Thursday, March 31, 2011

Spanish scientists search for fuel of the future


In a forest of tubes eight metres high in eastern Spain scientists hope they have found the fuel of tomorrow: bio-oil produced with algae mixed with carbon dioxide from a factory.

Almost 400 of the green tubes, filled with millions of microscopic algae, cover a plain near the city of Alicante, next to a cement works from which the C02 is captured and transported via a pipeline to the "blue petroleum" factory.

The project, which is still experimental, has been developed over the past five years by Spanish and French researchers at the small Bio Fuel Systems (BFS) company.

At a time when companies are redoubling their efforts to find alternative energy sources, the idea is to reproduce and speed up a process which has taken millions of years and which has led to the production of fossil fuels.

"We are trying to simulate the conditions which existed millions of years ago, when the phytoplankton was transformed into oil," said engineer Eloy Chapuli. "In this way, we obtain oil that is the same as oil today."

The microalgae reproduces at high speed in the tubes by photosynthesis and from the CO2 released from the cement factory.

Every day some of this highly concentrated liquid is extracted and filtered to produce a biomass that is turned into bio-oil.

The other great advantage of the system is that it is a depollutant -- it absorbs the C02 which would otherwise be released into the atmosphere.

"It's ecological oil," said the founder and chairman of BFS, French engineer Bernard Stroiazzo-Mougin, who worked in oil fields in the Middle East before coming to Spain.

"We need another five to 10 years before industrial production can start," said Stroiazzo-Mougin, who hopes to be able to develop another such project on the Portuguese island of Madeira.

"In a unit that covers 50 square kilometres, which is not something enormous, in barren regions of southern Spain, we could produce about 1.25 million barrels per day," or almost as much as the daily export of oil from Iraq, he said.

BFS, a private company, hopes to negotiate "with several countries to obtain subsidies for the installation of artificial oil fields," he said.

Other similar projects being studied in other parts of the world.

In Germany, the Swedish energy group Vattenfall last year launched a pilot project in which algae is used to absorb carbon dioxide from a coal-fired power plant.

US oil giant ExxonMobil plans to invest up to $600 million in research on oil produced from algae.

Companies, in particular those in the aeronautic sector, have shown keen interest in this research, hoping to find a replacement for classic oil.

Wednesday, March 30, 2011

David Sokol, potential successor of Warren Buffett resigns


David Sokol has abruptly resigned from Berkshire Hathaway, the company run by the billionaire Warren E. Buffett, raising major questions about the future stewardship of the conglomerate.

Mr. Sokol, 54, was long considered to be a leading candidate to take over from Mr. Buffett, now 80. The question of succession has been a concern to Berkshire’s investors and the many avid followers of Mr. Buffett, who has said he has no plans to step aside anytime soon. The company has given few clues about its plan other than to say it has identified four current Berkshire managers who could become the next chief executive. Now that game plan may have to be tweaked.

The resignation also raises deeper questions about Mr. Sokol’s stake in a company that Berkshire is acquiring.

In a statement on Wednesday announcing the departure, Mr. Buffett said that Mr. Sokol had bought thousands of shares in the company, Lubrizol, a maker of lubricants, two months before Berkshire announced a $9 billion deal for the company. Shares of Lubrizol have risen 27 percent since the deal was announced two weeks ago.

Mr. Sokol had pitched the acquisition to Berkshire’s board.

“Neither Dave nor I feel his Lubrizol purchases were in any way unlawful,” Mr. Buffett said in the statement. “He has told me that they were not a factor in his decision to resign.”

Yet the disclosure raises questions about the timing of Mr. Sokol’s share purchases — and whether he may face any legal repercussions.

Mr. Sokol could not be reached for comment.

The disclosure about Mr. Sokol’s stake in Lubrizol appears to be a rare mark on Berkshire’s squeaky-clean image. Meyer Shields, an analyst who follows Berkshire at the brokerage firm Stifel Nicolaus, said Mr. Sokol’s departure went “deep into the question” of Berkshire’s culture and raised the issue, not addressed in Wednesday’s statement, of whether Mr. Sokol had bought into other companies before a Berkshire acquisition.

“This is a company that has spent a lot of energy building its reputation, and as a result it makes it more vulnerable to news like this,” Mr. Shields said.

Class A shares of Berkshire fell more than 2 percent in after-hours trading.

Still, regulators have not announced any plans to scrutinize Mr. Sokol’s shares in Lubrizol, and he has not been accused of any wrongdoing. A spokesman for the Securities and Exchange Commission, which investigates allegations of insider trading, declined to comment.

Mr. Sokol’s resignation shocked some Berkshire Hathaway employees, according to people at the company who were not authorized to speak publicly. Even Mr. Buffett acknowledged that his statement was “unusual.”

The departure immediately recasts the field of candidates in the race to be the next chief executive of Berkshire. Yet there is a bench at Berkshire for Mr. Buffett to draw from.

One leading candidate to run Berkshire is Ajit Jain, the head of the company’s reinsurance operations. In his February letter to investors, Mr. Buffett praised a number of other Berkshire managers, including Tad Montross of General Re, Matthew K. Rose at Burlington Northern Santa Fe and Tony Nicely of Geico.

In late November, Berkshire hired Todd Combs, manager of a hedge fund in Connecticut, as a potential successor to Mr. Buffett as chief investment officer. (Mr. Buffett has said the plan is to divide the chief executive and investment jobs.) Mr. Combs was hired to oversee a sizable portfolio that would probably grow as he became comfortable with it and Berkshire’s operations.

Mr. Buffett praised Mr. Sokol, saying his “contributions have been extraordinary.” Mr. Sokol had run several Berkshire subsidiaries, including MidAmerican Energy and NetJets, which sells fractional ownerships of private jets.

On Wednesday, Mr. Buffett said that he did not ask for Mr. Sokol’s resignation, which was a “total surprise to me.” Mr. Sokol had twice before mentioned resigning, but Mr. Buffett was able to persuade him to stay, he said.

Mr. Buffett said he had spoken with Mr. Sokol the previous day and “received no hint of his intention to resign.” Mr. Sokol’s assistant delivered the resignation letter late Monday. Mr. Buffett said he did not attempt to talk Mr. Sokol out of the decision.

Mr. Sokol told Mr. Buffett: “As I have mentioned to you in the past, it is my goal to utilize the time remaining in my career to invest my family’s resources in such a way as to create enduring equity value and hopefully an enterprise which will provide opportunity for my descendants and funding for my philanthropic interests. I have no more detailed plan than this because my obligations from Berkshire Hathaway have been my first and only business priority.”

The resignation, however, comes under a cloud of suspicion about the stake in Lubrizol.

Mr. Sokol purchased 2,300 shares of Lubrizol on Dec. 14, which he then sold on Dec. 21, according to Mr. Buffett. On Jan. 5, 6 and 7, Mr. Sokol bought 96,060 additional shares, Mr. Buffett’s statement said.

It was not until mid-January that Mr. Sokol “brought the idea for purchasing Lubrizol to me,” Mr. Buffett said. “Dave’s purchases were made before he had discussed Lubrizol with me and with no knowledge of how I might react to his idea.”

Mr. Buffett added, “Though the offer to purchase was entirely my decision, supported by Berkshire’s board on March 13, it would not have occurred without Dave’s early efforts.”

It is unclear whether Mr. Sokol’s resignation and the disclosures about his Lubrizol stake would jeopardize the deal. Mr. Sokol was thought to be spearheading the deal, which is scheduled to close in the third quarter of this year, pending approval by Lubrizol’s shareholders.

And some legal experts cast doubt on the possibility that he would face insider trading charges.

A former lawyer with the S.E.C., who asked not to be identified in order to preserve business relationships, said that for this case to qualify as insider trading, Mr. Sokol would have to have been in possession of material nonpublic information at the time he bought or sold the stock. He would also have had to breach a duty to his employer, Berkshire Hathaway.

In this case, Mr. Sokol made a “passing remark” to Mr. Buffett about his stake in the company in mid-January, when Berkshire was first considering the deal.

Although Mr. Sokol’s departure appears linked to the Lubrizol stock purchase, Alice Schroeder, the author of “The Snowball,” the bestselling Buffett biography, noted that Mr. Sokol’s tough management style had antagonized employees.

Ms. Schroeder posted an e-mail from Mr. Sokol to employees in which he effectively “threatened to shut down the company if people don’t stop criticizing him,” as she described it.

Tuesday, March 29, 2011

Russian Facebook billionaire pays $70million for Silicon Valley mega-mansion



A Russian billionaire has paid a staggering $70 million for a mega-mansion in California’s Silicon Valley, it was revealed today.

The housing crisis may be rumbling on elsewhere in the US, but investor Yuri Milner bought the 25,000-square foot, 11-acre estate…as a second home!
It was the biggest price tag ever paid in Santa Clara County, an area known for its high-priced luxury properties.

The hilltop home, which includes its own carwash, was built in 2009 and has five bedrooms, nine baths and a tennis court.
Mr Milner’s primary residence is in Moscow, where he lives with his wife and two daughters. But he is a frequent visitor to the high-tech enclave in northern California.

The 47-year-old Internet tycoon – a former particle physics graduate student - appears on the cover of the most recent issue of Forbes magazine and has invested heavily in Facebook, Zynga and Groupon through his investment firm DST Global.
His company is said to control about 10%, or $5 billion worth, of Facebook’s shares.
He also built up the Russian online company Mail.ru, which last year listed on the London stock exchange.

Billionaire investor Yuri Milner has reportedly purchased this massive estate in California for $70,000,000 and plans to use it as his SECOND home! Mr Milner’s primary residence is in Moscow, where he lives with his wife and two daughters. The 11-acre estate is located on Paloma Road in Los Altos, CA and boasts panoramic views of the San Francisco Bay. Yuri bought it from Fred Chan, founder of ESS Technology, who has reportedly decided to stay in Hawaii after building the monstrosity of a home. This classical mansion was inspired by 18th-century French chateaux and boasts 25,000+ square feet of living space with 5 bedrooms, 9 bathrooms, central entry court, ballroom, home theater, wine cellar, spa/gym and more. The living areas are all located on the second floor to take advantage of the dramatic Bay view. It was designed by the prestigious Hablinski + Manion Architectural & Planning Group. The estate also boasts a tennis court, carwash, swimming pool and formal gardens

Monday, March 28, 2011

EU to ban cars from cities by 2050


Cars will be banned from London and all other cities across Europe under a draconian EU masterplan to cut CO2 emissions by 60 per cent over the next 40 years.
The European Commission on Monday unveiled a "single European transport area" aimed at enforcing "a profound shift in transport patterns for passengers" by 2050.

The plan also envisages an end to cheap holiday flights from Britain to southern Europe with a target that over 50 per cent of all journeys above 186 miles should be by rail.

Top of the EU's list to cut climate change emissions is a target of "zero" for the number of petrol and diesel-driven cars and lorries in the EU's future cities.

Siim Kallas, the EU transport commission, insisted that Brussels directives and new taxation of fuel would be used to force people out of their cars and onto "alternative" means of transport.

"That means no more conventionally fuelled cars in our city centres," he said. "Action will follow, legislation, real action to change behaviour."

The Association of British Drivers rejected the proposal to ban cars as economically disastrous and as a "crazy" restriction on mobility.

"I suggest that he goes and finds himself a space in the local mental asylum," said Hugh Bladon, a spokesman for the BDA.

"If he wants to bring everywhere to a grinding halt and to plunge us into a new dark age, he is on the right track. We have to keep things moving. The man is off his rocker."

Mr Kallas has denied that the EU plan to cut car use by half over the next 20 years, before a total ban in 2050, will limit personal mobility or reduce Europe's economic competitiveness.

"Curbing mobility is not an option, neither is business as usual. We can break the transport system's dependence on oil without sacrificing its efficiency and compromising mobility. It can be win-win," he claimed.

Christopher Monckton, Ukip's transport spokesman said: "The EU must be living in an alternate reality, where they can spend trillions and ban people from their cars.

"This sort of greenwashing grandstanding adds nothing and merely highlights their grandiose ambitions."

Tuesday, March 22, 2011

The Scariest Earthquake Is Yet to Come


The tsunami that struck Japan was the third in a series of events that now put California at risk.

All of those broken bones in northern Japan, all of those broken lives and those broken homes prompt us to remember what in calmer times we are invariably minded to forget: the most stern and chilling of mantras, which holds, quite simply, that mankind inhabits this earth subject to geological consent—which can be withdrawn at any time.

For hundreds, maybe for thousands of people, this consent was withdrawn with shocking suddenness—all geological events are sudden, and all are unexpected if not necessarily entirely unanticipated—at 2:46 on this past clear, cool spring Friday afternoon. One moment all were going about their quotidian business—in offices, on trains, in rice fields, in stores, in schools, in warehouses, in shrines—and then the ground began to shake. At first, the shock was merely a much stronger and longer version of the temblors to which most Japanese are well accustomed. There came a stunned silence, as there always does. But then, the difference: a few minutes later a low rumble from the east, and in a horrifying replay of the Indian Ocean tragedy of just some six years before, the imagery of which is still hauntingly in all the world’s mind, the coastal waters off the northern Honshu vanished, sucked mysteriously out to sea.

The rumbling continued, people then began to spy a ragged white line on the horizon, and, with unimaginable ferocity, the line became visible as a wall of waves sweeping back inshore at immense speed and at great height. Just seconds later and these Pacific Ocean waters hit the Japanese seawalls, surmounted them with careless ease, and began to claw across the land beyond in what would become a dispassionate and detached orgy of utter destruction.

We all now know, and have for 50 years, that geography is the ultimate reason behind the disaster. Japan is at the junction of a web of tectonic-plate boundaries that make it more peculiarly vulnerable to ground-shaking episodes than almost anywhere else—and it is a measure of Japanese engineering ingenuity, of social cohesion, of the ready acceptance of authority and the imposition of necessary discipline that allows so many to survive these all-too-frequent displays of tectonic power.

But geography is not the only factor in this particular and acutely dreadful event. Topography played an especially tragic role in the story, too—for it is an axiom known to all those who dwell by high-tsunami-risk coastlines that when the sea sucks back, you run: you run inland and, if at all possible, you run uphill. But in this corner of northeast Japan, with its wide plains of rice meadows and ideal factory sites and conveniently flat airport locations, there may well be a great deal of inland—but there is almost no uphill.

Such mountains as exist are far away, blue and distant in the west. All here is coastal plain. And so the reality is this: if a monstrous wave is chasing you inland at the speed of a jetliner, and if the flat topography all around denies you any chance of sprinting to a hilltop to try to escape its wrath, then you can make no mistake—it will catch you, it will drown you, and its forces will pulverize you out of all recognition as a thing of utter insignificance, which of course, to a tsunami, all men and women and their creations necessarily must be.

Even more worrisome than geography and topography, though, is geological history. For this event cannot be viewed in isolation. There was a horrifically destructive Pacific earthquake in New Zealand on Feb. 22, and an even more violent magnitude-8.8 event in Chile almost exactly a year before. All three phenomena involved more or less the same family of circum-Pacific fault lines and plate boundaries—and though there is still no hard scientific evidence to explain why, there is little doubt now that earthquakes do tend to occur in clusters: a significant event on one side of a major tectonic plate is often—not invariably, but often enough to be noticeable—followed some weeks or months later by another on the plate’s far side. It is as though the earth becomes like a great brass bell, which when struck by an enormous hammer blow on one side sets to vibrating and ringing from all over. Now there have been catastrophic events at three corners of the Pacific Plate—one in the northwest, on Friday; one in the southwest, last month; one in the southeast, last year.

That leaves just one corner unaffected—the northeast. And the fault line in the northeast of the Pacific Plate is the San Andreas Fault, underpinning the city of San Francisco.

All of which makes the geological community very apprehensive. All know that the San Andreas Fault is due to rupture one day—it last did so in 1906, and strains have built beneath it to a barely tolerable level. To rupture again, with unimaginable consequences for the millions who live above it, some triggering event has to occur. Now three events have occurred that might all be regarded as triggering events. There are in consequence a lot of thoughtful people in the American West who are very nervous indeed—wondering, as they often must do, whether the consent that permits them to inhabit so pleasant a place might be about to be withdrawn, sooner than they have supposed.

Invest only in what you understand: Warren Buffett


US billionaire investor Warren Buffett, whose group recently entered the Indian insurance market, on Tuesday said he was looking at investments in large countries like India, but rued the existing foreign investment caps in sectors like insurance. He said the company would look at investing in businesses where there is future.

Speaking to reporters on his maiden visit to India, Buffett said he did not consider India as an emerging market any more and even the US would benefit from rise of countries like India and China.

For Indian investors seeking a word of financial wisdom from Warren Buffett, regarded as world’s most successful investor, his advice is: “Invest in what you understand...don't go outside your circle of confidence...don't just buy and sell”.

Buffett's investments have mostly been in the US, but countries like China, Japan, Israel and South Korea have also attracted him in the past.

About India, where his presence is comparatively minuscule and includes recent tie-up with Bajaj Allianz for distribution of motor insurance products, Buffett said that he was looking at investments in large countries like India.

(Also read: Buffett praises Ajit Jain; adds to Indian-origin successor rumour)


Berkshire Hathaway, the conglomerate chaired by Mr Buffett, recently forayed into the Indian non-life insurance sector as a corporate agent of Bajaj Allianz General. India currently allows only 26 per cent foreign investment in insurance business, but a proposal is underway to hike it to 49 per cent.

Mr Buffett is in India as part of his philanthropic initiatives and is also expected to look at possible investment opportunities in the country.

As part of its India entry, the American conglomerate has incorporated Berkshire India to sell and distribute general insurance products in India. Recently, insurance regulator IRDA gave approval for the on-line corporate agency set up by Berkshire in India, the second country after the US to have such an entity by Buffett. The agency, where Allianz holds 20 per cent share, will have a capital of more than Rs. 22 crore.

Berkshire Hathaway is a sprawling conglomerate that has interests in various businesses, including property and casualty insurance and reinsurance, finance, manufacturing, and retailing.

Monday, March 21, 2011

How the iPhone led to the sale of T-Mobile USA


Deutsche Telekom’s announcement over the weekend to sell its American wireless unit, T-Mobile USA, to AT&T for $39 billion ended a decade-long foray into the American market that was undermined, in part, by one big event: the advent of the iPhone.

Until Apple introduced its highly popular touchscreen device in 2007, which went on to become the world’s leading smartphone, Deutsche Telekom had been generating decent sales from its American operation, with growth in some years surpassing that achieved in Germany.

But after the iPhone went on sale, sold exclusively at first by AT&T in the United States, T-Mobile USA began to lose its most lucrative customers, those on fixed monthly plans, who defected to its larger American rivals — AT&T and Verizon Wireless, which began selling the iPhone in February.

The percentage of T-Mobile USA’s contract customers fell to 78.3 percent in 2010 from 85 percent in 2006, according to the company’s annual reports. During 2010 alone, T-Mobile USA said it lost 390,000 contract customers to rivals.

“The iPhone effect cannot be underestimated in this decision,” said Theo Kitz, an analyst at Merck Finck, a private bank in Munich. “Without being able to sell the iPhone, T-Mobile was in an unsustainable position and T-Mobile USA became a problem child.”

The sale of the American unit by Deutsche Telekom, which is based in Bonn, was welcomed by investors, and the company’s stock was up more than 12 percent in late trading Monday in Frankfurt. Under terms of the deal, Deutsche Telekom will receive $25 billion in cash from AT&T and $14 billion in stock, representing an 8 percent stake in the AT&T. If the deal clears an antitrust review, AT&T would become the top wireless carrier in the United States.

The Deutsche Telekom chief executive, René Obermann, said the sale of T-Mobile USA was the best outcome for the company, which last year began looking for a partner for the unit, ranked No.4, behind Verizon Wireless, AT&T and Sprint.

Mr. Obermann said Deutsche Telekom would use proceeds from the sale to modernize its European networks, which extend from Germany to Britain, the Netherlands, Austria, Poland, the Czech and Slovak Republics, Hungary, the Balkan peninsula and Greece.

“We found the best solution for our company, our customers and our shareholders,” Mr. Obermann said in a statement. “Our position in Europe will be strengthened.”

The sale of the unit would reduce Deutsche Telekom to a purely European operator. Its largest competitors on the Continent, Vodafone, France Télécom and Telefónica, all have extensive wireless businesses outside of Europe.

“T-Mobile USA has always been a challenging business for Deutsche Telekom, but at the same time one that has offered growth potential to offset a stagnating western European business,” said Thomas Wehmeier, an analyst at Informa in London. “Without T-Mobile USA, Deutsche Telekom becomes a pure European play.”

The American market has always been challenging for European operators. Vodafone, the British mobile operator that has a 45 percent stake in Verizon Wireless, has not received a dividend from its venture in the United States since 2005. Telefónica, the Spanish operator that is the largest in Latin America, has never made a bid for the American market, despite its growing Spanish-speaking population.

Through its stake in AT&T, which would make Deutsche Telekom the largest single shareholder in the operator, the German company will “continue to share in the fast-growing U.S. mobile business,” Mr. Obermann said.

Deutsche Telekom entered the American mobile market in May 2001, when it completed its $50.7 billion acquisition of VoiceStream, a wireless operator in Seattle whose network ran on the global system for mobile communications, or GSM, the same technology as used by Deutsche Telekom and most other European operators.

For most of the past decade, the market in the United States grew faster than Deutsche Telekom’s own home market in Germany, where three aggressive competitors — Vodafone; O2, a unit of Telefónica; and E-Plus, a unit of the Dutch operator KPN — compete for mobile customers.

In some years, the unit was Deutsche Telekom’s star performer. In 2006, revenue at T-Mobile USA rose 15.5 percent from 2005, helping offset a 5 percent decline in the German market. The business helped finance Deutsche Telekom’s extensive severance costs to streamline German payrolls and adapt to the company’s eroding domestic landline business.

But the positive effect from T-Mobile USA began to diminish as the subsidiary started losing contract customers after the iPhone’s introduction, which came at a time when the German company had to consider spending billions of euros to upgrade its American network grid to the latest standard, Long Term Evolution, or LTE.

At the end of 2010, T-Mobile USA had the highest monthly “churn” rate of departing customers, 3.2 percent, more than double the 1.3 percent rate of Verizon and AT&T, according to figures from Merrill Lynch. The German company was earning 21 percent of its revenue in the United States from data services, compared with 30 percent at Verizon.

Until recently, the German operator resisted selling bulk access to its American network to virtual mobile network operators, which limited its ability to generate additional revenue.

“Deutsche Telekom had the wrong strategy in the U.S. market,” said John Strand, an analyst in Copenhagen who tracks virtual network operators. “It acted like it was a copy of T-Mobile Germany, the market leader, but that wasn’t the case. I know of at least 30 virtual network operators which were rebuffed by T-Mobile USA. It was a mistake.”

In the end, Deutsche Telekom decided the looming costs of its network upgrades in the United States and additional purchases of broadcast spectrum were too risky given the decline in contract customers, Mr. Kitz, the Merck Finck analyst, said.

After factoring in all of the costs and profit generated by T-Mobile USA over the course of its engagement, Deutsche Telekom will be left with a profit of about €500 million, or $710 million, from its unit, Mr. Kitz estimated.

He said he expected the German operator to inject part of the money into its Greek operator, OTE, which is struggling amid the country’s economic crisis. “The Greek business is not going well,” Mr. Kitz said.

Tuesday, March 15, 2011

US-Saudi tensions intensify with mid-east turmoil


Even before Saudi Arabia sent troops into Bahrain on Monday to quell an uprising it fears might spill across its own borders, American officials were increasingly concerned that the kingdom's stability could ultimately be threatened by regional unrest, succession politics and its resistance to reform.

So far, oil-rich Saudi Arabia has successfully stifled public protests with a combination of billions of dollars in new jobs programs and an overwhelming police presence, backed by warnings last week from the foreign minister to "cut any finger that crosses into the kingdom."

Monday's action, in which more than 2,000 Saudi-led troops from gulf states crossed the narrow causeway into Bahrain, demonstrated that the Saudis were willing to back their threats with firepower.

The move created another quandary for the Obama administration, which obliquely criticized the Saudi action without explicitly condemning the kingdom, its most important Arab ally. The criticism was another sign of strains in the historically close relationship with Riyadh, as the United States pushes the country to make greater reforms to avert unrest.
Other symptoms of stress seem to be cropping up everywhere.

Saudi officials have made no secret of their deep displeasure with how President Obama handled the ouster of the Egyptian president, Hosni Mubarak, charging Washington with abandoning a longtime ally. They show little patience with American messages about embracing what Mr. Obama calls "universal values," including peaceful protests.

When Secretary of Defense Robert M. Gates and Secretary of State Hillary Rodham Clinton were forced to cancel visits to the kingdom in recent days, American officials were left wondering whether the cause was King Abdullah's frail health -- or his pique at the United States.

"They're not in a mode for listening," said one senior administration official, referring to the American exchanges with Saudi officials over the past two months about the need to get ahead of the protests that have engulfed other Arab states, including two of Saudi Arabia's neighbors, Bahrain and Yemen. In recent days, Washington has tried to focus on the areas where its strategic interests and those of Saudi Arabia intersect most crucially: counterterrorism, containing Iran and keeping oil flowing.

The Americans fear that the unrest sweeping the Middle East is coming at a bad time for the Saudis, and their concerns have increased in recent weeks, partly because of the continued tumult in Bahrain. Many of the issues driving the protests elsewhere are similar to those in Riyadh: an autocratic ruling family resistant to sharing power, surrounded by countries in the midst of upheaval. At the same time, Saudi Arabia's leadership is in question. King Abdullah, 87, is, by all accounts, quite ill, as is the crown prince.

The latest tensions between Washington and Riyadh began early in the crisis when King Abdullah told President Obama that it was vital for the United States to support Mr. Mubarak, even if he began shooting protesters. Mr. Obama ignored that counsel. "They've taken it personally," said one senior American familiar with the conversations, "because they question what we'd do if they are next."

Since then, the American message to the Saudis, the official said, is that "no one can be immune," and that the glacial pace of reforms that Saudi Arabia has been engaged in since 2003 must speed up.

But the Saudi effort to defuse serious protests appears to take a different approach: a huge police presence, which smothered relatively small demonstrations in Riyadh and the Eastern Province last Friday; an appeal to the innate religious conservatism of the country; and an effort to throw more cash at Saudi citizens, who have become accustomed to the ultimate welfare state.

This month, Prince Nayef bin Abdel Aziz, the interior minister and No. 2 in the line of succession, publicly underscored the kingdom's ban on demonstrations. The government called in top Saudi newspaper editors to dictate how to report on protests foreign and domestic. The country's senior religious clerics condemned public protests for not conforming to Islamic law. These steps built on $36 billion in pay raises, housing support, unemployment benefits and other subsidies that King Abdullah promised to keep the peace.

"All this is about social control in Saudi Arabia," said Christopher Boucek, who studies the Middle East at the Carnegie Endowment for International Peace. "People have been forecasting the fall of Saudi for a long time, and they've always been proved wrong. It's a pretty resilient place."

One of President Obama's top advisers described the moves as more in a series of "safety valves" the Saudis open when pressure builds; another called the subsidies "stimulus funds motivated by self-preservation."

Saudi officials, who declined to comment for this article to avoid fueling talk of divisions between the allies, said that the tensions had been exaggerated and that Americans who criticized the pace of reforms did not fully appreciate the challenges of working in the kingdom's ultraconservative society.

Even as Libya has occupied much of the public debate, White House officials have said they have been focused most intently on the two Arab allies whose fates are most tied to American strategic interests: Egypt and Saudi Arabia. In a briefing for reporters last Thursday, Thomas E. Donilon, the national security adviser, said that "the success of the democratic transformation under way in Egypt is absolutely critical," and described his own conversations with its interim leadership. Mrs. Clinton will be visiting Cairo this week.

But Mr. Donilon, like other administration officials, said very little about the conversations they have held with Saudi leaders. Those have been strained in part by the slow-motion transition of power: King Abdullah, a popular monarch who just returned to the country after months of medical treatment in New York and Morocco, has been described by Saudi specialists as reform-minded but constrained by more conservative family members; the country's next in line, Crown Prince Sultan, is also severely ill.

"We've focused on Nayef and a next generation, who seem to understand a lot better what's got to happen," said one American official, referring to the Saudi interior minister, whom some Saudi experts view as a conservative who would take the kingdom backward, while others say that is a misreading and that he is more aligned with members of the next generation of Saudi princes who favor reforms.

In a relationship where the United States hardly has the upper hand, so far the discussions have largely steered clear of democratization and focused on safer subjects: energy and foreign threats.

Saudi Arabia has helped stabilize world energy prices by increasing its crude-oil production to make up for the loss of Libya's oil.

In the case of Bahrain, the senior official said, the administration's goal has been to enlist the Saudis' help to open up the Bahraini political system without overthrowing the government. Instead, the arrival of the Saudi-led troops underscored the approach advocated by Riyadh: Crack down and allow no room for dissent.

At a press briefing on Monday, the White House spokesman, Jay Carney, carefully avoided direct criticism of the Saudi-led entry of gulf forces into Bahrain, telling reporters that, in the view of the White House, "this is not an invasion of the a country." But he added: "We're calling on the Saudis, the other members of the G.C.C. countries, as well as the Bahraini government, to show restraint. And we believe that political dialogue is the way to address the unrest that has occurred in the region in Bahrain and in other countries, and not to, in any way, suppress it."

Some officials say that in some ways the relationship between the United States and Saudi Arabia may grow closer, particularly on security and counterterrorism issues, where there has been increased cooperation in the months before the protests began in the Middle East.

John O. Brennan, President Obama's counterterrorism adviser, speaks regularly with Prince Muhammad bin Nayef, his Saudi counterpart and the son of the interior minister, most recently last week about the political tumult in Yemen and the threat from Al Qaeda, an administration official said.

In the past several months, the Saudis have played a pivotal role in helping to thwart several terrorist plots. Prince Nayef alerted the Obama administration last October that bombs might be on cargo flights bound for the United States. A frantic search turned up two shipments containing printer cartridges packed with explosives, sent from Yemen by a Qaeda affiliate, and addressed to synagogues in Chicago.

The American military's longstanding ties to the Saudi armed forces have also weathered the recent diplomatic tempest. More than 4,100 Saudi and American soldiers conducted a training exercise in northwestern Saudi Arabia last week.

Demonstrating to Iran that the Saudi-American alliance remains strong has emerged as a critical objective of the Obama administration. King Abdullah, who was widely quoted in the State Department cables released by WikiLeaks as warning that the United States had to "cut off the head of the snake" in Iran, has led the effort to contain Iran's ambitions to become a major regional power. In the view of White House officials, any weakness or chaos inside Saudi Arabia would be exploited by Iran.

For that reason, several current and former senior American intelligence and regional experts warned that in the months ahead, the administration must proceed delicately when confronting the Saudis about social and political reforms.

"Over the years, the US-Saudi relationship has been fraught with periods of tension over the strategic partnership," said Ellen Laipson, president of the Stimson Center, a public policy organization. "Post-September 11 was one period, and the departure of Mubarak may be another, when they question whether we are fair-weather friends."

Have an idea? Get an investor and obtain a US visa


Even as the rules for getting an H-1B visa have been made more tough, three powerful American Senators on Monday introduced a legislation in the Congress which if passed would instantly provide a two-year U.S. visa to any entrepreneur that can obtain an investor to fund his idea.

The StartUp Visa Act of 2011 will allow an immigrant entrepreneur to receive a two-year visa if he or she can show that a qualified U.S. investor is willing to invest in the immigrant's startup venture.

The Act was introduced in the Senate by Senators John Kerry, Richard Lugar and Mark Udall.

Congresswoman Carolyn Maloney plans to introduce companion legislation in the US House of Representatives.

"Every job-creating American business started as an idea in the mind of an entrepreneur."

Tuesday, March 8, 2011

Microsoft to pay Nokia more than $1 billion?


How much is Microsoft paying to be on the Nokia platform?

It was earlier reported that it would be millions of dollars. Now, Bloomberg reports that Microsoft will pay Nokia more than $1 billion to promote and develop Windows based handsets.

Though Microsoft and Nokia have refused to comment, Bloomberg has said that the information comes from two people with knowledge of the arrangement. This agreement will run for five years, Bloomberg quotes its sources a saying. Nokia, on the other hand, will pay Microsoft a fee for each Windows OS used in its devices.

If this latest information is correct, it will benefit both sides financially as well as against competition from the iPhone and Android smartphones, which are currently leading the market.

Nokia, the once market leader, is at number 5 after Android, Apple iOS, Blackberry and Windows Phones. Nokia shares have fallen 26 per cent since the announcement of the deal on February 11, 2011. However, Nokia is still one of the largest global manufacturers and distributors of cell phones in the world. If Symbian could not help Nokia smartphones take off, perhaps the Windows OS will.

Monday, March 7, 2011

Don't Bet Against the United States

Poor U.S. of A., forever in decline. the arrival of public theaters in Boston circa 1790 caused Samuel Adams to despair for the cause of liberty in the face of such debauchery. "Alas!" he wrote. "Will men never be free!" Charles Lindbergh fretted, "It seems improbable that we could win a war in Europe." Long before baseball, hand-wringing was the national pastime. We've never been virtuous enough, civilized enough, smart enough or resolute enough.

I was born into a country reeling from Sputnik, which revealed to the whole world that Americans are as dumb as rocks. John F. Kennedy had just been elected President, in part by bemoaning the "missile gap" between the mighty Soviet arsenal and our paltry few bottle rockets. "The United States no longer carries the same image of a vital society on the move with its brightest days ahead," Kennedy said in his final debate with Richard M. Nixon. That's the same Nixon who declared eight years later, "We are worse off in every area of the world tonight than we were when President Eisenhower left office." Hard to believe we could sink further, but we did, as the nightmare of Vietnam segued into the nightmare of Watergate, while the Japanese exposed the insufficiency of American enterprise. As I stumbled off to college, President Jimmy Carter was warning us about "a crisis of confidence ... that strikes at the very heart and soul and spirit of our national will." Thanks to our horrible schools, we were — according to the title of a major 1983 report — "A Nation at Risk." Then our family values went down the toilet.
(See the Recession of 1958.)

You'd think America would be as washed up by now as the Captain and Tennille. So how come we're so much stronger than we were 50 years ago? Somehow, in the 235 years since we got started, Americans have weathered Boston theaters and Soviet science prodigies, violent lyrics and sex out of wedlock. We've survived a Civil War, two world wars and a Great Depression, not to mention immigrant hordes, alcohol, Freemasons and the "vast wasteland" of network television. We've dodged the population bomb, the coming ice age, acid rain and the domino effect. America is to nations what Roberto Clemente was to right fielders. The Pirates legend fretted endlessly about how poorly he felt and how sick he was — while vigorously spraying hits and vacuuming fly balls.

So don't reach for the defibrillator paddles or the rosary beads quite yet.

Overblown Symptoms
These days, the doctors diagnosing American decline tend to focus on two types of disease. Some worry about deteriorating "social capital" — inadequate education, a demoralized workforce, dysfunctional politics. Others focus on the physical fitness of our economic edifice: the scale of investment, the level of debt, the fractures in the infrastructure. If you collect enough symptoms, you can make a strong-sounding case that the country is indeed quite sick. But fallen trees don't prove the forest is dying.
(Comment on this story.)

And some of the most cited symptoms are overblown. Take the much discussed problem of income inequality. A very small number of superwealthy people are pocketing nearly all the growth in our national income. That sounds dire for a nation founded on the ideal of equality. It isn't, though, for a couple of reasons. First, a significant part of the rise in inequality is an illusion. Changes to the tax code since the 1980s have created strong incentives for owners of private businesses and certain partnerships to report their business earnings as personal income. This didn't necessarily change the amount of money in their pockets; it just meant that money is recorded in a different column of Uncle Sam's ledger. This expansion of so-called Subchapter S corporations and LLCs inflated the tax returns of the very rich — primarily the top 0.5% of all taxpayers. If the tax laws are changed again, money will shift again. Count on that.
Change could be good: a simpler tax code would be a boon for most Americans. Ideally, we could accomplish this without discouraging the private charitable giving that totals more than $300 billion per year in the U.S. But it probably wouldn't make much difference in the incomes of the less than superrich.

Why? Because the main force flattening income growth for most Americans is much bigger than the tax code. Globalization is one of those huge transformations you read about in history textbooks — and not in paragraphs but whole chapters, even whole volumes. Globalization is an epoch, as surely as the Bronze Age or the industrial age, only it is happening with unprecedented speed and scope.
(Watch TIME's video "Bill Clinton on Globalization.")

Contrary to what you may hear, the U.S. is doing pretty well at riding that whirlwind. Wages may have stagnated, but the U.S. hasn't. America's inventors, innovators, entrepreneurs and workers have answered the sudden glut of cheap labor around the world by leading an astonishing revolution in productivity. One American produces as much, per capita, as six Chinese. We outproduce Japanese and Germans by about 30% and citizens of the European Union by nearly 45%. So despite slow wage growth, our standard of living has continued to improve. The $160 that bought a portable black-and-white Admiral television set in 1971, with access to a handful of channels, will now buy (in 2011 dollars) a powerful laptop computer, with access to a world of information — more than any human could digest in a lifetime.

So yes, the world is changing, and yes, the U.S. — like all the world's countries — has a lot of hard work to do to keep up. It is deeply misleading, though, to cherry-pick dismal statistics from here and there to create an overall image of decline. To solve a problem, we must first understand it. American schools, for example, aren't lagging across the board. Where they struggle is in educating poor immigrant and minority students. Focus on that, and watch the gap close between our test scores and those of less diverse nations.
(See America's devastated retail landscape.)

Even worse than flawed statistics, though, is the tendency to interpret the gains of other countries as losses for America. It's true that the U.S. used to generate more patents than the rest of the world combined. Now we produce slightly fewer than half. It is a safe bet that we will generate a smaller and smaller proportion in the future. We're not inventing less; instead, others are being empowered to imagine and invent. Will we always have more airports than the next dozen nations combined? Will we always have three times as many miles of railroad track as China? Probably not, because the rest of the world wants to be as connected as we are.

The fact that students in Finland score well on tests is no threat to us — even as we keep trying to improve our own performance. Attempts by China and Saudi Arabia to create world-class universities don't endanger our institutions — and nothing prevents us from making better use of those resources for more and more of our people.
(Comment on this story.)

As Americans, we're in favor of creativity wherever it can be found. We're apostles of prosperity and defenders of the free exchange of ideas. When more people in more countries are free to rise, to invent, to communicate, to dissent, it's not the doom of U.S. leadership. It is the triumph of the American way. Generations have worked hard and sacrificed much for the country to reach this point, and with further hard work and sacrifice (goaded by the spur of our relentless self-doubt) the U.S. will do just fine in the world it has shaped.

Sunday, March 6, 2011

China tracks foreign journalists


Western journalists have lately been tolerated in China, if grudgingly, but the spread of revolution in the Middle East has prompted the authorities here to adopt a more familiar tack: suddenly, foreign reporters are being tracked and detained in the same manner -- though hardly as roughly -- as political dissidents.

On Sunday, about a dozen European and Japanese journalists in Shanghai were herded into an underground bunkerlike room and kept for two hours after they sought to monitor the response to calls on an anonymous Internet site for Chinese citizens to conduct a "strolling" protest against the government outside the Peace Cinema, near People's Square in Shanghai.

In Beijing, several plainclothes officers planted themselves on Saturday night outside the home of an American correspondent who was severely beaten by security officers the previous week as he sought to cover a similar Internet-inspired protest there. Seven officers in two separate cars then trailed the reporter to a basketball game on Sunday, recording his trip on video the entire time, correspondents said.

At least a dozen other journalists and photographers were visited in their homes over the weekend and repeatedly warned not to cause trouble -- or, as one officer put it, try to "topple the party."
The intimidation of foreign journalists is a marked shift for the Chinese authorities and a sign of the government's resolve to head off any antigovernment revolts like those that have swept the Middle East and North Africa during the past two months.

Anonymous Chinese-language posts on the Internet have called for people to show their discontent with the central government by taking a "stroll" at 2 p.m. every Sunday outside well-known locations in Beijing, Shanghai and several dozen other cities. Efficient mobilization of the nation's extensive security apparatus has helped ensure that no protests have materialized.

Indeed, the news has been limited to the government's crackdown on the foreign news media. The Olympic Games in August 2008 initiated a relaxation of reporting rules for the foreign media, culminating in a decree signed by Prime Minister Wen Jiabao that essentially removed the need for journalists to seek government permission for interviews.

But the past 10 days have reversed that momentum. A spokeswoman for the Foreign Ministry warned journalists on Thursday that they should not rely on the 2008 decree "as a shield."

David Bandurski, an analyst at the China Media Project of the University of Hong Kong, said: "They have gone into control mode once again. What we are seeing now, in the short term, is China is closing in on itself, because it doesn't have another answer or response."

He added: "Intimidation of journalists is the classic response. It is not necessarily entirely new, but it is something we have not seen for a long time."

Over the weekend, the police called or visited more than a dozen foreign journalists at their homes, including reporters and photographers for The New York Times, The Associated Press, CNN, NBC and Bloomberg News. One person said he received a knock on his door as early as 5:30 a.m. on Sunday. Another was not home when a police officer called, but a child who answered the phone was reportedly interrogated.

A third said an officer told him that the Public Security Ministry's Guobao -- or domestic security arm -- was in charge of the operation to keep foreign journalists in line. That department also keeps track of dissidents.

"In 10 years living in these parts, this kind of unannounced call was a first," said the reporter, who refused to be identified for fear of retaliation.

Journalists were told to abide by the rules and warned not to report on protests. Several journalists said over Twitter that one colleague had been ordered by the police to sign a document explicitly saying the journalist would never again report on the so-called Jasmine Revolution in China; the journalist refused.

At least four journalists have reported what appeared to be the hacking of their Gmail accounts, according to the Foreign Correspondents' Club of China.

The intensified scrutiny came as China released budget figures showing that for the first time annual spending on law enforcement and public security would outstrip the military budget. The government said it planned to spend $95 billion on the police, state security, armed civil militia and jails, 13.8 percent more than last year. Military spending rose 12.7 percent to $91.5 billion.

The anxiety of the Chinese government was on full display on Sunday afternoon at Wangfujing, Beijing's upscale pedestrian shopping street, and another shopping district called Xidan, both near the Forbidden City. Anonymous organizers had urged protesters to gather outside the McDonald's on Wangfujing for a public revolt modeled after the one that toppled Tunisia's government in January. China countered it with the kind of smothering security blanket that in many countries is reserved for visits by heads of state.

Security officers and volunteers were present every few feet on both sides of Wangfujing and on side streets. There were police officers in black uniforms; civilian volunteers wearing red armbands; men dressed as street sweepers and officers disguised in plain jackets with telltale black wires running from inside their jackets to earpieces. Many of these men had crew cuts and carried videocameras or small shoulder bags; those with videocameras would occasionally take shots of the crowds.

Security vehicles of every stripe -- squad cars, vans, unmarked buses with few windows -- were parked on all corners.

Throngs of shoppers and tourists strolled the street, which is lined with luxury stores and includes a food alleyway with live scorpions squirming on a stick. The police seemed to be resorting to racial profiling to weed out foreign journalists. While Asians appeared to encounter little or no harassment, officers flanked by burly Chinese men pulled aside white foreigners to check their passports.

Uniformed police officers stood in a line across the north entrance of Wangfujing, eyeing everyone who entered. In midafternoon, large street-cleaning vehicles rolled up and down, spraying water to disperse pedestrians.

Fake construction-site walls that had been erected last week outside the front entrance of McDonald's blocked the plaza there.

Customers had to enter through the side, where plainclothes security officers loitered on the steps.

No one gathered outside.

Wall Street: Are stocks nearing a bubble?


Federal Reserve Chairman Ben Bernanke fielded the usual questions about inflation, tax cuts and government debt during a trip to Congress last week. Then a new question popped up: Is the Fed creating another bubble in stock prices?

Bernanke told the Senate Banking Committee he saw "little evidence" that was happening. But he cautioned: "Of course, nobody can know for sure."

That's the problem with bubbles. You only know you're in one when it pops.

This week is the second anniversary of the bull market that followed the financial meltdown. The Standard & Poor's 500-stock index is in its fastest climb since 1955, doubling since the market bottomed on March 9, 2009. In January and February alone, it's up 5.5 percent, the best start to a year since 1998.

Stock bubbles are famously hard to define. In 1999, for instance, investors thought it was perfectly rational to pay 62 times a company's earnings per share for a technology stock because it seemed dot-com companies couldn't lose. They only realized their error when many of those companies turned out to be nothing more than slick marketing ploys.

After two bubbles in the past 10 years — tech stocks and real estate — investors are suspicious of consistent gains that seem too good to be true. Some worry that the Fed's dramatic measures to pump up the economy mean the market's gains are an illusion. But a range of measurements suggest the market isn't in the midst of a bubble now. Instead, the stock market may simply be back to normal.

"The last two years were the great giveaway," says Stephen Lieber, the chief investment officer responsible for $6 billion in assets at Alpine Mutual Funds. Stocks had fallen so low during the panic that anyone who bought stocks on March 9, 2009, received a once-in-a-lifetime deal, he says. Caterpillar Inc., for instance, closed below $24 that day. It's now above $100.

While stock prices are much higher than they were two years ago, Bob Doll, market strategist for asset-management giant BlackRock, says investors aren't irrationally optimistic.

"Bubbles occur when there are high valuations, evidence of lots of borrowing to lever up to buy something," he says. "When I look around the landscape I have a hard time finding anything that looks like that."

One sign of a bubble would be if stocks rose far beyond what's normal by historical standards, says Bill Stone, chief investment strategist at PNC Asset Management Group. By that measure, it's not happening yet. According to Stone's research, since 1928, the average bull market runs almost five years and gains 164 percent. By comparison, this bull market has barely hit middle age.

The fundamentals of the stock market don't suggest a bubble, either. The S&P 500 index now trades at 17.4 times the earnings of its stocks over the past year. In March 1999, during the tech bubble, the multiple was 30.6.

Corporations are expected to make record profits this year and have enough cash — $2 trillion — to pay bigger dividends and start buying back shares of stock, both of which make stocks more valuable.

"Corporate balance sheets haven't been in better shape over the last 200 years, period," says Joe Davis, the chief economist at fund giant Vanguard.

And there's no ignoring the economic recovery. The economy was shrinking at almost a 5 percent annual rate when stocks bottomed in 2009. Now it's growing at almost a 3 percent pace. Businesses added 222,000 jobs in February, the most since April 2010, and unemployment has fallen almost a full percentage point in three months.

"The economy is absolutely justifying what is happening in the stock market," says Liz Ann Sonders, an investment strategist at Charles Schwab.

Some investors say there isn't a bubble yet but worry that the market is in the first stages of inflating one. Rob Arnott, the founder of investment firm Research Affliates, thinks the stock market is "dangerously" overpriced. He points to Apple, which has a $321 billion market value, making it the second-largest company in the world behind Exxon Mobil. By revenue, profits or payouts to investors, however, Apple fails to crack the top 20, Arnott says.

"They have wonderful products and a finger on the pulse of the consumer like nobody else," Arnott says. "But the second-largest on the planet must mean Apple is the second-largest source of profits. Boy, that's a stretch."

Judged by other measures of value, the companies that make up the S&P 500 look rich. Investors are paying 24 times inflation-adjusted earnings over the last decade. The historical average is 16. That ratio could climb if people push stock prices higher because they expect earnings to catch up. But Arnott believes people are already underestimating larger problems ahead. The U.S. government's $14 trillion in debt and a greater share of the work force hitting retirement are both bound to drag down economic growth. "That's quite a hurricane," he says.

Legendary investor Jeremy Grantham, chief investment strategist of GMO, has a knack for timing. In a letter to investors released in early March 2009, Grantham argued it was impossible to declare a bottom in the stock market but said its steep drop was reason enough to jump back in. He predicted that the combined efforts of the Fed and government spending would spur a stock rally "far in excess of anything justified by either long-term or short-term fundamentals."

Grantham remains a critic of the Fed's stimulus program but isn't willing to say stocks have reached bubble territory. At least not yet. If the S&P 500, at 1,321 on Friday, climbs to 1,500 by October, then watch out. At that point, he says, "it will be a market looking for an excuse to go. On the first piece of really bad news, it will make a determined effort to tank."

Saturday, March 5, 2011

China to put man on the moon by 2030


China plans to make a manned moon landing by 2030, but the purpose of exploration of the moon should be seen as "peaceful" rather than a threat, a top scientist has said.

Ye Peijian, chief scientist of deep space exploration at the China Academy of Space Technology, said China's space technology still lags far behind the US and Russia, according to China Daily.

China's three-phase moon exploration plan began in October 2010 with the launch of the Chang'e-2. The second phase will see the Chang'e-3 land on the moon in 2013. Then, in 2017, a sample of rock from the moon will be sent to Earth.

China will launch a space module - the 8.5-tonne Tiangong-1 (or Heavenly Palace-1) - in 2011, after which two manned spacecraft would dock with the module in 2012, said a spokesman for the China Manned Space Engineering Office
The Shenzhou IX and Shenzhou X spacecraft will blast off in 2012 for manned docking with Tiangong-1.

Training of astronauts for the manned missions has begun. China has also recruited its first two women astronauts for training.

The space station, which would have a lifespan of around 10 years, will be cared for by two or three on-board astronauts, and would be open to scientists from foreign countries, officials said.

Tuesday, March 1, 2011

With Russia's $650 billion rearmament plan, the bear sharpens its teeth


The graying bear is getting a make-over. Russia's military is launching its biggest rearmament effort since Soviet times, including a $650 billion program to procure 1,000 new helicopters, 600 combat planes, 100 warships, and 8 nuclear-powered ballistic missile submarines.

Analysts say Russia, while already the world's fifth-largest military spender, needs strong conventional forces to reduce its overreliance on its aging Soviet-era nuclear missile deterrent. Valentin Rudenko, director of the independent Interfax-Military News Agency, says it could create "a whole new ballgame."

"For about two decades we've had no real modernization, at least not like what's being proposed now," he says. "Russia will finally have a modern, top-level armed forces that are capable of protecting the country."

IN PICTURES: World's Top 10 Military Spenders

Deputy Defense Minister Vladimir Popovkin last week announced the unprecedented new outlays, which will see a massive re-equipping of Russia's strategic nuclear deterrent as well as its conventional forces. The Defense Ministry today said the "modernization drive" will begin this year with the deployment of new generations of air defense and antimissile weapons by Russian ground forces.

The impressive shopping spree comes on the heels of a painful military reform that severely downsized Russia's conscript Army, eliminating 9 out of 10 Soviet-era units and cutting 200,000 officers. The goal now, experts say, is to equip Russia's new lean-and-mean, largely professional armed forces to face 21st-century threats. These are mainly considered to be regional conflicts such as the brief 2008 Russo-Georgian war, which highlighted military shortcomings.

Skepticism over spending

Much of the new spending will go toward revamping Russia's naval forces, which are slated to receive new submarines, 35 naval corvettes, 15 frigates, and 4 Mistral-type helicopter-transporting amphibious assault ships. Two of the $750 million Mistrals will be purchased from France, and two are to be constructed in Russian shipyards.

Some experts are deeply skeptical of the expenditures – especially the expensive purchase of Mistral helicopter carriers, which are designed to project power around the globe rather than fight the defensive and local wars that Russian military doctrine declares as the country's main priority.

"It's hard to see what our Navy needs these Mistral money pits for," says Viktor Baranets, a former defense ministry spokesman who's now military correspondent for the Moscow daily Komsomolskaya Pravda. He says they may be prestigious, "but they require a huge amount of protection. At any time, half the Russian Navy may be employed just escorting these ships around the world."

The new submarines will be designed to deploy a brand-new long-range nuclear missile, the Bulava, which has failed half of its flight tests so far. "Defense ministers can make promises, but no designer or engineer can promise that the Bulava will be operational in time," says Mr. Baranets.

Uncertainty over new stealth fighter

Experts point out that most of the new weaponry to be procured is actually based on old, Soviet-era designs, including the Mi-28 helicopter gunship, the Mi-26 transport helicopter, and the Sukhoi Su-35 multirole fighter plane.

"These are all designs from the late Soviet period, and not really new at all," says Alexander Golts, military expert with the online newsmagazine Yezhednevny Zhurnal. "The lack of fresh designs shows the underlying weakness of our military-industrial complex."

The only truly new weapons being rolled out, says Mr. Golts, are the trouble-plagued Bulava missile and the much-hyped "fifth-generation" fighter plane that Russia is reportedly developing with India.

"We don't know enough about this Russian fifth-generation fighter to tell whether it is the real thing" – a futuristic stealth fighter comparable to the US Air Force's F-22 and F-35 warplanes – "or if it's just a jumped-up version of something old," says Golts.

Critics say that despite the huge sums of money slated to be injected into the rearmament program, it is far short of the amounts needed to revive Russia's moribund military-industrial complex, which has lost the vast network of subcontractors that existed in Soviet times.

"This is not the first time the Kremlin has talked about military modernization," says Golts. "But all previous programs have failed."