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Wednesday, November 28, 2012
Excerpts: Egypts economic plan, IMF deal hanging in the balance. GCC to set up defense institute. World Bank grants Gaza $6.4 m for water project. Iran warns U.S. re 8 airspace violations. Iranian nuclear stockpile. Gazans say Thank you Iran November 28,

Excerpts: Egypt's economic plan,IMF deal hanging in the balance. GCC to set
up defense institute. World Bank grants Gaza $6.4 m for water project. Iran
warns U.S. re 8 airspace violations. Iran's nuclear stockpile. Gazans
say"Thank you Iran" November 28, 2012

+++SOURCE: Syria Report 28 Nov.’12:”Bank Audi Readying Plan to Quit Syria
“Should Conditions Deteriorate Further”

SUBJECT: Bank Audi readying plan to quit Syria

TEXT:Bank Audi is readying a plan B to quit the Syrian market should the
situation deteriorates further, its CEO Samir Hanna was quoted as saying.

+++SOURCE: Syria Report 28 Nov. ’12:”Pound Loses Further Ground as Demand
for Dollars Continues to Rise”

SUBJECT: Syrian pound declines further

The Syrian pound is losing further ground against the US dollar in both the
black and formal markets.

+++SOURCE: Syria Report 28 Nov.’12:”Dam Capture Risks Straining Further
Electricity Supplies”

SUBJECT: Threat to Syria electricity supply

TEXT:The reported capture of the Tishreen hydroelectric dam by Syrian rebels
is likely to strain further supplies of electricity across the country

+++SOURCE: AlArabiya News via Egypt Daily News 28 Nov.’12:”Mursi crisis
leaves Egypt’s economic plan, IMF deal hanging in the balance”,by Carina
Kamel

SUBJECT: Egypt’s economic plan ,IMF deal hanging in the balance

QUOTE:” ‘Consideration of the agreement by the IMF Executive Board will
require that there is no major change in the economic outlook and
implementation plans’: …IMF spokesperson”pt’s President (C) at the
Presidential Palace in Cairo, on Aug. 2012. (Reuters)

FULL TEXT:When the International Monetary Fund (IMF) board meets in a few
weeks to consider a nearly $5 billion financing agreement for Egypt, its
members will need to ensure that the economic outlook for the country has
not changed and, perhaps more pertinently, that the government is capable of
successfully implementing its economic reform program.

Concern is mounting in financial circles over IMF approval as the country is
gripped by a wave of protests against a presidential decree issued on Nov.
22 by Egypt’s Islamist leader Muhammed Mursi granting himself sweeping
powers and putting his decisions beyond judicial review.

“Consideration of the agreement by the IMF Executive Board will require that
there is no major change in the economic outlook and implementation plans,”
said Wafa Amr, IMF spokesperson.

Amr added that the IMF will also be looking for assurances from other
donors - such as the United States, the EU and international financing
institutions- that their share of financing will also be forthcoming. It is
as yet unclear how the President’s decisions and backlash against them will
affect external financing agreements between the Egyptian government and
these partners.

The latest unrest has already affected the Egyptian stock market, with
volatile trade over the past few days, and some fear the turmoil could
derail government efforts to implement unpopular economic policies such as
the removal of subsidies on petrol products – some of which came into effect
this week.

The financing agreement for Egypt, already approved on a ‘staff-level’ in
Cairo earlier this month, will be presented to the fund’s executive board
for final approval in a meeting scheduled for 19 December.

Egypt’s Minister of Planning Ashraf El Arabi said the political situation
would not delay the approval process and expected the first tranche of the
loan to be disbursed shortly after the board’s ratification.

However, local media quoted an IMF source as saying Mursi’s declaration
could delay the loan and economists cautioned that the latest political
deadlock pitting Islamists against secular and liberal groups poses risks to
the IMF program.

“Given the proposed nature of the staff-level agreement, and the requirement
by the IMF to ensure a broad consensus about the package of reforms, the
recent escalation in political confrontation may pose risks to the proposed
timetable, and cause slippage in board approval and possibly reform
implementation,’ Barclays Capital said in a note.

Barclays Capital described the current political confrontation as the
fiercest since the start of the revolution and said, “Even without this
latest crisis episode, political volatility and instability were to
constitute a key risk to the implementation of the IMF program, and to the
authorities’ ability to meet expected targets on both the fiscal and
monetary fronts.”

Capital Economics, a research consultancy, echoed that warning, saying that
“if nothing else the events of the past few weeks in Egypt illustrate that
progress over the next year will be extremely bumpy.”

The Egyptian government has already begun implementing the first phase of
fiscal reforms described by the IMF as ‘main pillars’ of its financing
agreement: reducing ‘wasteful expenditures’ on energy subsidies and boosting
revenue by introducing a new tax bracket for high earners.

On Sunday Nov. 25 three days after the controversial decree was announced,
the government lifted the subsidy on octane 95 fuel, with the price going up
from LE2.75 to above LE5. This measure is only expected to generate
negligible savings of LE100 million ($16.3 million) but, longer term, the
budget aims to reduce spending on energy subsidies by more than LE30 billion
($5 billion) to LE70 billion ($11.4 billion) a year – an estimate considered
to be optimistic by some economists.

Earlier this month, the Cabinet approved a new tax bracket of 22 percent for
annual incomes between LE1 million ($163 ,000) and LE10 million ($1.63
million). An increase in sales tax, the introduction of a value added tax
(VAT), as well as property and telecommunications taxes will follow.

The bulk of economic reforms and spending cuts are expected to be
‘back-loaded’ with measures generating the most savings implemented after a
constitution is finalized and a new parliament is elected. One reasoning
being that the presence of an elected parliament and functioning government
institutions would facilitate implementation of IMF reforms – some of which
are likely to meet with popular resistance.

Under the original timetable, these political milestones were expected to be
completed by April 2013, however the timing could change due to the current
political upheaval. It is also unclear if the current standoff between the
President’s Islamist backers and secular forces will leave Mursi and his
administration with a strong enough mandate to implement the wide ranging
economic reforms, most of which are expected to kick in next year.

Also, the IMF has long stipulated broad based domestic and international
support for Egypt’s economic program as a pre-requisite to any deal because
it is ‘crucial for successful implementation of the planned policies’. Given
the events of the past week, it remains unknown if Mursi and his cabinet can
maintain support for their economic plan let alone implement it.

+++SOURCE: Saudi Gazette 28 Nov.’12:”Gulf Cooperation Council (GCC) to set
up defense institute”

SUBJECT: GCC to set up defense institute

QUOTE:”the Defence Council discussed aspects of joint military work”

FULL TEXT:RIYADH – Defense ministers of the Gulf Cooperation Council (GCC)
decided here Tuesday to strengthen defense cooperation among member states
and to develop the Peninsula Shield Force.

A communique issued at the end of the 11th session of the Joint Defense
Council said that the ministers also decided to set up an institute for
defense and security.

Earlier, addressing the session, Crown Prince Salman Bin Abdul Aziz, Deputy
Premier and Minister of Defense said: “At this meeting, we will discuss what
has been achieved by committees and working groups that met during the past
few months. I thank all for their great efforts and recommendations.

Our meeting today comes at the conclusion of these meetings aiming to
enhance the efforts of all armed forces in the GCC states to confront the
risks that might emerge.”

Dr. Abdullatif Al-Zayani, GCC Secretary General, said the Defense Council
discussed aspects of joint military work and the recommendations adopted in
this regard.

The communique said that the defense ministers stressed the importance of
finding a substitute to the current track of the telecommunications cable
and unifying the references of medical services. The council discussed the
dangers and threats facing the member states in the light of the various
changes and developments in the region. In this context, the council
condemned the recent blasts in Bahrain and stressed the members’ full
support to the Kingdom of Bahrain. – SPA

+++SOURCE: Naharnet (Lebanon) 28 Nov.’12:” World Bank to Spend $6.4 million
on Gaza Water Project”’ Agence France Presse
SUBJECT: World Bank grants Gaza $6.4 million for water project

QUOTE: “Islamic Development Bank … making a parallel contribution of $11.14
million”

FULL TEXT:T he World Bank on Tuesday[27 Nov.] approved a $6.4 million grant
to improve water and sewage services in the Gaza Strip in the wake of an
eight-day firefight between Israel and the territory's Hamas rulers.

The infrastructure in the impoverished Palestinian enclave -- with a
population of more than 1.5 million people -- has been deteriorating in
recent years and the area is now "choked with untreated sewage," the Bank
said.

"We are concerned about the lack of clean water supply and the deterioration
in the quality of water resources in the Gaza Strip," Mariam Sherman, World
Bank Country Director for the West Bank and Gaza, said in a statement.

"The new project is very important to Gaza citizens. Not only will it
increase the sustainability of water and sewage networks, but it will also
allow the utility to better serve the needs of their customers."

The latest project will fund the construction of water tanks, the connection
of major wells to the supply grid and the reduction of costly leaks.

It will also be aimed at helping the local utility to enhance billing and
customer services, the Bank said.

The World Bank will be partnering with the Islamic Development Bank, which
is making a parallel contribution of $11.14 million.

Israel and the Islamist Hamas movement ruling Gaza waged an eight-day
firefight earlier this month in which at least 166 Palestinians, mostly
civilians, and six Israelis, including four civilians, were killed.

The conflict, which saw Israel launch a wave of air strikes as Gaza
militants fired volleys of rockets, threatened to erupt into a full-scale
ground war before a U.S. and Egyptian brokered ceasefire took effect last
week.

SourceAgence France Presse

+++SOURCE: Naharnet (Lebanon) 28 Nov.’12:”Iran Accuses U.S. of 8 Airspace
Violations in October. Warns of ‘Serious Reaction’, Agence France Presse
SUBJECT: Iran warns U.S. re 8 airspace violations
QUOTE:” ‘Any country violating our territory will face a serious reaction
from Iran’ “

FULL TEXT:Iranian airspace was violated eight times by archfoe the United
States in October, Iran's foreign ministry spokesman said, adding that an
official protest had been lodged with the United Nations.

"Any country violating our territory will face a serious reaction from
Iran," Ramin Mehmanparast warned in a statement quoted by the media on
Wednesday.

"In the month of October we witnessed eight cases of airspace violations by
the American fleet (U.S. Navy) and we have told the U.N. ... of course we
have announced our serious objection to the U.S.," said Mehmanparast,
without elaborating on the nature of the violations.

"We have written two separate letters to the (Security Council) and to the
secretary general of the U.N. regarding the U.S. violations, asking them to
notify the U.S. ... to respect our sovereignty," he added.

He said that the latest incident, the only one to have been made public so
far, had taken place on November 1, when a U.S. drone was attacked by two
Iranian fighters over the Gulf.

Tehran has said its planes opened fire while the drone was on a
reconnaissance mission over the main oil terminal on the Iranian island of
Kharg.

Washington insists the drone was in international airspace eight miles (13
kilometers) beyond the Iranian territorial boundaries. It said the drone was
not damaged.

Iran's envoy to the U.N. Mohammad Khazaee, quoted by the government
newspaper Iran Daily said that U.S. drones had violated Iranian airspace
seven times in October, flying over the southern city of Bushehr where
Iran's nuclear power plant is located and Kharg island where the oil
terminal is located.

Khazaee said Tehran had warned in its protest letter against the "adverse
consequences of any provocative and dangerous acts for which the United
States government would be held responsible."

+++SOURCE: Jordan Times 28 Nov.’12:”Iran’s nuclear stockpile grows but not
yet in ‘danger zone’ “,Reuters
SUBJECT: Iran’s nuclear stockpile
QUOTE: ”major expansion of its enrichment capacity in an underground
facility are increasing concerns over Tehran’s intentions”
FULL TEXT:VIENNA — An increase in Iran’s higher-grade uranium stockpile is
worrying but may arise from a bottleneck in making reactor fuel rather than
a bid to quickly accumulate material that could be used for nuclear weapons,
diplomats and experts say.

The issue of when and how fast Iran might be able to build an atomic bomb if
it chose to do so is closely watched in the West because it could determine
any decision by Israel to launch pre-emptive strikes against the Islamic
republic.

Tehran’s move this year to use a big part of its most sensitive material —
which could otherwise be turned into bomb-grade uranium — for civilian fuel
purposes helped ease intense speculation of an imminent attack by Israel.

But tension may soon flare again if Iran’s holding were to rapidly approach
an amount that would be enough for a weapon, either by stepping up output of
higher-enriched uranium or by no longer using the material to produce
reactor fuel, or both.

“The question is, at what point do they cross the critical points... when we
enter the danger zone?” one senior diplomatic source said. “Will they decide
to voluntarily decide to stay clear of that point?”

A UN nuclear watchdog report issued this month showed that Iran in late
September suddenly stopped converting uranium gas enriched to a fissile
concentration of 20 per cent into oxide powder to make fuel for a medical
research reactor in Tehran.

Because Iran’s enrichment work at the same time continued unabated, the halt
meant that its stockpile of the higher-grade uranium rose by nearly 50 per
cent to 135kg in November compared with the level in the previous quarterly
report in August.

“It is very puzzling,” said one intelligence official from a country which
suspects Iran is seeking to develop a nuclear weapons capability, a charge
Tehran denies, about the finding reported by the UN International Atomic
Energy Agency (IAEA).

It could be because of a technical malfunction or a “test balloon” to see
how the West would react, the official added.

It took Iran a significant step closer to the amount of roughly 250kg seen
as sufficient for one atomic bomb if refined further, which Israel has
signaled is a “red line” for Iran’s nuclear programme that may be reached by
mid-2013.

“By the late spring, at this pace, Iran will have more than enough to arm
its first weapon,” said Emanuele Ottolenghi of the Foundation for the
Defence of Democracies, a think-tank which has advised the US government on
sanctions against Iran.

But some Western diplomats and analysts believe Iran may have let its
stockpile grow for reasons related to the fuel manufacturing process, and
that it could at some point re-start conversion of uranium gas.

“I think it is a technical issue,” one envoy said.

Producing reactor fuel involves several steps. First, the enriched uranium
must be converted into oxide powder, then it is turned into fuel plates, and
this could help explain the halt in feeding more of the gas into production
process.

“It is probably because it is easier and quicker to make the conversion to
oxide than to produce the fuel elements,” Mark Fitzpatrick, a nuclear
proliferation expert at the International Institute for Strategic Studies
think-tank, said.

Fitzpatrick said he believed it was “more of a bottleneck” issue, adding:
“It is alarming because it brings the 20 per cent stockpile closer to a
weapons amount. But it is not alarming in the sense that this was a
strategic decision on Iran’s part.”

Danger zone?

Former chief UN nuclear inspector Olli Heinonen said he did not find the
Iranian nuclear fuel development unusual.

“This is not an industrial manufacturing process, but rather a pilot scale
operation,” Heinonen, now at Harvard University, said about the production
of 20 per cent reactor fuel in a facility near the city of Isfahan, which
started in late 2011.

“To turn all the material in Isfahan to fuel plates will take more than a
year. Before doing so, they also want to see the performance of the plates,”
Heinonen said.

Even so, Western diplomats and others said, Iran’s growing accumulation of
20 per cent refined uranium in combination with a major expansion of its
enrichment capacity in an underground facility are increasing concern over
Tehran’s intentions.

It may also further complicate diplomatic efforts to resolve the decade-old
dispute peacefully as major powers demand that Iran stop all 20 per cent
enrichment, shut down the Fordow underground site and ship out the stockpile
of the material.

“By converting [20 per cent uranium] into something else, it reduces the
tension, but in no way does it resolve the issue as a whole. They continue
to enrich,” the diplomatic source said.

Iran says it wants a recognition of what it sees as its right to refine
uranium for peaceful energy purposes and a lifting of sanctions, demands
rejected by Western powers.

The United States and its allies are especially watching how much 20 per
cent uranium Iran is amassing, as this is a short technical step away from
the 90 per cent level needed for bombs.

Iran has sharply expanded this activity — which compares to the 3.5 per cent
level needed for most nuclear power plants — over the last year to about
15kg per month.

By August, Iran had produced 233kg since the work started in early 2010.
About 40 per cent has been fed into conversion for making fuel, or was about
to be, a step that at least for the time being removed it from any dash for
a bomb.

Western diplomats are now waiting to see when Iran will switch on about 700
newly-installed centrifuges at Fordow, which would allow it to sharply
expand 20 per cent enrichment and once again raise the stakes in its
stand-off with its foes.

“I think Iran has been trying to calibrate its advances, not necessarily to
lower tension, but to try to manage the crisis,” Fitzpatrick said.

+++SOURCE:Jordan Times 28 Nov.’12:”Gazan’s say ‘Thank you Iran” after Israel
conflagration”, Reuters

SUBJECT: Gazans say ‘Thank you Iran”

QUOTE:”militant group leader Islamic Jihad …’We have distinctive good
relations with Iran and such a relationship will continue as long as Iran
supports the Palestinian people and backs the resistance’

FULL TEXT:GAZA — Gazans offered very public thanks to Iran on Tuesday for
helping them in this month’s fight against Israel, when Iranian-made
missiles were fired out of the Palestinian enclave towards Jerusalem and Tel
Aviv.

“Thank you Iran,” said large billboards on three major road junctions in the
Gaza Strip — the first time there has been such public acknowledgement of
Iran’s role in the arming of Islamic militants in the tiny territory.

The message was written in Arabic, English, Hebrew and Farsi. The posters
also depicted the Iranian Fajr 5 rockets that were used for the first time
to target Israel’s two largest population centres. No one was injured in the
attacks.

The billboards were not signed, but a senior official with the militant
group Islamic Jihad, Khader Habib, said it was only natural to show
gratitude for Iran’s role in the conflict.

“Iranian rockets struck at Tel Aviv. They reached Jerusalem. Therefore it
was our duty to thank those who helped our people,” he told Reuters.

“We have distinctive, good relations with Iran and such a relationship will
continue as long as Iran supports the Palestinian people and backs the
resistance,” he added.

Israel launched an air offensive on November 14 with the stated aim of
stopping Gaza fighters from firing rockets at its southern towns and cities.

About 170 Palestinians, more than half of them civilians, died in the
fighting that ended in a ceasefire last Wednesday. Six Israelis were also
killed, four of them civilians.

Israel has always asserted that arch-foe Tehran supplied Gaza with weapons,
but until the latest conflict both Iran and Gaza’s dominant Islamist group
Hamas had side-stepped the issue, acknowledging only financial backing and
warm political ties.

During the eight-day conflagration, the Iranian speaker of parliament, Ali
Larijani, said Iran was “honoured” to have provided Gaza with military aid.
Following the ceasefire, Hamas leader Khaled Meshaal thanked Iran for arms
and funding.

The public statements appeared aimed at dispelling speculation that the
mainly Sunni Muslim Gaza Strip was shutting the door on Shiite Iran and
turning instead to neighbouring Egypt for support and protection.

Israeli analyst Meir Javedanfar said he thought the Iranians would regret
telling the world they supplied Hamas with arms.

“Now that such high-ranking officials openly admit to having supplied
weapons to groups in Gaza, the job of isolating Iran will be even easier
than before,” said Javedanfar, an Iranian expert at the Interdisciplinary
Center in Herzliya.

Israel and many Western countries say Iran is developing nuclear weapons and
have imposed increasingly stringent sanctions on the Islamic Republic to get
it to halt its uranium enrichment drive. Tehran says its atomic programme is
peaceful.

Hamas, which has ruled Gaza since 2007, refuses to recognise Israel’s right
to exist and is shunned as a terrorist organisation by the United States and
the European Union
==========
Sue Lerner - Associate, IMRA

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