Hope of deal in world trade talks

Progress has been made at global trade talks and a deal looks possible, negotiators have said.

Earlier, Pascal Lamy, the head of the World Trade Organization warned that the long-running Doha round would fail unless a compromise could be reached.

Delegates from the EU, US, Brazil and Australia said signs were encouraging although others were more cautious.

Talks have been extended until Wednesday. There are still sticking points that could hold up a deal.

"I think the situation looks strong. I think we can be very hopeful now," said Mr Mandelson said.

"What is emerging is a deal that is not perfect, not beautiful, but is good for the global economy and good for development."

An 'emerging' deal

After four days of deadlock, the compromise emerged from a five-hour meeting of representatives from the US, European Union, Australia, Brazil, India, China and Japan. It was then reviewed by ministers from some 35 countries.

The proposed settlement, brokered by WTO chief Pascal Lamy, calls for cutting limits of European farm subsidies by 80% and US payments by 70% to about $14.5bn.

However, this would not mean the US would have to cut its actual spending on support to farmers, which totalled about $9bn last year.

The compromise proposal also involves cuts in tariffs on agricultural imports and on industrial goods.

However, it would still provide developing countries with some loopholes to protect strategic industries such as automobiles.

Caution

Developing countries like Brazil and India say the US and EU are failing to offer big enough cuts in subsidies and import tariffs, particularly in agriculture.

However, Washington and Brussels both say they have ceded ground and want emerging economies to further open their markets to imports of manufactured goods and services.

US Trade Representative Susan Schwab said ministers had reached tentative agreement on the way forward but struck a cautious note.

"I think the biggest concern that we have is that a handful of large emerging markets really threaten this round for the rest of us."

Argentina rejected the proposal drawn up by the countries, saying it "was not acceptable in its current form".

Indian Commerce Minister Kamal Nath, whose tough position has been blamed for the deadlock, said "there are certain areas of concern, certain areas of consensus".

"There's still a lot of work to be done because for instance we didn't deal with cotton, which is a central issue," said Brazilian Foreign Minister Celso Amorim.

Mr Mandelson is due to present the emerging deal to EU member states on Saturday. France has previously disagreed with the trade commissioner's negotiating stance, while Irish Prime Minister Brian Cowen faces pressure to reject the deal.

In Saturday's talks, negotiators will also look at the liberalisation of services such as banking and telecoms.

Bleak outcome?

John Hilary, executive director of the anti-poverty charity War on Want, said that proposed settlement could lead to "a bleak outcome for the world's poor".

He said the proposal allowed developed countries to get away with minimal cuts to their farm subsidies, while at the same time opening up developing country markets to both agricultural and industrial imports.

"Stitching together an agreement between seven states while shutting out all others exposes the lack of legitimacy at the heart of the world trade talks," he said.

"The deal threatens disaster for millions as developing country markets are forced open in the interests of corporate profits."

Trade ministers from around the world began talks on Monday aimed at saving the Doha round, which began in 2001 and aims to liberalise world trade rules by reducing tariffs on imports and industry subsidies.

If negotiators fail to find common ground after this week's meeting, many think the Doha round would be doomed.

It is also not clear that any pledges made by the Bush administration at these talks would be honoured by the new US president who will be elected in November - especially if the Democratic candidate, Barack Obama, wins.

Oil traders face US civil action

The US energy regulator has taken civil action against a Dutch-based oil trading firm and three top employees for manipulating crude oil prices.

The US Commodity Futures Trading Commission complaint relates to Optiver Holding and two subsidiaries.

As the price of oil has risen sharply since last year, the watchdog has turned its focus on the activities of speculators.

It is feared that traders have contributed to swings in oil prices.

Bastiaan van Kempen, the boss of Chicago-based Optiver, a subsidiary of Optiver Holding, was named as a defendant along with trader Christopher Dowson and Randal Meijer, a supervisor of Optiver.

The CFTC alleges that they attempted to manipulate the price of different types of oil during 11 days in March 2007.

Out of 19 attempts, five were successful earning the accused about $1m (£502,000).

Serious step

"These charges go to the heart of the CFTC's core mission of detecting and rooting out illegal manipulation of the markets," said CFTC acting chairman Walt Lukken.

In a statement, Optiver Holding said: "We have learned that the US Commodity Futures Trading Commission has filed a civil lawsuit against Optiver.

"We have received a copy of the complaint and are reviewing it. We take the CFTC's action very seriously and are treating it with the utmost attention and care."

The lawsuit comes as US lawmakers review a plan put forward by the CFTC to prevent speculators trading on the London oil market to escape strict US rules on trading.

UK economic growth slows sharply

The UK economy grew 0.2% in the second quarter of the year, as the credit crunch took its toll on the housing market and consumer spending.

The figure is the lowest growth quarter-on-quarter for three years.

It grew 1.6% on the same quarter a year ago, also the weakest growth for three years, and much lower than the 2.3% growth seen in the first quarter.

Economists had expected GDP growth to slip to 0.2%, and some are warning that a recession is likely.

Housing slowdown

The Office for National Statistics (ONS) said the slowdown was driven by the 0.7% fall in construction output, the biggest drop since the third quarter of 2005.

Construction companies have announced several thousand job cuts in recent months as the housing boom has stumbled to a halt.

The construction sector only accounts for 6% of the economy.

Industrial production has also fallen 0.5% in the quarter, the second successive drop.

And crucially, the service sector, which constitutes 74% of GDP, has also slowed. Output in the services sector rose 2.1% on the same period a year ago, the weakest annual growth since 1992.

Within the services sector, the transport, storage and communications category rose 2.2% on the quarter, the biggest rise since 2000.

Recession fears

The latest data heightens fears that the UK economy could enter a recession, and recent surveys by the CBI indicate that manufacturing output is likely to fall further.

Paul Dales, UK economist at Capital Economics, said: "An outright recession is now our central scenario. With industrial production having fallen in both Q1 and Q2, industry is already in recession.

"Looking ahead, the more up-to-date surveys suggest that in Q3 so far, overall economic growth has ground to a complete halt."

Interest rates will eventually need to fall, he added. "The recent drop in the oil price and the price wars on the petrol forecourts support our view that the next rate cut could come late this year, but this will be too late to prevent a recession," he said.

Added ING's James Knightley: "In terms of the outlook, we look for even weaker growth and possible contraction in Q3 and Q4."

Future decisions on interest rates also hinge on inflation, with rising oil and food prices pushing costs up across the world.

Alan Clarke, at BNP Paribas, said: "Growth has been much worse than (the Bank of England) expected. What really counts is what that does to the two-year ahead outlook for inflation."

UK warns of damage in TNK-BP row

The British embassy in Moscow has warned of the damage being done by the dispute between TNK-BP's shareholders.

The oil company is half-owned by BP, with the other half owned by a group of Russian billionaires known as AAR.

The embassy said that their spat was damaging the economies of both Britain and Russia as well as harming the global energy market.

It also accused AAR's members of using parts of the Russian government to help them in their fight with BP.

"The way shareholders have manipulated elements of the Russian state bureaucracy and the way this has been allowed to continue is very disappointing," an embassy spokesman said.

"We will continue to stress to the Russian government the importance of a resolution between the shareholders in full accordance with the rule of law."

The Russian shareholders deny they want control of TNK-BP.

Visa rows

They insist their only goal is to remove Robert Dudley as chief executive of TNK-BP because they say he's not running the company in the interests of all those involved.

On Thursday Mr Dudley, said he was temporarily leaving Russia because of "sustained harassment".

This year TNK-BP has faced lawsuits, visa rows and industrial spying claims, as well as arguments about investment and the future role of Mr Dudley.

BP has withdrawn 150 of its foreign specialists from the country.

The Russian shareholders said the claims of harassment were "insulting", but still want Mr Dudley replaced because they claim that he is only running the joint venture in the interests of BP.

Another businessman who has had problems doing business in Russia is Bill Browder from Hermitage Capital.

He was barred from the country three years ago, having become the biggest foreign investor in Russia.

He told the BBC that the high asset prices in Russia combined with the sort of problems BP is having makes Russia a bad place to invest at the moment.

"At this point you have no rule of law, no property rights and the prices are high - that's kind of a sucker's bet," he said.

Falling shares

The dispute between AAR and BP was one of the reasons for the fall in share prices on the Moscow Stock Exchange.

The benchmark Micex exchange had fallen 5% by mid-afternoon.

Many investors are concerned about the effect that the TNK-BP dispute will have on potential foreign joint ventures.

Sentiment was also hit by recent falls in the price of oil, with energy being such a big part of the Russian economy.

"The last train carrying the optimists out of Russian equities has just left the station," said Chris Weafer, chief strategist at UralSib.

"Let's hope it's just for a vacation rather than emigration."

Oil prices slip to seven-week low

Oil prices have tumbled to seven-week lows amid concerns that the slowing US economy will weaken demand.

US sweet, light crude fell $2.23 to settle at $123.26 a barrel - more than $20 off their peak earlier in July, when prices reached a record $147.27.

Brent crude in London also fell, dropping $1.92 to $124.52.

The oil market has been volatile as traders assess whether there will be enough supply to meet demand, with some predicting further price falls.

Analysts at Lehman Brothers predict oil prices could drop below $100 by the end of the first quarter of 2009.

But others are sceptical.

"Nothing in the fundamental drivers has changed," said Harry Tchilinguirian, an oil analyst at BNP Paribas.

Volatile market

Since last September, traders have been betting that the need for oil from economies, such as China, would continue to power the demand for oil.

Earlier this month, the International Monetary Fund (IMF) upgraded its economic forecasts for these countries.

At the same time, tensions between politically unstable oil-producing nations and the West sparked fears that supply would be constrained.

The weakening US currency has also encouraged investors to switch into commodities, which have been seen as a more attractive investment as the US economy falters.

A slight rebound in the dollar after a smaller-than-expected decline in new housing sales helped to give oil prices some relief, analysts said.

WTO ministers look to capitalise on new optimism

A new sense of optimism surrounded WTO negotiations on a new global trade pact on Saturday amid hopes of a breakthrough after seven years of deadlock.

Ministers from 35 leading nations headed for meetings hoping to finally bridge their differences, with pressure piling on emerging market countries India and Argentina which have signalled opposition to a proposed deal.

"This afternoon's session will be important. India will be looking to see what it can get out of the session to decide whether to ditch discussions," a diplomatic source told AFP on condition of anonymity.

Ministers from 35 leading economies have been meeting at the World Trade Organization (WTO) since Monday to discuss cuts in subsidies and import tariffs with the aim of mapping out a new deal under the so-called Doha Round of WTO talks.

The Doha Round was launched in the Qatari capital seven years ago but has stalled because of disputes between the rich developed world and poorer developing nations on trade in farm and industrial products.

The talks this week looked doomed -- like so many others since Doha began in 2001 -- until a breakthrough late Friday saw the biggest powers find common ground on a draft agreement.

"I think the situation looks strong. I think we can be very hopeful now," said European Trade Commissioner Peter Mandelson as he left talks late on Friday.

The United States warned that a handful of countries could still torpedo the exercise and Argentina said the draft agreement was unacceptable.

"There are a handful of large emerging markets that quite frankly risk unravelling the entire package," said United States Trade Representative Susan Schwab.

She added, however, that while there was "more work to do, it is a path forward."

Indian Commerce Minister Kamal Nath has insisted all week that he will protect his country's millions of subsistence farmers and nascent industry, which are shielded from imports by tariffs levied on foreign goods.

"We're not very happy with the package, primarily on agricultural issues," said Indian ambassador to the WTO, Ujal Singh Bhatia, on Saturday.

Indian newspaper Business Standard reported Saturday that Nath had threatened to walk out of negotiations on Friday.

"We have come with many goodies. We expect to return with many goodies. If not, we'll return with the same goodies we brought," said Bhatia, underlining that India was still ready to walk away.

Mandelson said Friday that he thought the Asian giant would eventually come on board, telling reporters: "I don't think India will be the one to break a world trade round. I really don't."

The talks Friday focused on trade in farm and industrial products -- the two main sticking points of a deal -- but attention is set to turn Saturday to the services sector.

The gathering is due to over-run its original programme, which foresaw an end on Saturday, and continue throughout the weekend and early next week, sources said.

"My opinion is that the chances of reaching an accord have risen to 65 percent from 50 percent," said Brazil's trade negotiator, Foreign Minister Celso Amorim, who said he had accepted the draft agreement.

The marked turnaround Friday emerged after meetings between seven key trading powers -- the United States, the European Union, Australia, Brazil, China, India and Japan.

The talks then widened to a ministerial conference of all 35 key nations invited to Geneva to broker the pact.

Anything approved by the 35 parties would still have to be cleared by all 153 WTO member states. A new pact can only be adopted with unanimity.

WTO Director-General Pascal Lamy had warned earlier on Friday that the talks faced failure unless countries showed flexibility and determination.

Among new proposals he put forward Friday was a further cut in the US annual farm subsidies to 14.5 billion dollars (9.2 billion euros) and a clause to prevent developing countries from shielding entire sectors from tariff cuts, a source told AFP.

Diplomats and negotiators had said that Friday would be make-or-break at the end of gruelling week of bargaining that had produced scant evidence of progress.

Samsung chief makes legal appeal

Chairman of South Korean firm Samsung, Lee Kun-hee, has filed an appeal over his suspended prison sentence and multi million dollar fine for tax evasion.

The charges followed a three-month investigation into alleged corruption at South Korea's biggest conglomerate.

Prosecutors have also appealed for a heavier sentence for Lee, who led South Korea's biggest business for 20 years.

Lee, 66, quit Samsung in April, less than a week after he was charged with tax evasion and breach of trust.

He was convicted this month for not paying about 47bn won ($46m; £23m) in taxes.

The court handed him a fine of 110bn won, but did not send him to jail even though tax evasion carries a potential life sentence.

But it found there was not enough evidence to convict him for the breach of trust charges.

At the time of his arrest, prosecutors said Samsung had a lot of "structural problems", including "illicit transfer of management control", in relation to transferring control of the company to his son.

Mr Lee, himself the son of the founder of Samsung, took over as head of the business in 1987, and it has since grown to become the world's largest producer of memory chips.

Samsung, which has a global workfore of 254,000, is best-known for its electronics unit, but it is also one of the world's largest shipbuilders and one of South Korea's leading companies.