Gazprom to control Serbia’s oil

Serbia is being offered a secure gas supply in return for its oil monopoly

Russia and Serbia have signed a controversial energy deal that will hand Russian gas giant Gazprom control of NIS, Serbia’s oil monopoly.

Under the deal, Gazprom is to build a gas pipeline through Serbia and an underground gas storage facility there.

Russia’s President Dmitry Medvedev and his Serbian counterpart Boris Tadic signed the agreement in Moscow.

The plan is for Serbia to host part of a new pipeline called South Stream, to deliver Russian gas to southern Europe.

Gazprom is taking a 51% stake in NIS for 400m euros (£380m; $560m), officials say.

Diplomatic tensions

Both countries signed an energy co-operation agreement in January, but the details have only just been finalised. Belgrade had delayed signing because a small party in Serbia’s ruling coalition had argued that the terms on offer to Gazprom were too generous.

Critics say Russia’s pledges to build South Stream by 2015 are not firm enough, given the current economic downturn.

South Stream is designed to take Russian gas under the Black Sea to Bulgaria and then to Serbia for transit towards the lucrative markets of southern Europe.

Washington and the European Union are backing a rival pipeline project called Nabucco, to bring gas from Central Asia, which would bypass Russia.

Correspondents say the planned pipeline could undermine the European efforts, which aim to reduce European dependency on Russian gas.

Serbia’s energy diplomacy is complicated by the fact that Nabucco has EU backing – yet Serbia wants to join the EU.

Political tensions over Kosovo are also a complicating factor, with the EU supporting Kosovo’s independence, while Belgrade and Moscow insist the territory remains part of Serbia.

Hijacked oil tanker nears Somalia

The Sirius Star’s cargo has an estimated value of $100m

A giant Saudi oil tanker seized by pirates in the Indian Ocean is nearing the coast of Somalia, the US Navy says.

The Sirius Star is the biggest tanker ever to be hijacked, with a cargo of 2m barrels – a quarter of Saudi Arabia’s daily output – worth more than $100m.

The vessel was captured in what the navy called an “unprecedented” attack 450 nautical miles (830km) off the Kenyan coast on Saturday.

Its international crew of 25, including two Britons, is said to be safe.

The ship’s operator, Vela International, said a response team had been mobilized to work towards ensuring the safe release of vessel and crew.

The hijacking was highly unusual both in terms of the size of the ship and the fact it was attacked so far from the African coast.

The seizure points to the inability of a multi-national naval task force sent to the region earlier this year to stop Somali piracy, he says.

The US Fifth Fleet said the supertanker was “nearing an anchorage point” at Eyl, a port often used by pirates based in Somalia’s Puntland region.

Admiral Mike Mullen, chairman of the US Joint Chiefs of Staff, said the pirates involved were well trained.

“Once they get to a point where they can board, it becomes very difficult to get them off, because, clearly, now they hold hostages,” he told a Pentagon briefing in Washington.

Oil price rises

Hijackings off the coast of East Africa and the Gulf of Aden – an area of more than 1m square miles – make up one-third of all global piracy incidents this year, according the International Maritime Bureau.

THE SIRIUS STAR Length of a US aircraft carrier Can carry 2m barrels of oil Biggest vessel to be hijacked

They are usually resolved peacefully through negotiations for ransom but, given the value of the cargo in this instance, a military response has not been ruled out, our correspondent says.

At least 12 vessels – including the Ukrainian freighter MV Faina, which was seized in September – remain captive and under negotiation with around 250 crew being held hostage.

This month alone, pirates have seized a Japanese cargo ship off Somalia, a Chinese fishing boat off Kenya and a Turkish ship transporting chemicals off Yemen.

War-torn Somalia has not had an effective government since 1991.

The South Korean-built Sirius Star was seized as it headed for the US via the southern tip of Africa, prompting a rise in crude oil prices on global markets.

The route around the Cape of Good Hope is a main thoroughfare for fully-laden supertankers from the Gulf.

With a capacity of 318,000 dead weight tonnes, the ship is 330m (1,080ft) long – about the length of a US aircraft carrier.

Owned by the Saudi company Aramco, it made its maiden voyage in March.

As well as the two Britons, the ship’s crew members are said to be from Croatia, the Philippines, Poland and Saudi Arabia.

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Bush warns on hurricane recovery

US President George W Bush has warned Texas will take a long time to recover from Hurricane Ike, as a huge search and relief operation gathers pace.

Mr Bush will travel to the state on Tuesday to inspect the relief effort.

Rescuers are trying to get to thousands of people who ignored orders to flee the storm, which cut power to millions and mauled America’s oil hub.

“This is a tough storm and it’s one that is going to require time for people to recover,” Mr Bush said.

Ike has been blamed for four deaths so far, two in Texas and two in Louisiana.

What’s really frustrating is that we can’t get to them Tommie Mafrei Galveston police chief

Rescuers are using boats, lorries and helicopters to tackle roads waist-deep in water and blocked by felled trees.The storm made landfall in Galveston early on Saturday with 110mph (175km/h) winds.

It cut a 500-mile (800-km) swathe of destruction across a span of the Gulf of Mexico coast before weakening to a tropical depression on Sunday morning over Arkansas.

Ike severely hit oil and gas production in the region and wreaked at least $8bn (£4.5bn) in onshore damage.

Texas senator Kay Bailey Hutchison warned that oil refineries disabled by the hurricane could remain idled for a further eight or nine days – and that Americans should brace for possible fuel shortages.

Some coastal residents waded through chest-deep water with their belongings and children in their arms to get to safety on Saturday, but thousands of others ignored evacuation orders.

Mr Bush said the federal government would be delivering 1.5m liters of water and 1m meals daily for the displaced.

Distress calls

Police, paramedics, rescue dogs and structural engineers fanned out at daybreak on Sunday across the coastal city of Galveston, which took the brunt of the storm, hampered by floodwater’s and widespread wreckage.

Galveston police officer Tommie Mafrei said: “What’s really frustrating is that we can’t get to [the stranded]… They are naive about it, thinking it’s not going to be that bad.”

State Governor Rick Perry’s office said 940 people had been rescued by nightfall on Saturday, but that thousands had made distress calls the night before.

Hurricane Ike caused widespread destruction in Galveston, Texas

Officials said another 600 people were rescued in neighboring Louisiana, where flooding ruined tens of thousands of homes and left nearly 200,000 householders without electricity.

More than three million people had no power in Texas at the height of the storm, and the authorities said it could be weeks before supplies were fully restored.

Ike sent fuel prices higher at the pumps and, analysts say, has triggered the biggest disruption to US energy supplies in at least three years.

Production was shut down at 14 oil refineries and 28 natural gas processing plants in the storm’s path.

The hurricane also battered Houston, the fourth-largest city in the US and the nation’s oil hub. Police there had used bullhorns to order people back into their homes.

The BBC’s Rajesh Mirchandani weathered the storm in Houston and described how ferocious winds ripped the glass from many of the city’s skyscrapers.

But officials were encouraged by the fact flooding brought by the storm surge turned out to be much less serious than forecast.

Among those killed by Ike were a woman in Pinehurst, Texas, and a teenage boy in Louisiana’s Bayou Dularge, AP news agency reported.

Last week, Ike caused devastation in Cuba and Haiti, where hundreds of people have died in several tropical storms over the last month.

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Expulsions stoke US-LatAm dispute

US-Venezuelan relations are said to have hit a new low

A series of tit-for-tat expulsions has left the US without ambassadors in three Latin American countries.

Bolivia and Venezuela have expelled their US envoys, accusing Washington of trying to oust Bolivia’s government.

Meanwhile, Honduras has refused the credentials of a new US ambassador, postponing his appointment.

Washington has responded by throwing out envoys from Bolivia and Venezuela and freezing the assets of three aides to Venezuelan President Hugo Chavez.

The US regretted the actions of Venezuela and Bolivia, State Department spokesman Sean McCormack said.

“This reflects the weakness and desperation of these leaders as they face internal challenges, and an inability to communicate effectively internationally in order to build international support,” he said.

Bolivian and Venezuelan allegations – including that the US supports continuing anti-government protests in Bolivia – were false “and the leaders of those countries know it”, Mr McCormack added.

Relations between the US and Latin American opponents such as Mr Chavez had seemed to be on a holding pattern – but the situation has changed in a matter of days.

This week’s arrival in Venezuela of two Russian bomber planes taking part in a military exercise is not thought to have helped the situation.

And with more joint military exercises in the pipeline, our correspondent says it could take a while for tensions to subside.

Bolivia accusations

Freezing the assets of the three Venezuelan aides, the US Treasury accused them of “materially assisting the narcotics trafficking” of rebels in Colombia.

All three had “armed, abetted and funded the Farc, even as it terrorised and kidnapped innocents”, according to a statement from the US Treasury referring to the left-wing rebel Revolutionary Armed Forces of Colombia (Farc).

Analysts say the trio – Hugo Armando Carvajal Barrios, Henry de Jesus Rangel Silva and Ramon Rodriguez Chacin – are members of Mr Chavez’s inner circle.

Evo Morales accused the US envoy of meddling in Bolivia’s internal affairs

Mr Carvajal Barrios is a military intelligence director who has protected Farc drug shipments from seizure, claimed the US statement.

Mr Rangel Silva is another intelligence chief who had pushed for greater co-operation between Venezuela and the Farc, the US Treasury alleged.

And Mr Rodriguez Chacin, who until Monday was Venezuela’s justice minister, is Caracas’ main “weapons contact” for the Farc, the statement charged.

The flurry of diplomatic expulsions began on Thursday, when Bolivia threw out the American ambassador to La Paz, Philip Goldberg.

President Evo Morales said the US envoy had been siding with a violent opposition movement in the east of Bolivia, where groups are demanding greater autonomy and a bigger share of gas export revenues.

‘Go to hell’

US officials said the allegations were baseless, but nonetheless expelled the Bolivian ambassador to Washington in retaliation.

This prompted the Venezuelan leader to step into the fray alongside his Bolivian ally.

President Chavez gave US ambassador Patrick Duddy 72 hours to leave Caracas, telling him: “Go to hell 100 times.”

On Friday, Washington responded by giving the Venezuelan ambassador his marching orders.

Now Honduran President Manuel Zelaya has refused to accept the credentials of a new US ambassador.

“We are not breaking relations with the United States. We only are [doing this] is solidarity with Morales, who has denounced the meddling of the United States in Bolivia’s internal affairs,” Mr Zelaya said.

In a separate development, Nicaragua’s President Daniel Ortega said he supports Bolivia, but did not announce whether he would take any action against the US envoy in Managua.

A growing number of left-wing Latin American governments have backed Mr Chavez’s anti-US rhetoric.

The region has also benefited from the Venezuelan leader’s generosity with oil.

But the US is a leading trade partner and a major aid donor to Latin America, so few in the region will be happy relations have plummeted to this new low, according to our correspondent.

He says this diplomatic row is serious but will probably soon blow over, while Bolivia’s problems are only likely to get worse.

Oil rises on Opec production curb

Mr Khelil said Opec would re-assess the situation at the end of the year

Oil prices have risen to $104 a barrel in Asian trade, reversing earlier losses, after OPEC agreed to return to its late 2007 production levels.

After talks in Vienna, Opec president Chakib Khelil said the measures to curb over-production amounted to a cut of 520,000 barrels a day within 40 days.

The October US light crude future was up about $1 to $104.20 a barrel after earlier tumbling to near $102.

Prices have sunk from a record of more than $147 a barrel seen in July.

On Tuesday Brent crude had dropped beneath $100 a barrel for the first time since April, and crude prices remain close to $100, below which Goldman Sachs said earlier this week could signal a global recession.

The fall from the record prices in July has helped the US dollar, which hit an 13-month high against the euro on Tuesday.

Supply question

The price has since fallen by nearly 30% as a global economic slowdown has reduced demand for oil.

Supply has also been increased in recent months by some Opec members – principally Saudi Arabia.

Meanwhile, Indonesia has suspended its membership of Opec.

Actions [to curb output] will be taken by members as soon as they can Chakib Khelil, Algerian oil minister

“The conference regretfully accepted the wish of Indonesia to suspend its full membership in the organisation and recorded its hope the country would be in a position to rejoin the organisation in the not too distant future,” Opec said in a statement.

After the late-night talks in Vienna, the group announced it had decided to “strictly” comply to the production ceilings agreed in September last year, which amount to 28.8m barrels a day excluding Indonesia and Iraq.

It linked the falling price of oil to slowing economic growth, a stronger US dollar, easing geo-political tensions and greater supply.

“All the foregoing indicates a shift in market sentiment causing downside risks to the global oil market outlook,” a statement said.

Output curbs

The effect of the measures will be a cut of about 520,000 barrels a day, according to Algerian Oil Minister Chakib Khelil, who chaired the meeting.

“Actions [to curb output] will be taken by members as soon as they can, that means in the next 40 days,” he said.

Opec members will re-assess the situation when the meet again at the end of the year.

The move is a compromise meant to avoid new turmoil in the oil markets, but it also reflects Opec’s attempts to stop the recent falls in global prices.

Economic battle is joined in US race

Unemployment is rising in the US as the credit crunch hits home

With just two months to go before the US presidential election, the state of the economy is far and away the biggest concern for most US voters.

The credit crunch has inflicted severe damage on Wall Street, left millions at risk of losing their homes, and millions more in negative equity.

Unemployment has risen above 6% while high petrol prices and rising inflation have squeezed household budgets to the limit.

Things are unlikely to get any better soon. Most economic forecasts suggest that the economy will slow sharply in the rest of 2008. The first official figures will be published in late October – on the very eve of the election.

TOP ISSUES Economy: 39% Iraq: 14% Gas prices: 4% Source: Washington Post/ABC News telephone poll, 19-22 August 2008, sample size 1108, margin of error +/- 3%

This is the background for a battle over economic policy that has so far been dominated by two issues – energy prices and taxes.Senator McCain made headlines by calling for a temporary suspension of federal gasoline taxes over the summer. He favors a major expansion of nuclear power and further drilling for oil on the US continental shelf. His running mate Sarah Palin, meanwhile, is a strong advocate of further development of Alaskan oil and gas reserves.

Mr Obama has called Mr McCain’s proposals “the same old gimmicks” though he has recently softened his outright opposition to drilling.

His energy plan calls for a big effort to shift the US towards cleaner energy, a windfall tax on oil companies, and a $50bn government investment plan to promote “energy independence”.

Tax cuts

To boost the economy, Senator Obama and many Democrats in Congress would like another stimulus package, worth around $50bn – following on from the $168bn package already put into effect – and more aid to help people at risk of foreclosure to stay in their homes.

But the growing size of the government’s budget deficit, which is expected to more than double to $400bn next year, limits the scope for further action of this kind.

It’s the size of that deficit that has put taxes at the heart of the economic debate between the two candidates.

Mr Obama wants to repeal the “tax cuts for the rich” of the Bush administration, and use the money to give further tax breaks to the “middle class” (all taxpayers earning less than $250,000), including special tax relief for college education.

He also has ambitious plans to use the tax system to boost jobs, provide subsidies for healthcare, and help redistribute income to the working poor.

PORK- BARREL POLITICS Commerce: $9bn Defence: $9bn Military construction: $6.6bn Energy: $4.6bn Transportation: $3.2bn Foreign aid and exports: $14bn Congressional earmarks in FY 2005. Source: Congressional Research Service

Senator McCain, however, reversing his earlier position, wants to keep the Bush tax cuts, which he argues will help small businessmen and lead to more job creation, while balancing the federal budget by eliminating wasteful spending.He has attacked “earmarks”, the system of “pork-barrel” politics where individual Congressmen and Senators get extra spending projects for their districts by attaching riders to important bills.

The most infamous of these pork-barrel projects was the $400m “bridge to nowhere” – which would have linked the 7,000 people in Ketchikan , Alaska, with their airport on Gravina island, replacing a three-minute ferry ride – promoted by the now-disgraced Alaska Republican Senator Ted Stevens.

It was Sarah Palin’s role as governor of Alaska in ultimately blocking this project which first brought her to the attention of Senator McCain.

But earmarks make up only $50bn of the $2,000bn Federal budget, according to the Congressional Research Service, and two-thirds of them relate to military spending or foreign aid, which Mr McCain has pledged to preserve.

Balancing acts

The ability of both candidates to project bold economic policy initiatives has been limited by disagreement within their own camps.

Wall Street wants a fiscal conservative – but small businessmen want tax cuts

Mr Obama’s economic instincts appear to lie with the moderate wing of the Democratic party, to judge from his appointment of Jason Furman, a close associate of former US Treasury Secretary Robert Rubin as his economic advisor.These “Rubin” Democrats persuaded the last Democratic president, Bill Clinton, that balancing the budget was more important for long-term economic growth than new spending programs.

Senator Obama has emphasized “nudge” economics, where the government tries to encourage individuals to take out private pensions and healthcare, rather than big new government programs.

But he faces pressure from the Democratic base, which is expecting him to tackle the lack of healthcare coverage for one in six Americans, and from the unions, which want him to do more to protect American jobs from “unfair” foreign competition.

Expanding health coverage to all children, as he has proposed, could cost at least $100bn a year.

And his support for renegotiating trade talks to include clauses recognising workers’ rights has worried businessmen.

Senator McCain, meanwhile, also has to appease two conflicting constituencies.

Many traditional Republicans share Mr McCain’s original beliefs in small government, low taxes and a balanced budget – as, mostly, does Wall Street, the US financial centre.

However, the Republican Party in power increased spending, especially on defence, while cutting taxes, leading to growing deficits.

Mr McCain backs higher defense spending, and in recent months he has increasingly leaned to the “supply-siders”, Republicans who believe that tax cuts are more important than balancing budgets – a view many small businessmen on Main Street, struggling in the economic downturn, would endorse.

Empathy

Both parties are also divided on how far the government should go in bailing out homeowners and banks who are the victims of the credit crunch.

Many Main Street Republicans are outraged by the idea that people who undertook irresponsible home loans, when they knew they could not afford them, should be bailed out – a view Mr McCain sometimes reflects.

And many left-leaning Democrats believe that the big banks and their shareholders who irresponsibly promoted sub-prime lending should be allowed to fail, rather than being bailed out by the US Treasury – as happened with Wall Street investment bank Bear Stearns and now the government-sponsored giant mortgage lenders Fannie Mae and Freddie Mac.

The policy solutions so far put forward to ease the credit crunch have been agreed on a bipartisan basis between Congress and the Bush administration.

WHO DO YOU TRUST MORE TO HANDLE THE ECONOMY? Barack Obama: 50% John McCain: 39% Neither/None: 9% Source: Washington Post/ABC News telephone poll, 19-22 August 2008, sample size 1108, margin of error +/- 3%

But voters have consistently expressed more confidence in the Democrats’ ability to handle the economy than the Republicans’ – so it’s a puzzle why this has not translated into a decisive poll lead for Senator Obama.

This may be because the battle is really over perception – which candidate has more empathy for the economic plight of ordinary Americans.

The choice of Sarah Palin as Mr McCain’s vice-presidential candidate was partly an attempt to put an “ordinary hockey mom” at the heart of his campaign.

Senator Obama, for his part, devoted much of his speech at the Democratic convention to the difficulties faced by hard-working Americans – perhaps hoping to banish the memory of his comments in March about “bitter” small-townspeople.

“It’s not because John McCain doesn’t care – it’s because John McCain doesn’t get it,” he said.

If Americans are persuaded that one candidate both understands their problems and can fix them, that could be the key to an election victory.

So far there is still everything to play for.

Antarctic scientists seek plumber

Accommodation is comfortable with two to three to a room

The British Antarctic Survey is looking for a plumber at Bird Island research station off South Georgia.

While there will be no call-out charge, frozen pipes and maintaining heating in temperatures of -20C will certainly keep the successful applicant busy.

The £22,340 salary may be low by UK standards, but accommodation is provided and living costs are next to nothing, the Survey says.

In addition they will “enjoy stunning scenery…no junk mail or television”.

“Experience of ducted ventilation systems, conventional radiator central heating and low-pressure oil-fired boilers would be a significant advantage,” it says.

According to Athena Dinar of the British Antarctic Survey – which is also looking for an electrician – the post would suit someone with a love of adventure and ready for “an opportunity of a lifetime”.

“This role is for 18 months, so it would suit somebody single or who has a very understanding partner,” she added.

Unloading cargo

Staff at Bird Island take turns cooking and making bread, so culinary skills would also be an advantage.

Hours can be long, especially if a ship comes in, when you could be spending 12 hours unloading cargo.

However, the philosophy is “work hard, play hard”.

Pastimes can include walking, skiing, snowboarding and learning languages.

Bird Island is the smallest of five BAS research stations. It lies 500 meters off the north-west tip of South Georgia in the South Atlantic.

It is approximately 1000km south east of the Falkland Islands and is accessible only by boat or helicopter.

During the southern hemisphere’s summer months it is home to a staff of 10, including scientists researching the island’s seals, penguins and albatross.

The deadline for applications is Friday.

McCain is just part of Washington crowd, Democrats say

Sen. John McCain got one thing right Thursday when he said the Republicans had let Washington change them, Democrats said after his speech.

On Thursday, Democrats called John McCain “a Bush partisan 90 percent of the time.”

The proof was in his voting record when he supported President Bush’s policies 90 percent of the time, they said.

That meant a McCain presidency would be four more years of Bush policies, said Barack Obama campaign spokesman Bill Burton.

In his speech, McCain said that his party “was elected to change Washington” but that Republicans “let Washington change them.”

“He admonished the ‘old, do-nothing crowd’ in Washington but ignored the fact that he’s been part of that crowd for 26 years, opposing solutions on health care, energy and education, ” Burton said.

“He talked about bipartisanship but didn’t mention that he’s been a Bush partisan 90 percent of the time, that he’s run a Karl Rove campaign and that he wants to continue this president’s disastrous economic and foreign policies for another four years,” Burton said. “With John McCain, it’s more of the same.”

But with Obama, Americans can look forward to changes that will directly help them and fight special interests, Burton said.

“That’s not the change Americans need. Barack Obama has taken on the special interests and the lobbyists in Illinois and in Washington, and he’s won.,” Burton said. “As president, he’ll cut taxes for 95 percent of all working families, provide affordable health care to every American, end the tax breaks for companies that ship our jobs overseas and eliminate the oil we import from the Middle East in 10 years.”

Robert Gibbs, Obama’s senior adviser, said that after days of speeches that included nothing regarding the economic policies Americans care so much about, he was waiting to see whether McCain would finally address those issues.

“I think, like me, a lot of those people are still sitting around wondering why they didn’t hear that tonight,” Gibbs said.

Hillary Clinton campaign manager Terry McAuliffe also attacked McCain’s speech, which pitted Obama’s proposed policies against his own. McCullough said that McCain distorted Obama’s record and that many of the statements he made were “patently false.”

Gibbs said that after hearing McCain’s policies, which he outlined in his speech, he is confident McCain is the wrong man for the job. iReport.com: Your thoughts on McCain’s big night

“I’ll put Barack Obama’s judgment against John McCain’s three decades in Washington any day of the week,” Gibbs said.

Clinton, who was praised for her achievements during the Republican National Convention, said in a statement that McCain’s speech put a cap on a convention drastically different than that of the Democrats the week before.

Clinton said that although Obama and his running mate, Joe Biden, offered new ideas to solve America’s problems and bring change, the Republican ticket did not.

“After listening to all the speeches this week, I heard nothing that suggests the Republicans are ready to fix the economy for middle-class families, provide quality affordable health care for all Americans, guarantee equal pay for equal work for women, restore our nation’s leadership in a complex world or tackle the myriad of challenges our country faces,” Clinton said in the statement. “So, to slightly amend my comments from Denver: No way, no how, no McCain-Palin.”

Pakistan ‘needs help’ on economy

Asif Ali Zardari faces huge challenges if he becomes president

Pakistan needs a “substantial” injection of external funds if it is to improve its worsening economic situation, an IMF official has said.

Mohsin Khan said Pakistan had not yet requested help from the IMF, which some economists have called for, to address a growing balance of payment crisis.

A falling rupee, soaring inflation and dwindling currency reserves are among Pakistan’s mounting economic problems.

Mr Khan said ministers planned to cut borrowing and tap donors for support.

Economic distress

Stabilizing Pakistan’s faltering economy will be one of the main priorities for Asif Ali Zardari, who is widely expected to be elected president following elections this weekend.

Pakistan’s public finances have deteriorated in the past 18 months amid political instability and violence which culminated in the resignation of former President Musharraf last month.

It seems the government is not getting its act together Yang-Myung Hang, Lehman Brothers

The rupee has fallen to a record low against the dollar while currency reserves have shrunk from $16.5bn ten months ago to $9.38bn.

The soaring cost of oil imports has eaten into the country’s reserves while the spiraling rate of inflation, which has risen to 25%, has sparked public anger.

Growth in the economy, which performed strongly in the early years of the Musharraf era, is expected to fall to a six-year low this year.

Pakistan’s fragile coalition government is pursuing a range of options to bolster confidence in the economy, including seeking $1bn in loans from the World Bank and the Asian Development Bank.

It is also in talks with Saudi Arabia to defer payment on an estimated $5.9bn of oil it has purchased.

Security concerns have put off some investors

Some economists believe it is inevitable Pakistan will have to turn to the IMF for help should it find itself struggling to pay its creditors.

Such a move could prove unpopular as any IMF funding would likely require undertakings to slash government borrowing and spending.

On the other hand, such a scenario is unlikely to materialise given the level of US financial and logistical support for Pakistan, a key ally.

Seeking stability

The IMF said it was encouraged that the government was committed to measures to improve its financial position, including privatizing assets and raising funds from the international markets.

“If measures outlined are implemented and sufficient financing is secured quickly,” Mr Khan – director of the IMF’s Middle East and Central Asia Department said, “the authorities could stabilize the economy this year and start to build up reserves.”

Despite attempts by the country’s central bank to reassure foreign investors, concerns remain about the new government’s ability to tackle multiple security and economic challenges.

“It seems the government is not getting its act together, making it difficult to actively address the decline in forex reserves,” said Yang-Myung Hang, a sovereign rating analyst at Lehman Brothers.

McCain unveils ‘The Barracuda’

There were no late night text messages and perhaps not the same build up that preceded the announcement of Barack Obama’s choice for running mate.

Mrs Palin has been credited with bringing in reforms in her time in office

But because it was kept a secret almost until the end, John McCain’s choice did generate a fair amount of rumor and speculation.

Was he going to pick a traditional candidate, a safe bet – someone like the young governor of Minnesota, Tim Pawlenty, or would the veteran Arizona senator go for the wild card?

The answer came on a private jet that flew in from the Alaskan city of Anchorage on Thursday night and landed outside Dayton, Ohio, apparently carrying on board a woman, two men and two teenagers.

All the journalists who were covering the story started looking up the biography of Sarah Palin, the 44-year-old governor of Alaska.

‘Average hockey mom’

She may be seen by some as a rising star of the Republican Party, but she was relatively unknown on a national level.

As he took to the stage, in front of a packed audience, Mr McCain introduced her as “exactly who I need, exactly who this country needs to help me fight the same old Washington politics of me first and the country second”.

For observers, it showed Mr McCain felt he needed to make a bold move to help change the course of the race to the White House.

SARAH PALIN Elected Alaska’s youngest and first woman governor in 2006 Grew up in Wasilla, near Anchorage, and was voted Miss Wasilla in 1984 Studied journalism and political science at University of Idaho Is mother of five, including a son with Down’s syndrome Her husband Todd is an oil production operator Likes hunting and fishing

The two presidential hopefuls have been running head to head, with Mr Obama gaining eight percentage points in the polls in recent days.

The choice of Sarah Palin is a high risk bet that could bring high rewards, but there are no guarantees.

Mrs Palin, a mother of five, is the first woman to be on a Republican presidential ticket.

Married for 20 years to Todd Palin, her high school sweetheart, she was nicknamed “Sarah Barracuda” during her college years for her aggressive basketball playing style – the name has stuck.

On stage, dressed in a conservative black power suit, her hair raised in a high ponytail, she described herself as “an average hockey mom from Alaska”.

She drew applause when talking about her anti-corruption drive, her standing up to big oil companies and even the “good old boys club”, which drew a smile from Mr McCain.

She eats moose meat and is an inveterate hunter, a lifelong member of the National Rifle Association (NRA).

One of her sons is heading to Iraq in September. The other, born in April, is diagnosed with Down’s syndrome.

‘Exciting choice’

In many ways, her story is all American and her values will appeal to the conservative base and to blue-collar voters.

With 80% approval ratings back home, she seemed to also get the approval of the crowd she was addressing, drawing very enthusiastic cheers, as she spoke in a relaxed, accessible way.

It turns out the women of America aren’t finished yet, and we can shatter that glass ceiling once and for all Sarah Palin

Mrs Palin also ticks several required boxes – she is fiscally conservative, in favor of drilling for oil and very staunchly anti-abortion.

Most of all she is a reformer and a fresh face for the Republican ticket.

President George W Bush said she was “an exciting choice” and Mrs Palin certainly adds energy and sizzle to the McCain campaign.

She also clearly reached out to disaffected Hillary Clinton supporters, who are disappointed their candidate did not make it on to the Democratic ticket, not even as vice-president.

“I can’t begin this great effort without honoring the achievement of Geraldine Ferraro in 1984 and of course, Hillary Clinton, who showed determination in her presidential campaign,” Mrs Palin said.

“It was rightly noted in Denver this week that Hillary left 18 million cracks in the highest, hardest glass ceiling in America. But it turns out the women of America aren’t finished yet, and we can shatter that glass ceiling once and for all.”

The Democrats for McCain group sent out an e-mail saying its supporters, especially the women, were “ecstatic” about the choice of Mrs Palin.

But other Democrats said they felt insulted that Mr McCain thought he could woo women by just putting any woman on his ticket, with one sentence making the rounds: “Palin, you are no Hillary Clinton”.

Experience questioned

It all made for an exciting day in Dayton, a city of just over 150,000 that has been hard hit by job losses in the past few years.

But the whole of the US is probably now scouring the internet for more information about Governor Palin and trying to assess her credentials.

What is it exactly that a VP does every day? Sarah Palin

Many will be wondering whether she is ready to be vice-president and even lead the US, should something happen to Mr McCain if he is elected president.

As commander of the Alaska National Guard, she visited troops in Kuwait last year, but has a very thin foreign policy background.

Similarly, while she does have executive experience, the Obama campaign wryly pointed out she had been the mayor of a town with just 9,000 people.

As governor of Alaska during the past two years she has gained more experience, but even some Alaskans calling into talk shows on US network television said they doubted whether that had prepared her for the challenge of national politics.

She did herself no favors in a recent interview.

“As for that VP talk all the time, I can’t answer until someone answers me. What is it exactly that a VP does every day?” she said just a month ago on CNBC when asked about her chances of being on the ticket.

“I’m used to being very productive and working real hard in an administration. We want to make sure that this VP slot would be fruitful type of position especially for Alaskans and for the kind of things we are trying to accomplish here for the rest of the US.”

Investigation

By choosing her, Mr McCain may have undercut his best attack against Senator Obama – if he uses the inexperience card now it will be turned against him and his running mate.

While conservatives, such as radio host Rush Limbaugh and former Bush adviser Karl Rove, hailed the Palin surprise, there were also dismayed reactions from some Republicans, who felt the choice underscored Mr McCain’s weaknesses and was too risky.

Polls in the coming days, and Mrs Palin’s performance at the Republican National Convention, will help assess the impact of Mr McCain’s decision.

In the meantime, Mr McCain and his new partner have something else to worry about – Mrs Palin is facing an investigation in Alaska for alleged abuse of power involving her former brother-in-law. Her deposition is expected to be scheduled soon.

She says she has “nothing to hide” and is “cool” about the investigation.