News Archive

Ukraine faces gas cut threat as talks with Russia fail

MOSCOW (Reuters) – Russia’s Gazprom GAZP.MM said on Monday Ukraine had failed to pay at least part of its gas debts by a 0600 GMT deadline and would now have to pay up front for deliveries.

It said in a statement that Ukraine’s state-controlled Naftogaz had also failed to pay for June deliveries, suggesting supplies could now be cut.

“Today, from 10:00 a.m. Moscow time, Gazprom, according to the existing contract, moved Naftogaz to prepayment for gas supplies … Starting today, the Ukrainian company will only get the Russian gas it has paid for,” it said.

(Reporting by Vladimir Soldatkin, writing by Elizabeth Piper, editing by Kevin Liffey)

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France pushes for concessions as Alstom bidding enters crucial week

PARIS (Reuters) – France is continuing to press for guarantees from contenders to buy power equipment assets from Alstom ALSO.PA, as Siemens SIEGn.DE and Mitsubishi Heavy Industries 7011.T consider a joint move to challenge a formal offer from General Electric GE.N.

The race to acquire power activities from Alstom, better known for its high-speed TGV trains, is entering a crucial week, with Siemens due to present an offer by Monday ahead of a June 23 cut-off date set by GE for its 12.4 billion euros ($16.88 billion) bid for all of Alstom’s energy arm, which includes its thermal power, renewable power and grid businesses.

Alstom is privately owned but the government has taken an active role in the talks. It views the group’s transport and energy activities, notably in nuclear power, as strategic and is keen to preserve jobs with unemployment stuck above 10 percent.

The French government has already secured a pledge from GE to create 1,000 new jobs in France within three years of a deal and Finance Minister Michel Sapin said on Sunday he expected the U.S. conglomerate to improve its offer further.

“Mitsubishi forming an alliance with Siemens improves Siemens’ offer,” Sapin said in an interview broadcast on Europe 1 radio and news channel iTele. “I think that GE is also going to improve its offer.”

GE said in an emailed statement it had “made progress in our discussions with the French government, including expanded alliances in the energy businesses with French investors as well as a global partnership with Alstom on transport.”

Siemens and Mitsubishi are putting the finishing touches on an offer for Alstom’s turbine businesses, including a cash element of roughly 9 billion euros ($12.3 billion), according to sources close to the bidders. (Full Story)

Siemens’ supervisory board was due to meet at 1600 GMT to consider an offer for Alstom. The German group has not commented on its discussions with Mitsubishi, but has said it would unveil a formal bid for Alstom assets by June 16.

In the move being considered by Siemens and Mitsubishi, the German firm would acquire Alstom’s gas turbines business while the Japanese group would inject cash and industrial assets into a joint venture in steam turbines, sources said.


Under the deal, Mitsubishi and the French state would take equal stakes in Alstom, acquiring part of the 29 percent holding of French group Bouygues BOUY.PA, union representatives said after meeting Economy Minister Arnaud Montebourg.

This could involve French state bank BPI acquiring a stake in Alstom alongside Mitsubishi, the Wall Street Journal reported on Sunday. A source familiar with the situation said BPI was “ready to be involved in any scenario”, including with Mitsubishi or GE.

A Bouygues spokesman said the group had not been approached by any party regarding a sale of its stake in Alstom, adding: “Bouygues wishes to remain a long-term shareholder in Alstom with a 29.3 percent stake.”

Bouygues would support the proposal recommended by the Alstom board, he said.

In a second step, separate to a turbines deal, Siemens is also proposing to combine its rail activities with Alstom’s, sources said. The French government has actively lobbied for this, saying it would create a European rail champion.

An Alstom spokeswoman declined to comment.

Finance Minister Sapin said he did not have “any preference” for a bidder, but France would defend jobs and investment through a new decree extending the government’s powers to block foreign takeovers in sectors deemed strategic. (Full Story)

His cabinet colleague Montebourg said in a newspaper interview on Friday a tie-up with Mitsubishi would be “a serious alternative” to GE’s offer.

Some sources close to the matter warned that the Siemens-Mitsubishi plan would effectively break up the company’s power business and ultimately run counter to the government’s aim of preserving Alstom’s integrity and scale.

“If this is all confirmed tomorrow, we’d be looking at a real dismembering of Alstom and desperately searching for the (energy equivalent of) European Airbus the government was calling for, given that a big chunk of the business would be going to Japan,” said one source.

French President Francois Hollande will host a meeting on Alstom on Tuesday morning, according to his official diary, while Siemens Chief Executive Joe Kaeser is due to appear before a French parliamentary committee later that day.

(Additional reporting by Benjamin Mallet and Gregory Blachier; Editing by Sophie Hares, Robin Pomeroy and Cynthia Osterman)

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China’s Li flies into UK to talk trade, seal deals worth $30 bln

LONDON/BEIJING (Reuters) – Chinese Premier Li Keqiang will fly into Britain on Monday for the first time since taking office on a visit focused on moving the relationship beyond the political differences of the past and signing more than $30 billion of deals.

Britain’s relations with China took a nosedive in 2012 after Prime Minister David Cameron met the Dalai Lama, the Tibetan spiritual leader whom Beijing says is a separatist. Ties have recovered somewhat since, and Cameron visited China last year.

Tensions remain, however. Beijing warned London on the eve of Li’s visit not to lecture it on the subject if it wanted good economic ties, after Britain angered China in April when it criticized its human rights record in a report. [ID:nL5N0OU3WE]

Britain is expected to take the opportunity to announce it is easing some visa restrictions on Chinese citizens, a long-standing request from Beijing which has complained current arrangements are overly lengthy, bureaucratic and opaque.

Li will hold talks with Cameron and will also meet the Queen. China’s ambassador to Britain on Friday robustly rejected local media reports that Beijing had threatened to cancel the trip if Li was not granted an audience.

In speeches to Chinese and British business people, as well as think tanks, Li is expected to make reassuring comments about slowing growth in China to try to shore up confidence in the world’s second biggest economy.

A Reuters poll in April forecast China’s economic growth could slow to 7.3 percent in the second quarter from a 18-month low of 7.4 percent in the previous quarter, with full-year growth of 7.3 percent in 2014, the weakest in 24 years.

Li has signaled some flexibility in achieving this year’s 7.5 percent growth target, but analysts say the government needs to prevent growth from falling towards 7 percent, something that could fuel job losses and threaten social stability.


Boosting business between Britain and China is one of the visit’s main aims. China views Britain as Europe’s most open economy and is keen for its firms to invest in nuclear and high-speed rail projects.

It also wants the government to ensure London’s Heathrow airport is expanded. [ID:nL5N0OU3HG] Two large Chinese investment funds are expected to announce plans to plough’s new money into Britain during the trip.

London wants to develop as an offshore yuan trading hub and there may also be deals related to that. China has said the visit should yield business deals worth a total value of over $30 billion. [ID:nL5N0OU3BX]

Ahead of the trip, Vice Commerce Minister Gao Yan said China’s investment in Britain had jumped from $840 million in 2008 to $12.4 billion in 2013.

“China is willing to import even more high-tech goods, services and products from Britain,” Gao said.

She said she hoped Britain would push Europe to lift curbs on exports of high-tech goods to China and said Beijing wanted British help to explore an EU-China free trade deal.

Li arrives on Monday, but his main schedule is on Tuesday and Wednesday, after which he is due to fly to Greece for a June 19-21 visit.

In Greece, Li is expected to focus on the debt-ridden country’s privatization programmer and the opportunities it offers Chinese firms.

He is likely to visit Piraeus port, which is being privatized and where China’s Cosco (1199.HK) has been short-listed to buy a majority stake, and Crete, where Greece is seeking investment in a new major airport estimated to cost 1.5 billion euros ($2.04 billion).

($1 = 0.7345 Euros)

(Additional reporting by Shanghai newsroom and Deepa Babington in Athens; Editing by Sonya Hepinstall)

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Ukraine, Russia hold last-ditch gas talks before deadline

KIEV (Reuters) – Ukraine and Russia made a last-ditch attempt to reach a deal in a gas pricing dispute on Sunday, hours before a deadline for Kiev to pay a $1.95 billion debt or have its gas supplies cut off.

Sources close to the talks in Kiev said no breakthrough was made in the initial stages of the talks on Sunday evening but the sides continued talking after a pause.

Russia and Ukraine disagree how much Kiev should pay for the natural gas it receives from Russia and Russian state-owned natural gas producer Gazprom plans to switch to an advance payment system if Kiev does not start paying its bills.

The deadline is 0600 GMT on Monday, after which Russia has threatened to halt supplies to Ukraine.

This could disrupt the gas flow to the European Union, which gets some of its imports via Ukraine, but prospects of a breakthrough have been hit by political tensions and clashes between government forces and pro-Russian separatists in east Ukraine.

The talks, which are being mediated by the European Commission, had been expected to resume on Sunday morning following a meeting on Saturday, but were delayed. The reason was not immediately clear.

A source close to one of the delegations said there had been a break in the discussions, by which time no “results” had been achieved. Another source close to the talks said there had been “nothing so far.”

Ukraine has accepted a European Commission compromise proposal of $326 per 1,000 cubic metres of gas for an interim period. Moscow has offered Kiev a $100 reduction to $385, around the average amount paid by Russia’s European clients.

Resolving the dispute and averting supply cuts could help ease tension over the separatist rising in east Ukraine, which Kiev blames on Moscow despite Russian denials that it is arming the rebellion.

Tensions are also high following Russia’s annexation of Crimea after Ukraine’s Moscow-leaning president was ousted and pro-Western leaders took over power.

(Editing by Timothy Heritage)

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U.S. orders mandatory inspections for F-35s after engine issue

WASHINGTON (Reuters) – The U.S. military has ordered mandatory inspections of all Lockheed Martin Corp F-35 fighter jets before further flights after a Marine Corps F-35B model suffered an in-flight emergency last week, a Pentagon spokesman said on Sunday.

Joe DellaVedova, spokesman for the F-35 program office, said the inspections were ordered late on Friday but that a majority of the 97 F-35s in the fleet – 69 operational jets used for training and 28 test aircraft – had already been inspected and cleared to resume flights on Monday.

He said the inspections, first reported by the Wall Street Journal, were focused on the oil flow management valve fitting on all F135 engines, which are built by Pratt Whitney, a unit of United Technologies Corp. The valve provides oil flow to the engine bearing compartments.

News of the engine issue came just days after Frank Kendall, the Pentagon’s chief arms buyer, said the F-35 program was making progress but more work was needed on developing the jet’s software and improving its reliability.

The inspections were ordered after an F-35B model suffered an in-flight emergency on June 10 caused by oil loss in the jet’s engine at a Marine Corps base in Yuma, Arizona, where issues have now been found with a total of three valves, DellaVedova said.

He said the pilot returned to base safely and there were no injuries.

No issues have been discovered at the other bases where F-35s are flown in California, Florida, Arizona and Maryland, he said.

Pratt Whitney spokesman Matthew Bates said the company was working closely with the Pentagon’s F-35 program office to determine the cause of the issue. He said it took about 90 minutes to inspect each aircraft, and nearly all planes had been inspected and cleared for further flights.

Bates said the F135 engine had completed nearly 32,000 hours of combined ground and flight testing, with more than 16,000 logged in operational flights. Engine availability had remained steady at or above 98 percent, he said.

Bates also said the engine was designed to survive significant damage from foreign objects as well as oil deprivation, and the control system for the engine included redundant mechanical and electronic parts.

DellaVedova said the source of that F135 engine oil leak appeared to be a supply line to engine bearings and a fitting that separated from the body of the valve in question.

It was not clear if the issue was maintenance-related.

(Reporting by Andrea Shalal; Editing by Sandra Maler)

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Fed in focus as investors seek reassurance

MADRID (Reuters) – Investors will look to the Federal Reserve for reassurance in the coming week, with little economic data to assuage their concerns over the strength of the global recovery, amid signs Iraq may be sliding into civil war.

The Fed, which wraps up a policy meeting on Wednesday, is expected to keep steadily reducing its massive bond-buying stimulus by $10 billion per month.

Financial markets will be listening out for any hints on when the U.S. central bank might begin raising interest rates.

“The Federal Reserve is preparing to move to the second step of the monetary policy exit. With the tapering of asset purchases virtually on auto pilot – QE3 is projected to end in late summer or early autumn – the focus is gradually shifting towards actual rate hikes,” Unicredit said in an investor note.

It said the notion that U.S. monetary policy has reached a turning point could be strengthened if the Fed policymakers’ median rate forecast for the end of 2016 stays at 2.25 percent, where it stood in March, up from 1.75 percent in December.

The matrix of dots for when each rate-setter expects policy to begin tightening – and how quickly – will be keenly scrutinised, as will any comments about rate hikes or slack in the economy from Fed Chair Janet Yellen, who speaks after the results of the meeting are released.

While the world’s largest economy got off to a weaker than expected start this year, many analysts believe the underlying trend for growth remains solid.

Global stocks are likely to stay on the back foot due to concerns over a growing radical Islamist insurgency in Iraq. U.S. President Barack Obama said he didn’t rule out air strikes to help Iraq counter the insurgency, but later said he needed several days to determine how the United States would react.

The escalating violence in Iraq drove oil prices to a nine-month high on Friday.


The monetary policy outlook will also be in focus in Britain after Bank of England Governor Mark Carney stunned the markets by saying rates could rise sooner than financial markets expect.

His comments, which put the British central bank out ahead of the world’s other major policy guardians on the monetary tightening front, pushed sterling to near five-year highs against the dollar on Friday.

The Bank publishes the minutes of its June policy meeting on Wednesday, which will be closely watched for signs of any further division among its members on rates, and several of its policymakers will be speaking during the week.

The Bank’s new Financial Policy Committee, which has the power to rein in an overheating housing market, meets on Tuesday, although the meeting minutes will not be published for a couple of weeks.

Meanwhile, the ECB’s fight against deflation via interest rate cuts and measures aimed at stimulating lending to crisis-hit companies, means few expect further action from it for now.

“The ECB has bought itself some quiet time, maybe for the remainder of this year. It doesn’t want to be pushed in to any additional movements before then,” economist at Deutsche Bank Gilles Moec said.

There will be few key economic indicators from the euro zone, with the German Zew index for June in focus after better-than-expected industrial output data and rising confidence in the bloc suggesting growth is accelerating in the second quarter.

Bond markets will look to absorb debt supply from Spain, Germany and France after a heavy issuance last week including 9 billion euros of a new 10-year bond from Spain and paper from France, Italy, Germany and Portugal.

Yield-hungry investors will be watching for news of a possible debt sale by Cyprus just a year after it bailed in bank depositors and imposed capital controls. That would make it the last euro zone member that took financial aid to make a market comeback.

The Bank of Japan publishes the minutes of its monthly policy meeting on Friday but is not expected to have moved from an optimistic viewpoint that the country is in the midst of a virtuous cycle of employment and output growth, analysts say.

“There is some support to this theory. The unemployment rate remains very low and job offers to applicants ratios are moving steadily higher. Add to this the slight improvement in cash wages, and the firmer backdrop to the Japanese economy than that prevailing back in 1997,” said ING in an investors note.

China will issue foreign direct investment data on Tuesday and house price figures on Wednesday. A slowdown in property inflation is likely to stoke fears about a deepening downturn in the sector. [ID:nL4N0OT14V]

(This story corrects Obama’s name in paragraph eight)

(Additional reporting by Gui Qing Koh and Ann Saphir; Editing by Hugh Lawson)

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ArcelorMittal taps into China’s booming market for growth

Loudi CHINA (Reuters) – ArcelorMittal (ISPA.AS), the world’s top steelmaker, said on Sunday it would use its Chinese joint venture to tap into the country’s fast-growing car market, helping offset slackening steel demand on the back of a slowing economy.

The company’s joint venture with China’s Hunan Valin Steel Co 000932.SZ starts operation this month, with an annual production capacity of 1.5 million tonnes, including hot and cold-rolled coils, and parts such as chassis and wheels.

“Demand for autos in China will continue to grow. Today, China produces about 20 million cars per year … so there is demand for these kind of niche products, like the ultra light-weight auto steel,” Lakshmi Mittal, the company’s chief executive, told Reuters in an interview in central Hunan province.

China became the world’s biggest auto market five years ago, with annual sales growing nearly 14 percent last year to smash through the 20 million mark, thanks to a burgeoning middle-class that is eager to spend.

ArcelorMittal, which set up the Hunan joint venture in 2010 to produce high-end automotive steels, said it has no further short-term expansion plans in Asia or elsewhere, despite steel demand gradually recovering in the U.S. and Europe.

“We don’t need to grow our capacity in our business. We will supply more steel to Europe and America by increasing our utilization,” he said.

Although China’s steel sector, the world’s largest in terms of capacity and consumption, is already plagued by gross over capacity, there is still a shortage of high-end automotive steel.

Imports from Japan and South Korea hover between 1.5 million to 2 million tonnes per year. ArcelorMittal previously supplied steel produced outside of the country to automotive manufacturers in China.

Mittal said the Hunan venture would supply steel to international car makers and domestic players such as Geely Automotive Holdings (0175.HK), Dongfeng Motor Group (0489.HK) and Shanghai Auto.


China’s huge automotive steel market is critically important to foreign companies, which have looked to its rapid growth to compensate for flagging sales in Europe. But Chinese laws requires foreign steel makers to team up with local partners.

South Korea’s POSCO (005490.KS), which reported an 8 percent growth in the auto sector in its 2013 results, has also partnered with Chongqing Iron and Steel Co (601005.SS) to build a 3 million tonnes per year auto steel plant in western China.

Despite a buoyant outlook for China’s auto steel demand, some analysts have said that any stronger-than-expected growth for electric vehicles, which use more aluminium for car bodies, could take some shine out of steel consumption.

China had set a target of selling over 5 million electric cars by 2020, which would account for about one-seventh of all vehicle sales in the country if realized.

The move by Ford Motor (F.N) to use aluminium for most of its F-150 truck has also renewed debate on whether aluminium would increasingly replace steel in the auto market.

“My position is that steel has the total solutions for the car industry … which is lighter, stronger and safer material that can meet all these standards of the car industry,” said Mittal.

(Reporting by Fayen Wong; Editing by Sophie Hares)

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Mobile ‘net neutrality’ faces new day of reckoning at FCC

WASHINGTON (Reuters) – A surge in mobile Internet usage has U.S. regulators considering whether to apply the same rules to fixed and wireless Internet traffic, and large technology firms are siding with consumer advocates to call for such a change.

The Federal Communications Commission is now rewriting the so-called “net neutrality” rules, aimed at ensuring that Internet providers do not unfairly block or slow down users’ access to content on the web, after their 2010 version was rejected in January by an appeals court. As part of that process, the agency is seeking comments on whether it should take a fresh look at distinctions now drawn between wireless and wireline networks.

Consumer groups have long advocated stricter anti-blocking and anti-discrimination rules for mobile web traffic. This year, they have powerful allies in Internet companies like Google and Facebook, who see mobile as an increasingly popular platform.

“The distinction between wireless and wireline is certainly not the same as it was… The enforceable net neutrality rules should apply equally, whether you use the Internet on your mobile or home broadband,” said Michael Beckerman, head of the Internet Association, which represents three dozen web companies including and Netflix.

“There will be differences in terms of network management, but at the end of the day, the same fundamental principles … need to apply to the mobile world.”

The new look at the rules comes as Americans routinely use smartphones to watch videos and browse websites. A growing number of U.S. consumers, many of them low income, non-white and young, rely on such devices as their primary means of Internet access.

The lines between fixed and broadband continue to blur as mobile carriers develop fixed broadband businesses of their own and use Wi-Fi to offload wireless data traffic, and cable broadband providers create Wi-Fi hotspots for their customers.

Under the 2010 rules, both fixed and wireless Internet providers were banned from blocking users’ access to legal websites, with exclusions for reasonable network management.

But wireline carriers also couldn’t block legal applications or “unreasonably discriminate” against any legal web traffic or apps, while wireless providers were only banned from blocking applications that competed with their own voice or video calling services.

Wireless carriers say it would be unwise to impede their customers’ freedom to roam the web, and that stricter rules would hurt how they manage their dynamic shared networks, leading to slower Internet speeds for everyone.

“The FCC already acknowledged the unique nature of wireless, specifically the technical and operational challenges our industry faces, including the need to … actively manage networks to provide high quality service to a customer base that is constantly on the go,” said Meredith Attwell Baker, CEO of CTIA, the wireless trade group.

Both sides plan to lobby the FCC as the agency collects public comments on its proposed rules until Sept. 10. Scrutiny on the wireless space promises to be more intense than before.

“It’ll be a topic that will have big resonance among the commissioners: why should wireless be treated differently than wireline in terms of net neutrality,” said one senior FCC official, who spoke anonymously to discuss the ongoing review.

(Reporting by Alina Selyukh and Marina Lopes, editing by Ros Krasny and Andrew Hay)

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Bangladesh accuses 17 over garment factory collapse

DHAKA (Reuters) – Bangladesh’s Anti-Corruption Commission (ACC) on Sunday filed a case with local police accusing 17 people of breaching regulations over the construction of a building that collapsed last year, killing over 1,130 mostly garment workers.

The April 2013 collapse of Rana Plaza, built on swampy ground outside Dhaka, ranks amongst the world’s worst industrial accidents and sparked a global outcry for improved safety standards in the world’s second-largest exporter of ready-made garments.

The accused include the parents of Mohammad Sohel Rana – the individual previously cited as the owner of Rana Plaza – as well as a local mayor, engineers and three owners of garment factories that used the building.

They do not include Rana himself, who was arrested after a four-day hunt shortly after the building collapsed, apparently trying to flee across the border to India.

ACC spokesman Pranab Kumar Bhattachajee said Rana’s name did not appear in documents covering ownership of the land and design approval, which instead listed his parents as owners.

Of the 17 accused, Bhattachajee said: “Our investigation found, they grossly breached the building code.”

Municipal authorities gave permission for extra floors in the building, but they had no such authority, he added.

The ACC will now appoint an official to conduct a further investigation that may result in a charge sheet being filed to a court.

Low labor costs and, critics say, shortcuts on safety, make Bangladesh the cheapest place to make large quantities of clothing.

Companies are split over how to improve conditions. Big European firms signed an accord that would make them legally responsible for safety. U.S. groups such as Wal-Mart Stores Inc (WMT.N) have broken ties with non-compliant factories.

Late last year, the government raised the minimum wage for garment workers by 77 percent to 5,300 taka ($68) and amended its labor law to boost worker rights, including the freedom to form trade unions.

(Reporting by Ruma Paul; Editing by Mark Potter)

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