds 47 percent of the seats in the parliament’s lower house, said it was putting forward a candidate because of “threats to the revolution.”

Group officials said nominating a candidate was a step taken to preserve the momentum of the uprising after the government failed to address the needs of Egyptians, including the economy.

The Freedom and Justice party head, Mohamed Morsi, said concerns that the group was trying “to control all leadership positions in the state” were unfounded, according to a statement e-mailed late yesterday. The group, along with the Salafist Al-Nour Party, commands a majority in both houses of parliament.

‘Never Happened’

A Facebook page opposing el-Shater’s candidacy, created after the decision was announced, has garnered over 89,000 “likes,” while his official Facebook campaign page, has received a 10th of the interest.

Presidential contender Amre Moussa, a former foreign minister and Arab League head under Mubarak, said a win by el- Shater, coupled with the Brotherhood’s dominance in parliament and on the committee charged with drafting the country’s new constitution, would make it seem as though “the revolution had never happened,” MENA quoted him as saying.

If el-Shater, who served as the deputy to the Brotherhood’s leader Mohamed Badie were elected, would Badie then “be the president of the president of Egypt?” MENA quoted Moussa as asking.

El-Shater spent years in and out of Mubarak’s jails amid a crackdown on the group. He was released early in March 2011 following his latest conviction, less than a month after Mubarak’s ouster. To run for office, he would need a pardon from the military.

Brotherhood lawyer Abdel Monem Abdel Maqsoud said in a phone interview yesterday that the military judiciary had expunged the candidate’s convictions and that el-Shater now “has the right to fully exercise all his political rights.”

The nomination marked a clear determination by the Brotherhood that it is “ready to assume sole responsibility for governing Egypt, and that in its power struggle with SCAF, it enjoys a slight edge,” said Hani Sabra, Mideast analyst with the New York-based Eurasia Group, in an e-mailed note that referred to the ruling military council by its acronym.

To contact the reporter on this story: Digby Lidstone in Cairo at dlidstone@bloomberg.net

To contact the editor responsible for this story: Louis Meixler at lmeixler@bloomberg.net

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Oil Rises a Second Day as Chinese Economic Data May Boost Demand

By Ben Sharples - Apr 2, 2012 5:48 AM GMT+0700

Oil advanced for a second day in New York as investors bet that fuel demand may increase on signs of a strengthening Chinese economy, the world’s second-biggest crude-consuming nation.

Futures rose as much as 0.5 percent after a Purchasing Managers’ Index climbed to a one-year high of 53.1 in March, China’s logistics federation and the National Bureau of Statistics said yesterday. Payrolls in the U.S., the world’s biggest crude user, probably increased in March for a fourth consecutive month, economists said before a report this week. Oil capped a second quarterly gain on March 30 after President Barack Obama declared world supplies were sufficient to proceed with new sanctions against Iran.

Oil for May delivery gained as much as 54 cents to $103.56 a barrel in electronic trading on the New York Mercantile Exchange and was at $103.46 at 8:35 a.m. Sydney time. Prices climbed 4.2 percent in the three months to March 30 for a second quarterly gain.

Brent oil for May settlement increased 51 cents, or 0.4 percent, to $123.39 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to New York-traded West Texas Intermediate was at $19.92 from $19.86 on March 30.

U.S. employment rose by 205,000 after climbing by 227,000 in February, according to the median projection of 54 economists surveyed by Bloomberg News. The Labor Department report is due April 6.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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Suu Kyi Stands in Myanmar Election With Sanctions in Bala

By Daniel Ten Kate - Apr 1, 2012 2:39 PM GMT+0700

Myanmar dissident Aung San Suu Kyi faced voters for the first time today in by-elections the U.S. and European nations are watching closely as they consider lifting sanctions against the former dictatorship.

Suu Kyi, who won the Nobel peace prize during her 15 years under house arrest, is among those standing for 43 of 664 parliamentary seats left vacant by lawmakers who joined President Thein Sein’s government. She said two days ago her National League for Democracy party would tolerate irregularities in the first vote it’s contesting since 1990.

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Aung San Suu Kyi is surrounded by the media as she visits a polling station in Kaw Hmu, Myanmar on April 1, 2012. Photographer: Paula Bronstein/Getty Images

“It’s more than words, I’m very, very happy,” May Nwe Soe, a 33-year-old garment factor worker, said of voting in Suu Kyi’s district today. “I just want Daw Suu to go to parliament,” she said, using a respectful title for Suu Kyi.

Moves toward greater political freedom in the nation of 64 million people bordering China and India have prompted Western nations to consider easing sanctions as companies from General Electric Co. to Standard Chartered Plc (STAN) await opportunities to invest. At stake for Thein Sein is dismantling a legacy of six decades of isolation that left Myanmar with per capita gross domestic product of just 14 percent of neighbor Thailand’s.

Suu Kyi, 66, spent last night in a village of 1,400 people in Kawhmu district about an hour’s drive south of Yangon, the country’s biggest city. Hundreds of residents yesterday lined a dirt road heading to the village to get a glimpse of the daughter of a Myanmar independence hero.

‘Democracy is Exciting’

“Don’t forget to vote tomorrow,” she told a crowd of several thousand people who chanted her name and “NLD - We Must Win” as she stood on a balcony at the house where she was staying. “Don’t miss this chance. If the people vote for me, I will come here often and I will try to develop the region.”

Voters started casting ballots when polls opened at 6 a.m. local time. In 2010, results were announced several days after the election.

“The voters are coming peacefully,” Myint Oo, the chairman of a ward in Suu Kyi’s district, said today. “Democracy is exciting because you can vote.”

Known in Myanmar simply as “The Lady,” Suu Kyi emerged on Myanmar’s political scene in 1988, when she returned to the country to care for her ailing mother after years of living overseas. She was first detained before 1990 elections in which her party won about 80 percent of seats for a committee that was designed to draft a new constitution. The military rejected the results.

Fairness Questioned

Suu Kyi refused to accept an army-drafted constitution in 2008 and boycotted an election two years later in which Thein Sein’s party won a majority. A meeting between Suu Kyi and the president in August led to her party rejoining the political system.

In a 90-minute briefing on March 30, Suu Kyi said her party will accept the results if the will of the people is “fairly reflected.” She called irregularities including vote-buying, incorrect voter lists and an incident where a candidate was almost hit with a betel nut “beyond what is acceptable for democratic selection.”

“I don’t think we can consider it a genuinely free and fair election if we take into consideration what has been going on in the last couple of months,” Suu Kyi told more than 300 journalists gathered at her lakeside home in Yangon. “But still I will be willing to work toward national reconciliation, so we will try to tolerate what has happened.”

Suu Kyi has appeared on state-run television and traveled throughout the country during the campaign period, falling ill on two occasions from exhaustion. Tens of thousands of people have greeted her at campaign stops around the country.

Military, Police Unseen

“We’re happy with what we’ve seen,” Chheang Vun, who is observing the election for Cambodia, said in Kawhmu district. “Myanmar is now very different. In the three days we’ve been here, we have not seen military or police.”

Thein Sein called on all political parties to accept the results in a March 24 speech published in the state-run New Light of Myanmar.

“We all need to work together to ensure that the outcome is accepted by all the people,” he said.

The elections “aren’t going to fundamentally shift power in the country, but they are hugely important in representing a historic compromise” between Suu Kyi’s party and the government, said Thant Myint-U, an author of two books on Myanmar whose grandfather, U Thant, was the first Asian head of the United Nations. “It will end a long chapter in Burmese history.”

Currency Float

Myanmar’s political opening is moving in parallel with efforts to rewrite investment laws and unify multiple exchange rates that impede trade. The country will adopt a managed float of its currency today, scrapping a 35-year fixed rate in a move to modernize the economy, the central bank said in a March 28 statement.

Rich in natural gas, gold and gemstones, Myanmar represents one of Asia’s last untapped frontier markets, attracting investors such as Jim Rogers, the chairman of Rogers Holdings, who predicted a global commodities rally in 1999. Myanmar’s opening is “a game-changer,” Bank of America Corp.’s Merrill Lynch said in a March 29 research note.

Honda Motor Co. is interested in building a motorcycle plant in Myanmar, Hiroshi Kobayashi, president and chief executive officer of Asian Honda Motor Co., told reporters in Thailand yesterday. The decision will depend on circumstances in the country and international consensus, he said.

U.S., EU Watching

American sanctions ban investment in Myanmar and imports from the country, restrict money transfers, freeze assets and target jewelry with gemstones originating in the nation. The European Union bans weapons sales and mineral imports.

The by-elections “are a tangible moment in the path to reform, just like the release of political prisoners in January,” Derek Mitchell, U.S. special envoy to Myanmar, told reporters on March 15. “We will respond after the elections in an appropriate fashion if we believe they were held free, fair and transparent.”

Myanmar invited a limited number of election monitors and journalists from the U.S., EU and neighboring countries. Voters will pick from 17 parties and seven independent candidates to fill 37 seats in the lower house, six in the upper house and two for regional assemblies, according to Network Myanmar, a U.K.- based organization that promotes reconciliation in the country.

The by-elections “are a key moment in national reconciliation and should allow a substantial review of EU policy vis-à-vis Myanmar,” Catherine Ashton, the EU’s foreign policy chief, said in a March 28 statement.

Security Concerns

Elections in three constituencies in Kachin state, home to a violent ethnic rebellion, were suspended due to security concerns. Myanmar’s army has displaced 75,000 ethnic Kachins since last June in an area along the Chinese border, New York- based Human Rights Watch said in a March 20 report, underscoring the challenges that remain for Thein Sein as he aims to make peace with political rivals.

“Myanmar will become a new model for other countries to get through a transition with stability and irreversibility,” Nay Zin Latt, one of nine advisers to Thein Sein, said by e- mail. “The 2012 by-elections are much more free.”

To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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