ASEAN to sign discounted oil deal: official

Southeast Asian nations are to sign an energy security agreement on Sunday that will allow their members to buy oil at a discounted price during times of crisis, a senior official said.

"Under the agreement, oil exporting states will supply petroleum to a country that is facing a shortage at a lower price," said S. Pushpanathan, deputy secretary-general of the Association of Southeast Asian Nations (ASEAN).


"The high price of oil is not an issue now, but should there be a crisis in the future, ASEAN can provide self-help," he said on Saturday.


It was not immediately clear how large a price reduction the deal would involve, when it would kick in or who would administer the pact.


Pushpanathan said oil price volatility posed a challenge to sustainable economic growth in the 10 ASEAN member states.



The agreement would be signed at the bloc's annual summit in the Thai beach resort of Hua Hin, he added.


"Given that ASEAN is increasingly dependent on petroleum resources from outside the region, it is important for ASEAN member states to enhance the ability to respond to an energy emergency situation by ensuring the physical availability of oil," he said.


Oil prices have slumped since hitting a record high above 147 dollars in July, as the global economic slowdown has hammered world energy demand.



Prices have recently fallen to near five-year lows.

India begins aircraft carrier construction; to go in for more

Joining an elite club of nations capable of building large warships, India on Saturday began the construction of its first indigenous aircraft carrier at the Cochin Shipyard in Kochi and will go in for 2 to 3 more carriers in the heavier class.

Pressing a remote to lower the keel the ship's backbone into the construction dock of the shipyard, Defence Minister A K Antony said, "The Navy's carrier will showcase India's technological prowess and warships' building capabilities to the world. It will be the largest ever warship to be built in India."


The 40,000-tonne carrier will operate nearly 30 aircraft including the Russian MiG-29Ks fighters, Kamov-31 helicopters and the indigenous Light Combat Aircraft (LCA).


"This is a crucial milestone and an occasion to cherish in the shipbuilding traditions and maritime history of the nation. The culmination of this prestigious project, sometime in 2014, will transform India into an aircraft-building nation," Antony said.


He said that India will certainly produce more indigenous aircraft carrier, but in the heavier class category to meet the future challenges and needs of maritime security.



"We hope to operate two to three aircraft carriers simultaneously in the not too distant future," Mukherjee said.



"Our ever expanding maritime responsibilities require enhanced 'blue water' capabilities and to achieve this, integral air cover is a must. Our navy is one of the few carrier-operating navies worldwide," Antony said.


Among the naval powers of the world, only the US, Russia, France and the UK have carrier building capability. Even out of these four, UK is yet to build a carrier with a 40,000 tonne displacement.


India already possesses an aircraft carrier in the 29,000-tonne class, the INS Viraat bought from the British navy and it has seen 50 years of cumulative naval service.



The 45,000-tonne Admiral Gorshkov aircraft carrier was purchased from Russia in 2004 and has been re-christened as INS Vikramaditya and is likely to join Indian Navy in 2012 after repair and refit in the Russian shipyard Sevmash.


The uncertainty, conflict and threats from maritime terrorism, piracy, narcotics, smuggling and low-intensity conflict were perpetrated by both state and non-state actors, he said, adding "the security of the sea lanes and offshore infrastructure will have to be ensured for sustainable development".



Designed by the Navy's Design Organisation since January 2003 after the government sanction came, the project had gained stream in 2006 when the construction of the warships' building blocks began.


The shipyard has already completed about 8,100 tonne of work with steel, developed by DRDO and produced by SAIL.


"The Project-71, as the integrated aircraft carrier is called in the Navy parlance, was initially sanctioned Rs 3,260 crore by the government, but the project cost was likely to increase as the warship construction progressed," Cochin Shipyard's (CSL) Chairman and Managing Director Commodore (retired) M Jitendran told reporters earlier in the day.


Jitendran said the CSL had already built around 400 blocks of the total 874 blocks that would form the fully constructed carrier when it would be delivered in 2014.


He said the Navy and the CSL had jointly designed the carrier, but taken help from Russia's NBD for the aviation aspects of the warship and Italy's Fincantieri for the propulsion system integration.


Asked about the carrier's contract, Jitendran said they were expected to complete work on the warship by December 2010 and launch it into the water, but the delivery would take place on schedule in the middle of the next decade.


On plans for construction of heavier aircraft carrier in the future, he said the CSL currently did not possess the construction dock to build warships heavier than 40,000 tonnes, but if the government intended to give it the orders, expanding the shipyard was possible.



India 'safe' in the hands of armed forces: Antony


Addressing a function in Kochi after laying the keel of India's first Indigenous Aircraft Carrier (IAC), he said this was his last public function as the Defence Minister.


He said, "when I look back, I feel satisfied that I tried my level best to protect national interest and security. I got total support and cooperation from all my colleagues."


Stating that rapid industrial growth was increasing country's dependence on sea route he said "this necessitates security of our sealink communication and offshore infrastructure".


"The task of defending seafront security of the offshore installations and safeguard of the sealines make the task extremely challenging".


" Indian Navy has to take the lead in safeguarding the nation's vital security interest," he said.


Praising the Indian Naval designers, he said they proved that they could design a world class aircraft carrier.



Neither Chief Minister, V S Achutanandan, nor any of his Cabinet colleagues attended the function.


Replying to a query, Antony said "there is no proposal with the government to privatise the Cochin Shipyard Ltd."



He added that any such move would be opposed.

US increases stake in Citigroup

Citigroup and the US Treasury have reached a deal that sees the government substantially increase its stake in the ailing bank from 8% to 40%.

The deal does not require extra taxpayer investment, but is dependent on Citi raising extra private capital.

Citi shares ended down more 39% as investors worried about their stake in the bank being diluted by the move.

As one of the banks hardest hit by the continuing credit crisis, Citi has already gained $45bn in Treasury cash.

It also has guarantees protecting it from the bulk of losses on $306bn (£216bn) of risky investments.

The latest agreement involves the government converting some of its preferred stock in Citi to common shares.

As part of the deal, the bank will suspend paying dividends and will also install new independent directors on its board.

Battered

The bank made an $8.29bn loss in the final three months of 2008, and was forced to split into two new firms.

The government will only raise its stake to match that put up by private investors, and it has said it preferred banks to remain in private hands.

The treasury's Capital Assistance Programme allows banks such as Citi to borrow money from the government if they need more capital.

Last week, Citigroup's share price fell below $2 to an 18-year low.

In November, the US Treasury announced a $45bn rescue plan for the bank, accompanied by a $306bn guarantee for Citi's most risky loans, as part of its Troubled Asset Relief Program (Tarp).

At present the government's preferred shares represent a 7.8% holding in the company.

The move means Citi shareholders will see their stakes diluted and the government will have a much larger influence over the bank.

Citigroup, which two years ago was worth $273bn and is now worth about £20bn, was brought to its knees by five quarterly losses in a row.

It has been battered by the meltdown in sub-prime mortgages - made to people on low incomes or with poor credit ratings.

A cost-cutting exercise last year resulted in some 52,000 jobs being slashed, bringing the Citi workforce down to about 323,000 people.

Avoiding sell-off

Analyst Peter Kenny, managing director at Knight Equity Markets in New Jersey said he did not think shares would be too badly hit by the announcement.

"We are talking about a form of nationalisation, and to the extent that the market is going to accept it," he said.

"The problem is that there is so much going on in terms of trying to manage the continuing and unfolding drama around the credit crisis.

The bottom line is that it's not like the government has much of a choice. Citi wasn't negotiating. The government was saying, 'This is what you have to do.'

"The government didn't want to have to take any more than it had to. This is the least they can do, and the most they can do without causing a wholesale sell-off."

US economy suffers sharp nosedive

The US economy shrank by 6.2% in the last three months of 2008, official figures have shown, a far sharper fall than had previously been reported.

Plunging exports and the biggest fall in consumer spending in 28 years dragged the annualised figure down from an earlier estimate of 3.8%.

The decline was much worse than analysts had expected, sending US stocks spiralling lower.

In 2008 as a whole, the economy grew by 1.1%, the slowest pace since 2001.

The blue-chip Dow Jones industrial average dropped 119.15 points, or 1.66%, to 7,062.93. The broader Standard & Poor's 500 Index fell 2.36% to 735.09 - a 12-year low.

Recession warning

Consumer spending, which accounts for about two-thirds of domestic economic activity, fell by a rate of 4.3% in the final quarter - the biggest fall since the second quarter of 1980. This was a revision of the earlier figure of 3.5%.

With rising unemployment, sliding home values, increasing numbers of repossessions and the slumping value of investments, observers say many US consumers are hanging on to whatever disposable cash they have.

Meanwhile, exports - which had until recently been supporting the economy - fell at the sharpest rate since 1970 at an annual rate of 23.6%, down from 19.7%.

Earlier this week, Federal Reserve chief Ben Bernanke warned Congress that without the right policies from the government, the US recession could last into 2010.

But he said if the Obama administration and the central bank can restore some measure of financial stability, 2010 could be a year of recovery.

President Obama recently signed a $787bn (£556m) recovery package of increased government spending and tax cuts, and unveiled a $75bn scheme to stem repossessions.

No good news

The latest GDP figures were "just awful" said Matt Esteve, a currency trader at Tempus Consulting in Washington DC. "It shows the weak state of the world's largest economy."

And Boris Schlossberg, director of currency research at GFT Forex said there was "doom all over".

He predicted that the dollar would not weaken too much against the euro because "there's no good news on the other side of the Atlantic, either".