Iran plans more war games in the street as bite sanctions

A new medium-range missile is fired from a naval ship during Velayat-90 war game on Sea of Oman near the Strait of Hormuz in southern Iran, January 1, 2012.

Credit: Reuters/Jamejamonline/Ebrahim Norouzi

By Robin Pomeroy

TEHRAN (Reuters) - Iran announced plans on Friday for new military exercises in the world's most important oil shipping lane, the latest in weeks of bellicose gestures towards the West as new sanctions threaten Tehran's oil exports.

Real Admiral Ali Fadavi, naval commander of the Revolutionary Guards Corps, said exercises next month would focus directly on the Strait of Hormuz, which leads out of the Gulf and provides the outlet for most oil from the Middle East.

Iran held a 10-day drill which ended on Monday in neighboring seas.

"Today the Islamic Republic of Iran has full domination over the region and controls all movements within it," Fadavi said in remarks reported by the Fars news agency.

Iranian officials have threatened in recent weeks to block the strait if new sanctions harm Tehran's oil exports, and this week said they would take action if the United States sails an aircraft carrier through it.

The United States, whose Fifth Fleet based in the area is far more powerful than Iran's naval forces, says it will ensure the international waters of the strait stay open. Britain said on Thursday that any attempt to close it would be illegal and unsuccessful.

In a brief respite from the mounting tensions between the two foes, the U.S. navy rescued 13 Iranians held hostage for weeks by pirates who had apparently taken over their fishing vessel as a "mother ship" for their operations, the Pentagon said on Friday.

The Iranians were freed by the very carrier group that Iran has said should not return to the Gulf.

The captain of the Iranian vessel, the Al Molai, expressed his "sincere gratitude" for their rescue by ships of the USS John C. Stennis carrier strike group, and the Iranians were returning home, a U.S. Navy officer with the strike group said.

New financial sanctions signed into law by U.S. President Barack Obama on New Year's Eve are aimed at making it difficult for most countries to buy Iranian oil. The European Union is expected to announce its own tough measures at end-January.

Most traders believe Iran will still be able to find buyers, at least for now, for its exports of 2.6 million barrels of oil per day (bpd). But it may have to offer steep discounts that reduce the revenue it needs to feed its 74 million people.

The sanctions are already hurting ordinary Iranians, faced with rising prices and a falling rial currency. They have been queuing at banks to convert their savings into dollars.

Iran holds parliamentary elections in two months, the first since a 2009 presidential election that led to nationwide mass street protests, put down by force. However, the Arab Spring has shown the vulnerability of authoritarian governments in the region to protests fuelled by anger over economic hardship.

NUCLEAR PROGRAMME

Diplomatic sources in Vienna said Iran had come closer in recent weeks to starting uranium enrichment deep inside a mountain at a protected site near the holy city of Qom.

Starting production at the Fordow site could make it harder to revive nuclear talks that collapsed a year ago, worsening Iran's confrontation with the West.

Iran is already refining uranium to a fissile purity of 20 percent - far more than the 3.5 percent level usually required to power nuclear energy plants - above ground at another site.

It is moving this higher-grade enrichment to Fordow in an apparent bid to protect the work more effectively against any enemy attacks. It also plans to sharply boost output capacity.

Washington and its allies say Iran's nuclear program is aimed at producing an atomic bomb, and they are imposing the new sanctions to force it to abandon such plans. Iran says the program is peaceful.

European Union officials say the EU, which collectively buys about 500,000 bpd of Iranian oil, rivaling China as the largest market, has agreed to impose an embargo halting all imports.

EU diplomats said they are discussing how long they will give member countries to halt purchases, with France, Germany and others wanting the ban imposed within three months but Greece favoring a grace period of up to a year.

China has also cut its imports by more than half in January and February while haggling with Tehran over the size of the discount it wants in return for doing business with it.

Other big buyers, including Turkey and Japan, say they are seeking a waiver from the U.S. sanctions.

The new American law allows Obama to give temporary waivers to allies to continue to buy Iranian oil to prevent a price shock, but to receive the permits, countries are meant to show they are reducing trade with Iran.

Iran has put on a brave face over the sanctions. Foreign Minister Ali Akbar Salehi said on Thursday it would "weather the storm," telling a news conference "Iran, with divine assistance, has always been ready to counter such hostile actions and we are not concerned at all about the sanctions."

But Salehi also said Tehran was interested in resuming negotiations over its nuclear program with Western powers, a sign it is trying to alleviate the pressure.

Turkey's visiting foreign minister brought an offer from Catherine Ashton, the EU foreign policy chief who negotiates on behalf of major powers.

Iran has repeatedly offered to restart the nuclear talks that collapsed a year ago but has insisted it will not negotiate over its right to go on enriching uranium. Western countries say talks are pointless unless a halt to enrichment is on the table.

OIL PRICES IN SPOTLIGHT

After years of sanctions that had little impact, Western countries have adopted a far more direct approach in recent months, imposing sanctions that explicitly impact the oil industry that provides 60 percent of Iran's state revenue.

The new U.S. measures would cut off any institution that deals with the Iranian central bank from the U.S. financial system. If implemented fully, it would make it impossible for most countries' refineries to buy Iranian crude.

But Washington has to balance its determination to isolate Tehran with concern that driving its oil off markets will raise prices and hurt the fragile global economy. Brent crude futures hovered above $113 a barrel on Friday, up nearly $7 since Obama signed the new sanctions law.

To ease the impact on markets, the new U.S. measures take effect over several months, and Obama's offer of waivers gives countries time to find other suppliers. Saudi Arabia, the world's biggest oil exporter and a foe of Iran, says it will make up for any supply shortfall.

Traders and analysts believe Iran is unlikely to carry out its threats to block the strait. "We've seen this movie before," said Cliff Kupchan, Iran analyst at the Eurasia Group. "Neither side wants a war. A lot of this rhetoric is overstated."

If it tried to blockade the strait, Iran would be outgunned by a U.S. fleet led by the giant supercarrier John C. Stennis, accompanied by a guided-missile cruiser and flotillas of destroyers and submarines.

The Combined Maritime Force protecting Gulf shipping also includes other countries such Britain, France, Canada, Australia and the Gulf Arab states, under the command of a U.S. admiral.

Still, Iran has many ways it could provoke a Western response, from missiles within range of U.S. targets in the region, to small boats that could attack a ship near shore, to allied militia in Palestine and Lebanon that can strike Israel.

(Additional reporting Dmitry Zhdannikov and Simon Falush in London, Justyna Pawlak in Brussels and Hashem Kalantari in Tehran; Writing by Peter Graff and Tim Pearce; Editing by Jon Boyle)

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Authorities foil NY protest bid to shut Wall Street

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1 of 10. Occupy Wall Street demonstrators hold signs as they gather with student activist groups at Union Square during what protest organizers called a ''Day of Action'' in New York November 17, 2011.

Credit: Reuters/Eduardo Munoz

By Chris Francescani and Aman Ali

NEW YORK | Fri Nov 18, 2011 9:43am EST

NEW YORK (Reuters) - New York police prevented protesters from shutting down Wall Street on Thursday, arresting more than 200 people in repeated clashes with an unexpectedly small but spirited Occupy Wall Street rally.

Protesters took to the streets in rainy New York and cities across the United States for a day of action seen as a test of the momentum of the two-month-old grass-roots movement against economic inequality.

Organizers and city officials had expected tens of thousands to turn out for a demonstration following the New York police raid that broke up the protesters' encampment in a park near Wall Street on Tuesday.

A crowd that disappointed organizers throughout the day grew to several thousand after the standard workday ended and labor union activists joined a march across the Brooklyn Bridge, where last month more than 700 people were arrested during a similar march.

"We certainly want to see more people mobilize and show up," said Occupy Wall Street spokesman Jeff Smith, who nevertheless said there was "a fantastic turnout."

After tempers among police and protesters flared throughout the day, crowds grew larger and more festive after dark.

"This is a great night for a revolution. I've never seen anything like this in my entire life," said Daniel Reynolds, 34, a financial analyst at a venture capital firm, who joined the protests for the first time on Thursday.

Many protesters complained of police brutality, pointing to one media image of man whose face was bloodied during his arrest and another of a woman who was dragged across the sidewalk by an officer.

Police reported seven officers were injured, including one whose hand was cut by a flying piece of glass and five who were hit in the face by a liquid believed to be vinegar.

Police barricaded the narrow streets around Wall Street, home to the New York Stock Exchange, and used batons to push protesters onto the sidewalk as they marched through the area to try to prevent financial workers getting to their desks.

Workers were allowed past barricades with identification and the New York Stock Exchange opened on time and operated normally.

Protesters banged drums and yelled, "We are the 99 percent," referring to their contention that the U.S. political system benefits only the richest 1 percent.

At the Union Square subway stop, one of the busiest in the city, protesters tried to crowd the entrance but police repeatedly moved them against the walls to make way for subway riders.

PROTESTS ACROSS U.S.

Demonstrators targeted bridges they considered in disrepair in cities such as Miami, Detroit and Boston to highlight what they said was the need for government spending on infrastructure projects to create jobs.

In St. Louis, more than 1,000 protesters marched through downtown in support of the Occupy St. Louis movement that was evicted last week from its campsite near the Gateway Arch. The Thursday march was by far the largest since Occupy St. Louis began in support of the New York demonstrators.

In Los Angeles, hundreds of anti-Wall Street demonstrators marched through the financial district, blocking a downtown street to snarl morning rush-hour traffic, and briefly pitched tents outside a Bank of America office tower. Nearly 80 protesters were arrested in the city.

At least 300 people gathered at Chicago's Thompson Center, giving speeches in English and Spanish. The protest was focused on jobs with signs reading: "We need jobs, not cuts" and "Jobs, schools, equality: end the wars."

The Washington, D.C., gathering was smaller than hoped for by organizers. One protester in McPherson Square said he expected about 1,000 people, while perhaps 200 showed up, with many leaving within the hour.

About 100 marched through downtown Denver, chanting slogans and calling for the recall of Mayor Michael Hancock for his decision to have police remove illegally pitched tents and other items from the Occupy Denver campsite last weekend.

In Dallas, more than a dozen people were arrested when police shut down their six-week-old camp near City Hall.

Hundreds of Occupy demonstrators in Portland, Oregon, gathered on a major bridge and later massed in front of a Chase bank branch downtown. Police arrested at least 30 people.

About 600 protesters in Seattle converged in an early evening "Jobs Not Cuts" rally on a bridge spanning near the University of Washington, causing a 2-mile (3-km) traffic backup during the city's raining rush hour.

Police in Las Vegas arrested 21 protesters who sat down in the street outside a federal courthouse after they ignored warnings to leave.

Before dawn on Thursday, police cleared away a protest camp from a plaza at the University of California, Berkeley, where 5,000 people had gathered on Tuesday night.

Protesters say they are upset that billions of dollars in bailouts given to banks during the recession allowed a return to huge profits while average Americans have had no relief from high unemployment and a struggling economy.

They also say the richest 1 percent of Americans do not pay their fair share of taxes.

(Additional reporting by Sharon Reich in New York, Lily Kuo in Washington, Mary Wisniewski in Chicago, Keith Coffman in Denver, Bruce Nichols in Houston, Alex Dobuzinskis in Los Angeles, Laird Harrison in Oakland and Jim Forsyth in San Antonio; Writing by Michelle Nichols and Daniel Trotta; Editing by Eric Walsh and Peter Cooney)

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Insight: The Wall Street disconnect

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1 of 8. An Occupy Wall Street campaign demonstrator stands in Zuccotti Park, October 17, 2011.

Credit: Reuters/Shannon Stapleton

By Matthew Goldstein and Jennifer Ablan

NEW YORK | Fri Nov 18, 2011 11:00am EST

NEW YORK (Reuters) - It was a telling moment at the height of the Occupy Wall Street protests.

John Paulson, the hedge-fund trader who famously made billions betting on the collapse of the housing market, was threatened by the demonstrators with a march on his Upper East Side home in New York last month. Paulson responded by putting out a press release that described his $28 billion, 120-person fund as an exemplar of the American Dream: "Instead of vilifying our most successful businesses, we should be supporting them and encouraging them to remain in New York City."

Other captains of finance like to portray themselves as humble entrepreneurs. One owner of a multi-billion-dollar hedge fund grumbled in the midst of the financial crisis that he has to worry not only about making trading decisions but also about "all the hassles that come with running a small business."

With U.S. cities moving this week to crack down on Occupy Wall Street encampments - including the one in New York's Zuccotti Park - the staying power of the movement is in question. Whatever its future, it's clear that so far, the Occupiers haven't changed many minds on Wall Street over blame for the country's hard times. The cognitive disconnect between the protesters and the captains of finance is alive and well.

David Mooney, chief executive officer of Alliant Credit Union in Chicago, one of the nation's larger credit unions, used to work at one of Wall Street's top banks, JPMorgan Chase. There's a vast cultural gap between Wall Street and his new world, he says: Old friends from the Street, he says, now jokingly refer to him as a "socialist." A credit union is supposed to be run in the interests of all members, he says, while commercial bankers tend to see consumers as customers who can be "exploited" by layering on more fees.

Says Mooney: "I don't say this lightly, but the consumer is simply an income stream and exploiting that is the purpose of the banking organization."

In conversations with nearly two dozen current and former bankers, finance professionals and money managers across the United States, the prevailing sentiment is that the anger at Wall Street's elite is misguided and misdirected. Blame the politicians and policymakers in Washington, many of them say, for encouraging people to buy homes they couldn't afford and doing nothing to stop or discourage U.S. consumers from piling on more than $10 trillion in household debt.

"I think everyone gets what the anger is about... But you just can't say, 'Well I want all debts forgiven.' That is not happening," says one West Coast trader, who like most still working in the financial services industry, declined to be identified by name in this article.

The disconnect, says Jason Ader, a former top Wall Street casino analyst turned hedge fund manager, is in part a simple product of Wall Street's isolation from the hardship out there. Ader says he spends a lot of his time in Las Vegas, one of America's hardest-hit housing markets, and thus wasn't too surprised by this fall's anti-Wall Street outburst.

"I see plenty of despair in places like Las Vegas, where in some neighborhoods every other house is vacant or foreclosed and lots are overgrown by weeds," says Ader, who sits on the boards of Las Vegas Sands Corp and a small Nevada community bank called Western Liberty Bancorp.

But the 43-year-old Ader, who manages $200 million in his hedge fund, says it's a different story for many of the wealthy who work in finance in New York City and don't spend a lot of time in states with high unemployment and high foreclosure rates. Living in Manhattan or the Hamptons or hedge fund havens like Greenwich, Connecticut, can lead to a bit of myopia, he says.

"At first I had friends who were scratching their heads at the protests," says Ader.

BLAME GAME

To put it bluntly, many on Wall Street still see the events leading up to the financial crisis as a case of banks having legitimately sold something - whether it be mortgages or securities backed by those loans - that someone wanted to buy.

Thomas Atteberry, a partner and portfolio manager with Los Angeles-based First Pacific Advisors, a $16 billion money management firm, says his success "wasn't a gift" and he had to work hard to get where he is. Atteberry says he understands the frustration many feel about income inequality. But he said the problem isn't with those who are successful, but rather our "tax codes and regulations."

While some members of the financial elite say they are willing to pay higher taxes, they note the picture for Wall Street firms is not as sunny as some on Main Street might paint it. Wall Street banks already are beginning to shed jobs, and consulting firm Johnson Associates Inc. is predicting bonuses for those who remain will shrink by 20 percent to 30 percent.

Complaints over new financial regulations burdening Wall Street firms are a major reason blamed for the layoffs. Sit down with a hedge fund manager or a top trader and it won't take long before he or she grabs some spreadsheet that shows all the new rules and regulations coming out of the Dodd-Frank financial reform bill.

Many of America's well-to-do, not just Wall Streeters, say they don't feel particularly advantaged. A recent survey by marketing firm HNW Inc. found that half of the nation's richest 1 percent "don't see themselves as being part of that elite group." Also, 44 percent of those surveyed told HNW's pollsters they already pay too much in taxes.

Maybe it is just the ethos of Wall Street, where success is defined solely by who makes the most money, that makes it hard for financiers to feel they've wronged anyone. But in a time of 9 percent unemployment and 15 percent of U.S. citizens receiving food stamps, some Wall Street alums say the financial elite are doing themselves no favors by giving the appearance of shrugging off the current mood.

"I think Wall Street hasn't taken in how much anger there is out there and they haven't taken partial responsibility for the financial crisis," says Brookings Institution fellow Douglas Elliott, who was an investment banker for two decades before joining the liberal-oriented public policy group. "I think both sides - Wall Street and Main Street - misunderstand each other."

Some who get paid to advise the rich on how to deal with the media and the public are telling clients to pay attention.

Robert Dilenschneider, founder and principal of The Dilenschneider Group corporate consulting group, recently sent a report to his clients telling them that many of the protesters taking part in the Occupy movement are not a bunch of unemployed crazies and hippies.

"The CEOs in big board rooms in Paris, in Zurich and New York don't normally think about people who are demonstrating in parks," says Dilenschneider, whose firm advises some of the biggest companies in the world. "In the banking and financial area, we are telling our clients you have to explain more completely what makes up your business and why your profits are what they are."

MOM AND POP HEDGE FUNDS

Some of the disconnect is simply a matter of lifestyle and the fact that the super wealthy really do live differently from everyone else. Hedge fund managers and bankers fly around on private jets, live in palatial penthouse apartments overlooking Central Park and have second homes in the country.

In New York City, the average pay for those working in finance is $361,183, more than five times the average salary of $66,106 for all workers in the city, according to the New York State Department of Labor.

This disparity in income and attitudes was evident in the response of hedge fund managers like Paulson who portrayed themselves as humble businessmen. Says Wall Street historian Charles Geisst, "Hedge funds may be small businesses in terms of labor intensity, but in terms of capital intensity they are just the opposite."

A spokesman for Paulson said he had nothing more to add on the subject.

Former Wall Street practitioners say the Street does not lend itself to a lot of introspection. "The world of investment bankers and especially the trading floor region is notoriously hermetically sealed,'" says Kenneth Froewiss, a retired JPMorgan Chase investment banker and former finance professor at New York University's Stern School of Business. "The walls may be filled with screens beaming the latest news, but there is typically an obliviousness as to what is happening across the street."

LESSONS LEARNED

There are exceptions, of course. Some are saying it may be time for the government which has bailed out the banking system to help millions of struggling homeowners.

One of those is former top Pacific Investment Management Co executive Paul McCulley, best known for his analysis on central banks and monetary policy when he worked at the world's biggest bond fund. McCulley, who retired a year ago from Newport Beach, California-based PIMCO to become a consultant with a public policy firm, enjoys the wealth he accumulated in his old role. He lives in a house by the water where he docks his two boats. But he says Wall Street went too far.

"Our society was ripe for a convulsion about social justice, and Occupy Wall Street was the catalyst for that," says McCulley. "New York can be very insular. It is not the real world and neither is Newport Beach."

Now that he's no longer working for PIMCO, McCulley is a bit more free to speak his mind. And he says the only way to jumpstart the U.S. economy is for the federal government to get behind a serious program to encourage consumer debt forgiveness and principal reductions on mortgages by banks. (tinyurl.com/3cbdjpk)

McCulley noted that mortgage firms Fannie Mae and Freddie Mac have been propped up by about $169 billion in federal aid since they were rescued by the government in 2008, yet there's a "a moral overtone" to the argument against reducing mortgage debt burdens for individual borrowers.

"Wall Street capitalism has given us a foul stench in our society," says McCulley.

The disconnect continues.

Just this week, top executives at Fannie and Freddie found themselves drawing fire on Capitol Hill for trying to distribute nearly $13 million in bonuses to key employees.

And the October 31 collapse of MF Global Holdings is prompting some critics to say Wall Street hasn't learned any lessons from the financial crisis. The futures brokerage house filed for bankruptcy after investors and traders became fearful that MF Global had taken on too much exposure to European sovereign debt in a bid to juice revenues.

The risky trade was put on by former New Jersey Governor Jon Corzine, a former Goldman Sachs Group chief executive. Last year, Corzine was saying Wall Street investment banks had taken on too much risk in the months leading up to the financial crisis. On the lecture circuit Corzine was calling for tighter regulation of Wall Street, even while his firm was borrowing more and more money to bet on some of the riskiest European debt. A Corzine representative declined to comment. (link.reuters.com/xad25s).

William Cohan, the author of several Wall Street-related books and a former Lazard investment banker, said MF Global was acting as if the 2007-2008 crisis never happened: "You would have to be living under a rock if you didn't get the message of the financial crisis."

(Reported by Matthew Goldstein and Jennifer Ablan, with additional reporting by Sam Forgione; editing by Michael Williams and Claudia Parsons)

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Anti-Wall Street protesters dig in against police

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1 of 3. People walk around an Occupy Oakland encampment in front of City Hall in Oakland, California, November 11, 2011.

Credit: Reuters/Kim White

By Dan Whitcomb

LOS ANGELES |

LOS ANGELES (Reuters) - Tensions were rising at anti-Wall Street protests in three western U.S. cities on Friday as demonstrators in Portland, Salt Lake City and Oakland defied orders by police to dismantle their camps.

In Portland, police said they had received reports that protesters were digging a reinforced hole and fashioning make-shift weapons out of wood and nails after Mayor Sam Adams gave them until midnight on Saturday to clear out of two downtown parks.

Police said they believed Occupy Portland organizers had also put out a call for reinforcements from Oakland, Seattle and San Francisco as they prepared for a confrontation.

"There may even be as many as 150 anarchists who will arrive soon," Portland police said in a written statement.

"There is information that people may be in the trees during a police action and that there are people who are attempting to obtain a large number of gas masks," the statement said.

Occupy Portland organizers, who say their encampment numbers between 500 and 800 people, denied that they were making weapons or recruiting anarchists for a pitched battle and insisted that they were a nonviolent movement.

Still, while a few protesters trickled out of the two main camps in downtown Portland as the deadline approached, hundreds remained hunkered down in their tents on a chilly Friday night in the Pacific northwest.

In Salt Lake City, meanwhile, protest organizers vowed to resist an order by police chief Chris Burbank clear out of Pioneer Park in downtown by 30 minutes after sundown Saturday.

Burbank said he had had enough after an unidentified and possibly homeless man was found dead in his tent there, possibly of carbon monoxide poisoning from a propane heater and a drug overdose.

'I'M GOING TO FIGHT'

"We can no longer tolerate individuals camping on our streets. We can no longer care for individuals camping here," Burbank told protesters. "I commit to work with you to find avenues that you can express your free speech. It just can't be done through camping in our streets and in our parks."

But protest organizer Jesse Fruwirth told Reuters that a number of protest members were willing to remain in the park and face arrest on Saturday night if the city could not be persuaded to let them stay.

"We were caught off guard this afternoon. We believed we had a cooperative relationship with the city," he said following an impromptu press conference and candlelight vigil.

Homeless protester Nathan Clark, meanwhile, told Reuters he had found a safe haven in the park after years in foster homes and on the streets and "us being shut down isn't cool."

"I'm staying here," Clark, 18, said. "I'm going to fight this cause. I'm going to stay my ground."

And in Oakland, where police and protesters have clashed several times over the past few weeks, organizers said they intended to stay in Frank Ogawa Plaza near city hall despite increasing pressure by authorities.

On Friday night, police handed out fliers at the Occupy Oakland encampment putting demonstrators on notice that they were violating the law by camping and having open fires.

The warnings came one day after a man was shot to death not far from the plaza, prompting the Oakland police officers union to release an open letter asking protesters to pack up and leave.

But protesters, who say the shooting was unrelated to them, took shelter in their tents on Friday night as a steady rain fell over the Bay Area, showing no signs of leaving.

Police forcibly removed tents and drove protesters out of Frank Ogawa Plaza on October 25, only for demonstrators to return later to reclaim the public square outside City Hall.

Police and protesters clashed again the following week after a day of largely peaceful citywide rallies and marches that forced a brief shutdown of the Port of Oakland.

(Additional reporting by Teresa Carson, James Nelson, Noel Randewich, Jim Christie, Dan Levine, James Nelson, Alex Dobuzinskis and Mary Slosson)

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