profitepaper pakistantoday 26th august, 2012

Sunday, 26 August, 2012

Wall Street gains on

stimulus hopes, but

ends week lower

NEW YORK

AGENCIES

Despite the day’s advance, the S&P 500broke a six-week string of gains. For theweek, the benchmark index fell 0.5percent. Conflicting perceptions of theFed’s commitment to provide morestimulus took a toll on the market thisweek. Investor sentiment received a lifton Friday from U.S. Fed Chairman BenBernanke, who said the Fed has room todeliver additional monetary stimulus toboost the U.S. economy. Bernanke madethe comment in a letter to acongressional oversight panel. The lettercomes a week ahead of the annualeconomic symposium at Jackson Hole,Wyoming, where Bernanke and ECBPresident Mario Draghi will speak.The ECB is discussing yield-band targetsunder a new bond-buying program to letit shield its strategy and avoidspeculators trying to cash in, centralbank sources told Reuters on Friday. Anydecision would not be made before theECB’s September 6 policy meeting.“If there can be a nice balance ofstimulus that keeps interest rates low,as opposed to throwing more debt atthe problems in Europe, and somelevel of austerity, Europe can get outof this tangle. But that balance is reallythe key,” said Bryant Evans,investment advisor and portfoliomanager at Cozad Asset Management,in Champaign, Illinois.

PARIS

AFP

The Greek prime minister headed toParis Saturday on the second leg of a tripto try and win more time for his countryto meet a deadline to slash billions ofeuros (dollars) from its budget.

Antonis Samaras was due to meetFrench President Francois Hollande, aday after Germany’s Chancellor AngelaMerkel offered a ray of hope to Greece,stressing she wanted the debt-burdenedcountry to stay in the eurozone.

Samaras on Friday kicked off a two-day trip to Berlin and Paris with histroubled country’s future in the 17-na-tion eurozone in the balance as its cashreserves dry up and a new injection ofEuropean funds hangs by a thread.

The trip began just after Merkel andHollande urged Greece to redouble itsreform efforts to unlock a new fundinglifeline. As part of a 130-billion-euro($161-billion) bailout package from theEU and the International MonetaryFund (IMF), Greece has committed tosweeping reforms and some 11.5 billioneuros of cuts in 2013 and 2014.

But amid reports that the budgetaryhole is actually closer to 14 billion eurosand a recession now in its fifth year,Samaras is thought to want a two-yearextension to make the cuts.

Merkel on Friday pledged Germanhelp after her crisis talks with the Greekleader. “I want to say very clearly ... thatGreece is part of the eurozone and Iwant Greece to remain part of the euro-zone,” Merkel said at a joint news con-ference with Samaras.

GREEK PM TAKES DEBT CRISIS TALKS TO PARIS

NEW YORK

AGENCIES

Alittle-noticed provisiontucked into the latest Iransanctions bill may have donejust that for American vic-tims of a 1983 bombing of

the U.S. MarineCorps barracks

in Beirut.The sanc-

tions bill,signed byP r e s i d e n t

B a r a c kObama on Au-

gust 10, set outa d d i t i o n a l

p e n a l -

ties against Tehran to curb the country’snuclear ambitions.

The bill also specifically disarmsclaims the Central Bank of Iran has madein a legal battle in federal court in Man-hattan over $1.75 billion in securitiesfrozen in a New York bank account thatthe central bank says it owns. The plain-tiffs in that case are trying to get Tehran,through the Central Bank of Iran, to paydamages for Iran’s suspected role in help-ing Hezbollah carry out the barracks at-tack during the civil war in Lebanon.

The $1.75 billion was uncovered bythe U.S. Treasury Department in 2008and sits in a New York branch ofCitibank, part of Citigroup. Treasury saysthe money is effectively Iranian funds.

The Beirut plaintiffs’ lawsuit, filed in2010, argues that the funds should go to-ward paying a $2.65 billion damagesaward they obtained against Iran in 2007and have so far been unable to collect.

In court papers, the Central Bank ofIran has argued that the funds are off lim-its from seizure under the doctrine of sov-ereign immunity, which holds thatforeign states or their agents are not sub-

ject to another nation’s laws.But Section 502 of the sanctions

law, officially known as the IranThreat Reduction and Human

Rights Act of 2012, takes direct aim atthat defense. The section specifically de-clares that the Central Bank of Iran “isnot immune” under the Foreign Sover-eign Immunities Act of 1976, the U.S. lawthat Iran’s central bank claims protectsits funds from seizure.

It also states that the “financial assetsthat are identified” in the Manhattan case“shall be subject to execution or attach-ment ... to satisfy any judgment to the ex-tent of any compensatory damagesawarded against Iran.” Over the years,there have been billions of dollars in de-fault judgments against Iran levied byU.S. courts in favor of Americans, butnever collected. Language in the latestsanctions bill, which could be subject tolegal challenge, appears to have broughtthe plaintiffs in the Manhattan casecloser to seizing actual funds than in anyother case.

David Lindsey, a New York-basedlawyer for the Central Bank of Iran, alsoknown as Bank Markazi, acknowledgedthat the new sanctions law could affectthe Manhattan case. “The purpose of this10th inning change in the law was to doaway with our defenses,” Lindsey said.“No allegations have ever been made thatthe Central Bank of Iran was involved inthe 1983 attack,” he said.

Steven Perles, a lawyer for the Beirutplaintiffs, declined comment. The casewas brought on behalf of Deborah Peter-son, the personal representative of one ofthe deceased servicemen, and encom-passes hundreds of individual plaintiffs.

“If this section stands, it does seem toovercome any defenses Iran might have,”said Julian Ku, a professor at HofstraUniversity’s School of Law. Ku, whocalled the statute modification “unusual,”said that “if the payment is made, I thinkit would be the first such payment, andcertainly the largest ever paid out in aU.S. court against Iran.” To be sure, theplaintiffs must file supplemental briefs inlight of the new legislation, and the judgemust eventually decide whether to orderthat the funds be turned over - a processthat could still take years.A BIG ASSIST FROM CONGRESS:While Congress has previously inter-vened to help terrorism victims obtaincompensation from foreign states, it israre for a law to directly address an activecase, legal experts said.

“There is precedent for massive pay-outs, but this is a little bit unusual be-cause it changes a law about Iraniansovereign immunity in just one case,”said Roger Alford, a professor at the Uni-versity of Notre Dame Law School. “Howdid the lawyers get Congress to do that?”

The amendment was introduced lastwinter by Senator Robert Menendez, aNew Jersey Democrat. A senior aide toMenendez said the lawmaker’s effortswere spurred on by a visit from a victim’sfamily from his homestate. The aide, whospoke on conditionof anonymity, saidthe purpose of thelegislation was toensure that claimsagainst Iran werein fact actionable.“The amendmentsends a message notjust to Iran but to theother states that sup-port terrorism that theU.S. will allow the seizureand attachment ofassets to sat-isfy judg-m e n t sa g a i n s t

those countries,” the aide said.Experts and lawyers involved in such

cases said the defendants in the Manhat-tan case may seek to challenge the consti-tutionality of Congress changing thestatute, but that this would likely be a los-ing battle. One way would be to arguethat the legislative branch had improp-erly interfered with judicial matters.‘INNOCENT THIRD PARTY’: There isanother wrinkle in the claims over the$1.75 billion held in a Citibank account.The money was deposited there by Lux-embourg-based bank Clearstream, whichholds Iranian funds in accounts in Luxem-bourg. Clearstream said in court papers inJuly that if it is forced to turn over the$1.75 billion in New York, it may be barredfrom docking an equivalent sum from aBank Markazi account in Europe becauseof European sanctions against Iran.

Clearstream has argued that since theIranian assets were booked in Europe,they could not be considered to be in theUnited States. The sanctions law, how-ever, said that a sum held in the UnitedStates that was “equal in value” to Iranianassets held abroad could be attached.

A spokesman for Clearstream’s lawfirm, White & Case, declined comment.FEEDING FRENZY: Ever since theMenendez amendment was introduced,other groups of plaintiffs who have wonjudgments against Iran have expressed in-terest in getting a piece of any possible pay-out. Lawyers close to the case in New Yorksay the $1.75 billion would currently beshared among about 1,350 people, whichincludes families of victims of a 1996 truck

bomb attack at a U.S. military complexin Khobar near the Saudi Arabian oilcity of Dhahran. The attack killed 19soldiers and injured nearly 400. Theaide to Menendez said lawyers for the1,350 people had brokered a sharingagreement for the funds should theybe turned over. Five days after

Obama signed the sanctions bill, thePeterson plaintiffs sued London-based

bank Standard Chartered seekingcompensation over its conceal-

ment of Iran-linked trans-actions, citing the

Beirut bombing,which killed

241 U.S.s e r v i c e -men.

Tweak to US bill onIran sanctions opensdoor to damagesOne way to win a court case is to get theUnited States Congress to change the rulesof the game midstream

PARIS

AGENCIES

French President Francois Hollande said Greek leadersmust demonstrate their commitment to push throughreforms and that Europe must take decisions on the countryas soon as possible following a progress report by Athens’international lenders. Hollande also said following ameeting with Greek Prime Minister Antonis Samaras onSaturday that Greece must stay in the euro zone, echoingcomments by German Chancellor Angela Merkel, who heldsimilar talks with Samaras on Friday. “It (Greece) mustdemonstrate again the credibility of its programme and thewill of its leaders to go through with it to the end, whilstensuring it’s bearable for the population,” Hollande toldreporters. “On the European side, we are waiting for thetroika report,” he said, referring to the grouping of theEuropean Commission, European Central Bank andInternational Monetary Fund. “Once we have this report,once the commitments ... are confirmed, Europe has to dowhat it has to do. “We’ve been facing this question for 2-1/2years. There’s no time to lose — there are commitments toreaffirm on both sides, decisions to take, and the sooner thebetter. That means after the troika report at the Europeansummit in October.” Samaras said he had assured theFrench president that Greece was determined to overcomethe debt crisis and remain in the euro zone, which wouldshow that Europe was capable of solving its problems.“Some are betting that Greece will not make it. I am here toassure the French president that Greece is determined tomake it and it will. (It will) do whatever is needed toovercome its crisis and remain in the euro zone and play therole it merits in European integration,” he said. The Greekleader added that economic recovery was crucial to help itmeet its targets. Merkel on Friday reassured Samaras that

she wanted Greece to stay in the euro zone, but gave no signof ceding to his pleas for more time to meet the tough termsof Athens’ international bailout. Merkel also stuckdoggedly to her policy of deferring to the troika report,though she did say that she and Hollande were in no doubtthey wanted Greece to stay in the single currency. TheFrench and German leaders had coordinated their stance onGreece over dinner in Berlin on Thursday. Trying toemulate the “Merkozy” partnership under Hollande’spredecessor Nicolas Sarkozy, the conservative Merkel andthe Socialist French president showed a united front,insisting Greece must meet its targets before any newdiscussion of terms. The markets have been optimistic thatEurope – and particularly the ECB — will finally come upwith decisive action in a busy month of euro diplomacy inSeptember to resolve the shared currency bloc’s sovereigndebt crisis. Samaras said in a German newspaper interviewearlier this week that Greece can stay afloat if it receives itsnext tranche of aid later than October, but will be broke ifthe money does not arrive.

Greece must be tackled after troika report: Hollande

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Sunday, 26 August, 2012

Business

SEOUL

AGENCIES

AU.S. court has ordered Samsung -which sold around 50 millionphones in April-June, almost twicethe number of iPhones - to pay$1.05 billion damages, after ruling

that the South Korean firm infringed on someApple patents.

While the verdict was a big win for Apple, thedamages are less than half the $2.5 billion com-pensation it sought - although that could yet beincreased by the judge - and are just 1.5 percentof annual revenues from Samsung’s telecomsbusiness. That phone and tablet business is thepowerhouse behind Samsung’s growth, earningaround 70 percent of total profit. The group hadnet profit of $4.5 billion in April-June.

Samsung could also see its popular Galaxysmartphone banned from sale in the UnitedStates. But its skill as a “fast executioner” - quickto match others’ innovations - would likely meantweaked, non-patent infringing devices would beon the market soon after any ban came into place.

“Samsung has already made some designchanges to new products since the litigation firststarted more than a year ago,” said Seo Won-seok, an analyst at Korea Investment & Securi-ties. “With the ruling, they are now more likely tomake further changes or they could simply decideto raise product prices to cover patent-relatedpayments.” Also, Apple’s demands for Samsungto pay it a royalty on its phone sales could hitrival phones using Google’s Android operatingsystem more than it hits Samsung. CONTRADICTING VERDICTS: The Califor-nia jury had only begun deliberating on Wednes-day after a complex weeks-long trial. Friday’s

verdict on sevenApple patent

claims andfive Sam-sung patentclaims sug-

gests then i n e - p e r s o n

panel had littledifficulty in con-

cluding that Samsunghad copied some features

of Apple’s iPhone and .It could lead to an outright ban on

sales of key Samsung products, with Apple sayingit planned to file for a sales injunction withinseven days and the judge in the case setting ahearing on September 20. Because the jury found“wilful” infringement, Apple could seek tripledamages. The U.S. ruling, read out to a packedfederal courtroom in San Jose, just miles fromApple’s headquarters, came less than 24 hoursafter a Seoul court found that while the iPhoneand Galaxy look very similar Samsung hadn’t vi-olated Apple’s design.

Samsung issued a defiant response to theU.S. decision, which it called “a loss for the Amer-ican consumer”, indicating the legal tussle is farfrom over. “This is not the final word in this caseor in battles being waged in courts and tribunalsaround the world, some of which have already re-jected many of Apple’s claims,” Samsung said ina statement. Nomura analyst CW Chung, speak-ing before the verdict, predicted it could take“many years” for Apple and Samsung to settle thecase whatever the result of this round, leaving thetwo firmly in control of the $200 billion-plusglobal smartphone market.

“The litigation may end up with both partiesentering a cross-licensing agreement, whichshould enable them to build a higher patent wallin the smartphone market,” said Chung. “Thiswould have a positive impact on the share pricesof Samsung and Apple, while posing a substantialthreat to other competitors.”

Based on the damages ruling, Samsung isasked to pay Apple around $10 royalty per phone,a move seen aimed at slowing rival phones thatrun on Android - which account for more thantwo-thirds of the global market.

If Apple were to pursue similar legal chal-lenges against other Android manufacturers thatcould squeeze profit margins as smartphoneprices decline in a growing market - reinforcingthe dominance of Samsung, one of the few withbig enough margins to absorb the extra cost.

Handset competitors using Android includeTaiwan’s HTC Corp, LG Electronics, Google’sMotorola, Sony Corp and some Chinese brands.

WIN SOME, LOSE SOME?: Although Sam-sung had been viewed as the underdog in the U.S.case, the sweeping nature of Apple’s victory wassomething of a surprise, with many analysts hav-ing expected a mixed ruling.

Concerns over potential reputational dam-age, the short-term cash hit and the impact onbillions of dollars of business with Apple hadknocked as much as 5 percent off Samsung’sshares this week in the run-up to the verdict. Butthe stock is still up nearly 50 percent since Applefiled its accusations. Samsung has previouslybeen able to move nimbly to release model up-grades by the time courts have ruled certainproducts infringed Apple patents and retirepatent-infringing models from its line-up. It hasskirted around those rulings with a few engineer-ing tweaks and has also made some bold designchanges to differentiate its devices from Apple’s.

“The impact on Samsung will be quite limited,as affected models are mostly legacy products andits new products did make some design changes toavoid potential litigation,” said D.J. Jung, repre-sentative patent attorney for SU Intellectual Prop-erty. “Still ... it’s a sweeping loss in the mostimportant market. It’s inevitable that Samsung’sbrand will be negatively affected - Samsung couldbe perceived as a copycat.” Even though Sam-sung’s flagship Galaxy S III phone was not in-volved in the trial, the jury validated Apple’spatents on features and design elements thatApple could then try to wield against that product.

It is possible Apple would not have to seek anentirely new trial against the S III, but rather in-clude it in a “contempt proceeding” which movesmuch faster, said Nick Rodelli, a lawyer and ad-viser to institutional investors for CFRA Researchin Maryland. Seoul-based Jung predicted furtherappeals and fresh suits against newer products asthe rivals continue to clash in court.OUTSIDE THE BOX: In a research note beforethe verdict, UBS analysts said an Apple wincould, in the long-run, hurt the U.S. firm “as thereal threat is not a competitor beating Apple atits own game, but instead changing the game.

“The likelihood of Apple being leapfrogged ora rival creating a new category (of device) isgreater if they have to think out of the box. If theyjust copy Apple, like Coke, Apple can claim to be‘the real thing’.”

Samsung also looks to be staying ahead of thecurve - by reviving the stylus function, derided byApple’s Steve Jobs, in its latest tablets and by cre-ating the hybrid phone-cum-tablet, or phablet,category, with its 5.3-inch Note.

Apple, which has largely stood by its originalform and design, is taking note, with speculationthat the next iPhone will have a bigger screen andnew iPads may be smaller.

US, European sharesrise on ECB report,euro trims lossesUS and European stocks rose and the eurobounced off lows against the dollar aftersources said the European Central Bank isconsidering setting targets in the bond marketin a bid to contain crippling borrowing costs introubled euro zone economies.

NEW YORK

AGENCIES

Stocks had earlier come under pressure on worries aboutGreece and uncertainty over how Europe will addressSpain’s debt crisis. Speculation has grown in recent weeksthat the ECB will soon start buying Spanish and Italianbonds. The ECB is considering targeting a yield band, anoption gaining favor among central bankers, central banksources told Reuters. But the decision would not be madebefore the ECB’s September 6 policy meeting and it wasn’tclear how wide the band would be or how the ECB woulddecide when to intervene in the bond markets. “Any timewe get comments out of Europe that create a perceptionthat they are working diligently to solve the debt issue, theeuro starts to rally, (the) dollar goes lower and in return,our equity markets move higher,” said Randy Frederick,managing director of active trading at Charles Schwab. “I’mnot sure if this will have lasting impact on the market.”Further boosting investor sentiment, U.S. Federal ReserveChairman Ben Bernanke said the Fed has room to deliveradditional monetary stimulus to boost the U.S. economy.Bernanke made the comment in a letter to a congressionaloversight panel. The Dow Jones industrial average .DJIended up 100.51 points, or 0.77 percent, at 13,157.97. TheStandard & Poor’s 500 Index .SPX closed up 9.04 points, or0.64 percent, at 1,411.12. The Nasdaq Composite Index.IXIC finished up 16.39 points, or 0.54 percent, at 3,069.79.The FTSEurofirst-300 index of pan-European shares .FTSErose 0.11 percent to end at 1,090.38 points. The MSCIglobal stock index .MIWD00000PUS slipped 0.1 percent to324.34. Mixed U.S. economic data added to uncertaintyover whether the Fed would act soon to bolster the stalledeconomic recovery. Hopes for action had grown afterminutes from the Fed’s latest meeting showed policymakersmight deliver another round of stimulus “fairly soon” unlessthe economy improves considerably. New orders for long-lasting U.S. manufactured goods surged in July, but a gaugeof planned business spending declined for a second straightmonth, pointing to slowing growth in manufacturing. GREECE WORRIES RESURFACE: Sentimentremained fragile and worries about Greece supported safe-haven German government bonds, which rallied to theirbiggest weekly gains since early July. Germany and Francewant Greece to stay in the euro zone, but Athens must meetits commitments, German Chancellor Angela Merkel saidafter meeting Greek Prime Minister Antonis Samaras. Theeuro fell 0.4 percent to $1.2511, off a session low of $1.2481on Reuters data. It briefly erased losses to trade littlechanged after the ECB report. The euro zone’s commoncurrency fell to a session low against the dollar after MarketNews International reported that senior euro-zone officialssaid the German Finance Ministry is seriously considering aplan in which Greece would be obliged to ask for atemporary exit from the euro zone until it sorts out itspublic finances. Against the yen, the dollar rose 0.3 percentto 78.69 yen.

ACCORDING to a Global Data re-port oil and gas capital expendi-ture (capex) would increase by

13.4% this year as compared to the $916

million of 2011. This precipitous rise ininvestment in oil and gas exploration isnot only owing to increasing demand-supply disparity of energy resources inthe world, it is also the logical corollary ofthe presence of untapped (or at least notfully tapped) zones like the Gulf of Mex-ico, offshore Brazil and the one creating

the most hullabaloo: Arctic Circle, whichhas 22 percent of the global untapped oiland gas resources underneath the ice.

As the black gold-rush heats up inthe Arctic, it’s obviously Russia that hasthe upper hand if any military conflictwere to surface in the region. For, notonly is it by far the strongest militaristicpresence in the area, it is also the onlynation scrambling for the Arctic that is anuclear power. Even so, NATO has beenmaking noises about a possible chargetowards the North Pole in case the afore-mentioned scramble goes pear-shapedand brims over.

The deadline for countries to fileclaims with the United Nations (UN) for“the right to exploit the seabed beyondtheir coastlines” has passed. This shouldlogically mean that this race that isunder discussion to carve out the region,or slice out the cake, so to speak has al-ready begun. However, what needs to bekept in mind – something that PavelBaev, a Russian expert on the Arctic Cir-cle recently said on a TV show “Spot-light” – is that the center part of theArctic, which is completely covered withice isn’t exactly a promising prospect asfar as the resources being sighted areconcerned. It is the area near the coast-line that is actually promising, which iswhy the whole ‘race for oil’ might just bea misnomer, for what in all honestycould be a peaceful division of the areain synchrony with the countries andtheir stake-holding sectors.

There is the “Russian shelf”, which le-gitimately belongs to Russia and hence

no one else can stake a claim to that re-gion, like no one else can stake a claim tothe opulent oil zones in offshore Alaskabut the US – even though Washingtonhas a pretty weak legal position aproposAlaska since it hasn’t as yet ratified theUN convention and hence any nation canpick up their tools and start digging thereand no one would be breaching anyclause of the International Law.

There are talks about a joint submis-sion by Canada, Russia and Denmark tothe UN Commission, and hence peacefulcooperation between the five Arctic statesis definitely not off the table. If anything

it seems like the more likely course of ac-tion, considering the imbalance of mili-taristic wherewithal in the region, thevarying stakeholders of the respective na-tions, lack of ambiguity with regards tothe demarcation of oil zones and mostimportantly the fact that mutually coop-erative exploration would not only bebeneficial for the entire Arctic zone, butalso for the world as a whole. Maybe thisrace for Arctic riches is one where theparticipants are collaborating and drivingeach other on instead of opting for a cal-lous competition for regional and eco-nomic supremacy.

Oil beneath the iceArctic Circle in the spotlight as therace for a quarter of the world’suntapped oil and gas reserves heatsup in freezing temperatures

KUNWAR KHULDUNE SHAHID

CRUDE AWAKENING

SweepIng Apple wIn,but Samsung set for bounce-backDefeat in a bitter patent wrangle with Apple Inc, its smartphone rival andbiggest customer, will dent Samsung Electronics Co’s $21 billion cash-pile, butcould actually help cement its leadership in the global smartphone market

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