China's ZTE planned U.S. computer sale to Iran

ZTE Corporation

(Reuters) - China's ZTE Corp, which recently sold Iran's largest telecommunications firm a powerful surveillance system, later agreed to ship to Iran millions of dollars worth of embargoed U.S. computer equipment, documents show.

The American components were part of an 8 million euro ($10.5 million) equipment-supply contract, dated June 30, 2011, between ZTE, a Chinese trading firm and a unit of the consortium that controls the Iranian telecom, Telecommunication Co. of Iran, according to documents reviewed by Reuters. ZTE is China's second-largest telecommunications equipment maker.

The documents shed further light on how Iran obtains sophisticated American tech products despite U.S. sanctions on Iran. China is a major conduit. Reuters in March revealed an earlier deal between ZTE and TCI, which centered on non-American surveillance equipment but also included some U.S. tech goods. The latest deal, though smaller in scale, was much more reliant on U.S. products.

Beijing and Moscow have vetoed Western attempts to strengthen sanctions against Iran over its nuclear-development program. ZTE, based in the city of Shenzhen, is publicly traded but its largest shareholder is a Chinese state-owned enterprise.

According to the contract's parts list, the equipment to be delivered from China included IBM servers; switches made by Cisco Systems Inc and Brocade Communications Systems Inc; database software from Oracle Corp and a unit of EMC Corp; Symantec back-up and ant-virus software; and a Juniper Networks firewall. The parts were intended for business-support services, including a ZTE billing system.

A spokesman for ZTE said last week in an email that "as far as we know" the company had not yet shipped any of the products. Asked if ZTE intended to do so, he emailed a new statement Monday that said: "We have no intention to implement this contract or ship the products."

He also said ZTE decided "to abandon" the agreement after "we realized that the contract involved some U.S. embargoed products."

The contract had made clear the American provenance of the goods: Its accompanying parts list, signed by ZTE, lists more than 20 different computer products from U.S. companies. Washington has banned the sale of such goods to Iran for years.

U.S. companies that responded to requests for comment said they were not aware of the Iranian contract; several said they were investigating the matter.

A spokesman for IBM said: "Our agreements with ZTE specifically prohibit ZTE from the transfer of IBM products to Iran. If any of IBM's business partners are breaching our export compliance agreements, then IBM will take appropriate actions."

A Brocade spokesman said the company doesn't sell any products to Iran "and we certainly have not shipped these products to" ZTE. A spokesman for Greenplum, the EMC unit, said: "We have no knowledge of the contract described, but are actively researching this matter." A Cisco spokesman said: "We continue to investigate this matter, as any violation of U.S. export controls is a very serious matter."

According to the U.S. Treasury Dept., a U.S. company would violate sanctions if it shipped products requiring an export license to a third party knowing the goods would end up in Iran.

The United States, Europe and the United Nations have been imposing increasingly tough economic sanctions on Iran to pressure it to refrain from developing nuclear weapons, which Iran denies it is doing. The five permanent members of the U.N. Security Council - the U.S., China, Russia, Britain and France - plus Germany are scheduled to hold talks with Iran Saturday in Istanbul over its nuclear program, which it maintains is peaceful.

Reuters reported on March 22 that ZTE had sold Iran's TCI a surveillance system capable of monitoring landline, mobile and internet communications. The system was part of a 98.6 million euro ($128.9 million) contract for networking equipment signed in December 2010.

The article reported that despite a longtime U.S. sales ban on tech products to Iran, ZTE's "Packing List" for the contract, dated July 24, 2011, also included numerous American hardware and software products, although they were not part of the surveillance system.

The U.S. product makers - which included Microsoft Corp, Hewlett-Packard Co and Dell Inc, among others - all said they were not aware of the Iranian contract, and several said they were investigating the matter.

The day after the article was published, a ZTE spokesman said the company would "curtail" its business in Iran. The company later issued a statement saying, "ZTE no longer seeks new customers in Iran and limits business activities with existing customers."

Three other telecommunications equipment makers - Ericsson, Nokia Siemens Networks and China-based Huawei Technologies - previously have said they would reduce their business in Iran. Huawei and ZTE have emerged as the largest equipment suppliers to Iran, according to people involved with the country's telecom industry.

The parts list for the June 2011 contract was much more dominated by U.S. products than the earlier equipment contract. The earlier pact was between TCI, ZTE and a Chinese trading company called Beijing 8-Star International Co. The latest contract was between ZTE, Beijing 8-Star and an Iranian company called Aryacell.

Aryacell is a unit of Iran Mobin Electronic Development Co., part of a consortium that controls TCI along with the Iranian government. According to the contract, Beijing 8-Star was required to provide "third-party equipments," while ZTE was responsible for supplying equipment and collecting payment. The contract was to last until December 31, 2015.

Officials at Aryacell and TCI did not respond to requests for comment. A representative of Beijing 8-Star, reached in China, declined to answer questions, saying: "Concerning my business matters, it's not necessary for me to tell you anything."

The contract's parts list included products made by manufacturers from several countries. But most were from the U.S., with IBM items accounting for the bulk of them. The IBM parts included 30 servers and other computer equipment with a total cost of more than 6.8 million euros ($8.9 million), minus about a 30 percent discount.

Several of the IBM server models, though new, were discontinued shortly before the contract was signed. It called for a 12-month warranty on all equipment.

It is not clear how ZTE will get out of the contract. According to the terms, the contract only can be terminated if Aryacell breaches it, becomes bankrupt or can't pay its debts.

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Europe's banks bleed from Greek debt crisis

(Reuters) - Greece's debt problems drove a slew of heavy losses across the European banking sector on Thursday, and bosses warned the euro zone crisis would continue to threaten earnings.

From France to Germany, Britain to Belgium, some of the region's biggest banks lined up to reveal billions of euros lost through writedowns on Greek loans.

"We are in the worst economic crisis since 1929," Credit Agricole (CAGR.PA) chief executive Jean-Paul Chifflet said.

Credit Agricole reported a record quarterly net loss of 3.07 billion euros ($4.06 billion), performing worse than expected from the cost of shrinking its balance sheet and after a 220 million euro charge on its Greek debt.

"We think 2012 is going to still be a tense period," Chifflet said, adding: "We're hoping that our results will be largely better than in 2011.

Europe's banks have already written down billions of euros from losses on Greek government bonds and loans, and a deal agreed this week with its creditors will inflict losses of 74 percent on bondholders.

"We can't say that the writedowns are over," said Franklin Pichard, director at Barclays France. "Even if some can say that the worst is over, we are only at a new stage in terms of provisioning and not necessarily at the end."

That is because, despite the bond swap deal, bondholders could suffer further hits if Greece's economy fails to recover.

Britain's Royal Bank of Scotland (RBS.L) has marked its Greek bonds at a 79 percent loss -- or 1.1 billion pounds -- for 2011. The state-owned bank posted a fourth quarter loss of nearly 2 billion pounds on Thursday.

FAR WIDER THAN GREECE

Problems in Europe's banking sector are far wider than Greece, however.

"We have reduced the balance sheet of RBS by over 700 billion pounds of assets. That is roughly twice the size of the entire national debt of Greece," said RBS boss Stephen Hester.

The region's banks are still repairing the damage of the financial crisis and shrinking their assets. They must also find 115 billion euros by the middle of this year to shore up their balance sheets against future shocks. But any weakening in the economy will hit earnings and make that harder to achieve.

Germany's Commerzbank (CBKG.DE), whose fourth-quarter earnings were spoiled by a 700 million euro hit on Greek sovereign debt, needs to find 5.3 billion euros to meet the stringent new capital requirements set by Europe's banking regulator. It has now lost more than 2 billion euros on its Greek bonds.

Commerzbank said it could reduce some of its shortfall by shedding risky assets, though the debt crisis still had the potential to disrupt earnings.

"The high degree of uncertainty associated with the European sovereign debt crisis will ... continue to pose challenges for us," Chief Executive Martin Blessing said.

STILL ROOM FOR A BONUS

European governments are hoping to avoid more state bailouts to prop up the banking sector, and to limit the fallout should any bank collapse.

Bailed out Franco-Belgian bank Dexia (DEXI.BR) warned on Thursday it risked going out of business. It suffered a 2011 net loss of 11.6 billion euros, hit by its break-up and exposure to Greek debt and other toxic assets such as U.S. mortgage-backed securities.

Dexia, which accepted a state-led break-up and the nationalization of its Belgian banking arm in October and is now little more than a holding of bonds in run off, booked a 3.4 billion euro loss on its holding of Greek sovereign bonds.

French investment bank Natixis (CNAT.PA), rescued from near-collapse during the 2008 financial crisis by a government-backed merger of its retail cooperative parents, reported a milder-than-expected 32 percent decline in quarterly profits.

Despite the weak results, banks still found room for bonuses.

RBS, 82 percent owned by the British government, paid out almost 1 billion pounds in bonuses to staff in 2011. Credit Agricole said it would cut trader bonuses by 20 percent.

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Iran halts oil sales to UK, France on eve of talks

Iranian Oil minister Rostam Qasemi talks to journalist

(Reuters) - Iran ordered a halt to its oil sales to Britain and France on Sunday in a move seen as retaliation against tightening EU sanctions, as a team of U.N. inspectors flew to Tehran to press the Islamic Republic over its disputed nuclear program.

The European Union enraged Tehran last month when it decided to impose a boycott on its oil from July 1. Iran, the world's fifth-largest oil exporter, responded by threatening to close the Strait of Hormuz, the main Gulf oil shipping lane.

On Sunday, its oil ministry went a step further, announcing Iran has now stopped selling oil to France and Britain altogether - a powerful yet largely symbolic message since neither European nation relies on Iranian crude imports.

"Exporting crude to British and French companies has been stopped ... we will sell our oil to new customers," spokesman Alireza Nikzad was quoted as saying on the ministry website.

Iran, which denies Western allegations that it is seeking to make nuclear weapons, has ramped up its rhetoric in recent weeks while also expressing willingness to resume negotiations on its nuclear program.

A five-member team from the U.N. International Atomic Energy Agency (IAEA) flew to Tehran late on Sunday for talks, although Western diplomats have played down any hopes of a major breakthrough in the two-day meeting.

"I'm still pessimistic that Iran will demonstrate the substantive cooperation necessary," one envoy said in Vienna.

Yet the outcome of this week's discussions is important and will be watched closely because it could either intensify the standoff or offer scope to reduce tensions.

The European Commission says the bloc would not be short of oil if Iran stopped crude exports as it has enough stock to meet its needs for around 120 days.

Industry sources said European oil buyers were already making big cuts in purchases from Iran months in advance of EU sanctions. France's Total has stopped buying Iranian oil while debt-ridden Greece is most exposed to Iranian crude disruption among European countries.

MILITARY STRIKE?

Iran says its nuclear program is entirely peaceful but its refusal to curb uranium enrichment, which can have both military and civilian purposes, has raised concerns.

Western powers have not ruled out using force against Iran, and there has been an intense public discussion in Israel about whether it should attack Iran to stop it making a nuclear bomb.

However, on Sunday the top U.S. military officer said a military strike would be premature as it was not clear that Tehran would use its nuclear capabilities to build an atomic bomb.

"I believe it is unclear (that Iran would assemble a bomb) and on that basis, I think it would be premature to exclusively decide that the time for a military option was upon us," said General Martin Dempsey, chairman of the U.S. military's Joint Chiefs of Staff.

He said he believed the Iranian government was a "rational actor."

The West has expressed some optimism over the prospect of new talks with Tehran, particularly after it sent a letter to EU foreign policy chief Catherine Ashton last week promising to bring "new initiatives" to the table.

"In these negotiations, we are looking for a way out of Iran's current nuclear issue so that both sides win," Iranian TV quoted Foreign Minister Ali Akbar Salehi as saying on Sunday.

Oil is a major part of Iran's export revenues and an important lifeline for its increasingly isolated economy. It has little refining capacity and has to import about 40 percent of its gasoline needs for domestic consumption.

Tightening sanctions, combined with high inflation, have squeezed the ability of working-class Iranians to feed themselves and their families, and this uncertainty forms the backdrop to a parliamentary vote on March 2.

"Everything's become so expensive in the past few weeks," said Marjan Hamidi, an Iranian shopper in Tehran, "But my husband's income stays the same. How am I going to live like this?"

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Iran calls for Israel to be "punished"

(Reuters) - Major powers signaled on Friday their willingness to reopen talks about curbing Iran's suspected pursuit of nuclear weapons but said Tehran must show it is serious about any negotiations.

The focus on diplomacy follows weeks of rising tensions between the West, which is seeking to cut Iran's oil sales, and Tehran, which has threatened to close the Strait of Hormuz through which almost one-fifth of oil traded worldwide flows.

Alarmed Arab neighbors made a plea to avoid escalating the dispute over Iran's nuclear program while an ally of Iran's supreme leader called for Israel to be "punished" for allegedly killing an Iranian nuclear scientist.

The West suspects Iran is using its civilian nuclear program as a cover to develop atomic weapons and has pursued a two-track approach of sanctions and diplomacy to try to rein it in. Iran says its nuclear program is solely to produce electricity.

While major powers stressed their openness to renewed talks,

diplomats said they remain divided on their approach, notably on whether to let Iran keep enriching uranium at some level.

The group, known as the P5+1 and as the EU3+3, includes Britain, China, France, Germany, Russia and the United States.

EU foreign policy chief Catherine Ashton, who represents the group, issued a statement making clear that a diplomatic path remains open to Iran despite tougher sanctions and fresh speculation of a military strike on its nuclear facilities.

"The EU3+3 has always been clear about the validity of the dual track approach," Ashton's spokesperson said in a statement that included her October 21 letter to the Iranians laying out the possibility of talks. "We are waiting for the Iranian reaction."

The release of the statement and letter appeared to reflect frustration at Iran's statements hinting at a willingness to resume talks but Tehran's failure to formally respond to the letter and commit to discussing the nuclear program in earnest.

CONCILIATORY TONE FROM CLINTON

U.S. Secretary of State Hillary Clinton struck a decidedly conciliatory tone at a news conference with German Foreign Minister Guido Westerwelle in Washington.

"We do not seek conflict. We strongly believe the people of Iran deserve a better future," she said. "They can have that future, the country can be reintegrated into the global community ... when their government definitively turns away from pursuing nuclear weapons.

"We have to see a seriousness and sincerity of purpose coming from them."

Westerwelle said, "One thing is clear: the door for serious dialogue remains open but the option of nuclear weapons in Iran is not acceptable."

Diplomats said major powers are divided over what incentives to offer Iran if talks were to resume.

A central issue is whether the group might ask Iran to cease enriching uranium to the higher level of 20 percent but allow it, at least for a time, to continue enriching at lower levels -

a stance partly at odds with the group's past positions.

Uranium enrichment is a process that at low levels can yield fuel for nuclear power plants or, if carried out to much higher levels of purity, can generate fissile material for bombs.

To let Iran enrich at lower levels would be something of a concession by the P5+1, although it has previously offered a temporary "freeze-for-freeze" in which Iran would not expand its nuclear program and the powers would not pursue more sanctions.


IRANIAN CALLS FOR PUNISHING ISRAEL

After Supreme Leader Ayatollah Ali Khamenei paid his respects to the families of two scientists assassinated on what Tehran believes were Israel's orders, one of them just last week, a close ally demanded retribution.

"Terrorism has a long history in some countries like the Zionist regime," Ali Larijani, speaker of Iran's parliament and a former nuclear negotiator, said Israel, which views an atomic bomb in Iran's hands as a threat to its survival.

"The Zionist regime should be punished in a way that it can not play such games with our country again."

Such threats have been made before in Tehran and it is unclear how or when they might be carried out. Israel, widely assumed to have the only nuclear arsenal in the Middle East, is on guard against attacks on its borders and within, notably by Lebanon's Hezbollah movement, which is supported by Iran.

Obama's top military official, chairman of the Joint Chiefs of Staff General Martin Dempsey, briefly visited Israel and was quoted by its Defense Ministry as telling officials there that Washington was keen to coordinate on strategy.

"We have many interests in common in the region in this very dynamic time and the more we can continue to engage each other, the better off we'll all be," Dempsey was quoted as saying in a statement issued by the Israeli Defense Ministry.

The comments may reflect U.S. concerns about the possibility that Israel, which has previously bombed nuclear facilities in Iraq and in Syria, might launch an attack on Iran.

French President Nicolas Sarkozy said on Friday that time was running out to avoid a military intervention and appealed to China and Russia, veto-wielding U.N. powers who have been reluctant to tighten sanctions, to support new sanctions.

"Time is running out. France will do everything to avoid a military intervention," Sarkozy told ambassadors gathered in Paris. "A military intervention will not solve the problem, but it will unleash war and chaos in the Middle East."

"We need stronger, more decisive sanctions that stop the purchase of Iranian oil and freezes the assets of the central bank, and those who don't want that will be responsible for the risks of a military conflict," Sarkozy warned.

"We really need you," he said in an appeal to Moscow and Beijing.

With tensions, including mutual threats of disrupting the oil trade, creating worries across the region, the foreign minister of the United Arab Emirates, the wealthy, U.S.-allied state sitting across the Gulf from Iran, offered a warm welcome to a call for calm on Thursday by his Iranian counterpart.

"It's important to get far away from any escalation and we stress the stability of the region," Sheikh Abdullah bin Zayed al-Nahayan was quoted as saying by state news agency WAM.

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Swiss bank chief to respond over wife's dollar trade

Phlilpp Hildebrand, Swiss bank cheif

(Reuters) - Switzerland's central bank chief will break his silence on Thursday over a controversial currency trade made by his wife three weeks before he imposed a cap on the Swiss franc.

Philipp Hildebrand's decision to speak came after the sacking on Tuesday of a bank employee who leaked details of the trade to the lawyer of a political adversary.

The affair goes to the heart of bank secrecy in Switzerland, whose banks are plagued by scandals over their role in tax avoidance by the world's wealthy, but where controversy over the actions of the central banker's wife has been centered on the leak of her private data rather than on the action it revealed.

Kashya Hildebrand, a former trader who also owns a Zurich art gallery, told Swiss television she "felt good" about the deal last August. Local tabloid Blick reported it had yielded a 60,000 Swiss franc ($64,400) profit on a 500,000 franc trade.

"What motivated me to buy dollars was the fact that it was at a record low and was almost ridiculously cheap," she was quoted as saying. "As I have worked in the financial and banking industry for over 15 year and always observe the markets, I felt at ease with this transaction."

The Swiss National Bank has already investigated the trade and said last month it did not breach the letter of internal rules.

On Wednesday, it bowed to political pressure and published internal trading rules for the first time -- alongside a report by auditor Price Waterhouse Coopers (PwC) on the controversial dollar purchase.

PwC said Hildebrand had not known in advance about his wife's dealings on August 15, but that one day later, he told Sarasin in an email all future dealing would need his express approval. He copied in the Swiss National Bank's (SNB) compliance department for good measure.

His caution was well warranted. On September 7 the SNB's compliance department ruled that there should be no repeat of such trades, the PwC report said. The Swiss franc cap was introduced on Sept 9.

"One could call this trade risky," PwC said in the report.

Swiss central bank rules, as well as those from the Bank of England and European Central Bank, put the onus on staff to refrain from unauthorized disclosures rather than on families to avoid trading. But officials said the spirit of guidelines demanded extra sensitivity.

"It may well be completely above board but nevertheless it leaves a bitter taste in the mouth," said one central bank official, who declined to be named.

The SNB said Philipp Hildebrand, a former hedge fund manager and vice chairman of the Financial Stability Board (FSB), would make an announcement on Thursday.

The respected banker, credited with steering Switzerland's banking system through the financial crisis, is expected to weather the storm, and won the backing of the government in a statement late on Wednesday.

"The Federal Council has no reason to question the validity of the audit findings and has expressed its full confidence in Mr. Hildebrand," it said in a statement.

Some said that the scandal was nothing more than a politically motivated attack.

"As long as allegations (of wrongdoing) turn out to be unfounded, which at the moment I think looks likely, it looks like just another attempt to discredit the central bank and its chairman," said Nikola Stephan at Informa Global Markets.

"CONSIDERABLE UNPLEASANTNESS"

In a country which prizes itself on bank secrecy, the fact that the leak breached client confidentiality -- and that the data had found its way into the hands of Hildebrand's political rival Christoph Blocher -- initially took centre stage.

Bank Sarasin (BSAN.S), which said on Tuesday it had fired an IT staffer for the leak of customer data, apologized for the "considerable unpleasantness" caused by its employee, who turned himself over to police on Sunday.

"The bank condemns the misuse of confidential bank data for political purposes in the strongest possible terms," it said.

The data was leaked to the lawyer of Christoph Blocher, a political rival of Hildebrand.

Blocher has called for the central banker's resignation over the losses racked up trying to stem the relentless rise of the Swiss franc as funds seeking a safe haven from the euro zone crisis poured in.

But to date, Blocher, who transformed the right-wing Swiss People's Party into the country's largest political force, has stayed out of the trading embarrassment.

"There is a time to talk and a time to be quiet. In this affair, it is time for me to be silent," he has told Swiss television.

Philipp Hildebrand met Kashya, an American citizen born in northern Pakistan, when they worked as colleagues for the U.S. hedge fund Moore Capital, according to Swiss newspaper reports.

Police raided the London offices of Moore Capital, headed by billionaire Louis Bacon, in 2010, and arrested an equity trader as part of Britain's biggest swoop on an insider trading ring.

($1 = 0.9323 Swiss francs)

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Owner suprised to find cat regularly catches bus

Traveler Cat

A pet cat named Dodger is living up to his name - by catching free bus trips from his home town.

The ginger moggy, who was named after the Artful Dodger from Oliver Twist, has taken to hopping on and off the public transport at the bus station near his home.

The 15-year-old Tom even sits on bemused passengers' laps as the bus makes up to 10 mile round trips from Bridport to Charmouth in Dorset.

Dodger is such a regular customer that some of the drivers take tins of cat food to work with them to give to him. They even know what stop to let him off at.

At the end of his journies the roving moggy returns to his home and owner Fee Jeanes.

Mrs Jeanes, 44, believes Dodger first took a liking to the buses as they are warm like greenhouses when the sun is on them.

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French mother, 32, set to become first woman to be jailed for wearing banned Islamic veil

Hind Ahmas, left, could be sentenced to two years in prison in France

A 32-year-old mother from France is set to become the first woman ever to be sent to prison for wearing an Islamic veil.

Hind Ahmas refuses to accept the legitimacy of a Paris court which has ordered her to spend 15 days learning her civic duties.

She was sentenced by magistrates in Meaux, a Paris suburb, yesterday - after being arrested wearing an outlawed veil outside the Elysee Palace in the French capital on April 11.

That was shortly after Nicolas Sarkozy's government introduced a ban on all forms of Islamic head coverings, including the niqab and the burka.

Ahmas was not allowed into the hearing at Meaux Criminal Court because she refused to remove her face covering.

But prosecutors made it clear to her lawyer, Gilles Devers, that Ahmas now faces two years in prison and a £27,000 fine.

'There is no possibility of me removing the veil,' Ahmas said.

'I'm not taking it off. The judge needs citizenship lessons, not me.'

Ahmas, who has already refused to pay a fine of around £100 for wearing a veil on another occasion, intends to take her case to the European Court of Human Rights.

She has launched a pressure group, Do Not Touch My Constitution, along with Kenza Drider, another veil wearer who wants to run for president in the Spring.

If Ahmas does become the first woman in the world to go to prison for wearing a veil, then it will be seen as a huge propaganda coup for Islamic-rights campaigners.

Mr Sarkozy said the ban on head coverings was not aimed at persecuting Muslims, but merely to make France a more tolerant, inclusive society.

When it was introduced, he said the ban was aimed at stopping criminals – from terrorists to shoplifters – disguising their faces from security staff and CCTV.

But the sight of a young mother being led away to the cells merely because she refuses to take off her veil will cause outrage around the world.

Mr Devers said the veil ban was 'unconstitutional', while senior police officers have told judges that it is unenforceable without persecuting women.

France became the first country in Europe to outlaw the veil, while similar legislation has since been passed in Belgium and Holland.

One has been mooted in Britain by a number of politicians, including Conservative backbenchers, but there are no immediate plans to introduce one.

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