Wall Street Journal số ra ngày 25/2/2014

Wall Street Journal số ra ngày 25/2/2014

VOL XXXII NO 18 TUESDAY, FEBRUARY 25, 2014

EU, U.S Scramble to Find Aid for Kiev

Western Officials Say Swift Action

Is Needed to Avoid Financial Crisis But Face Thicket of Rules, Hurdles

BRUSSELS—Europe andthe U.S grappled with how topull together billions of dol-lars in financing for Ukraine

to fend off its economic lapse in the aftermath ofweeks of political crisis andviolent street protests

col-Talks between Kiev, sels and Washington comeamid allegations that the gov-ernment of former PresidentViktor Yanukovych, who fledKiev to an unknown location,raided the government’s cof-fers before being removedfrom power over the week-end

Brus-“The treasury has beenplundered, the country hasbeen bankrupted,” ArseniyYatsenyuk, one of the opposi-tion leaders and a former for-eign minister, said Monday,according to Interfax newsagency

Amid Ukraine’s ingly dire financial situation,European Union negotiatorsare facing a thicket of rulesgoverning how the 28-nationbloc can lend money to prop

increas-up its neighbors The EU andthe U.S want the Interna-tional Monetary Fund in-volved to force long-delayedreforms from Kiev in ex-change for cash But IMF pro-grams can take weeks to ne-gotiate, while Ukraine may

not have that long

“We have to help themsoon—this month, nextmonth,” said Elmar Brok,chairman of the EuropeanParliament’s foreign affairscommittee, who was in Kievmeeting with Ukrainian offi-cials “Hopefully everyone isflexible to do that.”

The U.S., the U.K andsome other European officialssaid the IMF is best placed toprovide aid to Ukraine U.S

Treasury Secretary Jacob Lewbacked IMF aid for Ukraine,after speaking by phone withIMF chief Christine Lagardeand Mr Yatsenyuk, a U.S

Treasury official said

"Such support could beprovided quickly once re-quested by the new govern-ment,” U.K Foreign SecretaryWilliam Hague said

Meanwhile, Ukraine’s ing finance minister said in astatement Monday that thegovernment would seek a loanfrom the U.S and Polandwithin one to two weeks Bythe end of 2015, Ukrainehopes to raise some $35 bil-lion from the IMF and Europe

act-to revamp the economy andrepay its foreign debt But toget that aid, a yet-to-be-formed government wouldhave to carry out unpopularmeasures that were shotdown by Mr Yanukovych andother Ukrainian authorities

Those measures include lowing the currency to de-

al-Please turn to page 11

By Matthew Dalton, Andrey Ostroukh and Laurence Norman

A woman studies a wanted poster in Kiev on Monday seeking the whereabouts of Viktor Yanukovych, the ousted Ukrainian president He was believed to be in hiding in the southern Crimea province.

Zuckerberg:WhatsApp IsWorthIt

BARCELONA—Mark erberg has a message for

Zuck-doubters of Facebook Inc.’s

acquisition of

mobile-messag-ing service WhatsApp Inc.:

$19 billion was cheap

The book chief exec-utive said Mon-day that the

Face-f ive-year-oldmobile application was worthmore than Facebook agreed topay for it last week, becausethe app is a rare platform that

has the potential to reachover a billion users

In a question-and-answersession here at the yearly Mo-bile World Congress, Mr

Zuckerberg said that othermessaging apps are alreadymonetizing their users at $2

to $3 a head MeanwhileWhatsApp, with little revenue

so far, is on a trajectory togrow quickly from 450 millionusers to over a billion, Mr

Zuckerberg said

“The reality is that thereare very few services thatreach a billion people in theworld They’re all incredibly

valuable, much more valuablethan that,” Mr Zuckerbergsaid, referring to the pricetag, which included $16 billion

in cash and stock and $3 lion in restricted stock units

bil-What’s more, WhatsApp issoon to offer voice calling toits users, the startup’s co-founder and chief executivesaid at a separate event inBarcelona on Monday

Jan Koum said during aspeech at Mobile World Con-gress that WhatsApp wouldfirst release a version of thevoice service for Apple Inc.’siPhone and Google Inc.’s An-

droid platforms, followed byservices for Microsoft Corp.’sWindows Phone, as well assome phones by BlackBerryLtd and Nokia Corp

He also said the WhatsAppvoice product would “focus onsimplicity” as it has with itstext-based messaging service.With its move into voicecalls, WhatsApp will nowcompete more directly withMicrosoft’s Skype service,which began as a platform for

Please turn to page 18

Business & Finance 15

Turkish Finance Minister Mehmet Simsek, in

an article for The Wall Street Journal, says Turkey will rise above fear

Opinion 14

FugitiveLeader Faces Charges

Of ‘MassMurder’

KIEV—Ukraine’s actinggovernment on Monday is-sued an arrest warrant forousted President Viktor Yanu-kovych and said it was open-ing a criminal case into the

“mass murder” of civiliansstemming from violentclashes in the capital lastweek that left dozens dead

The Interior Ministry’sacting head, Arsen Avakov,wrote on his Facebook pagethat Mr Yanukovych is be-lieved to be in Crimea, asouthern region dominated byethnic Russians that serves ashome to Russia’s Black Seanaval fleet A ministry officialwho declined to be namedverified the post

“As of this morning, acriminal case has beenopened based on the massmurder of civilians Yanuk-ovych and some other offi-cials have been put on thewanted persons list,” Mr Ava-kov wrote

He said Mr Yanukovych isbelieved to have left his na-tive Donetsk late Saturdayand arrived in Crimea on Sun-

Please turn to page 10

By Lukas I Alpert, Andrey Ostroukh, Alan Cullison and James Marson

MOBILE WORLD CONGRESS

HEARD ON THE STREET

For China,

A Storm Brews in

A TeacupChina’s secretive currency

managers certainly know how

to conjure up a storm

The usually predictableChinese yuan took a dive overthe past week, its first sus-tained weakness against thedollar since 2012 The Peo-ple’s Bank of China has guidedthe yuan 0.5% weaker by mov-ing its daily target rate lower

That is despite pressure fromtraders, who work within thecurrency’s narrow trading

band, to let it strengthen

It is a fast and big movefor the tightly controlled cur-rency The freely traded HongKong flavor of the yuan, a lev-eraged reflection of its on-shore cousin, has fallen a

more dramatic 1.3%

The most obvious tion is that China wants toflush speculators out of atrade that seemed to go inone direction: toward yuanstrength The yuan’s low vola-tility and steady 3% apprecia-tion against the dollar lastyear made it like catnip forcarry-trade investors burned

explana-by the Indian rupee and ish lira

Turk-Beijing has accepted along-term strengthening of itscurrency, as evidenced by theyuan’s 20% rise in trade-weighted terms since 2010,

according to UBS economist

Wang Tao What it doesn’tlike is speculative cash thatpiggybacks on that apprecia-tion Such inflows put pres-sure on the government to ei-ther allow the currency torise more than it desires,harming the export sector, orabsorb the inflows by accu-mulating currency reserves

Reserves grew last year by

$510 billion to $3.8 trillion

It is likely a chunk of thoseinflows didn’t come throughwholly legitimate means Two

of the biggest inflow tors—export earnings and for-eign direct investment—have

genera-in the past been manipulated

by companies that work onboth sides of the border tosneak in cash to take advan-tage of higher interest ratesand other investment oppor-

tunities

A risk is that if investorssense Beijing wants the ap-preciation trend to take a pro-longed breather to boost theslowing economy, capitalmight flow back out It ishighly unlikely that China’sreserves-rich, risk-averse cur-rency managers will let thecurrency drop substantially

But by guiding the currencylower in the short term, Bei-jing hopes to prevent an un-winding of the yuan trade

from causing real damage

—Alex Frangos

HSBC Is Running in Place

HSBC is suffering growing

pains Despite a 9% rise in

both the bank’s pretax profit

and dividend for 2013, its

shares fell 2.8% Monday as

results came in below

expec-tations With worries about

emerging markets clouding

the outlook for a bank that

has hitched itself to the mast

of growing global trade,

HSBC has a bit to do to renew

investor excitement

Sure, the fall in its shares

looks a little overdone

Ana-lysts may have failed to

antic-ipate the impact of the U.K.’s

bank levy, a $903 million

charge that HSBC takes in the

fourth quarter And HSBC has

managed steady performance

even while it has been

shrink-ing Since 2011 the bank has

exited from 63 businesses,

ac-counting for $95 billion of its

risk-weighted assets Its

oper-ating income has fallen by

only 2.3% in that time, helped

by target-beating annual cost

savings worth $4.9 billion

Moreover, HSBC’s balance

sheet is in decent shape, with

core Tier 1 equity up to 10.9%

of its risk-weighted assets

The rising dividend could

eventually be accompanied by

share buybacks HSBC will

seek shareholder approval for

that this spring

Still, the problem for

HSBC is that since 2011 it has

effectively been running hard

to stand still It has promoteditself as a key beneficiary ofglobal growth thanks to itsexpertise in trade finance

But with emerging-marketgrowth increasingly check-ered, it is getting harder tojudge HSBC’s revenue out-

often

Slower revenue and

di-minished savings ties could make it hard forHSBC to significantly raise itsreturn on equity from the9.2% it achieved last year

opportuni-Certainly, its hopes of ing a ROE of 12% to 15%

achiev-sometime between 2014 and

2016 look hard to realize Theabsence of firm regulatorycapital requirements makesthat ROE target even moreuncertain, because the equityside of the equation still is

unclear

HSBC’s best hope may be

to achieve a ROE that at leastbeats its roughly 10% cost ofequity That would mean thebank at least creating valuefor its shareholders Butgiven that it already trades at1.3 times its expected tangi-ble book value for 2014, thathardly equates to much forinvestors to get excited

about

—Andrew Peaple

Volkswagen Keeps on Truckin’

Ferdinand Piëch’s empirebuilding knows no bounds

The Volkswagen chairman is

offering €6.7 billion ($9.21 lion) to buy out minorityshareholders in Swedish truck

bil-maker Scania, of which it

al-ready owns 63% That lookslike a steep price considering

VW shareholders aren’t likely

to see much for their moneyanytime soon

Scania deserves some mium to its truck-makerpeers, thanks to its premiumproducts, efficient manufac-turing model and the largeportion of sales it derivesfrom high-margin service con-

forecast 2014 sales; Volvo and

VW’s MAN trade at just 0.8times and one times, respec-

tively

VW looks unlikely to getmuch for its generosity It al-ready has an 89% voting in-terest in Scania, but it argueslegal restrictions designed toprotect the Swedish com-pany’s minorities prevent itfrom realizing the full bene-fits of cooperation, like shar-ing technology With 100% ofScania, VW reckons that itcan generate an additional

€650 million a year in cost

synergies

The snag is that long uct cycles in the trucks busi-ness mean the new savingswon’t materialize for 10 to 15years, reducing their value tojust €1.8 billon taxed and cap-italized today, estimates ISI

prod-Group

Nor is VW treating itsshareholders equitably Ordi-nary shareholders, which in-clude the Porsche family, ha-ven’t been asked to

contribute

But holders of VW’s moreliquid preference shares havebeen asked to throw in up to

€2 billion of the Scania chase price, marking thefourth cash call since 2009

pur-The capital increase also

looks unnecessary, unless VWhas bigger designs for its

cash

It will be left with about

€14 billion in net cash, abovethe €10 billion it needs tomaintain its credit rating VWexpects to generate a further

€6 billion in free cash flowfrom operations this year

All this comes as VW’score business is generatingdiminishing returns This year

is expected to mark the fourth

in a row of flat earnings spite sales being 24% higherthan in 2011, Bernstein Re-search notes Pressure on VW

de-to prove the merits of its panding empire is only likely

ex-to grow

—Renée Schultes

Fender Bender

Volkswagen’s preferred shares

The Wall Street Journal Source: FactSet

€225

100125150175200

’142013

Assembly line at the Scania truck plant in Angers, France

Monetary policy is a lotlike weather forecasting: It is

cloaked in scientific methodbut often turns out to be

the board’s Sept 16 meeting,

a day after the collapse ofLehman Brothers, there was

discussion of how othercountries were reacting to

market turmoil

Nathan Sheets, then theFed’s director of the division

of international finance,noted the People’s Bank of

China the day before cut itsmain policy rate by 0.27 per-

centage point, or 27 basispoints He said, “I guess they

felt that 26 would not havebeen enough and 28 would

have been too much.”

Fed Chairman Ben nanke added that “three is a

Ber-lucky number in China,” andthat Vice Chairman Donald

Kohn was about to point outthat, “three cubed is 27.” To

which Mr Kohn said he alsowas going to wonder

“whether we needed to ness the mystical powers.”

har-The transcript reflectsthe back and forth was

steelmakers and fertilizer

producers can smell gas

Front-month natural-gas

prices rose back above $6 a

million British thermal units

last week Steelmakers burn

gas to fuel their blast

fur-naces Credit Suisse

esti-mates that before adjusting

for hedging, a $1 increase in

the gas price knocks $1.60 a

share off U.S Steel’s value

and 74 cents off AK Steel

Holding’s—6.5% and 11.5% of

their current share prices,

re-spectively

CF Industries Holdings,

meanwhile, uses gas to make

nitrogen-rich plant food But

the company shielded itself

against swings in natural-gas

prices by locking in 75% of its

first-quarter natural-gas

needs at $3.66 MMBtu via

hedges It has also hedged

half of its second-quarter

ex-posure

Still, analysts at brokerageFeltl say CF’s earnings couldface pressure if strength ingas prices persists They ex-pect earnings of $18.38 ashare in the second half ofthe year if gas prices average

$3.75 MMBtu, but that drops

to be delivered in April haverisen only about 8% over thepast month and are below $5

That offers some hope forthe steelmakers especially,whose stocks have slipped bydouble-digit percentages thisyear But with gas inventoriespossibly hitting a 10-year sea-sonal low by the end of thisharsh winter, there is anotherrisk to negotiate: a hot sum-mer All that air conditioningwould take a lot of electric-ity—and the gas to produce

it —Tatyana Shumsky

With emerging-market growth becoming increasingly checkered, it is getting harder

to judge the bank’s revenue outlook.

Back of the Pack

%

’142013

The futures curve

suggests gas prices

will drop markedly.

PAGE TWO

Rep EricCantor wantsRepublicans tostop thinking ofthemselves assimply theopposition party, and to startacting more like the alternativeparty

Such a distinction is important,but difficult to realize As is oftenthe case when a party doesn’toccupy the White House,Republicans have become farmore comfortable simply beingagainst what President BarackObama is for, rather than doingthe tougher work of agreeing onprecisely what they would dodifferently

To some in the party’s moreconservative quarters, in fact,even calls for targetedgovernment action are reflexivelybeing read as unwanted calls forbig-government action, and anunnecessary distraction fromattacks on the health lawchampioned by the president But

in an election year in whichRepublicans are asking voters togive them full control of Congress,the need to be for something andnot simply against lots of thingsbecomes crucial

“Our members are going to getvery excited if we can providealternatives, not just be a partythat’s against whatever thepresident is for,” Mr Cantor, theHouse majority leader, said in aninterview “It doesn’t mean we’renot going to prosecute the caseagainst the president’s agenda inthe form of a public debate.”

This quest has taken the form

of a series of speeches andwritings in recent weeks in whichthe Mr Cantor has sought todefine what Republicans—at leastHouse Republicans—ought tostand for The effort started a yearago, when he delivered a speech

at the American EnterpriseInstitute that laid out argumentsfor, among other things, charterschools and school choice, and afederal law that would enableworking parents to convertovertime into comp time

Last month, at a retreat of

House Republicans, Mr Cantorpresented a broad agenda that hedescribed as “An America ThatWorks.” In it, he urgedRepublicans to embrace reforms

in federal job-training programs,while also pushing morepredictable ideas for easingregulations on energy andmanufacturing, and tax reductions

on the middle class He againmade a push for more charterschools, but also urged the GOP togenerate ideas for reducing thecost of college education

And then, this month, he gave

a speech at the Virginia MilitaryInstitute on national-securityissues in which he called for moreaid for Syria’s rebels, moreeconomic sanctions on Iran, areversal of some planned defense-spending cuts and completion of afree-trade pact in Asia

In some ways, though, thequestion hanging over all this isthe giant, complicated question ofhealth care Like virtually everyRepublican in sight, Mr Cantorhas called for repealing theAffordable Care Act

But the harder part forRepublicans is spelling out howthey would replace it

“Honestly, I think Obamacare is

on borrowed time,” Mr Cantorsays “We may have anopportunity for an alternative to

be put in place.” But there isn’tagreement among congressionalRepublicans on whether toparticipate in attempts to modifythe law or on any single

alternative to take its place

House Republicans presented aplan back in 2009 that wouldallow insurance companies to sellpolicies across state lines andexpand use of state-based high-risk insurance pools to helppeople with pre-existingconditions find insurance Morerecently, the conservative HouseRepublican Study Committeeoffered its own plan, using taxdeductions to help individuals buyhealth insurance, and last monththree Republican senatorsreleased their own All havesimilarities, but aren’t identical

Mr Cantor says simply: “Ourconference is working on that.”

His bigger problem is that, toget to this kind of agenda, HouseRepublican leaders have beentrying to move past the

arguments about spending anddebt that have left Congress tied

in knots for the last two years andsent perceptions of Republicanleadership sliding downward

Yet many in the party’s party and conservative wingsseem more interested inremaining focused on opposition

tea-Look at the website of HeritageAction, the new political-actionarm of the Heritage Foundationthink tank, and you get a visualimage of this impulse

On the group’s list ofrecommended votes on keycongressional issues, the firstseven items are all calls for votesagainst something The groupurged ‘no’ votes on raising thedebt ceiling, on passing the farmbill, on reforming flood insurance,

on a new federal spending plan,

on extending unemploymentbenefits for the long-termunemployed, on a new budgetoutline and on the confirmation ofJanet Yellen as chairwoman of theFederal Reserve

Mr Cantor clearly doesn’t wantthat to be the totality of the GOPmessage: “It’s really important to

us to assert conservativesolutions, because so many peopleare hurting.”

Cantor Pushes the GOP

To Spell Out Its Agenda

[ Capital Journal ]

BY GERALD F SEIB

i i i

Business & Finance

n State-controlled Royal Bank

of Scotland is going to

exten-sive pains to appease its

own-ers and customown-ers after six

years of withering criticism 15

n Novartis is distancing itself

from the era of Daniel Vasella,

the former chairman whose

controversial exit package

blemished the Swiss

pharma-ceutical company’s image 15

n China’s yuan hit a

four-month low, sparking

expecta-tions that years of gains may

be nearing an end 15

n Samsung unveiled an

up-dated flagship smartphone that

reflects an attempt to eschew

flashy features—and to keep

the price competitive 18

n Mining in the Arctic has

proved a quixotic quest for all

but a few tenacious miners like

Agnico Eagle-Mines 17

n HSBC said flat revenue and

higher operating costs weighed

on profits last year, adding to

concerns about the bank’s

prospects 20

n Sony Corp is rolling out a

new smartphone loaded with

its most advanced camera and

audio technologies 19

n Jewelers and traders in

In-dia are exploiting a legal

loop-hole and using Indians who are

coming home after working in

other countries to ferry the

gold into India 22

i i i

World-Wide

n Italy’s new prime minister,

Matteo Renzi, was expected towin two confidence votes thisweek and begin implementinghis coalition’s ambitiousagenda 4

n Ugandan President Yoweri

Museveni signed into law anantigay bill, setting the stagefor a showdown with Westerndonors and rights activists op-

posed to the legislation 8

n China’s property market is

showing its strongest signs of

a cool-down, as price growtheases, credit for many develop-ers dries up, and some cut

prices at new projects 7

n A Russian court sentenced

seven activists to prison termsranging from 30 months tofour years after they were con-victed of being involved in a

“mass riot” during an Kremlin protest in 2012

anti-n Thai Prime Mianti-nister Yianti-ng-

Ying-luck Shinawatra vowed not toresign amid continuing anti-

government street protests 8

n Afghans mourned 21

sol-diers killed in a Taliban attack

as details emerged about an cident that sparked a wave of

in-outrage in the country 8

n U.S Rep John Dingell, a

Democrat who is dean of theHouse and the longest-servingmember of Congress in history,

is retiring after serving more

than 58 years in the House 6

What’s News—

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OFF THE WALL

Making New York Trains Easier on the Ears

Musician and ‘Subway Geek’ Is on a Quest to Jazz Up Turnstile Tones; a Swipe at the Ugly Beep

thinks New York’s ground music” sceneleaves a lot to be desired Hewants to change the underlyingsound: the cacophony produced bythe subway turnstiles

“under-“They make this unpleasantbeep and are all slightly out oftune from one another,” said Mr

Murphy, 44 years old, over fast recently in the trendy Wil-liamsburg neighborhood here

break-For the past 15 years, Mr phy has been crafting what hesays is a low-cost musical solu-tion: He has worked out a uniqueset of notes for every station, one

Mur-of which would sound each time apassenger swipes his or her Met-roCard to catch a train The busier

a station becomes, the richer theharmonies would be The samenotes would also play in a set se-quence when the subway arrives

at that stop Each of the city’s 468subway stations would have notesets in different keys

Now, he believes his plan nally has a chance, as the state’sMetropolitan Transportation Au-thority embarks on a $900,000-a-year project to improve passengerflow at some stations by reposi-tioning turnstiles, furniture andemergency exits

fi-A separate project in the workswill preserve the old turnstiles buteventually eliminate the need toswipe MetroCards through them

By 2019, according to the plan,subway riders will enter using de-vices such as a smartphone, card

or key, embeddedwith an electronicchip

The reason forthe tones in thefirst place is sim-ply to accommo-date the blind: Asingle tone means

“go,” a doubletone means ”swipe again” and atriple tone indicates insufficientfare

The dissonance among chines is due to “natural technicalvariation and we really don’tcare,” said MTA spokesman AdamLisberg Many New Yorkers areprobably completely oblivious tothe tones and their meaning

ma-Mr Lisberg said ma-Mr Murphy’splan “is a very cool idea,” one thatseveral people have independentlyproposed over the years But itmight be hard to put into practice,

he said: It’s likely to require a lot

of time and money, and probablymeans temporarily taking each ofthe city’s 3,289 turnstiles out ofservice, something the authority isnot inclined to do “for an art proj-ect.”

“If you screw something up,”

Mr Lisberg continued, you riskbreaking the turnstile Given the5.5 million passengers who use thesystem on an average weekday, hesaid the transit authority was “notinclined to mess with anythingthat could get in their way.”

Mr Murphy, though, arguesthat his plan would cost very lit-tle, and labor could be saved iftone generators were installed orreprogrammed during the reposi-tioning or along with the newmechanism that will detect pas-sengers’ microchips

Mr Murphy, the well-knowncreator and lead singer of thenow-defunct electronic-dance-punk band LCD Soundsystem,failed to land a meeting with for-mer Mayor Michael Bloomberg

He’s more hopeful about his pects with Mr Bloomberg’s suc-cessor, Bill de Blasio: “If the mayorwanted this to happen, I knowthere’s someone who could makethis work.”

pros-Howard Wolfson, who served

as deputy mayor under Mr

Bloomberg and writes a popularmusic blog, said he was ap-proached about the idea butcouldn’t help because the MTA is astate agency, not part of New York

City government

Mr Murphyisn’t the only onelobbying for moreeuphonic turn-stiles In July,James Kogan,freshly graduatedfrom New York’sselective Stuyve-sant High School, emailed theMTA’s arts department with anearly identical proposal thatwould substitute “soothingchords” for the current sound of aturnstile, which he lamented was

“a cold, dismissive beep.”

He said he could write the codehimself that would tell turnstiles

to generate notes at random from

a given harmonic set All he wouldneed, he said, is one computer sci-entist familiar with turnstile lan-guage to help with the installation

“This is not so difficult—I tooksome very basic computer pro-gramming,” said Mr Kogan, a self-taught guitarist who is now afreshman at the University of Chi-cago He said he got the idea whileplucking chords on an Africanthumb piano called a kalimba

Mr Murphy, a subway geekwhose smartphone is loaded withapps that suggest the most strate-gic train car and door to standnear in order to exit a stationmost efficiently, has lived in NewYork since the 1980s and is gener-ally happy with the subway ser-vice He said he gets “very angrywhen I see people jump fare.”

He said his subway-sound session began in the 1990s when

ob-he first rode tob-he Tokyo metro andwas blown away by the system’sfriendly voices and “incrediblygentle beeps.” He was further in-

spired by trips through the lona airport, which he said fea-tured a signature four-notesequence before loudspeaker an-nouncements Mr Murphy said theditty reminded him of the openingnotes of the group Chicago’s song

Barce-“Colour My World.”

“In New York at the time, youhad all this indistinguishable yell-ing and horrible ‘you’ve donesomething wrong’ sounds,” hesaid “I became kind of obsessed

with this idea that instead of justunpleasant, with almost no change

at all, it could be beautiful.”

Unique harmonic sequencescould also help cut down on ridersmissing their stops, Mr Murphyadded, while boosting their emo-tional connections to their neigh-borhoods

So around 2001, the same year

he started LCD Soundsystem andfounded his record label, DFA Re-cords, Mr Murphy and his man-

agement team started approachingarts-funding organizations andcity and state officials They madelittle headway

“An art project that integrates

in with the turnstile—that’s likethree different departments and

no one’s going to agree,” Mr phy said he was told repeatedly.Still, Mr Murphy forged ahead

Mur-in his spare time, composMur-ing thenote sequences for various subwaylines in his head—the same way hewrites songs

Mr Murphy played his lastshow with LCD Soundsystem in

2011 He is doing a lot of differentthings now In addition to frequentsolo DJ gigs, he produced Cana-dian indie-rock band Arcade Fire’sfourth studio album, “Reflektor,”and composed music for a revival

of the play “Betrayal.”

He also created his ownespresso blend in conjunction withBlue Bottle, a high-end coffee com-pany, and is building a new studio

in Williamsburg

While his subway oeuvre isonly partially complete, he is pre-pared to drop everything if theMTA gives his plan a green light

“If it doesn’t happen I’ll be ken hearted,” he said

James Murphy, pictured in a New York subway station, thinks turnstiles should emit more pleasing sounds.

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Egypt’s Prime Minister, Cabinet Abruptly Resign

CAIRO—Egypt’s military-backedinterim prime minister and his cabi-net abruptly resigned Monday, eas-ing the way for the nation’s populardefense chief to run for presidentand further solidify his power

Prime Minister Hazem lawi, in his announcement on livestate television, gave no reasons forthe decision by the interim cabinet

el-Beb-to step down after eight months inoffice, saying only that “reform can-not take place through the govern-ment alone.”

Interim President Adly Mansoursaid in a statement he had acceptedthe resignations but gave no indica-tion of when a new governmentwould be assembled

While the interim caretaker ernment was expected to be dis-solved, the timing of the resigna-tions raised questions about theirmotivation Some observers said themilitary rulers might have engi-neered the move to sidestep thescorn for Egypt’s myriad social andeconomic problems

gov-“This government didn’t haveany political role and didn’t offersuggestions to solve the current cri-sis,” said Abdel Moneim Aboul Fot-ouh, a presidential candidate in 2012and a frequent critic of the military-led ouster of Egypt’s first democrati-cally elected president in July

Egypt has been hit by a wave ofrare winter blackouts, cooking-gasshortages and mounting laborstrikes in recent weeks And Mr Be-blawi has been criticized by somepoliticians and pro-military mediafor his delay in declaring the MuslimBrotherhood a terrorist organizationfollowing an upsurge in insurgentattacks on army and police installa-tions, and most recently a group ofSouth Korean tourists

On the other hand, the tion was also roundly criticized byrights groups and Western govern-ments as politically motivated Thegovernment presented no evidence

designa-of the Brotherhood’s involvement inattacks, while militant groups haveclaimed responsibility

There was no immediate ment on the resignations from FieldMarshal Abdel Fattah Al Sisi, Egypt’spopular military chief who is ex-pected to easily win election asEgypt’s next president when votingtakes place later this spring FieldMarshal Sisi has yet to announce hisbid, but has received a critical en-dorsement from the military council

com-he leads

Some observers said, however,that with Egypt’s economy falteringand the public’s discontent rising,the shake-up may benefit Field Mar-shal Sisi

“This is overdue and needed cause of the unpopularity of the cab-inet in the street,” said an official fa-miliar with the matter “There needs

be-to be a positive change before dential elections are held and actualresults people can see.”

presi-Analysts said the move couldgive Field Marshal Sisi room to in-fluence the next cabinet before hisexpected run for president while aninterim president is in office, spar-ing him the political fallout if theyfail to meet the demands of an in-creasingly frustrated population

“This will be the first time thatwe’ll be seeing his designatedchoices in place but they will be ap-

pointed by Mansour,” Josh Stacher,

an Egypt expert at Kent State versity, said of the next cabinet “It’s

Uni-a very nice sleight of hUni-and.”

In his televised statement, Mr

Beblawi said the cabinet had sought

to stabilize Egypt after MohammedMorsi, the nation’s first democrati-cally elected president and a topBrotherhood official, was forcedfrom power on July 3 by the militaryamid large demonstrations against

the Islamist-run government “Wemade every effort to get Egypt out

of the narrow tunnel in terms of curity, economic pressures and polit-ical confusion,” he said

se-After the announcement, HossamEissa, the departing deputy primeminister and higher education minis-ter, said he and other cabinet mem-bers were “relieved” by their deci-sion to resign, which came during aregularly scheduled cabinet meeting

Sochi’s Gondolas Left Dangling

Olympics Expansion Leaves Russian Ski Resorts With More Lifts Than Tourists

SOCHI, Russia—Eight years ago,

only a handful of ski lifts existed on

the snowy, desolate mountains near

Sochi But since this resort area in

southern Russia made its bid to

host the Winter Olympics, more

than 50 chairlifts and gondolas

have been built

In case you’re wondering, That

is 20 more than there are in all of

Vail, Colo

This latticework of lifts—some

of which are the fastest of their

kind in the world—were built to

ferry athletes, officials and fans to

Olympic events ranging from

women’s halfpipe to men’s biathlon

During the Games, visitors

mar-veled at their speed and efficiency

while experts expressed

astonish-ment at the overall scale of the

ski-lift expansion

“It’s the biggest one I ever saw,”

said Paul Matthews, president of

Ecosign, the nearly 40-year-old

company that plotted Sochi’s

moun-tain venues “They put many more

lifts than I recommended I call it

lift porn.”

Now that the Games are over,

the future of some of the most

elaborate lifts, which were built for

use primarily at the Games, isn’t

entirely clear Sochi’s resorts have

a long way to go to establish

them-selves as international destinations

Even Rosa Khutor, the largest of the

region’s ski areas and the site of

many Olympic events, is attracting

only about 5% of its guests from

outside Russia Without a

signifi-cant increase in tourism, those lifts

could become an Olympic white

ele-phant

In all, 21.6 kilometers (13 miles)

of cable-car routes were built forthe Games, organizers say One gon-dola took people to a peak near thestart of the Olympic cross-countryskiing and biathlon events It is theworld’s longest and fastest detach-able-car ropeway, traveling at up to8.5 meters per second It is one ofthe two crown jewels here: 3S gon-dolas made by Austria-based Dop-pelmayr Both of the 3S lifts—

named for the three cables onwhich they travel—can carry up to

30 people in each sleek, royal-bluecabin The other 3S lift can carry4,500 people per hour in each di-rection It goes to the mountainsideOlympic Village and is equipped to

of the Sochi 2014 tangible legacy.”

The total budget for Games

“sports venues and transport andengineering infrastructure” was 214billion rubles (about $6 billion), or-ganizers said, half of which camefrom the federal budget and halffrom private investments That ap-proaches the entire cost of the Van-couver 2010 Games, $7.4 billion,

which also included operations andsecurity The total cost of the SochiGames is reported to exceed $50billion, making them the costliest

Olympics ever

According to Matthews, Sochiorganizers built so many lifts inpart because leaders at the Interna-tional Ski Federation (FIS) askedthem to They requested lifts to thestart of each competition, he said,and, “they got everything they

wanted They got gold-plated.”

A spokeswoman for FIS, whichsanctions skiing and snowboardingevents at the Olympics, respondedthat “planning an Olympic Games is

a total team effort that involves put from the Sochi OrganizingCommittee, the International Olym-pic Committee and the Interna-

in-tional Ski Federation.”

Most Winter Olympics areawarded to areas with sizable skiresorts Vancouver didn’t build asingle chairlift for the Games Bycontrast, Sochi started fromscratch Russian President VladimirPutin pushed development of itsmountain area with two agendas: toprepare for the Olympics, and tofoster in Russia the kind of world-class ski area available in other

parts of Europe

The push has been a boon to theworld’s lift builders France-basedPoma erected 16 lifts in Sochi, in-cluding the heated chairlifts usedfor the men’s and women’s downhillski courses, and a 10-person gon-dola to the ski jump A Pomaspokeswoman said its Sochi liftscost €100 million, or about $137million, the largest project in a sin-

gle area in company history

Doppelmayr, the world’s share leader in lifts, has installed

market-35 in Sochi Five more installationswere delayed until after the closingceremony because they weren’t in-tegral to the Winter Games, Doppel-mayr spokesman Ekkehard Ass-

mann said

Helicopter skiers long haveprized the cluster of CaucasusMountain peaks about 65 kilome-ters east of downtown Sochi for itspowdery snow, breathtaking vistasand untouched slopes But until re-cently the area lacked infrastruc-ture to support day-trippers andlarge numbers of skiers A long-term plan to expand ski facilitiesslammed into high gear in 2007,when Sochi won the bid for the

2014 Games Organizers built atrain that takes visitors from theSochi Airport to Rosa Khutor and

accelerated lift construction

“Projects like Sochi need hugemanpower and are therefore veryexpensive in my opinion,” said An-dreas Haselsberger, an executive atthe large Austrian ski-resort com-plex SkiWelt “For a normal skiingarea this investment cannot be

done.”

Sochi’s ski areas still aredwarfed by ones like SkiWelt,which has 91 lifts and cable cars,and France’s Les Trois Vallées,which bills itself as the world’slargest ski area Those resorts,however, were developed over a

half-century

The big question following theOlympics is whether large numbers

of other tourists will follow Putin

to Sochi’s slopes A paper prepared

by Games organizers on the SochiOlympics’ legacy says the alpineskiing complex will help “cement itsstatus as an international alpine

become a white elephant.

After Sochi, Winter Games Focus Shifts to Korea

The moment the torch went out

in Sochi, Pyeongchang 2018 begansucking the Winter Olympic air

eastward to the Korean Peninsula

The South Koreans have hadsome 200 observers in Sochi, tak-

ing notes on everything from rity to transportation to the design

secu-of the venues Their goal is to liver their Games in an “accurate,

de-convenient and prompt manner,” inthe words of Moon Donghoo, sec-

retary-general of the Pyeongchangorganizing committee—absent thechaos and roughly $50 billion ex-

penditure of the Sochi Games

That may be easier said thandone Like Sochi, Pyeongchang is a

massive project that includes anew high-speed rail line and

expressway, construction of sixvenues and a plethora of housing

Pyeongchang also has yet to beginselling major sponsorships, an

effort Moon said will start laterthis year

“We expect following Sochi wewill have a more favorable environ-

ment,” Moon said “Pyeongchang isrelatively far away.”

Of course, as Sochi organizersknow, four years can pass quickly,

especially when multibillion-dollarinfrastructure projects are involved

As of now, few in the InternationalOlympic Committee are particularlyworried about Pyeongchang The

2016 Rio Summer Games are thenext crisis on the horizon

Pyeongchang figures to be nificantly different from the Sochi

sig-Games, whose ice sports tookplace in a vast gated park that was

a 40-minute train ride from town Sochi “This huge Olympic

Park is a bit far from Sochi’s town,” Moon said “We want to in-

down-tegrate our Games into the cityand the people.”

Also, Sochi isn’t near a majorRussian city and has just 350,000

residents The plan is for ngchang to be just a 60-minute

Pyeo-train ride or a 90-minute car ridefrom Seoul, a metropolitan area

with roughly 25 million people TheGames will be within about a four-hour drive from any major city in

the nation

Finally, Pyeongchang will likely

be a more accommodating host interms of hogging medals The Ko-reans specialize in speedskating,

especially short-track speedskating

They won eight medals in Sochi,including three gold, but silver-

medalist figure skater Yuna Kimwas the only Korean to win a non-

speedskating medal

— Matthew Futterman

HEARD ON THE PITCH

Getty Images

Kim Jung-haeng, head of South Korea’s Olympic Committee

EUROPE NEWS

Italy’s Renzi Pledges ‘Boldness’

ROME—Matteo Renzi spoke of

“haste and boldness” as primary

at-tributes of his new government

be-fore a confidence vote on Monday,

pledging that the Italian state would

pay down all of its commercial

ar-rears and focus on improving the

country’s schools

The 39-year-old Mr Renzi, sworn

in Saturday as Italy’s youngest

prime minister after leading a party

revolt against his predecessor,

wants to deliver swiftly on an

ambi-tious agenda, which is expected to

include measures to tackle the

coun-try’s soaring unemployment rate

and reignite growth in Italy, which

is struggling to exit its longest

re-cession since World War II

Setting out his governing agenda

in a speech to the Senate, the

for-mer mayor of Florence established

three primary pledges: a

double-digit cut to Italy’s payroll tax rates,

the creation of guarantee funds toboost lending to small companies,and paying down all of Rome’s ar-rears to suppliers, a move thatwould provide Italy’s private sector

a cash boost

Mr Renzi was expected to win aconfidence vote in the Senate sched-uled for later in the day, though theexact size of his majority remains to

be seen The premier explicitlycourted lawmakers from the opposi-tion Five Star Movement during hisspeech

Last year, Italy promised to paydown €40 billion ($54.9 billion) ofthose debts and achieved just overhalf of that in 2013 Total arrears—

and Mr Renzi insisted he would payall of them—may be more than €100billion, according to some estimates

Paying down those arrears wouldhave no impact on Italy’s budgetdeficit, but it will raise the country’spublic debt under European Unionaccounting rules

Mr Renzi also dwelled at length

on what he said was the urgentneed for school repairs around thecountry, an effort he said would costseveral billion euros

He urged lawmakers to freethemselves of “cultural subalter-nity,” or inferiority to Europe, and awidespread perception that thebloc’s rules are too bureaucratic

“We need to dream bigger,” he said

Mr Renzi said Italy’s influenceover EU processes and affairs would

be enhanced if lawmakers agreed torapid approval of his reform mea-sures—including changes to laborand electoral laws—before July 1,when Rome takes over the EU’s ro-tating presidency

His proposed institutional form would also change the nature

re-of the Senate, turning the upper islative chamber into an assembly oflocal government representativeswith limited sovereign powers

leg-“I hope I am the last prime ister ever to have to ask for yourconfidence,” said Mr Renzi, who at

min-39 wouldn’t be eligible to hold office

Half of the new ministers arewomen and several of them are un-der 40 But six were also members

of the Letta government, a decisionthat could expose Mr Renzi to criti-cisms of falling short on his prom-ises to make a clean break with thepast For the key Economy Ministry,

Mr Renzi picked Pier Carlo Padoan,

64, chief economist of the tion for Economic Cooperation andDevelopment

Organiza-BY CHRISTOPHER EMSDEN

AND GIADA ZAMPANO

Italy’s new premier, Matteo Renzi, delivers a speech to the Senate in Rome on Monday hours before the body was to hold a confidence vote on his government.

On Juncker

BRUSSELS—Chancellor AngelaMerkel’s Christian Democratic Unionand its Bavarian sister party, theChristian Social Union, on Mondayendorsed former Luxembourg PrimeMinister Jean-Claude Juncker tolead Europe’s center-right into Eu-ropean elections in May

means their delegates are expected

to vote for Mr Juncker at the pean People’s Party congress inMarch, making Mr Juncker a clearfavorite ahead of Former LatvianPremier Valdis Dombrovskis, whoentered the EPP race last week

Euro-Mr Juncker “is an outstandingEuropean with whom we want tocampaign together for a strong EPP

in the European Parliament,” PeterTauber, the CDU’s general secretary,told reporters in Berlin

For May’s European Parliamentelections, European parties for thefirst time are selecting lead candi-dates that they say should also be-come contenders for president ofthe European Commission However,

EU leaders, including Ms Merkel,have in the past said that there is

no direct link between lead dates and the top post in the EU’sexecutive

candi-The CDU’s Mr Tauber made noreference to the commission in hisremarks But Markus Ferber, amember of the CSU’s board, took aclearer line “Yes of course,” Mr

Ferber said when asked whether theCSU wanted Mr Juncker to becomecommission president

“Among all the candidates, webelieve Mr Juncker to be the mostcapable,” Mr Ferber said Hepointed out Mr Juncker’s experi-ence in dealing with other Europeanleaders and institutions during histime as Luxembourg prime ministerand his “ability to build bridges” be-tween the bloc’s rich and poor mem-bers

The European Socialists have ready selected Martin Schulz, cur-rently president of the EuropeanParliament, as their lead candidate

al-A recent aggregate poll from all 28

EU countries gave the Socialists anarrow lead over the EPP in theMay vote

BY GABRIELE STEINHAUSER

Iceland Protesters Want EU Referendum

REYKJAVIK—Some 3,500 people

gathered outside the parliament in

Reykjavik on Monday to protest the

Icelandic government’s backtracking

from its election promise to hold a

national referendum on whether to

seek European Union membership, a

move also creating friction within

the government that has been in

power for less than a year

The protest meeting was called

after the two parties leading the

government coalition said Friday

that the small island nation will

withdraw its EU membership

appli-cation without holding a referendum

on the issue

“I’m protesting betrayals of the

election promises that the parties

that are now in power made They

pulled out from their promise assoon as they were in power,” said23-year old Bjarki Guðmundsson, amusic student who took part in theprotest outside the Althingi

“I’m against EU membership but

I think the people should have thelast say,” he said

The center-right Progress Partyand Independence Party said Fridaythey had agreed on a proposal towithdraw the application that wassubmitted by a previous government

in 2009

A parliamentary debate on theissue was postponed Monday, butlawmakers will probably debate thebill Tuesday, and “a vote is expectedwithin the next couple of weeks,”

said Urður Gunnarsdottir, a ForeignMinistry spokeswoman

The EU-skeptic government pended accession talks in Septem-

sus-ber, after coming to power in thespring of 2013 on an election plat-form that included putting the EUmembership issue in the hands ofIcelanders in a referendum

Friday’s agreement sparked troversy among the public and op-position MPs, but the government isalso facing criticism from within itsown ranks

con-The Independence Party, whilegenerally EU-skeptic, also has vocalsupporters of an Icelandic EU mem-bership One of them, VilhjálmurBjarnason, a member of parliament,said Iceland should finish the mem-bership application negotiations,and then bring the issue to the na-tion in a referendum Mr Bjarnasonadded that his party “needs to con-sider the different views of its mem-bers.”

Political scientist Eirikur

Berg-mann, a professor at Bifrost sity in Iceland, said the governmentparties’ move is a clear breach of amain election promise “Already,large parts of the public are un-happy and support for the coalition

Univer-is decreasing,” Mr Bergmann said

While Mr Bjarnason said hewouldn’t leave the IndependenceParty over the issue, Mr Bergmannsaid some members from the EU-friendly faction of the party couldtake that step

Since the membership tion was submitted in 2009, much ofthe discussion in Iceland has cen-tered around possible exceptionsfrom EU regulations, particularly re-garding fisheries The most recentpolls, from January, indicate strongopposition to an Icelandic member-ship, with 60.3% against it and39.7% in favor

applica-BY LÁRA HILMARSDÓTTIR

AND CLEMENS BOMSDORF

Agence France-Presse/Getty Images

Luxembourg’s Jean-Claude Juncker

PERSONAL JOURNAL

Professional Makeup Advice in Your Home

But These New Online Services Aren’t Ready to Replace Old-Fashioned Beauty Counters Just Yet

You may not need to go to thenearest beauty counter to find theperfect shade of lipstick New on-line services let customers consultprofessional makeup advisers athome

To combat feeling washed out

in the winter, we asked four

serv-ices for mendations forfoundation andpowder, a newstylish lip color and subtle eye-liner shade We were able to chatalmost instantly with beauty pro-fessionals online, many of whomare trained makeup artists JillGlaser—a makeup artist andfounder of the Makeup FirstSchool of Makeup Artistry, avocational school for makeup art-ists in Chicago, who isn’t affili-ated with a specific brand—

recom-helped us apply the makeup thevarious services suggested and as-sess the results

We either chatted with a livemakeup expert about our needs orfilled out an online survey Com-panies also provided makeup tu-torials or virtual try-on toolswhere we learned more about theproducts

The one-on-one attention fromonline makeup professionals was

a plus since it can be difficult to

get at a busy store beauty ter Shopping online also allowed

coun-us to easily browse ccoun-ustomer views and get more information

re-on a product

Nordstrom, Estée Lauder and

its Bobbi Brown unit offer flexiblereturn policies, so in each casepeople have the option to returnthe products even if they wereused or opened

There were some hitches Toget a list of the recommendations,

we had to scroll through anemailed chat transcript each sitesent afterward We had troublepinpointing our skin type andtone with online surveys Also, wewanted to know more than justthe first name of the person andwhat made them an expert

Nordstrom

Nordstrom.com

Service: Online chat function

in-cluded product hyperlinks andone-on-one attention

Best recommendation: YSL Glossy

Stain

What we liked: Site offered various

brands

What we disliked: A lip gloss brand

was recommended without ashade Foundation was too sheerfor our skin

Favorite tip: Some companies can

use a foundation shade you rently own to help find a compa-

cur-rable match in another brand

Our recommendations via a30-minute chat were from thestore’s entire array of products

We didn’t always understand why

a product was being mended For example, the beautyspecialist recommended a bronzerbecause it was matte and a sub-tler option for wintertime Butshe also recommended a $60foundation that Ms Glaser saidmatched our skin tone but wastoo sheer “We should be askingmore probing questions,” of thecustomers, says Nordstromspokeswoman Pamela Lopez, re-garding the issue

Overall, we liked the mendations, including brandswe’ve never tried before, such asthe Balm and Stila Ms Glaserliked the consistency of a recom-mended lip gloss, but we weren’tprovided a shade and were left tochoose from dozens of colors

recom-Bobbi Brown

BobbiBrown.com

Service: Upload a photo of yourself

before online chat

Best recommendation: Pot Rouge in

pale pink

What we liked: Included detailed

application instructions and ous tutorials on building a beautyroutine

vari-What we disliked: Bronzer wasn’t a

good fit

Favorite tip: Apply a creamy blush

on the apples of the cheeks withour fingers for a “lit-from-withinglow.”

We were asked to answer afew questions about our prefer-ences and upload a photo beforethe online makeup artist, Cassan-dra, gave us advice We liked theblush and lip color, but Ms Glaserpointed out the bronzer looked

“flat” on the face and didn’t givethe desired glow

L’Oréal

lorealparisusa.com

Service:: Quizzes help determine

product suggestions

Best recommendation: True Match

Super-Blendable Compact Makeup

in creamy natural

What we liked: Online assessments

were useful and fun to complete

What we disliked: Some questions

were confusing, such as one ing us to describe our makeupstyle from choices like “alterna-tive,” “girly” or “fashion forward.”

ask-Favorite tip: Twist the mascara

wand as we pull it out of the tube,

to evenly coat each part of thebrush and avoid clumps

With just a short quiz, thefoundation was perfect for ourskin tone and type, said Ms Gla-ser

She liked the “staying power”

of the gel-based black eyeliner butthought the shade was too harsh

A blush that was recommendedwas sheer and chalky The com-pany declined to comment

Estée Lauder

EsteeLauder.com

Service: Virtual makeover tool and

chat function manned by makeupexperts

Best recommendation: Double Wear

Stay-in-Place Eye Pencil in night blue

mid-What we liked: Thorough chat with

detailed product tions Virtual makeup tool let ustest products on a headshot ofour face

recommenda-What we disliked: We had to

search the website to order ucts ourselves

prod-Favorite tip: Navy-colored eyeliner

would make the whites of oureyes seem brighter

The company has 12 virtualbeauty advisers who have an aver-age of 16 years experience withinEstée Lauder, says Beth Zurn, asenior vice president

We liked our product mendations, especially a wine-col-ored lip gloss shade that turnedout to be perfect for winter Asfor the issue of having to searchfor products online, Ms Zurn saysit’s up to each expert to send hy-perlinks

EUROPE NEWS

Russia Court Sentences Seven Activists

MOSCOW—A Russian court tenced seven activists to prisonterms ranging from 30 months tofour years after they were convicted

sen-of being involved in a “mass riot”

during an anti-Kremlin protest in2012

An eighth defendant received asuspended sentence

Critics at home and abroad havesaid the case was politically moti-vated

All eight defendants were foundguilty on Friday of taking part inwhat police described as mass riots

on Bolotnaya Square in central cow during a rally just before Presi-dent Vladimir Putin’s inauguration

Mos-in May 2012 Investigators had cused the defendants of trying tooverthrow the government and de-stabilize the country

ac-The longest sentence of fouryears was still below the six years inprison prosecutors had requested

The only female activist in the groupreceived a suspended sentence ofthree years and three months

Defense lawyers told the Interfaxnews agency that they would be ap-pealing the court’s decision

Kremlin spokesman Dmitry

Pes-kov was quoted by Interfax as ing the Bolotnaya case defendantsare free to seek a presidential par-don, which would be reviewed in ac-cordance with Russian law

say-Around 200 people who hadcome to the court building to sup-port the defendants were detainedfor disturbing public order by po-lice, a representative for Moscowpolice told Interfax

Human-rights activists ately asked for the defendants’ re-lease Vladimir Lukin, Russia’sstate-appointed human-rights om-budsman, was quoted by Interfax assaying the sentences were “too

immedi-harsh” and that he would support

an appeal

Former Finance Minister AlexeiKudrin, who has often criticized thecurrent government, described thesentences as “another example ofexcessive and selective punishment,”

on his official Twitter account

The case occurred months after awide-ranging, Kremlin-backed am-nesty led to several high-profile po-litical prisoners being set free inlate December ahead of the WinterOlympic Games in Sochi

Those released included twomembers of the punk group PussyRiot and several other activists

charged in connection with the 2012clash with police Russia’s best-known prison inmate, former Yukosoil tycoon Mikhail Khodorkovsky,was also pardoned that month.Human-rights activists have saidthey feared that Russia would begin

a crackdown on political opponentsafter the Winter Olympic Games.Arrests and detentions resumedduring the Sochi Games with envi-ronmental activist Yevgeny Vitishkobeing sentenced to three years inprison for violating his parole byswearing in public Members ofPussy Riot were also briefly de-tained in Sochi

Pope Begins Overhaul

Of Financial Structures

ROME—Pope Francis on Mondaybegan the first significant overhaul

of the Vatican’s financial structure

by creating a powerful departmentthat will control economic and ad-ministrative activities, as he aims toreshape the Holy See bureaucracy totackle the needs of the 21st century

The pontiff established a newsecretariat for the economy to runthe Vatican’s finances more effi-ciently, slim down existing struc-tures and improve transparency andoversight of its accounts Since hiselection last year, he has made a pri-ority of overhauling the Vatican’sadministration, known as the Curia,and its finances

The new secretariat aims also toimprove the support available forprograms destined to assist the poorand marginalized, the Vatican said

“Like a faithful and prudent ager who has the task of carefullylooking after what has been en-trusted to him, the Church is aware

man-of her responsibility to protect andmanage her assets,” said Pope Fran-cis in the order that established thenew secretariat

The new secretariat, which will

be headed by Australian CardinalGeorge Pell, will report directly tothe pontiff It will have authorityover all economic and administra-tive activities within the Holy Seeand the Vatican City State—theworld’s smallest country nestled inthe center of Rome The secretariatwill be guided by a council of 15members, made up of eight cardi-nals or bishops and seven lay ex-perts from across the globe

The emphasis on picking sional experts is of particular impor-tance in attempting to bring the fi-nancial practices of the 2,000-year-old church in line with currentsystems

profes-“This will greatly assist the HolySee in improving budgetary manage-ment and adopting modern-daypractices that will be more easilymonitored and understood,” saidFrancesco Cesareo, president of As-sumption College in Worcester,Mass

The pope’s decision followsmeetings last week in which cardi-nals discussed financial, economicand administrative matters Thesecardinals have also been picked todiscuss a new constitution to runthe Vatican

BY LIAM MOLONEY

How the world advances

CME Group is a trademark of CME Group Inc The Globe logo is a trademark of Chicago Mercantile Exchange Inc All other trademarks are the property of their respective owners Copyright © 2014 CME Group All rights reserved.

Confidence to expand That’s what participants in international commerce can achieve when they’re smart about managing risk.

And smart managers work with CME Group, the world’s leading derivatives marketplace Companies doing business around the world partner with us to manage virtually every kind of risk Changing currency valuations, energy costs, interest rate fluctuations, commodity shifts – whatever the risk, we help the world advance

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Major players & benchmarks

Credit derivatives

Spreads on credit derivatives are one way the market ratescreditworthiness Regions that are treading in rough waters

can see spreads swing toward the maximum—and vice versa

Indexes below are for five-year swaps

Mid-spread, since most recent roll Index: series/version in pct pts Mid-price Coupon Maximum Minimum Average

for corporatedebt; based on

Markit iTraxxindexes

In percentage points

3.00 2.00 1.00 0

14500

HighClose

Low

50–daymoving average

t

Stoxx Europe 50: Monday's best and worst

Previous

And the rest of Europe's blue chips

Latest,

in local STOCK PERFORMANCE Company/Country (Industry) Volume currency Latest YTD 52-week

France (Integrated Oil & Gas)

Netherlands (Food Products)

United Kingdom (Banks)

France (Clothing & Accessories)

United Kingdom (Nondurable Household Products)

Germany (Diversified Industrials)

United Kingdom (Tobacco)

France (Commodity Chemicals)

Switzerland (Full Line Insurance)

Netherlands (Life Insurance)

United Kingdom (Integrated Oil & Gas)

United Kingdom (General Mining)

Sources: SIX Financial Information

DJIA component stocks

Source: WSJ Market Data Group

Credit-default swaps: European companies

Atitsmostbasic,thepricingofcredit-defaultswapsmeasureshowmuchabuyerhastopaytopurchase-andhow much a seller demands to sell-protection from default on an issuer's debt The snapshot below gives a

sense which way the market was moving yesterday

Showing the biggest improvement

CHANGE, in basis points

Yesterday Yesterday Five-day 28-day

And the most deterioration

CHANGE, in basis points

Yesterday Yesterday Five-day 28-day

CIR SpA CIE Industriali

Source: Markit Group

BLUE CHIPS & BONDS

Below, a look at the Dow Jones Stoxx

50, the biggest and best knowncompanies in Europe, including the U.K

US: Bank revenues from equity capital markets

Behind every IPO,follow-on or

convertible equityoffering is one or

more investmentbanks At right,

investment bankshistorical and

year-to-daterevenues from global

equity-capital-market(ECM) deals

Source: Dealogic

75%

6

50 4

25 2

0 0

n Equity capital markets nDebt capital markets (both in billions, left axis)

ECM as a percentage of total

(right axis)t

Cristobal Herrera for The Wall Street Journal

Cuban artistic trio called the Merger, with one of their works in Key West, Fla.

Pentagon’s Budget Plan Shifts Priorities

WASHINGTON—Defense

Secre-tary Chuck Hagel is proposing a new

budget plan designed to turn the

mil-itary’s attention from the long

ground war in Afghanistan toward

emerging cyberthreats from China

and increasing challenges from al

Qaeda-affiliated groups in Africa

The Pentagon road map, sure to

face fierce resistance from across the

political spectrum, calls for reducing

the military’s reliance on

manpower-heavy troop buildups, investing

in-stead in more agile special forces

of a new class of Navy ships ished by top admirals and scrapping

cher-an Air Force plcher-ane used to protectU.S forces in Iraq and Afghanistan

Instead, Mr Hagel proposes jecting more money into changes de-fense officials say will make for amore adaptable and innovative mili-tary that is better ready to respond

in-to changing threats

Mr Hagel wants to pare the size

of the active-duty military by 13%

and the reserve force by 5% But he

is looking to boost the size of U.S

Special Forces by nearly 6% by ing about 3,000 personnel to thekinds of teams that killed Osama binLaden in Pakistan, rescued an Ameri-can aid worker in Somalia and freedU.S commercial sailors captured bypirates off the coast of East Africa

add-“This is a time for reality,” Mr

Hagel said Monday in unveiling the

$496 billion budget plan “This is abudget that recognizes the reality ofthe magnitude of our fiscal chal-lenges, the dangerous world we live

in, and the American military’sunique and indispensable role in thesecurity of this country and in to-day’s volatile world.”

Congress has the final say on thePentagon budget and must approvemost of the recommendations in it

The full details of the proposed get will be included in President Ba-rack Obama’s budget plan to be un-veiled next week The proposal will

bud-be submitted to Congress, which willweigh the Pentagon’s proposals overthe course of the year

Every major element of thespending plan is certain to face op-position from powerful groups, gov-ernors and lawmakers who have dif-ferent ideas for how the Pentagonshould spend its money

Veterans groups and their gressional supporters are preparing

con-to battle Mr Hagel’s call con-to curtailspending on military benefits thatconsume a significant portion of thePentagon budget

Influential lawmakers are pected to oppose Mr Hagel’s pro-posal to eliminate the entire militaryfleet of about 300 A-10 “Warthog”

ex-jets, widely admired as a plane key tohelping U.S ground forces in battle

And Congress is likely to reject

Mr Hagel’s call for creating a mission to examine the closure ofmilitary bases across the country

com-But Pentagon officials said day if Congress doesn’t make thosecuts, other spending would have to

Mon-be curtailed

BY DION NISSENBAUM

AND JULIAN E BARNES

Dingell to Retire From House

WASHINGTON—Democratic Rep

John Dingell, dean of the House and

the longest-serving member of

Con-gress in history, is retiring after

serving more than 58 years

Mr Dingell, 87 years old, said in

prepared remarks to a Michigan

business group that he had “always

known that when the time came

that I felt I could not live up to my

own personal standard for a

Mem-ber of Congress, it would be time to

step aside for someone else to

rep-resent this district.”

In the speech, he had harsh

words for Congress, calling it a

“great disappointment to everyone.”

And he said the blame was with

lawmakers and voters “There will

be much blaming and finger

point-ing back and forth, but the members

share fault, much fault; the people

share much fault, for encouraging a

disregard of our country, our

Con-gress, and our governmental

sys-tem,” he said

Mr Dingell first won his House

seat in 1955, through a special

elec-tion held after the death of his

fa-ther, who had held the seat since

1933 As the longest-serving

mem-ber of the House, he swears in the

House speaker at the beginning of

every Congress

Mr Dingell’s tenure in Congress

became the longest in history in

June 2013, when he broke the

re-cord held by the late Democratic

Sen Robert Byrd of West Virginia

Since Congress convened in 1789,

there have been just 26 lawmakers

who served 40 years or more in the

House Mr Dingell is the head of the

pack, with fellow Michigan

Demo-crat Rep John Conyers fifth on the

all-time list

Mr Dingell has been involved insome of Congress’s most celebratedachievements, including Medicare,the 1990 Clean Air Act, the Afford-able Care Act and the 1964 VotingRights Act—which, he said in an in-terview in June, was the “singlemost important vote I cast.”

His retirement is the latest in aseries of departures of “old bulls”

who have been the House’s pillars ofliberal legislating That group in-cludes California Democrats HenryWaxman and George Miller, whothis year announced they wouldn’trun again With Mr Dingell’s depar-ture, Mr Conyers, now in his 25thterm, will become the longest-serv-ing member of Congress Mr Con-yers began his tenure in 1965

From 1981 to 1994, and thenfrom 2006 to 2008, Mr Dingell waschairman of the Energy and Com-merce Committee The business-friendly congressman was a staunchdefender of the auto interests in hisdistrict in Detroit’s working-classsuburbs, and those interests in-creasingly put him at odds with theDemocratic caucus’s commitment totougher antipollution standards Hefrequently stood in the way of pro-posals to more rapidly increase fed-eral gasoline-mileage standards andsupported less-aggressive proposals

to curb greenhouse gases, includingcarbon dioxide His stance contrib-uted to his ouster as chairman in

2008, when he was successfullychallenged by Rep Waxman

Still, under Mr Dingell’s ship, the committee passed legisla-tion removing more than 8.6 billiontons of carbon dioxide from the at-mosphere and requiring that a per-centage of the country’s electricity

leader-be generated by renewable energysources The committee also widelybroadened the scope of its investi-gations, targeting Pfizer Inc., the ge-neric-drug industry and StanfordUniversity, among others

Known as an intimidating ence on oversight committees, Mr

pres-Dingell was known for his “pres-Dingell-grams,” information requests thatsignaled investigations

“Dingell-Mr Dingell also worked on lation to improve the safety ofdrinking water, to address leakingunderground storage tanks and toimprove air quality

legis-Michigan Democratic Sen CarlLevin praised the lawmaker’s “rarecombination of legislative skill, de-termination, hard work and gener-osity of spirit,” and his “tireless ad-vocacy” on behalf of the state Rep

Gary Peters, another Michigan ocrat, said, “Whether you measure

Dem-by years of service, laws passed orservice to constituents, the UnitedStates Congress will never again see

a legislator leave as an indelible amark as John D Dingell.”

Rep Fred Upton (R., Mich.), rent chairman of the Energy andCommerce Committee, said in astatement that “it has been a realpleasure working closely with ‘BigJohn’ through the years on a num-ber of issues facing our country.”

cur-His wife, Debbie Dingell, 60, issaid to be considering a bid for theseat, which is likely to stay in Dem-ocratic hands Ms Dingell is chair-woman of the Wayne State Univer-sity board of governors andpreviously served as a senior execu-tive at General Motors Co for morethan 30 years President BarackObama won the district with abouttwo-thirds of the vote in 2012

With two members living in vana and the third in Miami, theytraverse the Florida Straits roughlyonce a month to work on their steeland Plexiglas sculptures They showtheir works regularly at art fairs inFlorida and draw buyers fromacross the U.S.—all despite the five-decade-old American trade embargoagainst Cuba

Ha-An exhibit featuring the three—

Mario González, Niels Moleiro andAlain Pino—along with seven otherCuban artists opened last week atfive cultural institutions here Theshow, called One Race, the HumanRace, is the counterpart to an ex-hibit that had its debut last month

at the Museo Nacional de BellasArtes in Havana, featuring pieces byMario Sanchez, a deceased Cuban-American artist who lived in KeyWest

Organizers say it is the first ample of a cultural exchange be-tween art institutions, as opposed

ex-to art galleries or fairs, in the twocountries

The dual exhibits underscore thegrowing cultural ties between thecountries, facilitated by each loosen-ing travel restrictions in recentyears The result is a growing thaw

in relations at the grass-roots level,even as rhetoric between the twogovernments remains largely hos-tile “These are the first steps to-

González said “We can’t be bors 90 miles away and not getalong.”

neigh-In recent weeks, debate overU.S.-Cuba relations flared once

again, in part because of a poll bythe Atlantic Council in Washingtonthat found that a majority of Ameri-cans, and an even higher percentage

of residents of Miami-Dade County,Fla., which is heavily Cuban-Ameri-can, favored normalized relationswith Cuba

In 2000, 62% of cans in Miami-Dade favored con-tinuing the embargo in a poll byFlorida International University

Cuban-Ameri-A fundamental policy change isunlikely any time soon, given theneed for congressional approval andstiff opposition of Cuban-Americanlawmakers, said Guillermo Grenier,

a sociology professor at FIU “Sowhat is left is clearly on the culturallevel,” he said

While cultural exchanges tween the nations have occurred pe-riodically for decades, they have be-come more frequent after recentgovernment moves In 2011, theObama administration loosened re-strictions on educational and cul-tural travel to the island, and lastyear, it extended the duration ofnonimmigrant visas for Cubans tofive years from six months, and al-lowed for multiple entries

be-Meantime, Cuba last year nated the need for its citizens to ob-tain exit visas to travel overseas andextended the period they could stayabroad to two years from 11 months

elimi-According to Cuban governmentdata, the number of U.S citizens, ex-cluding Cuban-Americans, who trav-eled to the island rose to 98,000 in

2012 from 42,000 in 2008

The eased rules have allowedmore American painters, play-wrights and musicians to travel toCuba to collaborate on shows

Meanwhile, a variety of companiesare organizing educational and cul-tural tours aimed at exposing Amer-icans to Cuba’s culture

BY ARIAN CAMPO-FLORES

Major stock market indexes Stock indexes from around the world, grouped by region Shown in local-currency terms

PREVIOUS SESSION PERFORMANCE Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk.

Brazil Bovespa 47476.97 96.73 0.20 -7.8 -16.3

Note: Americas index data are as of 3:00 p.m ET Sources: SIX Financial Information; WSJ Market Data Group

Cross rates U.S.-dollar and euro foreign-exchange rates in global trading

USD GBP CHF SEK RUB NOK JPY ILS EUR DKK CDN AUD Australia 1.1061 1.8405 1.2448 0.1703 0.0312 0.1835 0.0108 0.3145 1.5201 0.2037 1.0002

yield ratio MSCI Index Last Daily YTD 52-wk 2.50% 16 MSCI ACWI* 406.40 -0.30% -0.5% 14.4%

2.50 17 World (Developed Markets) 1,659.85 -0.23 -0.1 18.1 2.40 17 World ex-EMU 201.88 -0.17 -0.3 17.7 2.40 17 World ex-UK 1,668.51 -0.20 -0.3 18.5 3.10 16 EAFE 1,924.84 -0.85 0.5 14.1 2.70 11 Emerging Markets (EM) 959.26 -0.90 -4.3 -10.3

3.20 18 EMU 200.87 -0.61 1.6 20.7 3.20 18 Europe ex-UK 122.98 0.42 2.2 17.5 4.20 13 Europe Value 117.01 0.51 3.1 17.1 2.40 21 Europe Growth 108.04 0.25 1.3 14.5 2.30 23 Europe Small Cap 275.07 0.53 5.5 33.8

3.60 13 UK 2,016.12 0.37 1.2 8.5 3.30 17 Nordic Countries 207.29 0.52 2.8 14.0

3.00 18 South Africa 1,133.05 0.89 -0.4 12.8 3.00 13 AC ASIA PACIFIC EX-JAPAN 459.61 -0.72 -1.8 -3.9

*Twenty-four developed and 21 emerging markets Source: MSCI

S&P Dow Jones Indices

Price-to-Dividend earnings PERFORMANCE (euros) PERFORMANCE (U.S.dollars)

yield* ratio* S&P Dow Jones Index Last Daily 52-wk Last Daily 52-wk.

6.35%14.98 Global Select Div 254.43 0.83 14.0

6.71 14.35 Asia/Pacific Select Div 280.86 1.27% -9.0% 329.93 1.13 -5.5

3.29 29.14 S&P Glb Nat Resources 2006.01 0.46 -4.6 2737.94 0.40 -0.8

*Fundamentals are based on data in U.S dollar Footnotes: a-in US dollar b-dividends reinvested c-in local currency Note:All data as of 2 p.m.ET Source: S&P Dow Jones Indices

GLOBAL MARKETS LINEUP

WSJ.com >> Follow the markets throughout the day with updated stock quotes, news and commentary at WSJ.com Also, receive email alerts that summarize the day’s trading in Europe and Asia To sign up, go to WSJ.com/email.

Commodities Prices of futures contracts with the most open interest

EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.MDEX: Bursa Malaysia

Derivatives Berhad; LIFFE: London International Financial Futures Exchange; COMEX: Commodity Exchange; LME: London Metals Exchange;

NYMEX: New York Mercantile Exchange;ICE-EU: ICE Futures Europe *Data as of February 21, 2014

ONE-DAY CHANGE Year Year Commodity Exchange Last price Net Percentage high low

Corn(cents/bu.) CBOT 458.25 -0.75 -0.16% 463.00 414.50

Gold($/troy oz.) COMEX 1336.70 13.10 0.99 1,339.20 1,203.70

Tin($/ton)* LME 23,100.00 100.00 0.43 23,175.00 21,410.00

Lead($/ton)* LME 2,154.00 11.00 0.51 2,242.00 2,097.50

Zinc($/ton)* LME 2,056.00 20.50 1.01 2,110.00 1,964.00

Sources: SIX Financial Information; WSJ Market Data Group

Currencies London close on Feb 24

EUROPE Per euro In euros U.S dollar U.S dollars

1-mo forward 1.0000 1.0000 0.7277 1.3743 3-mos forward 1.0000 1.0000 0.7276 1.3743 6-mos forward 0.9999 1.0001 0.7276 1.3744

Czech Rep koruna-b 27.354 0.0366 19.904 0.0502

Turkey lira 2.9885 0.3346 2.1746 0.4598

U.K pound 0.8259 1.2107 0.6010 1.6639 1-mo forward 0.8261 1.2105 0.6011 1.6636 3-mos forward 0.8265 1.2099 0.6014 1.6628 6-mos forward 0.8271 1.2091 0.6018 1.6616

MIDDLE EAST/AFRICA Bahrain dinar 0.5181 1.9301 0.3770 2.6525

Saudi Arabia riyal 5.1542 0.1940 3.7505 0.2666

South Africa rand 14.8569 0.0673 10.8107 0.0925

United Arab dirham 5.0478 0.1981 3.6731 0.2723

a-floating rate b-financial c-government rate c-commercial rate d-Russian Central Bank rate.

Source: ICAP Plc.

Data Hint at Cooling

Of China’s Properties

SHANGHAI—China’s red-hotproperty market is showing itsstrongest signs yet of a cool-down,

as price growth eases, credit formany developers dries up, andsome start to cut prices at newhousing projects

The potential slowdown could

be welcomed by Beijing, which formore than four years has tried tocool the market to keep the highcost of housing from becoming apolitical and social problem But asharp slowdown could hit the Chi-nese economy just as growth isslowing, and Beijing is looking forways to keep it steady

The latest sign came on day, as new home price accelera-tion in China’s biggest citiesshowed its first slowdown in ayear It follows indications frombanks and developers that lendersare treating the sector with in-creasing caution amid worriesabout possible bad loans On Mon-day, China’s Industrial Bank Co

Mon-confirmed that it stopped issuingsome new loans to property devel-opers

In some markets, developers arealso worried about an oversupply

of homes Developer DoThinkGroup last week said it cut prices

by 12.2% at its North Sea Park ect in the eastern Chinese city ofHangzhou to 15,800 yuan ($2,592)per square meter from 18,000 yuanper square meter It said on itswebsite late last week it starteddiscounting apartments at its 12-tower high-rise project, which hadbeen on sale in phases since April2012

proj-Analysts said the price cuts inHangzhou and in the nearby city ofChangzhou are an indication thatthose places have an oversupply ofhousing, which could spread tolarger cities

“The risk in the property sector

is currently underappreciated, andthe price cuts in Changzhou andHangzhou are worrying signalsworth investor attention,” said No-mura economist Zhiwei Zhang inwritten comments

“A sharp slowdown in propertyinvestment is possible and wouldincrease systemic risks,” Mr Zhangwrote He added that the sector’s

“contribution to GDP growth hasbeen critically important over thepast five years, and the govern-ment may not have the proper pol-icy tools to manage a situationwhere oversupply eventually causesproperty prices to fall, particularly

in third- and fourth-tier cities.”

Shares of property developerswere sharply lower Monday Shares

of China Vanke, the nation’s largestproperty developer by revenue,closed 6.6% lower, and Poly RealEstate Group fell 8.5% The Shang-hai Composite Index ended down1.8%

China has been grappling with aresurgent property market in bigcities that has resisted governmentcurbs aimed at reining in highprices The boom has also contrib-uted to growing supplies of newhomes in smaller cities, raisingconcerns about a sharp drop inprices and deteriorating loan qual-ity

Average new-home prices in 70Chinese cities rose about 9% inJanuary from a year earlier, ac-cording to Wall Street Journal cal-culations based on data released on

Monday by the National Bureau ofStatistics While that figure showsChina’s housing market remainsfrothy, it also marks a drop fromDecember’s 9.2% rise as well as No-vember’s 9.1% rise

The results released Mondaymarked the first slowdown sincehome prices began surging in Janu-ary 2013, after a sluggish 2012

“The oversupply situation has agreater bearing on slowing downthe property market this year Thecurrent liquidity tightness is un-likely to last into the second half,because economic growth isn’t thatgreat,” said Nicole Wong, a prop-erty analyst at CLSA “Property-price growth this year will deceler-ate, and in some cities, there will

Banks have periodically ened lending to developers; the lasttime was in 2010-12 when the gov-ernment worried that easy creditwas helping drive up prices Wor-ries about a slowing economy led

tight-to a loosening in early 2013.Now banks are growing cautiousabout lending to developers, espe-cially those active in smaller citiesthat face an oversupply of housing,and Beijing is concerned about abuildup of debt and unoccupiedhousing

In Changzhou, the developers of

a 21-tower project announced counts last week Prices were re-duced to an average of 7,000 yuanper square meter, with some unitsselling for 5,380 yuan per squaremeter, down from an 11,000-yuanprice tag in December, according todata from property broker SouFunHoldings One of the developers,Agile Property Holdings, didn’t re-spond to requests to comment

dis-—Grace Zhu in Beijing contributed to this article.

Finance Minister Chang ford said Monday the government islooking at raising the top rate of in-come tax to 45% from 40% on indi-viduals whose annual taxable in-come exceeds 10 million NewTaiwan dollars (US$329,161)

Sheng-Additionally, the administration

is considering an increase in thebusiness-tax rate on banks and in-surers to 5%, a level it was at beforethe 2008 financial crisis, from thecurrent 2%

The government is also looking

at reducing tax credits individualscan claim if they are subject to bothincome and dividend taxes

“This is only fair,” Mr Chang said

at a news conference “The ment is trying to establish a concept

govern-of ‘feedback tax,’ and let a small ber of high-earning individuals andsectors give back to the communityand propel the economy forward.”

num-Taiwan is joining other mies in raising taxes on the wealthy

econo-France’s constitutional court in cember approved President FrançoisHollande’s “millionaire tax,” a 75%

De-tax rate on individuals who earnmore than €1 million ($1.37 million)

U.S President Barack Obama is alsoexpected to unveil a proposal to in-crease taxes on high-income earners

when he announces his 2015 budget,The Wall Street Journal reportedThursday

Taipei has been spending morethan it collected since 2009, pumpingdollars into infrastructure projectsand social-welfare programs whilethe economy was weighed down byweak exports

Mr Chang said tax revenue, if allproposed increases kick in, should beboosted by up to NT$90 billion 90billion New Taiwan dollars a year,around 5% of the government’s taxincome last year

The plans come after the ment last Tuesday projected 2.82%

govern-economic growth for this year, thefastest in three years but still belowthe average 3.3% annual growthover the past five years

Improving exports to developedeconomies have led companies inTaiwan to increase investments andraise wages in recent months, al-though a slowing Chinese economyremains a continuing concern

Taiwan has no external debt, butthe central government owes itsown citizens NT$5.192 trillion NewTaiwan dollars (US$171 billion) as ofthe end of January Rolling govern-ment notes and bonds are about36.8% of the average gross domesticproduct over the previous threeyears, according to governmentdata

The island’s public debt level,while already close to its statutoryceiling of 40.6%, is lower than manyAsian countries such as Japan andSingapore Mr Chang said Mondaythe government has no plans toraise the debt limit

BY ARIES POON AND FANNY LIU

Beijing Rejects Modi’s

‘Expansionist’ Comments

BEIJING—China’s Foreign try on Monday played down a long-simmering border dispute with In-dia, brushing off a blunt comment

Minis-by the front-runner to become dia’s next prime minister that Bei-jing is set on territorial expansion

In-Over the weekend, Indian tion leader Narendra Modi traveled

opposi-to an area near the country’s puted Himalayan border with China—

dis-over which the two fought a borderwar in 1962—and warned Beijing toabandon its territorial ambitions Hesaid that China “will have to leavebehind its mind-set of expansion.”

Chinese Foreign Ministry woman Hua Chunying denied thatChina has expansionist tendenciesand described the territorial disputewith India as a complex and sensi-tive matter “left over from history.”

spokes-“I want to say that you can allsee in history China has never ac-tively launched a war of aggression

to invade and occupy one inch ofterritory,” said Ms Hua

The comments by Mr Modi lowed growing apprehension acrossAsia over China’s ambitions Re-gional leaders have criticized Bei-jing for what they view as aggres-sive measures by China to establishcontrol over contested territories,some of which are strategically im-portant and rich in resources

fol-Ms Hua’s comments were mutedcompared with the rhetorical bar-rage her agency has directed in re-cent weeks toward Japan and its

leader, Shinzo Abe While rejecting

Mr Modi’s claims, Ms Hua alsostressed the “joint efforts” taken byboth sides to work through the dis-pute, which is centered on remoteHimalayan borderlands

Observers are watching China’sapproach to relations with India,particularly given recent overtures

by Japan’s government to bolsterties with New Delhi

Following a January meeting tween Mr Abe and Indian PrimeMinister Manmohan Singh, thecountries pledged to more closelywork together for stability andpeace in the face of a changing stra-tegic environment

be-Harsh V Pant, an expert onChina-India relations at King’s Col-lege London, said China has toneddown its rhetoric against India inanticipation of a new Indian govern-ment At the same time, he said,Beijing is concerned about India’snewly forming partnerships with Ja-pan and others in the region

“China might be calculating thatfurther pushing India into the arms

of its regional adversaries might not

be in its best interest, at least in theshort term,” he said

Concerned about a backlashamong smaller Asian nations fearful

of China’s rise, Beijing has pledgedbetter relations with its neighbors,particularly those in Southeast Asia

But growing assertiveness by nese security forces, including anincreasingly capable navy, in dis-puted waters in the South China Seahas further strained ties

The Wall Street Journal

Sources: National Bureau of Statistics;

WSJ calculations

10

–202468

%

2011

Year to yearMonth to month

EUR Inflation-Linked Bond

Funds that invest principally in inflation-linked bonds denominated in or hedged-intothe Euro Ranked on % total return (dividends reinvested) in Euros for one year ending

February 24, 2014

Leading 10 Performers

iBoxx€SovInfLnkEu-InfTRETF Solutions S.A.

NS Duemme SICAV Duemme EURLUX 1.37 1.88 2.85 NS

BondInflationLinkedIAcc International Luxembourg SA

4 Aviva Aviva Investors EURFRA 1.23 1.84 4.65 NS

InvestorsInflationEuroA France

4 Vanguard Vanguard Group EURIRL 1.47 1.70 6.74 4.82

EurznInfl-LnkdBdIdxInsEUR (Ireland) Limited

NS MEAG MEAG Munich Ergo EURDEU 1.71 1.38 3.77 NS

4 FIM Real FIM Varainhoito Oy EURFIN 1.37 1.37 4.23 4.43

4 Lyxor ETF Lyxor EURFRA 1.48 1.33 5.39 4.51

EuroMTSInfLinkInvstGrdA/I International Asset Management

NOTE: Changes in currency rates will affect performance and rankings Source: Morningstar, Ltd KEY: ** 2YR and 5YR performance is annualized 1 Oliver’s Yard, 55-71 City Road

NS-fund not in existence for entire period www.morningstar.co.uk; Email: mediaservice@morningstar.com

tors’ enthusiasm for stocks

European shares also climbed,boosted by the gains in the U.S and

by better-than-expected data on man business confidence The Stoxx

Ger-Europe 600 rose 0.6% to338.19, its highest close

since January 2008

The U.K.’s FTSE 100index added 0.4% to 6865.86, its sev-enth consecutive gain, leaving it atits highest close since December

1999 Germany’s DAX rose 0.5% to9708.94, and France’s CAC 40 ad-

vanced 0.9% to 4419.13

The S&P 500 closed up 11.46points, or 0.6%, at 1847.71, just belowits Jan 15 record closing level of1848.38 It hit an all-time intraday

high of 1858.71 Monday

The rally over the past few weekshas wiped out the S&P 500’s earlieryear-to-date loss of 5.8%, underscor-ing investors’ willingness to shrug off

a bevy of disappointing U.S nomic reports and a mixed fourth-quarter earnings season Many mar-ket watchers have dismissed the badnews as unduly influenced by unusu-ally harsh winter weather and areconfident growth will pick up again

eco-later in the year

One upbeat indication has beenthe recent pickup in gross domesticproduct U.S GDP expanded at a pace

of 3.7% in the final two quarters of

2013, the best second half of a yearsince 2003 Meanwhile, the FederalReserve’s willingness to continuereining in its stimulus program hasbeen viewed by investors as a vote of

confidence in the U.S economy

“The markets should be at an time high because we have an all-time high in GDP and an all-timehigh in earnings, so it’s reflectingthat reality,” said Ron Florance, dep-

all-uty chief investment officer for Wells

Fargo Private Bank, which manages

$170 billion He said he expects morevolatility in stocks this year, though

he still favors corners of the marketthat will benefit from economic ex-pansion, including consumer-discre-tionary, industrial and technology

stocks

The Dow Jones Industrial Averagegained 105.83 points, or 0.7%, to16209.13 The Nasdaq Composite In-dex advanced 29.56 points, or 0.7%,

to 4292.97, its highest close sinceApril 2000

While the S&P 500 finished close

to its all-time high, the Dow remains2.2% away from its record of16576.66 reached Dec 31 The NasdaqComposite Index remains 15% fromits all-time high of 5048.62 reached

at the height of the dot-com bubble

in 2000

In Europe, shares got a lift from

German confidence data The Ifo

in-stitute’s business-confidence index

climbed to 111.3 in February, from anunrevised 110.6 in January, hittingits highest level since July 2011 and

smashing economists’ forecasts

“The rise in February’s GermanIfo survey suggests that the eco-nomic recovery has continued topick up some momentum in theearly months of 2014,” said Jona-than Loynes, chief European econo-

mist at Capital Economics

Yields on Ukraine governmentbonds fell sharply on expectationsthe European Union and other au-thorities will offer a financial-assis-tance package The yield onUkraine’s benchmark dollar-denomi-nated 10-year bond fell by nearly apercentage point to 9.17%, according

to Tradeweb

HSBC Holdings shares fell 2.8%

in London after the bank’s full-yearresults came in short of analyst ex-

pectations

Gold for February deliverygained $14.40 a troy ounce, or 1.1%,

to $1,338.30 on the Comex division

of the New York Mercantile change Nymex crude for April deliv-ery gained 62 cents a barrel, or

Ex-0.6%, to $102.82

—Dan Strumpf contributed to this article.

AND NEELABH CHATURVEDI

MARKET REPORT

India Migrant Workers

Bring Home the Gold

CALICUT, India—More than 50

passengers on a recent Air India

flight from Dubai arrived in this

small city on India’s Malabar Coast

carrying gold bars that customs

of-ficials valued at $2.5 million

The passengers arrived at the

customs line in the dusty airport

here, handed over declaration forms

for the gold and paid the 10% duty,

many saying that they had bought

the bars for a relative’s coming

wedding

The customs officials weren’t

surprised to see the caravan of gold

With normal avenues of import

closed, officials say, jewelers and

traders in this gold-obsessed

coun-try are exploiting a legal loophole

and using Indians who are coming

home after working in other

coun-tries to ferry the precious metal

into India It is an example of what

happens when a government tries

to restrict a much sought-after

commodity

“We’ve seen this sharp

in-crease,” said Peter Abraham,

Cali-cut’s airport director “These people

just don’t have the capacity to buy

all this gold They are just poor

people working in the Middle East

Probably they are acting as

couri-ers.”

In December, passengers

de-clared a total of more than 4,000

pounds of gold at the Calicut

air-port alone, valued at roughly $80

million That is up from 518 pounds

in November and 70 pounds in

Oc-tober

India’s insatiable demand for

gold has been rising over the past

decade The metal is considered the

best form of life savings by the vast

majority of the country’s one-billion

plus people

Very few Indians own stocks or

bonds and close to half don’t even

have a bank account The yellow

metal is also thought to bring both

good fortune and prosperity India’s

gold demand jumped to around 864

metric tons in 2012, up around 30%

from a decade earlier

“India’s demand for gold cannot

simply dry up” because the

govern-ment is blocking imports said

Bachhraj Bemalwa, director in the

All India Gem and Jewelry Trade

Federation “People are crazy for

gold in this country.”

Desperate to shrink a chronic

trade deficit that has threatened to

destabilize the economy, India

started trying to curb gold imports

last year The import tax on gold

was raised to 10% of the value of

the gold from 2% Importers are

also required to re-export at least

20% of the gold they bring into the

country Because of the restrictions,

gold prices in India are out of

whack with those in the rest of theworld A kilogram of gold sells forabout $40,300 on global markets In

India, it is fetching $48,400

But there is a way around thecurbs Indians who have livedabroad for at least six months areallowed to bring home up to 1 kilo-gram, or 2.2 pounds, of gold Theyneed only to pay the 10% duty

There is no re-export requirement

The difference in domestic and ternational gold prices provides anample margin for traders to coverthe cost of airfare and even a littlesomething extra for couriers to

in-bring the metal home

Millions of Indian migrant ers come and go every year fromCalicut and other Indian cities toMiddle East destinations such asDubai Many work as constructionworkers and domestic helpers, oftenearning a monthly salary of about

work-$1,000

“Whole families are walking inwith their pockets stuffed withgold,” said one Calicut customs offi-cial “They all tell us stories aboutneeding the gold for weddings inthe family, but we all know are just

couriers.”

And one after the other, theymeet people just outside the air-port, hand over their gold and move

bring in gold for others, customs ficials said, but most are reluctant

of-to declare the real source of theirgold because they feel like they may

be breaking the law

“So long as it comes within thelegal provisions, then there is nocause of worry for the government,”

said D.S Malik, a Finance Ministryspokesman “If it still continues toincrease, then the government maytake a call at the appropriate time”

about closing the loophole, he said

Meanwhile, outright gold gling is also on the rise, officialssaid India arrested 206 people inthe first half of this fiscal year forsmuggling the yellow metal, com-pared with 38 people a year earlier

smug-The value of gold seized fromsmugglers between April and Octo-ber was $33.6 million, almost dou-ble the $17.3 million seized in thefull financial year to March 31, 2013,according to India’s finance minis-

dis-is like a return to the 1980s, whenIndia was more socialist and re-stricted most imports, creating athriving smuggling trade in every

town

The Indian government maysoon cut its import tax on gold tobetween 6% and 8% from the cur-rent 10%, according to government

and industry officials

While gold supplies through cial channels such as banks havedried up and posed problems forjewelry shops across India, some inCalicut say there is no dearth ofsupply, as long as they don’t ask too

offi-many questions

“People bring in coins and barsall the time,” said Shirish K.P., a 39-year-old jeweler at Calicut’s goldhub of Palayam “We don’t reallyneed to ask where it comes from.”

Global Investors Reverse Course on the Yuan

Bullish bets had buoyed the yuan

since the beginning of the year,

ac-cording to traders and analysts,

driven by hopes that the currency

would keep appreciating as China

continued to promote its

interna-tional use

“There were way too many

struc-tured products [betting on yuan

ap-preciation] bought by private-bank

investors and wealthy individuals,”

and Hong Kong dollar trading at J.P

Morgan Chase & Co “Panic selloffwas triggered when the PBOC keptfixing the yuan at weaker levels.”

Hot-money inflows—defined asnet capital inflows not intended forforeign direct investment—ac-counted for more than $150 billion

of the $433 billion increase inChina’s foreign-exchange reserves in

2013, UBS said That had been

help-ing to push up the yuan

Some reckon, though, thatChina’s long-term policy to let theyuan appreciate won’t change much,given Beijing’s plan to international-

ize its currency

Plus, they figure, the centralbank may be reluctant to let theyuan become too weak because thatcould trigger outflows from inves-tors and multinational companies

Thai Leader Obstinate as Crisis Persists

BANGKOK—Thai Prime Minister

Yingluck Shinawatra vowed again on

Monday not to resign amid

continu-ing pressure from antigovernment

street protests, while the army chief

reiterated that the military has no

plan to intervene to end the political

stalemate

Antigovernment protests here

have entered their fourth month as

demonstrators try to topple Ms

Yingluck’s administration

Protest-ers have recently targeted

compa-nies linked to her family, especially

those associated with her older

brother, telecom tycoon and former

Prime Minister Thaksin Shinawatra

“I have to protect democracy and

do my best to hand it over to the

new government,” Ms Yingluck told

reporters “Whatever happens, I will

perform my duty until the last

min-ute.”

Protesters believe Mr Thaksin,

who was ousted in a military coup

in 2006, still runs the country from

behind the scenes They want to set

up an unelected interim government

to pin back the influence of populist

politicians such as the Shinawatras

Fears of clashes between rival

political groups have raised concern

that Thailand’s armed forces may be

compelled to step in Thailand’s

army chief, though, said Monday

that the military intends to keep out

of the conflict, urging rival factions

to talk through their differences and

find a peaceful solution

“The military doesn’t want to

use force and weapons to fight

against fellow Thai people who have

different political viewpoints,” Gen

Prayuth Chan-ocha said in a

tele-vised broadcast

Gen Prayuth warned that thecountry’s political impasse is wors-ening and is more complex than asimilar conflict in 2010, when sup-porters of Mr Thaksin gathered inBangkok to demand the electionsthat ultimately brought Ms Ying-luck to power

Gen Prayuth urged governmentand security officials to find thepeople responsible for the attacks,some of whom he said were linked

to the violence leading up to the

protest crackdown in 2010 He alsoasked protesters not to overtakestate offices or use weapons againstsecurity officials

Three people—a woman and twoyoung children—were killed anddozens injured in a grenade blastnear a protest in one of the city’sbusiest shopping districts on Sun-day That explosion came after at-tackers fired on a political rally inTrat province, 290 kilometers east

of Bangkok, and threw explosive vices into the crowd, killing a 5-

de-year-old girl

A policeman who was shot in thehead during clashes between the po-lice and protesters last week waspronounced dead on Monday

Twenty people have died andmore than 700 have been injuredsince the protests began

On Monday, a group of ers rallied in front of a cable televi-sion station run by Mr Thaksin’sson, while others entered state com-pounds to pressure officials to aban-don work

protest-There was little police presenceafter the country’s Civil Court lastweek barred the government fromusing force to disperse protesters

Ms Yingluck’s government isalso facing legal threats Thailand’sNational Anti-Corruption Commis-sion last week said it would chargeher with negligence for continuing arice price-support program despitewarnings of financial losses and cor-ruption She was summoned to ap-pear over the charges of alleged ne-glect of duty on Thursday

If Ms Yingluck were foundguilty, she would be suspended fromduty and would face an impeach-ment trial in Thailand’s partiallyelected Senate

Ms Yingluck has repeatedly nied corruption allegations, defend-ing her flagship rice subsidy—whichhas incurred paper losses of up to

$8 billion to date—as being signed to raise incomes in rural ar-eas

de-Leaders of the mass-membership

“Red Shirts” movement, supporters

of the Shinawatra family and theirpolicies, said Sunday that theywould protect Ms Yingluck’s gov-ernment from being overthrown byprotesters, judges or other indepen-dent agencies

After a pro-Thaksin governmentwas removed from power for allegedelection violations, tens of thou-sands of Red Shirt members con-verged in Bangkok in 2010 to de-mand a new vote, occupying much

of the city center for nearly twomonths More than 90 people werekilled in those clashes between pro-testers and security forces, with thevast majority of the dead being RedShirt members

Early Sunday, militants staged acoordinated assault on an Afghanarmy outpost near the area ofShirghaz, in the Ghaziabad district

of eastern Kunar province

In the course of an hourslongbattle, a group of 40 Afghan soldiersfought against insurgents armedwith heavy machine guns and mor-tars, Afghan military officials said

Help was late to arrive: The tackers seeded a nearby road withmines to slow the arrival of a col-umn of reinforcements, and the Af-ghan troops on the ground were un-

at-able to call in time for air supportfrom the U.S.-led coalition, Afghanand coalition officials said

All told, 21 soldiers were killed,three were wounded and four weremissing, officials said

The Afghan army handed overthe bodies of the dead soldiers tofamily members in a somber cere-mony at the country’s national mili-tary hospital Monday morning

The dead, carried in casketsdraped with Afghan flags, wereborne away by honor guards in pa-rade uniform as senior Afghan offi-cials looked on and military bandplayed a funereal march

In a speech, Afghan Defense ister Bismillah Khan Mohammadiblamed “foreign supporters and for-eign intelligence agencies” for help-ing to coordinate the attack, short-hand that Afghan officials often use

Min-to refer Min-to neighboring Pakistan

BY NATHAN HODGE AND HABIB KHAN TOTAKHIL

Soldiers’ caskets are draped with Afghan flags during Monday’s funeral service. As

President Yoweri Museveni signed

into law a controversial antigay bill,

setting the stage for a showdown

with Western donors and rights

ac-tivists opposed to the legislation

Although the bill has won praise

in Uganda, especially among

reli-gious groups, human-rights

activ-ists have decried the measures to

curb what Mr Museveni has called

“abnormal” behavior

Hundreds of jubilant antigay

ac-tivists took to the streets of the

cap-ital, Kampala, on Monday, shortly

af-ter the president signed the bill into

law

The president, who signed the

bill at the State House just outside

Kampala, said it represented a

re-sponse to Western activists who

promoted gay rights in the country

“This law was provoked by

arro-gant and careless Western-based

groups that are fond of coming into

our schools to recruit our young

children,” he said in a televised

speech shortly after signing the bill

“Can somebody be homosexual

purely by nature without nurture?

The answer is: ‘No.’ ”

On first conviction for so-called

homosexual acts, offenders face a

14-year prison sentence

Subse-quent convictions for “aggravated

homosexuality,” which include

ho-mosexual acts committed by an

HIV-positive person, could bring a

penalty of life in prison

The United Nations agency on

HIV/AIDS, UNAIDS, warned last

week that the Ugandan law could

compel homosexuals to shun HIV

testing and treatment to evade rest Only around 30% of the na-tion’s 35 million people have beentested, according to governmentdata

ar-Western donors—including theU.S., Canada and European Union—

have warned that the law couldjeopardize Uganda’s foreign aid,upon which the country relies for atleast $2 billion every year

Maria E Burnett, a senior searcher at Human Rights Watch,said that by signing the bill intolaw, Mr Museveni has dealt a “dra-matic blow” to freedom of expres-sion and association in the country

re-She warned that the legislationwould distract police from more im-portant tasks “By signing this bill,Museveni has not only let down gayUgandans; he has also failed thevery constituencies he claims to beprotecting, including children,” shesaid

Not all opposition has comefrom Western countries South Af-rican retired Archbishop and NobelPrize Laureate Desmond Tutu ap-pealed for Mr Museveni not to signthe bill, “criminalizing acts oflove.”

Mr Museveni, a Christian, thismonth said he would sign the bill,after citing a report from Ugandanmedical experts who said homosex-uality isn’t “genetic but a social be-havior.”

The U.S.-based medical group fectious Diseases Society of Amer-ica said that Mr Museveni was rely-ing on “outdated and discreditedscience” to justify his decision tosign the bill

In-“Current, evidence-based

find-ings show that the law will have asdevastating an impact on publichealth as it will on human rights,”

the group said

Uganda ranks 10th among thecountries with the highest HIV/AIDSprevalence in Africa More than twomillion Ugandans are infected withHIV/AIDS, according to U.N data

The latest move by Uganda forces an already tough stanceamong African governments againsthomosexuality A same-sex relation-ship is considered taboo in manyAfrican societies, and it is illegal inaround two-thirds of countries onthe continent

rein-In some countries such as Sudanand Mauritania, along with south-ern Somalia, homosexual acts arepunishable by death

In January, Nigerian PresidentGoodluck Jonathan signed into law

a bill that makes homosexuality acriminal offense The law hasspurred mass arrests of homosexu-als

A coloniera law in Uganda ready criminalizes homosexuality

al-Lawmakers say the new bill willstrengthen the existing one by in-cluding new prohibitions to bar

“promotion of gay rights and ish anyone who funds or sponsorshomosexuality.”

pun-An original version of the bill troduced in 2009 proposed a maxi-mum penalty of death for homosex-ual acts, though this was withdrawnfollowing international criticism

in-The White House said Mr seveni’s decision to sign the billinto law reflects poorly on thecountry’s commitment to protectinghuman rights

Mu-BY NICHOLAS BARIYO

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T: +44(0)20 7838 7580, F: +44(0) 20 7838 7590, www.horsemancapital.com Horseman EurSelLtd EUR EU EQ GBR 01/31 EUR 349.13 4.3 31.3 29.1 Horseman EurSelLtd USD EU EQ GBR 01/31 USD 349.13 NS NS NS Horseman Glbl Ltd EUR GL EQ CYM 01/31 USD 577.71 NS NS NS Horseman Glbl Ltd USD GL EQ CYM 01/31 USD 577.71 NS NS NS

n HSBC ALTERNATIVE INVESTMENTS LIMITED

T +44 20 7860 3074 F + 44 20 7860 3174 www.hail.hsbc.com HSBC ALTERNATIVE STRATEGY FUND

Special Opp EUR OT OT GGY 12/31 EUR 122.21 14.2 14.2 17.0 Special Opp Inst EUR OT OT GGY 03/31 EUR 88.51 0.7 -0.3 13.3 Special Opp Inst USD OT OT GGY 03/28 USD 123.18 4.2 18.5 10.6 Special Opp USD OT OT GGY 12/31 USD 129.13 14.0 14.0 17.3

n HSBC Portfolio Selection Fund

GH Fund CHF Hdg OT OT GGY 01/31 CHF 125.95 0.5 6.7 6.1

GH Fund EUR Hdg (Non-V) OT OT GGY 01/31 EUR 140.23 0.5 6.3 6.0

GH Fund GBP Hdg OT OT GGY 01/31 GBP 154.96 0.5 6.9 6.7

GH Fund Inst USD OT OT GGY 01/31 USD 133.63 0.6 7.3 7.0

GH FUND S EUR OT OT CYM 01/31 EUR 156.05 0.6 7.7 7.2

n HSBC Trinkaus Investment Managers SA

E-Mail: funds@hsbctrinkaus.lu Telephone: 352 - 47 18471

HSBCTrinkausGoldenOpportunities OT OT LUX 02/21 USD 86.28 23.3 -24.9 -22.3 Prosperity Return Fund A JP BD LUX 12/06 JPY 8577.68 -9.3 -8.4 0.3 Prosperity Return Fund B EU BA LUX 12/06 JPY 9032.12 4.6 11.0 13.2 Prosperity Return Fund C EU BA LUX 12/06 USD 79.01 -12.2 -11.1 -1.0 Prosperity Return Fund D EU BA LUX 12/06 EUR 121.37 -9.0 -8.8 8.1 Renaissance Hgh Grade Bd A EU BA LUX 12/06 JPY 10807.34 3.5 5.1 11.3 Renaissance Hgh Grade Bd B EU BA LUX 12/06 JPY 11130.39 17.9 25.6 23.9 Renaissance Hgh Grade Bd C EU BA LUX 12/06 USD 96.94 -0.9 0.7 8.4 Renaissance Hgh Grade Bd D EU BA LUX 12/06 EUR 102.83 -4.6 -4.1 6.9

n MP ASSET MANAGEMENT INC.

Tel: + 386 1 587 47 77

MP-BALKAN.SI EE EQ SVN 08/12 EUR 19.29 -1.9 -8.4 -10.9 MP-TURKEY.SI OT OT SVN 02/21 EUR 33.35 -7.9 -31.1 -6.8

Paragon Limited USD A EU EQ CYM 12/31 USD NS.00 12.7 12.7 14.2

UK Fund USD A OT OT CYM 04/13 USD 157.94 1.8 NS NS

n PT CIPTADANA ASSET MANAGEMENT

Tel: +6221 25574 883 Fax: +6221 25574 893 Website: www.ciptadana-asset.com

Indonesian Grth Fund GL EQ BMU 02/19 USD 154.09 13.0 -16.5 -10.2

n THE NATIONAL INVESTOR

PO Box 47435, Abu Dhabi, UAE Web:www.tni.ae

MENA Special Sits Fund OT OT BMU 01/31 USD 1127.97 1.1 5.8 6.7 MENA UCITS Fund OT OT IRL 02/13 USD 1372.98 6.0 28.6 18.4 UAE Blue Chip Fund OT OT ARE 02/13 AED 10.69 17.3 84.6 52.3

n YUKI MANAGEMENT & RESEARCH

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YMR-N Growth Fund JP EQ IRL 02/24 JPY 13472.00 -6.4 37.6 28.2

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Yuki Mizuho Jpn Dyn Gro JP EQ IRL 02/24 JPY 5745.00 -6.7 36.4 27.1 Yuki Mizuho Jpn Inc JP EQ IRL 02/24 JPY 10031.00 -4.0 27.0 22.4 Yuki Mizuho Jpn Lg Cap JP EQ IRL 02/24 JPY 6167.00 -8.4 25.1 18.0 Yuki Mizuho Jpn LowP JP EQ IRL 02/24 JPY 18512.00 -6.3 49.8 35.6 Yuki Mizuho Jpn Val Sel AS EQ IRL 02/24 JPY 9158.00 -4.9 51.2 39.7

GH FUND S GBP OT OT CYM 01/31 GBP 163.37 0.6 7.8 7.6

GH Fund S USD OT OT CYM 01/31 USD 183.43 0.6 7.8 7.6

GH Fund USD OT OT GGY 01/31 USD 318.33 0.5 6.5 6.4 Hedge Investments OT OT GGY 08/16 USD 158.48 NS NS 3.6 Leverage GH USD OT OT GGY 01/31 USD 148.62 0.9 11.1 10.7 MultiAdv Arb CHF Hdg OT OT JEY 01/31 CHF 100.74 0.8 3.6 3.9 MultiAdv Arb EUR Hdg OT OT JEY 01/31 EUR 112.34 0.8 4.0 4.2 MultiAdv Arb GBP Hdg OT OT JEY 01/31 GBP 122.34 0.8 4.4 4.7 MultiAdv Arb S EUR OT OT JEY 01/31 EUR 126.73 1.0 5.3 5.6 MultiAdv Arb S GBP OT OT JEY 01/31 GBP 133.92 0.9 5.6 6.0 MultiAdv Arb S USD OT OT JEY 01/31 USD 144.88 0.8 5.2 5.7 MultiAdv Arb USD OT OT JEY 01/31 USD 212.29 0.8 4.1 4.5

n HSBC Uni-folio

Asian AdbantEdge EUR OT EQ JEY 01/31 EUR 97.06 -0.4 4.9 4.0 Asian AdvantEdge OT EQ JEY 01/31 USD 181.80 -0.4 5.0 4.7 Emerg AdvantEdge OT EQ JEY 09/28 USD 151.22 3.4 -2.4 -5.5 Emerg AdvantEdge EUR OT EQ JEY 09/28 EUR 82.99 2.8 -3.0 -5.9 Europ AdvantEdge EUR OT EQ JEY 06/30 EUR 127.84 -3.4 -1.3 2.2 Europ AdvantEdge USD OT EQ JEY 06/30 USD 135.07 2.0 4.3 5.1 Real AdvantEdge EUR OT OT JEY 04/30 EUR 104.69 1.3 -9.5 -1.9 Real AdvantEdge USD OT OT JEY 04/30 USD 105.31 1.5 -8.8 -1.7 Trading AdvantEdge OT OT GGY 01/31 USD 126.86 -2.6 -12.0 -8.6 Trading AdvantEdge EUR OT OT GGY 01/31 EUR 114.61 -2.2 -12.0 -8.6 Trading AdvantEdge GBP OT OT GGY 01/31 GBP 122.37 -2.6 -12.0 -8.5

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Tel: + 376 741 175 Fax: + 376 741 183 Email: meriden@meriden-ipm.com Antanta Combined Fund EE EQ AND 01/24 USD 207.19 -1.3 -19.3 -17.5 Antanta MidCap Fund EE EQ AND 01/24 USD 373.49 3.5 -7.3 -11.6 Meriden Opps Fund GL OT AND 02/05 EUR 22.68 0.0 -11.2 -11.0 Meriden Protective Div GL EQ AND 11/24 EUR NS.00 -2.8 NS NS

n Pictet Funds (Europe) SA, ROUTE DES ACACIAS 60, CH-1211 GENEVA 73

Tel: + 41 (58) 323 3000 Web: www.pictetfunds.com

Pictet-Abs Ret Gl Div-P EUR GL OT LUX 02/21 EUR 113.74 -0.3 -3.7 -0.9 Pictet-Agriculture-P EUR OT OT LUX 02/21 EUR 149.57 -2.1 -1.4 3.1 Pictet-Asian Eq ExJpn-P USD OT OT LUX 02/24 USD 179.60 -2.4 -0.2 1.5 Pictet-Asian Loc Cur Dbt-P USD AS BD LUX 02/24 USD 142.84 0.2 -7.8 -2.2 Pictet-Biotech-P USD OT EQ LUX 02/21 USD 658.29 18.9 70.8 45.8

“Financialinstitutions may beglobal in life, butthey are national indeath.” The words

of Thomas Huertas,

a British banking watchdog, in

2009 sum up the most importantpiece of unfinished regulatorybusiness left over from thefinancial crisis

Unlike most other sectors,finance is a global industryregulated by national authorities

When the failure of a companywith headquarters near TimesSquare, as Lehman BrothersHolding Inc was, can hit traders inLondon, regional banks in Germanyand churches in Australia, domesticregulators have their work cut out

The problem has been that,since the crisis, national agencieshave been even more preoccupiedwith their home turfs, trying tobolster domestic defenses againstbanking crises The urge isunderstandable but it has created acacophony of rules on issues

ranging from capital levels andbankers’ bonuses to the legalstructure of subsidiaries

To critics—and there are many

on Wall Street—the drive to erectnational barriers threatens toBalkanize the banking sector andhit world economic growth byconstraining the free flow ofcapital “While we haven’t seen anew protectionism, we have seenfragmentation in rules and capitalwhich is not useful for

coordinated global growth,” KevinWarsh, who was on the board ofthe Federal Reserve from 2006 to

2011, told me

Last Tuesday marked animportant point in the postcrisisregulatory shakeout, because theFed asserted its right to becomethe world’s banking policeman

What the central bank did is asimportant as what it said

What the Fed did was pass rulesthat require large foreign banks tokeep high levels of capital in theirU.S units The aim is simple: tomake sure that, in times of trouble,overseas lenders don’t rely on U.S

financial help, as some of them did

Not surprisingly, the Fed’sactions elicited outrage in theEuropean Union, which abhors theidea of having U.S regulatorssetting capital levels for EU banks

Michel Barnier, the Europeancommissioner for the internalmarket, called the measuresdiscriminatory and issued a not-so-thinly-veiled threat to retaliate

When I spoke to Mr Tarullo onThursday, he didn’t back down

“The stability of the U.S financialsystem is very important,” he said

“Contrast the 1997-1998 Asianmarket crisis, when the U.S wasvery solid and as a result, thecontagion never could engulf theentire financial system In 2007,when the U.S wasn’t solid, thecontagion did spread.”

The Fed’s ruling encapsulatesboth the worst and the best of the

postcrisis regulatory response Theworst because the rules areunabashedly unilateral andpredicated on the belief, spelledout by Mr Tarullo, that the U.S

can tell other countries what to do

in order to keep the financialsystem safe

That won’t go down well withthe Europeans and other critics,who argue that the U.S abdicatedthat role after failing to police itsown banks in the run-up to thecrisis

Yet, the Fed’s decision cutsthrough the regulatory quicksandsthat have mired the internationalfinancial system since 2008

Instead of the morass ofcommittees, international forumsand tepid communiqués from theGroup of 20 (there was anotherone this past weekend), banks andtheir investors have the prospect ofhaving the Fed and its rules as aglobal model If the Fed is theglobal lender of last resort, itshould also be the global bankingregulator

In itself, that won’t eliminatethe maze of diverging nationalrules but could go a long waytoward simplifying it, even if the

EU retaliates Unless Mr Barnier

imposes wildly differentrestrictions on the European units

of U.S banks, which already have

to observe international capitalrules, the resulting outcome should

be tighter capital and risk controlsacross the two regions

The Fed’s rules—and the EU’sresponse—could help plug twoother holes in the regulatory net:the lack of a system to let a largebank fail without disrupting globalmarkets, and the sluggish efforts

by European banks to bolstercapital levels

According to Chris Brummer, alaw professor at GeorgetownUniversity, the impetus to passforeign-bank rules partly reflects

“the absence of a credible border resolution mechanism, aswell as lingering concerns with therecapitalization efforts in Europe.”Despite the controversy, lastweek’s move by the Fed could bethe start of a race to the top of theregulatory tree After all, these are

cross-“our” banks and our problem

Francesco Guerrera is The Wall Street Journal’s financial editor Write to him at: currentac- count@wsj.com and follow him on Twitter: @guerreraf72

Fed as Top Cop Is Something to Bank On

[ Current Account ]

BY FRANCESCO GUERRERA

Ally of Venezuelan Leader Joins Critics

CARACAS, Venezuela—VenezuelaPresident Nicolás Maduro, buffeted

by protests against his tion, encountered the first criticismfrom within his ruling coalitionMonday when a state governor criti-cized the government’s crackdown

administra-on a growing student movement

José Vielma Mora, a governorfrom the western state of Tachiraand member of the ruling UnitedSocialist Party, told a Caracas radiostation that he opposed how the se-curity forces have cracked down onstudents in that state The proteststhat have roiled the country began

in Tachira three weeks ago, withstudents first demonstrating to pro-test rampant crime The proteststhen spread to cities nationwide, ashundreds of thousands of peoplejoined the rallies to voice anger over

a dysfunctional economy, high tion and corruption

infla-“I am against putting down apeaceful protest with weapons,” thegovernor said in an interview withOnda, the radio station “No one isauthorized to use violence.” Hecharacterized the government’s de-ployment of heavily armed securityforces and the use of Russian Sukhoifighter jets that roared over theTachira capital of San Cristobal asexcessive and unnecessary

Mr Vielma also said he had dered the replacement of a localgeneral from the National Guard forhis rough handling of the protesters

or-The governor later said in a vised interview in Caracas that hestill backed the Socialist Party andremained loyal to Mr Maduro But

tele-he didn’t back away from his

criti-cism of the government’s handling

of the protests in Tachira, wherethey have been particularly largeand unruly

Mr Vielma’s comments are ularly bracing in Venezuela because

partic-he is among tpartic-he first to have joined

Mr Maduro’s predecessor, HugoChávez, when he rose up against thegovernment in a failed 1992 coup Mr

Vielma, a member of the military likeChávez, participated in the attemptedcoup, which was put down but whichmade Chávez a household name Sixyears later, Chávez won office and his

leftist movement was swept intopower

The governor also told the radiostation that he opposed the impris-onment of Leopoldo López, a 42-year-old politician from the affluenteast of Caracas who had surren-dered to authorities Feb 18 after be-ing accused of having incited pro-testers on Feb 12 in clashes that leftthree people dead

“One issue for peace is that all ofthe people who are prisoners for po-litical reasons—send them home,”

Mr Vielma said

The governor stressed that hehadn’t broken with the governmentbut noted that others in the pro-government coalition “are calling

The governor’s comments came

as Attorney General Luisa Ortegaannounced that a total 13 peoplehave died in the protests since theybegan At least one has taken place

In Caracas, antigovernment testers set up barricades across thecity, using tree trunks, trash and de-bris to close off roads Demonstra-tors in other cities also blockedroads, leaving traffic in knots.Demonstrators reeled off a lit-any of complaints about the gov-ernment and said they were trying

pro-to pressure Mr Maduro inpro-to ing Mr López, the oppositionleader Mr López, now being held

releas-in a military jail on the outskirts ofthe capital, has denied committingany crime

“We are barricading the streets

to bring the city to a halt and it hasbeen successful,” said Luisa Malave,

23, a recent university graduate

“We are out here because of all theproblems of the country, the crime,the shortages, the lack of opportu-nity.”

A fellow protester, CarlosFronterotta, 26, who is studying to

be an accountant, said tors were enraged by the govern-ment crackdown That, he said, hasgiven the protests momentum

demonstra-“We have been repressed in away that you can only describe as adictatorship,” he said “We havebeen left blind without media out-lets reporting the news I have neverbeen part of protests before, but Ijust felt like I need to be part of themarches.”

BY KEJAL VYAS AND EZEQUIEL MINAYA

A man passes a burning barricade in Caracas on Monday after more protesters were injured in clashes over the weekend.

Mexican Arrest Shifts Focus to ‘El Mayo’

MEXICO CITY—The capture ofMexico’s most-wanted drug-cartelboss puts the spotlight on Ismael

“El Mayo” Zambada, an allegedpartner in the Sinaloa cartel, ana-lysts and government officials said

Mr Zambada—who analysts said

is known for keeping a low profileand comes from an older generation

of drug capos that was less violentthan newer drug kingpins—was thealleged mentor for Joaquín “ElChapo” Guzmán, who is in a maxi-mum-security prison following hisSaturday arrest in the beach resort

“Mayo is the natural heir,” saidGuillermo Valdés, who served asMexico’s intelligence director from

2007 to 2011 “He’s not on the light, he’s not been chased by themedia, he’s a leader with strong de-cision capabilities, strategic visionand a lower profile than El Chapo.”

spot-Mr Zambada has maintained ahigh degree of autonomy despite hisstrong ties to the Sinaloa cartel and

is closely allied with Juan José “ElAzul” Esparragoza, who is a key ne-gotiator in the drug underworld,said George Grayson, a professor atThe College of William & Mary andexpert on the Mexican drug trade

Mr Esparragoza hasn’t commented

on that characterization

The U.S government indicted Mr

Zambada for drug trafficking in

2003 and has offered $5 million forinformation leading to his arrest,and the Mexican government is ag-gressively pursuing him with helpfrom U.S law-enforcement agencies

The U.S government says Mr

Zambada’s organization is capable

of moving multiton quantities of caine and marijuana and multikilo-gram quantities of heroin

co-One of the keys to Mr Zambada’ssurvival has been his relatively re-strained use of violence and his con-stant efforts to keep the peace, Mr

Grayson said

Newer cartels, including the tas, La Familia and the Knights Tem-plar, have engaged in bloody turf

Ze-wars that have weakened them andleft them no match for the SinaloaCartel

In a 2010 interview in the can newsmagazine Proceso, Mr

Mexi-Zambada portrayed himself as afamily man in love with the country-side He was quoted as saying that

he was saddened over the tion of his son, Vicente, or “El Vicen-tillo,” who is awaiting trial in theU.S

extradi-For the magazine interview, theheavyset Mr Zambada posed for thecover photo wearing a dark baseballcap pulled down to his nose andsporting a thick handlebar mustache

Not all analysts agree that Mr

Zambada is up to the job of fillingthe vacuum created by El Chapo’scapture

“People tend to forget that thisguy is a great-grandfather,” saidAlejandro Hope, an analyst with theMexican Competitiveness Institute

“He’s 66, he’s in poor health, he’s onthe run He’s definitely not the fu-ture of the organization It may beChapo’s sons, but we really don’tknow.”

Mexican President Enrique PeñaNieto’s gain from the capture of Mr

Guzmán may be short-lived if Mr

Zambada’s rule is challenged by ger lieutenants or rivals who may see

youn-in Mr Guzmán’s capture an nity to take over drug routes andstrongholds, some analysts say

opportu-Bruce Bagley, an expert on LatinAmerica and drug trafficking at theUniversity of Miami, said the cap-ture will markedly increase violence

For instance, he said, bloodshedcould rise in strategic cities such asTijuana and Ciudad Juárez Thesecities were once among the most vi-olent in Mexico

“It could be a return to the badold days in Tijuana and CiudadJuárez,” said Mr Bagley “I fully ex-pect there will be fighting for thosecities and the transportation routesthat come up across Mexico fromthe Pacific coast through Guatemala,which will place the organization inconsiderable conflict.”

Mr Bagley said he believes therewill be a sharp increase in violence

in Central America as well, as theimpact from the capture ripples out-ward

“The killing fields in CentralAmerica will get bloodier,” he said

—Santiago Pérez contributed to this article.

BY LAURENCE ILIFF AND JOSÉ DE CÓRDOBA

Marines transported alleged drug boss Joaquín ‘El Chapo’ Guzmán on Saturday.

gov-in 2001, is halfway through servgov-ing

a sentence in Mexico, making itawkward—and legally question-able—to extradite him to the U.S

“I don’t think Mexico wants tokeep the guy,” said a person close

to the administration of MexicanPresident Enrique Peña Nieto “Justimagine how embarrassing it would

be if he escaped again.”

But an official from Mexico’s torney General’s office said Mr.Guzmán should first finish the sen-tence he was serving when he es-caped from prison in 2001 before anextradition request from the U.S.could be considered

At-Mr Guzmán also faces about 20new charges in Mexico, including drugtrafficking, homicide and being amember of an organized crime group,Mexican prosecutors said The prose-cutors said Mr Guzmán on Sundaymade an initial statement at themaximum security prison where he isbeing held

House Homeland Security man Michael McCaul (R., Texas) onSunday called for Mr Guzmán to beextradited to the U.S to stand trial

Chair-—Siobhan Hughes and David Luhnow

HSBC’s 2013 Results

Weaker Than Expected

LONDON—HSBC Holdings PLC

said lower revenue and higher

oper-ating costs weighed on profit

growth last year, adding to concerns

about the bank’s prospects this year

as some of its key markets cool and

capital requirements rise

HSBC said 2013 group revenue

fell to $64.6 billion from $68.3

bil-lion in 2012, while its core operating

expenses rose because of an increase

in the U.K bank levy and higher

liti-gation charges Net profit, though,

rose 15% to $16.2 billion from $14.03

billion, reflecting a drop in bad loans

in 2013 and a drag on 2012 results

from the bank’s $1.9 billion

money-laundering settlement that year

The results fell far short of

ana-lyst expectations, and HSBC shares

fell 2.8% in London The bank’s final

2013 dividend of 19 cents was less

than the 21 cents anticipated by

in-vestors, highlighting a continuing

tug of war between U.K banks and

the country’s banking regulator over

rules on capital

Chief Executive Stuart Gulliver

warned that rising capital

require-ments could hinder the bank’s ability

to ever hit the upper end of its 12%

to 15% return-on-equity target, a

measure of how much profit a

com-pany generates from shareholder

funds He also dashed hopes of a

share buyback in the near term bysaying he didn’t think it would hap-

pen in 2014

HSBC, with $2.7 trillion in assets,

is regarded as one of the world’smost stable banks because of itsstrong capital ratios and exposure torapidly expanding emerging econo-mies Mr Gulliver said on Mondaythe bank has succeeded in becoming

“leaner and simpler” since starting

a restructuring in 2011 that includedexiting from 63 businesses and shed-

ding tens of thousands of jobs

But analysts have been cerned about the bank’s ability to hitits return targets and jump-startrevenue growth in an uncertainglobal economy Return on equity inthe year was 9.2%, up from 8.4% in

con-2012 The bank missed its ciency target, too, and said both fig-ures had been affected by repay-ments to U.K customers who werewrongfully sold insurance on loans

cost-effi-and credit cards

Profit before taxes fell in many ofthe regions where HSBC operates InAsia Pacific excluding Hong Kong,pretax profit slipped to $7.76 billionfrom $10.45 billion Latin Americapretax profit fell to $1.97 billionfrom $2.38 billion The decline wasoffset, though, by a better perform-ance from Europe, where last year’s

$3.41 billion pretax loss swung to a

$1.83 billion gain

In Hong Kong, the bank’s largest

profit generator last year, profit fore taxes rose to $8.09 billion from

be-$7.58 billion

Mr Gulliver said the recent sharpselloffs in some emerging marketsare “a reflection of specific circum-stances rather than a generalizedthreat,” and that the bank remains

“optimistic about the longer-termprospects of emerging markets andespecially the opportunities forHSBC, which will arise from the an-ticipated material expansion inSouth-South trade and capital

flows.”

Meanwhile, there were freshgrumbles from Mr Gulliver andother HSBC executives about U.K

and European Union rules

Mr Gulliver outlined a new payprogram for top executives and trad-ers that will see about 665 peoplecollect new “fixed pay allowances”

that hand them extra cash andshares in addition to their salaries,

as a way around new EuropeanUnion rules limiting annual bonusesfor bank staff to 100% of their fixedpay, or 200% with shareholder ap-

proval

Although it means Mr Gulliver’sfixed pay will rise to around $3.6million a year, mainly in the form ofshares, from $1.875 million now incash, he said “we’d prefer not tohave to do this” but felt compelled

to act in the best interests of holders to attract and retain staff

share-BY MARGOT PATRICK

MARKETS

U.K to Ease Banks’ Entry

LONDON—British regulators arepoised to make it easier for foreignbanks to set up shop in the U.K., areversal of years of intensified su-pervision following the financial cri-

sis

The U.K.’s Prudential RegulationAuthority, the primary overseer ofbanks operating here, plans to un-veil a proposed new approachWednesday to supervising the U.K

arms of foreign banks The overallmessage will be that it will becomeeasier for foreign banks to openlightly regulated arms known asbranches, assuming the banks don’tcollect retail deposits and that theirhome-country regulators aredeemed cooperative, according topeople briefed on the PRA’s plans

The expected shift represents anattempt by the U.K to make London

a more attractive financial hub andthereby increase cross-border trade

The PRA already has started moting an open-door policy to Chi-nese banks looking to do business inLondon The agency’s head, AndrewBailey, visited China last December

pro-to help spread the message, though he has said the new policy

al-isn’t specific to any country

“The message is that the doorsare open so come and play in ourmarket—as long as you have theright sort of business model anddon’t want to do something thatcould bring the system down,” saidBob Penn, a partner at Allen &

Overy LLP “In part this looks like apolitical rear-guard action to putLondon back on the agenda for in-ternational organizations who may

have felt snubbed in the past.”

The PRA plans to outline the newapproach in a consultation paperWednesday that will delve into de-tails such as specific activities thatwill be tolerated within the U.K

branches of foreign banks Existingbranches of banks from outside theEuropean Economic Area may have

to meet new requirements to tinue operating in their currentform if the PRA’s proposed rules are

con-adopted

The planned shift is remarkablebecause of the aggressive way inwhich the U.K has cracked down onforeign-bank branches following the

Assets at local subsidiaries of

for-eign banks such as Citigroup Inc.,

UBS AG and J.P Morgan Chase &

Co account for another £1 trillion

Local subsidiaries are supervised

by the PRA like domestic banks andmust have their own liquidity andcapital Bank branches, by contrast,are more lightly regulated offshoots

of a foreign bank, overseen rily by the home-country regulator

prima-Those branches have causedheartburn for the U.K in the recentpast The government is still en-gaged in legal action with Icelandover a £2.35 billion bailout of de-positors in the local branch of Ice-land’s Landsbanki in 2008 The PRAalso encountered concern over thehealth of Cypriot banks during theeuro-zone debt crisis, successfullypressuring their U.K branches to

convert into subsidiaries

Since the postcrisis crackdown,the PRA has continued to press for-eign banks to move more of theiractivities into local subsidiaries Italso has taken a tougher line on let-ting subsidiaries rely on their par-

ents for financial help

For example, a liquidity line tended to U.K.-incorporated UBSLtd by its Swiss parent, UBS AG,was cut off by the PRA two weeksago as part of an agreement be-tween the regulator and the bank to

ex-make the entity self-sufficient

The PRA’s new stance stands incontrast to the U.S., where the Fed-eral Reserve approved new ruleslast week requiring large foreignbanks to hold more capital locally

Fed officials said the move is tant to fortify the U.S financial sys-tem, but foreign banks criticized it

impor-as a step toward further tion of the global financial industry

Balkaniza-“If you have a subsidiary youhave local capital and local liquidityand the capacity to carry out yourown domestic regulation effec-tively,” said Clifford Smout, a for-mer Bank of England official “If it’s

a branch, you are completely reliant

on the supervision of another partybecause the capital and the liquidity

of the firm is available for globalcreditors.”

BY MARGOT PATRICK

Weighed Down

Analysts are concerned about HSBC’s ability to hit its return targets amid an uncertain global economy

The Wall Street Journal Sources: WSJ Market Data Group (share price); the company (return on equity, ratios)

*Measures profits on shareholder funds †Total operating expenses divided by net operating income, before bad loan charges

%20

051015

65%

505560

RBS ‘Makes the Tea’ for Clients

Deutsche Bank Will Cut Its U.S Assets

FRANKFURT—Deutsche Bank

AG plans to reduce its U.S.-based sets by around a quarter to $300billion in the coming years to com-ply with new rules for foreignbanks’ subsidiaries published by the

as-U.S Federal Reserve last week

Germany’s largest lender aims toreassign activities from the U.S toother regions such as Europe or Asia,

a spokesman for the bank told TheWall Street Journal, confirming state-ments Chief Financial Officer StefanKrause made to the Financial Times

Under the Fed’s new rules, eign banks with U.S assets greaterthan $50 billion will have to main-tain more loss-absorbing capital andhold a minimum 4% of total assets

for-in equity capital

Analysts have said that Deutsche

Bank is the foreign bank most

af-fected by the rule According to

Citi-group analysts, Deutsche Bank could

face a capital shortfall of roughly $7billion under the new rules

Mr Krause said the bank is dent it will be able to meet new re-quirements on capital and the use ofleverage Further, he said, a reduc-tion in the bank’s U.S assetsshouldn’t be viewed as a pullback

confi-from the U.S

The bank’s U.S operations clude its Mexican arm as well as itsrepo business located in Frankfurtand Tokyo A spokesman confirmedthe bank plans to reassign these ac-tivities to its German or Asian oper-ations The lender also is set to con-vert some of its internal fundinglines for the U.S into hybrid capital,

in-a finin-ancing instrument thin-at is in-matically transformed into equity in

auto-times of stress

BY ISABEL GOMEZ AND EYK HENNING

bank, introducing new services and

shuffling the unit’s management,

ac-cording to a person close to the

company

It is also trying to drum up

de-mand for loans The bank sent

hun-dreds of relationship bankers, who

work with specific clients, to deliver

letters to small businesses offering

them credit Since 2011, RBS also

sends corporate bankers to work in

customers’ businesses The aim is

for bankers to see things from a

customer’s perspective and better

understand the businesses that they

lend to

Mr Eady, who is relationship

di-rector at RBS, has worked in about

nine different businesses, including

a supermarket He says he enjoys

spending days with clients

Some-times his new co-workers worry

that he is spying on their business

about bankers Mr Eady says he justgrins and gets on with the job

The roles are varied Ian Cowie,chief executive of RBS’s businessand commercial banking, spent aday collecting trash in East London

A colleague in Northern Englandchased chickens around a farm

On a recent day, Mr Eady went

to visit North London food

whole-saler Cyprofood A few months

ear-lier, Mr Eady had spent a day ing unpack vegetables and carryfood around the airy warehouse

help-The day was productive: He learnedabout Cyprofood’s booming water-melon business But things nearlytook a turn for the worse when alarge crate of feta cheese wobbledperilously as Mr Eady unloaded it

A colleague righted the crate, ing it from falling

keep-RBS lent Cyprofood money to

ex-pand over the past five years Ithasn’t always been easy, says CetinAgcagul, Cyprofood’s managing di-rector Despite the company morethan quadrupling its turnover overthe past few years, the bank wasn’talways eager to lend “There weretimes when we didn’t get what wewere expecting,” says Mr Agcagul

He didn’t say how much the bankhad lent the company

The 29-year-old businessmanwas surprised to hear that Mr Eadyspent a day working in the ware-house “Did we pay him for thatday?” he said turning to his financedirector, and, of course, the answer

was no

Mr Agcagul praised Mr Eady forhis efforts to better understand hisbusiness, telling him: “You see

things like us.”

—Jason Douglas contributed to this article.

UPHEAVAL IN UKRAINE

Former Leader Gets a Chilly Welcome

KIEV, Ukraine—Yulia

Tymosh-enko was Ukraine’s most prominent

political prisoner, so it seemed a

perfect political moment when she

was suddenly released from prison

on Saturday and sped to Kiev’s main

square

As Ms Tymoshenko, 53 years

old, headed to the square to address

the crowds who had just ousted the

president, her welcome was hardly

one befitting a hero

“Yulia Vladimirovna, remember

who made this revolution,” a

volun-teer security officer admonished her

through the window of her car

Ms Tymoshenko’s sharp tongue

and political savvy made her the

face of Ukraine’s 2004 revolution

But during her two stints as prime

minister the economy stumbled and

she faced allegations of graft and

mismanagement

She denied the allegations, but

her rival, Viktor Yanukovych, was

elected president

For many of the thousands of

protesters who spent the past three

months on Kiev’s main square

try-ing to drive Mr Yanukovych from

office, memories of Ms

Tymosh-enko’s tenure were fresh, and they

still taint many of the veteran

politi-cians who now seek to lead Ukraine

A crowd of around one hundred

people gathered outside Parliament

on Sunday to demand a new crop ofleaders

“We all understand that cians] are the same Swapping onefor the other is dangerous,” saidTetyana Karmaiska, a 52-year-oldcompany director who held a posterwith an arrow pointing from Ms Ty-moshenko to Mr Yanukovych andthe phrase: “People died for that.”

[politi-“We need new people in power

We need a total renewal,” said Inna

Andriyishina, a 37-year-old tant Speaking to the thousands onthe central square here Saturday,

consul-Ms Tymoshenko gave a tically fiery speech, calling on Mr

characteris-Yanukovych to come to the square

to face the people

The half-hour speech, whichcame minutes after an open-air fu-neral service for protesters killed inthe unrest, struck some as being atodds with the somberness of the oc-casion, even when she appeared to

choke back tears to speak of menwho died behind flimsy shields

Aides said Ms Tymoshenko, whouses a wheelchair because of backpain and had indicated she wouldtravel abroad for medical treatment,has changed her mind

On Sunday, she said she wouldn’tput herself forward as a candidatefor prime minister

Still, there were signs she waspreparing a political comeback Herlongtime right-hand man, OleksandrTurchynov, was elected speaker ofparliament and confirmed as actingpresident over the weekend Ms Ty-moshenko spoke by phone with Ger-man Chancellor Angela Merkel, EUenlargement commissioner StefanFüle and Senator John McCain, herparty said

Ms Tymoshenko’s style sents the kind of politics that pro-testers were campaigning againstduring months of demonstrations

repre-She was a wealthy woman in the 1990s who ran UnitedEnergy Systems of Ukraine, a whole-sale supplier of Russian gas toUkrainian companies She shot toprominence as a leader of the 2004Orange Revolution, a street protestthat thwarted Mr Yanukovych’s firstrun at the presidency

business-With her firebrand speeches andblond peasant braid, she became thedarling of the crowds But the pro-

Western government, with ViktorYushchenko as president and Ms

Tymoshenko as prime minister, soonfell into bickering, hampering prom-ised reforms to the country’s scle-rotic economy and corrupted admin-istration In 2009, she negotiatedwith Mr Yanukovych to form a co-alition government under which hewould be president, elected by par-liament, and she would be primeminister Mr Yanukovych pulled out

of the agreement at the last minute

At the start of 2010, when cow cut the flow of gas to Ukraineover a payment dispute, she flew toRussia to meet with President Vladi-mir Putin, cementing a relationshipthat protesters now view with sus-picion

Mos-After losing a close presidentialrunoff to Mr Yanukovych, she wasjailed for seven years in 2011 oncharges of abuse of office in connec-tion with the Russian gas deal

During her 2½ years in prisonher popularity waned and she waseclipsed by other opposition lead-ers, including boxer-turned politi-cian Vitali Klitschko

Despite her powerful speeches,energetic campaigning, and steelydetermination, some say her timemay have passed “It’s probably not

a good thing if she runs,” said one

of her advisers “But who’s going totell her?”

For ‘Mass Murder’

day, where he stayed in a privately

run sanitarium, avoiding state-run

facilities and his presidential dacha

Upon learning that the acting

parliament had ousted him from the

presidency, Mr Yanukovych hastily

left the sanitarium and headed to a

regional airport but never arrived

there, Mr Avakov said Instead, he

decided to stay at a private home

with his security detail He then

Continued from first page asked his guards whether they

wanted to leave or stay with him,and some left with their weapons

Mr Yanukovych and the ing guards then piled into three carsand drove away, switching off allforms of communication His cur-rent whereabouts were still un-known as of late Monday

remain-The transformation of Mr kovych from the country’s electedleader to a hounded fugitive hasbeen stunning in its speed after hisloyalists in parliament broke ranks

Yanu-in response to police firYanu-ing on testers in Kiev on Thursday Onemember of his political party called

pro-an opposition leader, urging a vote

to end the violence

“We’re under sniper fire Wecan’t get there,” replied the opposi-tion leader, deputy parliamentspeaker Ruslan Koshulinskiy, ac-cording to a person who heard thecomments As darkness fell and theshooting ebbed, opposition lawmak-ers made it to the legislature, pro-posing a proclamation ordering se-curity services to stop firing onprotesters and withdraw

At about 10 p.m., the vote passed

by a slim majority Its effect wasenormous and immediate Policewho didn’t want to shoot protestersnow had official sanction to backoff

The episode shows how Mr

Yanukovych was abandoned indroves by his closest political allies,driving him out of power and intohiding On Sunday, Ukraine’s parlia-ment confirmed an interim leader: anew parliament speaker injured lastweek by a police stun grenade

Mr Yanukovych’s political party

on Sunday condemned his “cowardlyflight,” declaring the pro-Russianpresident personally responsible forUkraine’s ills, including “the loss ofhuman life, an empty treasury, huge

debts, shame in the eyes of theUkrainian people and the world.”

In Kharkiv, a city near the sian border where Mr Yanukovychnever showed up to speak to agroup of supporters, even longtimeallies are keeping their distance

Rus-“He has passed into history now,”

said Gennady Kernes, Kharkiv’smayor “I don’t know where he is Idon’t go to the sauna with him.”

Like many autocratic ments, Mr Yanukovych’s was morefragile than it seemed While some

govern-of Ukraine’s regions saw clashesSunday, fears that his supporterscould spark an instant civil war ap-peared to fade Officials in Moscowappeared dumbfounded by his quickcollapse, calling back Russia’s am-bassador from Kiev late Sunday for

“consultations.”

When police began killing dozens

of protester with live ammunition

on Thursday, many lawmakers gan to feel pressured to do some-thing because the EU finally indi-

be-cated it was ready to join the U.S inimposing sanctions on Ukrainian of-ficials deemed responsible for theviolence

Thursday night’s vote was “a bicon,” said Mykola Rudkovskiy, amember of Mr Yanukovych’s Party

Ru-of Regions “People understood thesituation could swing in any direc-tion, including a command to spe-cial forces to destroy thousands ofpeople and sink the whole country.”

At first, a fistfight broke outwhen a pro-government deputy saidthe vote should be delayed until Fri-day Lawmakers in Mr Yanukovych’sparty said they were being threat-ened in text messages to oppose awithdrawal The mood calmed whenanother lawmaker proposed a min-ute of silence in honor of protestersand police killed in the violence

Parliament’s vote to stop firing

on protesters squeezed Mr ovych, who was locked in negotia-tions Thursday night with opposi-tion leaders and European foreign

Yanuk-ministers who came to Kiev to forcethe two sides into a deal In a mara-thon session at the Ukrainian presi-dent’s administrative offices in thecapital, diplomats threatened bothsides

Mr Yanukovych was told hewould be a world-wide outcast ifthere was more violence Oppositionleaders were told they risked morebloodletting

Parliament then swung back intomotion In quick-fire votes, the op-position and the ruling party voted

to roll back constitutional changesthat handed the president morepowers Protesters received am-nesty Lawmakers voted by a hugemajority to fire Mr Zakharchenko,the top enforcer for Mr Yanuk-ovych, and in favor of a law freeingformer Prime Minister Yulia Ty-moshenko, a bitter political foe of

Mr Yanukovych She was jailed in2011

—Katya Gorchinskaya contributed

to this article.

Activists paid respects to protesters killed in clashes in Kiev last week after police were armed with combat weapons.

Tug of War

The European Union and Russia

have vied for influence in Ukraine

in recent decades

 Aug 24, 1991 Ukraine declares

independence from Soviet Union.

 January 2005 Viktor

Yushchenko defeats Viktor

Yanukovych for the presidency

after pro-democracy protests

known as the Orange Revolution

force a rerun of disputed vote.

 March 2010 Yanukovych’s party

forms new ruling coalition.

 Feb 20, 2013 The EU and

Ukraine agree on a trade and

political-association pact.

 Nov 21, 2013 Yanukovych pulls

out of planned EU pact in favor of

closer ties with Russia, provoking

pro-Europe Ukrainians to protest.

Source: Staff reports

High Stakes in Mobile After Company Pulls Plug on PC Business

Sony Corp is rolling out a new

smartphone loaded with its mostadvanced camera and audio technol-ogies But will the cutting-edge,high-tech features really help thephone sell?

That question is a key one forSony as well as a host of bigger ri-

vals like Samsung Electronics Co.,

which are showing premium phone models at the Mobile WorldCongress in Barcelona this week

smart-The makers are hoping to woo sumers to top-end phones with big-ger displays and better cameras, as

con-a host of new rivcon-als spurs tion and pushes prices of cheapermodels below $100

competi-The stakes are even higher forSony, which earlier this month said

it would pull the plug on its itable personal-computer business,effectively doubling down on smart-phones and tablet computers SonyChief Executive Kazuo Hirai is bank-ing on mobile devices to drive prof-its in its struggling electronics busi-ness, as well as to restore its fadingreputation for cool gadgets

unprof-Results so far are mixed: Sales atSony’s mobile-products segment,which included PCs, jumped 40%

from a year earlier and made upabout 22% of total revenue duringthe nine months through December

Yet Sony also reduced its phone sales target by 4.8% for theyear through March, citing slower-than-expected demand in China andEurope

smart-Sony handsets now have a 3.8%

global share by shipments, whileSamsung and Apple Inc togetherhold a 47% share, according to re-search firm IDC Sony sells morethan half of its handsets in Japanand Europe, while its presence istiny in the U.S with just one carrierdistributing its phones Its marketshare in China last year was just0.5%, according to Canalys, anotherresearch firm

Sony’s new flagship phone—theXperia Z2, unveiled Monday in Bar-celona—comes with a larger andbrighter 5.2-inch display, curvededges and a slimmer body than theprevious model With two speakersand a noise-canceling headset, Sonysays users should get quality sound,even on noisy trains and buzzing

planes Sony also showed off itsslick new Xperia Z2 tablet, which itclaims to be the slimmest and light-est waterproof tablet with a 10.1-inch display

But the new phone’s highlight is acamera that uses an ultrahigh-defini-tion technology known as 4K for itshorizontal resolution of roughly4,000 pixels

Sony and other electronics ers like Samsung are trumpeting 4K

mak-as the key ingredient in their generation television sets

next-In Sony’s new Xperia Z2, 4Kvideo lets users capture and watchdetails normally too small to see,even though the handset displayuses a lower resolution, said KichiroKurozumi, vice president overseeingXperia’s product planning, in an in-terview in Tokyo ahead of the mo-bile show

But the Z2 isn’t the only phonethat takes video in 4K: Samsung’sGalaxy Note 3—a phablet that is big-ger than a smartphone but not quite

a tablet—launched in Septemberalso had 4K video capabilities; LG’snewest phablet with a 5.9-inch dis-play, the LG G Pro 2, unveiled Sun-day, boasts 4K video capture too

And consumers don’t alwaysgravitate toward high-end features

In 2003, Sony released a high-endhome audio and video brand calledQualia, which failed to gain tractionand was shut down after threeyears Instead, it was the lower-fi-delity Apple iPod that became amegahit

Even Samsung’s recent attempts

to spur sales with everything fromcurved-screen smartphones to theGalaxy Gear smartwatch haven’tdone much to spark demand

Analysts also say many usersmay not want to shoot high-resolu-tion video on their phones, because

it eats up battery life Others may

not be able to see the difference inresolution quality on such a smalldevice

“Innovation on the smartphoneitself has pretty much reached a pla-teau,” said IDC research managerRamon Llamas “A lot of times, theexperiences tend to look the same.”

To hedge their bets, premiumhandset makers are introducingcheaper models Sony is launching

in April a more affordable modelcalled Xperia M2 with a 4.8-inchscreen and high-speed network ca-pabilities

But the low-end market is fastbecoming crowded with Chinese andother Asian brands offering cheapdevices that work on speedy, fourth-generation cellular networks Com-

petition will get fiercer after Lenovo

Group Ltd completes its purchase

of Google Inc.’s Motorola handsetbusiness

“The scary part about phones is that a hit product can in-stantly flip the industry,” Sony’s Mr

smart-Kurozumi said “Both Lenovo andMotorola have the ability to comeout with such a product so it is athreat for us.”

The Taiwanese tionally seen as a high-end phonemaker—has pledged that lower-priced handsets would be a majorfocus this year, and that it would

company—tradi-venture into price bands that it hadpreviously considered too low, as itstruggles to compete with low-costhandsets from a raft of Chinesephone makers

HTC Chief Executive Peter Chousaid the new HTC Desire 816 is apart of this effort, although thecompany didn’t immediately spec-ify the phone’s retail price “There’s

a huge opportunity in the middle ofthe market People are looking for

affordable smartphones that don’tcompromise,” Mr Chou said

The Android-running Desire 816sports a 5.5-inch screen, fourth-generation network capability and

a quad-core processor It is set tostart shipping next month Thecompany hasn’t given up on high-end phones and said it would un-veil the successor to its HTC Oneflagship device at an event in NewYork on March 25

BY SVEN GRUNDBERG

MOBILE WORLD CONGRESS

Nokia Takes Wraps Off Android Phone

BARCELONA—Nokia Corp took

the wraps off its low-end Nokia Xsmartphone, the first in a new line

of phones running Google’s

An-droid software designed to boostthe Finnish company’s eroding po-sition in developing markets

Priced at €89 ($122) excludingcarrier subsidies and taxes, thesmartphone hits an attractive pric-ing level in places such as India,Indonesia and Russia, and fills ahole in Nokia’s product portfolio

Nokia also released two otherAndroid-powered devices, theNokia X+, priced at €99, and the

XL, with a larger screen, at €109

Amid the rise in popularity ofthe Android operating system,thousands of developers are mak-ing third-party software for theplatform The main benefit of theNokia X range is that they are able

to run these apps, said Timo kanen, the head of Nokia’s mobilephones unit

Toik-Still, betting on one of its maincompetitors’ software is a riskymove for the Finnish device maker,which in early 2011 actively optedout of working together withGoogle Inc.—whose Android OSpowers popular phones made by

Nokia competitors like Samsung

Electronics Co.—in favor of

back-ing Microsoft Corp.’s smartphone

push

The phone also comes weeksahead of the expected closure ofMicrosoft’s $7 billion takeover ofNokia’s phone business

“Three years ago, this wouldhave been the perfect move, butnot anymore,” said Francisco Je-ronimo, an analyst with Interna-

tional Data Corp “What if theseAndroids are a hit, and Nokiastarts to ship tens of millions ofthem? What message will that givedevelopers, consumers and inves-tors about the viability of the Win-dows Phone platform?”

With Windows Phone sales off

to a shaky start, Nokia’s board ofdirectors initiated a review of itscollaboration with Microsoft andbegan weighing its options in thesummer of 2012 Engineers atNokia had been working on the An-droid phone strategy long beforeMicrosoft struck its deal to buyNokia’s handset business last Sep-tember But Microsoft has knownabout the push, Mr Toikkanensaid

In an update on its official blog

on Monday, Frank X Shaw, soft’s head of communications,wrote that Microsoft is “pleased”

Micro-to see Microsoft services duced on Nokia’s new Android de-vices

intro-He added however, that soft and Nokia are still operating

Micro-as “independent companies” untilthe deal closes, and that Microsoftremains committed to its WindowsPhone strategy

While giving Nokia yet anothersmartphone platform to manage,the new Android phones will fill agap in the company’s product port-folio The Finnish company hasfaced increasing difficulties com-peting in developing markets,where consumers and manufactur-ers have embraced Android.Globally, Android was installed

on 80% of smartphones sold lastyear In places such as India,Android has more than 90% mar-ket share

Sony

31%

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UPHEAVAL IN UKRAINE

Ex-Leader Seeks Refuge

In Pro-Russia Bastion

SIMFEROPOL, Ukraine—Theysigned up one-by-one, hundreds ofRussian-speaking men pledging torepel the ascendant pro-Europe up-rising in Kiev from any attempt toinfiltrate their city

They handed over their phone numbers for registration anddivided into brigades Commanders

cell-in fatigues cell-inspected the assembledtroops—a ragtag militia of mostlymiddle-aged men

This is the capital of Crimea, apeninsula dominated by ethnic Rus-sians that juts out from Ukraine’ssouth into the Black Sea The region

is the last bastion of Ukraine largelyimpervious to the uprising on Kiev’sIndependence Square

Now, it is also the focus of thenew acting government’s hunt forousted President Viktor Yanukovych,who is believed to have headed toCrimea after leaving his native city

of Donetsk on Saturday night in anunescorted motorcade

Arsen Avakov, the acting head ofUkraine’s Interior Ministry, said onhis Facebook page Monday that thedeposed president purposely es-chewed government residences inthe region and instead went to aprivate sanatorium in Crimea

Upon learning that the actingParliament had ousted him from thepresidency, Mr Yanukovych at-tempted to flee to the local airportnear Sevastopol, but he never made

it there, according to Mr Avakov,who said officials from Kiev were al-ready on hand at the facility

Instead, Mr Yanukovych stoppedoff on Sunday night at a private res-idence near the Black Sea port ofBalaclava, Mr Avakov said, wherehis convoy huddled

“He gathered his guards andsaid: ‘Who is going to forge on with

me and who is going to remainhere,’ ” Mr Avakov wrote “Some ofhis security officials expressed a de-sire to ‘stay here.’ ” Some decided to

stay behind

In the early hours of Monday,

Mr Yanukovych bade them farewelland signed a letter releasing themfrom their duty to protect him, ascanned version of which Mr Ava-kov posted on Facebook The re-leased guards collected the weaponsthat officially belong to the govern-ment so they can be handed over tothe authorities, Mr Avakov said

A smaller group boarded threecars with Mr Yanukovych at night,turned off all their wireless devices

to avoid tracking, and took off in anunidentified direction, Mr Avakovsaid, noting that the toppled presi-dent’s precise whereabouts is un-known Mr Avakov said the deposedpresident was traveling with AndreiKlyuyev, who was the head of hispresidential administration

Balaklava, a somewhat rundownport now part of the city of Sevasto-pol, served as a vacation destinationfor the Russian Empire’s elite in thelate 19th and early 20th centuries

Locals there are somewhat tomed to talk of Mr Yanukovych

accus-A company connected to his dest son, Oleksandr, restored a se-ries of historical waterfronthomes—their white exteriors andgreen roofs look pristine from theoutside but remain empty on the in-side—and also set up a privateyacht club, according to AnatolyKuklenko, the club’s dispatcher

el-A three-story maroon and whiteyacht named the Bandito that manylocals think belongs to the Yanuk-ovych family showed up in the har-bor a few years back but hasn’t ap-peared in the port since, Mr

Kuklenko recalled Some Ukrainianshave speculated that Mr Yanuk-ovych could leave Crimea by boat

“I don’t have enough pockets forall the notes people give me withaddresses of where Yanukovychcould be,” Mr Avakov told reportersduring a briefing at parliament inKiev on Monday, when asked if thetoppled president could be fleeing

the country on a boat owned by hisson from the Balaklava dock in Cri-mea

Since Mr Avakov mentioned thefugitive president’s alleged stopover

in the port, locals there have beenjoking about his whereabouts

“He sailed away, kids!” a blondwoman smoking a cigarette and sell-ing trinkets on the seashore calledout as people walked past on Sun-day “We all said goodbye.”

Most, however, said they hadseen no sign of a motorcade or Mr

Yanukovych

Crimea is an example of the ficulties Ukraine faces as it looks toform a united future The peninsulabelonged to Russia until 1954, whenSoviet authorities transferred theregion to the then-Soviet republic ofUkraine

dif-It remained part of independentUkraine after the Soviet Union’s col-lapse in 1991, but it is still home toRussia’s Black Sea naval fleet, which

is based in the Russian-speakingcity of Sevastopol

Today, more than half the lation of about two million is ethnicRussians, many of them hostile tothe Ukrainian nationalists from thecountry’s west who played a criticalrole in Kiev’s protest movement

popu-Even half a century later, many inneighboring Russia lament losingCrimea, which some still describe asSoviet leader Nikita Khrushchev’s

“present” to his Ukrainian land In a recent poll, more than half

home-of Russians said they consider mea part of Russia

Cri-Though some in Crimea havecalled for Russia to rescue themfrom the clutches of the opposition

in Kiev, the idea of Crimea rejoiningRussia or seceding divides locals,even ethnic Russians

“I want Crimea to be more pendent,” said 60-year-old doctorVladimir Rodionov, who signed up

inde-to join the militia’s medical brigade

But Mr Rodionov, who describedKiev protesters as bandits, says he

doesn’t want Crimea to be ruled byPresident Vladimir Putin

Not everyone in Crimea isagainst the protesters The CrimeanTatars, who account for more than10% of the population, have beenvigorous supporters of the protestmovement

The Crimean Tatars recall their

deportation from the peninsula toCentral Asia under Stalin, a tragedythey associate with Moscow’s rule,said Server Abdulayev, a 45-year-oldbusinessman who came to the rallyfrom Stary Krym

“There are other people here,” hesaid “The Crimean Tatars, the Ukrai-nians We support our own way.”

BY PAUL SONNE

Pro-Russian Ukrainian activists gathered Sunday in Crimea’s capital of Simferopol.

EU, U.S Scramble to Pull Together Package for Ukraine

value, slashing the budget deficitand cutting huge government subsi-dies that keep energy prices con-tained

Standard & Poor’s Ratings ices estimates that the government,the central bank and state-ownedgas company Naftogaz must spend

Serv-$13 billion to service rency debt this year

foreign-cur-Europe and the U.S face the riskthat Russia could make matters farworse by raising the price it chargesUkraine for natural gas Such amove would siphon more precioushard currency reserves out of thecountry

“It might well be that a lot of theburden could fall on us,” a euro-zone finance official said

Ukraine’s foreign currency serves have been falling steadily inrecent months, to $17.8 billion at thestart of February from $20 billion atthe beginning of this year That wasbefore the Ukrainian crisis turneddeadly, as government securityforces killed scores of protesterscamped out in Kiev’s Maidan square

re-Catherine Ashton, the EU’s eign affairs chief, was in the Ukrai-

for-Continued from first page

nian capital on Monday to discusspossible political and economic as-sistance Senior finance ministry of-ficials from the 28 EU nations arescheduled to meet in Brussels onThursday, where the situation in

Ukraine will likely be discussed, ficials said

Over the weekend, European ficials said the bloc could providemore than €20 billion ($27.5 bil-lion.) But that would be long-term

of-aid tied to an IMF deal that would

be paid out only over the next sevenyears Ukraine’s needs are more im-mediate

Moscow has frozen paymentsfrom a $15-billion loan package itpledged to Ukraine last year, afterdisbursing $5 billion European andU.S officials hoped that Russiawould join an international confer-ence of donors that would put to-gether an aid package once a newUkrainian government is in place

“It would be extremely desirable

if the direct neighbor also utes to an aid package,” said GernotErler, the German government’spoint man on Eastern Europe issues

contrib-Without Russian involvement,the politics of a bailout organized

by Europe and the U.S would come more complicated, since a bigchunk of the bailout money would

be-go toward paying Ukraine’s gas bills

€610 million, for 2014 only

Another potential move, a

euro-zone finance ministry official said,would be for the European CentralBank and other central banks, to set

up swap lines with the NationalBank of Ukraine, giving the countryaccess to desperately needed foreigncurrency But a euro-zone officialsaid that a swap line for Ukraineisn’t under discussion at the mo-ment

The question of whether Ukrainewill sign a broad economic and po-litical agreement with the EU hasbeen placed on the back burner fornow Mr Yanukovych’s rejection ofthe deal late last year in favor ofcloser ties with Moscow triggeredthe crisis EU officials said on Mon-day that they want an elected Ukrai-nian government in place before re-suming any talks on the deal.Ukrainian elections are now sched-uled for late May

“We would like to have a ment coming from the elections dis-cussing that with us, to make surethis a full sovereign choice,” EUspokesman Olivier Bailly said

govern-—William Mauldin, Nicholas Winning and Andrea Thomas contributed to this article.

U.S Treasury Secretary Jacob Lew backs IMF aid for Ukraine, a U.S.

Black Sea

M

OLDOVA

Gained as part of World War II-related annexationsTransferred from Russia to Ukraine in 1954

Source: U.K National Archives (territorial expansions)

RUSSIABELARUS

POLAND

ROMANIA

Sevastopol

Home of Russia’s Black Sea Fleet

Donetsk

On Saturday night, Yanukovych was stopped trying to leave on a private jet

Latest Samsung Phone Returns to Basics

Core Features Like Battery Life and Photo Capabilities Are Enhanced as Company Seeks ‘Competitive Pricing’

BARCELONA—Samsung

Elec-tronics Co., eager to maintain its

lead in global mobile-phone sales,

on Monday unveiled an updated

flagship smartphone that reflects a

deliberate attempt to eschew flashy,

but little-used, new features—and to

keep the price competitive

Instead of going for the wow

fac-tor, Samsung executives said the

company wanted to enhance core

features that improve everyday use,

like photo-taking, battery life,

down-load speeds and protection against

water and dust

Indeed, one of the few new

fea-tures on the Galaxy S5 is a

finger-print sensor—something already

available on the latest Apple Inc.

iPhone

The Galaxy S5, which runs on

Google Inc.’s Android operating

sys-tem, will go on sale April 11 and

fea-tures a more powerful camera, a

slightly larger 5.1-inch screen and

supports faster download speeds

than its predecessor

In a nod to the pressures from

low-cost rivals, Samsung executive

vice president Lee Younghee said in

an interview ahead of the launch

that the company would push for

“competitive pricing” of the device

Ms Lee said Samsung is striving

for the “optimal mix of feature set

and pricing point,” declining to

elaborate on price

Samsung will have to slash the

price to compete with some of its

ri-vals

The 16-gigabyte version of the

previous Galaxy S4 model sold for

about $600 at Verizon Wireless

without a contract By contrast,

Mo-torola Mobility’s Moto X with

equiv-alent memory costs $399 without a

wireless contract in the U.S The

Moto X comes from the Motorola

handset business, which is currently

owned by Google Inc but is in the

process of being sold to China’s

Len-ovo Group Ltd

Analysts say the lack of bold

in-novations will likely disappoint

some consumers, who have come toexpect dramatic new features witheach new iteration of devices from

Samsung and rival Apple

Unlike with the previous model,Samsung didn’t play up the smart-phone’s software capabilities be-yond an expanded suite of fitness-

and health-related apps

A model version of the Galaxy S5seen by The Wall Street Journal fea-tured Google’s applications promi-nently, a contrast to Samsung’s deci-sion to drop Android for its latestgeneration smartwatch, the Gear 2,which was also publicly unveiled in

Barcelona

“People are easily excited aboutall this ‘disruptive’ and ‘latest tech-nology,’ and we are working on thistoo,” Ms Lee said “But our philoso-

phy is to listen to consumers.”

In line with the lower-key proach, Samsung’s event Mondaywas held on the sidelines of MobileWorld Congress here, a bustling an-nual confab where it has had tocompete for attention with a host of

ap-competitors

The event stands in contrast tolast year’s launch of its flagshipsmartphone, which was announced

at a lavish private event at RadioCity Music Hall in New York

The device’s most unique feature

is one that rival Apple introduced inits iPhone 5S last year: a fingerprintscanner that allows a user to unlocktheir phone with the swipe of a fin-

ger

Samsung also added severalcamera functions typically found onthe digital SLR cameras used byprofessional photographers En-

hanced wireless capabilities, time, would boost download speeds

mean-by nearly five times in some cases,the company said

Samsung said it also has beefed

up the phone’s waterproof and dust capabilities

anti-That may not be enough to nate with consumers at a time whensmartphone growth starts to level offand as a raft of Chinese competitorsproduce cheaper smartphones thatlook similar According to market re-search firm IDC, China accounted forone out of every three smartphonesshipped around the world in 2013,equaling 351 million units But re-cently, the surge in growth hasstarted to slow as smartphones al-ready account for more than 80% ofChina’s total phone sales, IDC said

reso-At the Mobile World Congress

where Samsung unveiled its device, a

number of its rivals, including Sony Corp., Huawei Technologies Co., LG

Electronics Inc and HTC Corp., all

introduced competing devices thatalso played up more powerful cam-eras and longer battery life in bodies

that look more like Samsung’s

Sony, for one, unveiled its XperiaZ2 smartphone hours ahead of Sam-sung Monday, loaded with its mostcutting-edge camera and audio tech-

nologies

As a result of the heightenedcompetition, Samsung has seen itsprofit growth slow The company re-ported its first quarterly decline inoperating profits in two years in the

fourth quarter

The worry for Samsung is a lack

of sales drivers, analysts say able devices, which Samsunglaunched in three varieties on Mon-day, haven't yet proven to be main-stream products, though entries inthe market by companies like Appleand Google, expected later this year,

Wear-could change that

Samsung’s new wearable devices,which include the flagship Gear 2and a fitness band called Gear Fit,remain limited in their functional-ity—so much so that Samsung ismarketing them as companion prod-

ucts to its smartphones

The Gear 2 drops the “Galaxy”

name in a nod to the fact that it isnot powered by Google’s Androidsoftware Instead, the smartwatchruns on Tizen, a rival operating sys-tem that Samsung has backed prom-

inently

Analysts said the “back to sics” approach—as Samsung calledthe new phone Monday—could fall

ba-flat with the public

“If it’s just about replacing thecurrent device with a more powerfulone, it’s not going to be enough forconsumers,” said Thomas Husson,

an analyst at Forrester Research

“Beyond the specs, expectations arenow increasing for Samsung, nowthat they’re the leader People ex-pect them to lead in terms of inno-

vation.”

BY JONATHAN CHENG

MOBILE WORLD CONGRESS

Bigger screen, same resolution

The 5.1-inch screen is a slight increase from the S4’sscreen but it comes with the same resolution of

1920 x 1080 pixels

Faster processor

The 2.5-gigahertzprocessor is faster

than the 1.6-GHz(Samsung chip)

or 1.9 GHz(Qualcomm chip)

processors inthe S4

Fingerprint sensor

A swipe-enabledfingerprint sensor is the

biggest change fromthe Galaxy S4, but

consumers who hadbeen anticipating an

iris-scanner will bedisappointed TheiPhone 5S already

has a fingerprintsensor

Waterproof and dustproof

Samsung hasn’t changed itsplastic-casing, but claims

the S5 is both waterproofand more dust-resistant

Samsung’s New Galaxy

A rundown of key specs of the Galaxy S5,which goes on sale in April

Source: the company The Wall Street Journal

5.1”

sc re en

Zuckerberg: Deal Was Worth It

computers but also offers messaging

and voice calls over mobile phones

Mr Koum said the voice product

would “use the least amount of

bandwidth, and we optimize the hell

out of it.”

Speaking about the Facebook

deal, Mr Koum said that WhatsApp

wouldn’t change He alluded to

In-stagram, the photo-sharing service

that was acquired by Facebook in

2012

“There are no plans to change

anything that we do with the

prod-uct today,” he said

Mr Koum said that WhatsApp

was likely valuable to Facebook

be-cause “we both want to make the

world more connected,” though Mr

Koum stressed that WhatsApp

wanted to know “as little as

possi-ble” about its users, including

de-tails such as a user’s name

Mr Zuckerberg didn’t focus on

the WhatsApp acquisition during a

45-minute-long discussion in

Barce-lona Monday He spoke mostly

about a Facebook-led coalition that

aims to push operators to connect

poor people in emerging countries

to the Internet, by offering

ac-cess to some services like Facebook

Mr Zuckerberg also reiteratedhis view that the U.S governmenthad “blown it,” when it came to be-ing transparent about its surveil-lance activities, following leaks fromformer U.S National SecurityAgency contractor Edward

Snowden

The subject, however, did keepcoming back to Facebook’s deeppockets Asked if he was prepared tomake another run at messaging-ser-vice Snapchat, which Facebook hadexplored buying last year, Mr Zuck-

erberg chuckled

“After buying a company for $16billion,” he said, “you’re probably

done for a little while.”

Mark Zuckerberg spoke on Monday at the Mobile World Congress in Barcelona.

Windows, Nokia Phones Get BlackBerry Messenger

BlackBerry Ltd said Monday it

will make its messaging serviceBlackBerry Messenger, or BBM,available to Windows Phone and

Nokia X smartphone customers in

coming months

“BBM continues to grow in larity as millions of people use ourmobile platform for chatting andconnecting with friends or col-leagues,” said John Sims, Black-Berry’s president of global enter-

popu-prise solutions

Waterloo, Ontario-based Berry launched BBM in 2005 Theservice runs on Android-powered

Black-phones, Apple Inc.’s iPhone and

Nokia X platform launches

Windows maker Microsoft Corp.

is in the process of completing a $7billion takeover of Nokia’s phone

business

At the Mobile World Congress

trade show in Barcelona, Nokia veiled its low-end Nokia X smart-phone, the first in a new family ofphones running Google Inc.’s An-

un-droid software

Meanwhile, the BlackBerry utive in charge of software designand one of the key drivers behindits current operating system has left

exec-the company, exec-the latest in a string

of executive departures under thenew leadership of Chief Executive

Android-powered phones, iPhones and

BlackBerry devices.

OPINION: REVIEW & OUTLOOK

T he latest Ukrainian revolution

moved rapidly on the weekend,

with President Viktor Yanukovych

fleeing Kiev before parliament removed

him from power and scheduled

elec-tions to replace him on May 25 The

Obama Administration prudently

warned Russia not to intervene

militar-ily, but more creative U.S and Europe

policy will be needed

to help Ukraine to a

better future.

The good news is

that public order held

as the police backed

down from a week of

violence against

pro-testors Parliament

as-serted its

constitu-tional authority and

spent the weekend

working to form a new

government.

One danger is a fracturing stoked by

Vladimir Putin between Ukraine’s

Rus-sian-speaking east and

European-lean-ing west Mr Yanukovych was Russia’s

man, but by the end he had lost the

support of his own allies in parliament, the powerful business tycoons and even his base in the east His own party on Sunday blamed him for last week’s bloodshed and declared itself “a hos- tage of one corrupt Fam-

ily,” as his entourage is known Mr Yanukovych was last seen in a TV in- terview Saturday, calling his ouster “a coup d’etat”

in Russian.

The downfall of a fellow Slavic crat by a democracy movement is a nightmare for Mr Putin, who ironically made it possible by overreaching again.

auto-In 2004 he bet on Mr Yanukovych to steal an election and lost after another popular upheaval that became known as the Orange Revolution Ukraine kept close economic and cultural ties to Rus- sia and will try to do so under any new leader The fight in the last three months has been over Ukraine’s right to get closer to the West.

Russia may try to destabilize a new government, and it is already making noises about protecting “ethnic Rus-

sians” in the east and Crimea Foreign Minister Sergei Lavrov this weekend called the victors in Kiev “thugs” and

“armed extremists and pogromists.” It’s good to hear that John Kerry called him

twice to warn Russia to stay out.

In contrast to Russia, Ukraine has the building blocks for democracy in a functioning parliament, opposition parties and a free media The problem has been the quality of its politicians and corruption.

Former prime minister Yulia enko, who was released on Saturday af- ter three years in jail on political charges, made her fortune in the 1990s from energy dealings She may run for the presidency but is not a unifying fig- ure.

Tymosh-The country needs a “political start,” in the words of former heavy- weight boxing champion and opposition leader Vitaly Klitschko Fresher faces would be welcome, and Mr Klitschko, a Russian speaker, has a following in the east and leads in the polls He’s inexpe-

re-rienced but untainted by corruption.

Any new leader will have to carry out

an economic overhaul that will include some short-term pain.

Now is the time for Europe and the U.S to help Ukraine get through the rough transition The EU has never of- fered membership in a way that would give Ukraine’s leaders an incentive and roadmap to reform The U.S was a staunch champion of Ukrainian inde- pendence in the 1990s, so maybe Bill Clinton can give President Obama a tu- torial If the International Monetary Fund has any useful purpose, it should

be helping Ukraine with emergency nancing to make up for the $15 billion bailout that Mr Putin tailor made for

fi-Mr Yanukovych and will surely be pulled.

The stakes go beyond Ukraine Mr.

Putin knows that a successful cratic Ukraine would be an inspiration for Russia’s reformers, which is why his meddling isn’t over and the West needs

demo-to push back with diplomatic attention, money, and the prospect of closer eco- nomic ties.

H ong Kong’s battle over press

free-dom is escalating, as several

thousand journalists and regular

Hong Kongers marched on Sunday to

protest increasing government pressure

on independent media The “Free Speech,

Free Hong Kong” rally is the latest sign

that locals won’t quietly let Beijing

re-nege on promises to grant the city

demo-cratic self-government by 2017.

Marching to the chief executive’s

of-fice, demonstrators condemned this

month’s firing of prominent government

critic Li Wei-ling from Commercial Radio,

an ouster that many suspect is meant to

please local officials currently deciding

whether to renew the station’s

broad-casting license Protesters also

high-lighted last month’s firing of Ming Pao

newspaper editor Kevin Lau—who had

published aggressive reporting on official

corruption and human-rights abuses—

and December’s news that mainland

Chi-nese companies and international banks

had pulled advertising from racy outlets.

pro-democ-“I have been in this industry for 30 years I would say this is the worst time,”

said protest organizer Shirley Yam, vice chairman of the Hong Kong Journalists Association China guaran-

teed Hong Kong press freedom when it took over the city from Britain in

1997, but the ruling munist Party still finds di- rect and indirect ways to squeeze local journalists.

Com-The soft approach is to encourage self-censorship, which is easy when most Hong Kong media owners have business interests and political ties that they don’t want to jeopardize by an- gering Beijing According to the Commit- tee to Protect Journalists, more than half

of local media owners sit on pointed government bodies such as the National People’s Congress and the Chi-

Beijing-ap-nese People’s Political Consultative ference.

Con-Journalists who persist with critical reporting risk being fired—the fate of former South China Morning Post staff- ers Paul Mooney and Willy Lam, among

many others—or worse.

Last June, iSun Affairs publisher Chen Ping was beaten by a group of men with batons Days later the pro-democracy Apple Daily newspaper faced a series of attacks, as thugs twice intercepted deliver- ies and torched thousands of copies, while others crashed a car into the gate

of owner Jimmy Lai’s home, leaving an axe and machete at the scene Mr Lai told the Committee to Protect Journalists that local police “can’t chase people into China, and that is where these attacks come from.”

Book publishing can also be

danger-ous Hong Kong is famous for bookstores full of salacious exposes about China’s leaders, but Beijing is now trying to quash publication of a biography of Pres- ident Xi Jinping by a U.S-based Chinese author Hong Kong publisher Yiu Mantin was planning to release the biography but last October he was detained in the mainland on dubious charges of smug- gling A second publisher was due to is- sue the book, author Yu Jie told the New York Times last week, but he received a threatening phone call this month that deterred him.

Beijing wants to subvert Hong Kong’s media because the Communist Party be- lieves that free speech leads inevitably to chaos and political unrest The reality is that Beijing’s policies are the greatest cause of discontent and protest in Hong Kong—and the situation will only get more tense if Beijing continues to push

“mainlandization” over the transition to democracy it promised.

Aiding Ukraine’s Democrats

Hong Kong Journalists Take to the Street

An escalating battle with Beijing over press freedom and democracy.

How the West can help Kiev resist Putin’s interference.

Notable  Quotable

London Mayor Boris Johnson writing

in the Telegraph on Monday, Feb 24:

I’ve just got back from the French

Alps and the place is just as beautiful as

it was when I first went there 30 years

ago: the air like champagne, the sky blue,

the snow like gulfs of icing sugar wafting

over your ski—and the mind-numbing

beauty of those high white landscapes,

silent except for the soft clank of the lift.

Yes, it’s still the same, the French skiing

experience—and so is the great

ski-school scandal: a complete, naked,

shameless and unrepentant breach—by

the French—of the principles of the

Eu-ropean Single Market.

It is still the case that if you want to

find someone to teach your kids to ski,

that teacher will have most or all of the

following characteristics His face will be

deeply tanned and handsomely creased;

his eyes will twinkle roguishly at his male charges; he will say “HOP!” as he plants his pole to turn; he may or may not have a paunch, a hip-flask of cognac and a smell of cheroot.

fe-But one thing is for sure: he will be dressed in an all-in-one red ski uniform emblazoned with the logo of the École du

Ski Français—and he will be French, mes

amis And only French.

In defiance of every basic principle of the Common Market—free establishment, free movement of services, you name it—

the French continue to make it virtually impossible for a U.K national to set up a ski school, in the French alps, to cater for the vast numbers of English speakers who flock there every winter—and who

think dérapage is something to do with

a woman’s cleavage.

It is now more than 40 years since [the U.K.] joined the EEC; it is 10 years since the protectionists torpedoed the excellent Bolkestein Directive on liberali- sation of the market in services—and we still have an outrageous and illegal re- straint on trade that has probably cost this country millions in the treatment of wholly unnecessary broken legs as well

as retarded our progress up the medals rankings in the winter Olympics.

Why on earth shouldn’t we have British ski instructors freely touting for hire, on the snows of the alps, and speaking Eng- lish? Can you think of any sector of U.K.

business or industry that imposes such strictions? Come to that, is there any equivalent over here of the “guilds sys- tem” they have in Germany, which means they are able to restrict the number of Polish plumbers? Of course there isn’t. “Welcome back.”

re-Pepper and Salt

THE WALL STREET JOURNAL

Viktor Yanukovych

BUSINESS & FINANCE

Rio Tinto’s Walsh Still Faces Challenges

LONDON—After a year at the

helm of Rio Tinto PLC, Chief

Execu-tive Sam Walsh has trimmed themining’s giant’s ballooning debt,sold off noncore assets and prom-ised to slash capital spending 38%

over the next two years

In a year when the shares ofmost mining peers have fallensharply, Rio stock is up almost 3%

since Mr Walsh took over in ary 2013, succeeding CEO Tom Alba-nese

Janu-Mr Albanese stepped aside afterRio wrote down more than $14 bil-lion in assets, stemming from bigaluminum and coal asset purchasesmade at the top of the market Itwas the biggest in a series ofcharges taken by some of theworld’s largest mining companies,

as a decadelong commodities boomand deal frenzy came to a suddenhalt

In the shakeout that followed,bosses at six of seven of the world’sbiggest publicly listed miners bymarket capitalization stepped down

The world’s top 40 mining

compa-nies, from BHP Billiton Ltd to

Bar-rick Gold Corp., wrote down a total

of $45 billion in 2012, according toPricewaterhouseCoopers Minershave shed assets and employees,slashed costs and scaled down proj-ect ambitions

It now falls to Mr Walsh—64years old and a 23-year veteran atRio—to steer the world’s second-largest miner by market valuethrough that new landscape A for-

mer auto executive who helped turn

around the Australian unit of

Gen-eral Motors Co., Mr Walsh said in

an interview that he’d like the board

to consider keeping him on when hiscontract expires in 2015

“I would be very happy to go on,extend my term,” Mr Walsh said

“On the other hand, if someone ter comes along in the interim,that’s fine, too…I would like to meetthem, but that’s a different matter.”

bet-He still faces a number of lenges before then He has promisedsteep cost cutting and reduced capi-tal expenditure over the next twoyears He slashed net debt by $4 bil-lion in the final six months of lastyear, to $18.1 billion That came as

chal-Rio announced or completed $3.5billion worth of noncore assets salesduring the year

But he has also publicly takenthe for-sale sign off two other bigassets—Rio’s diamonds operationsand one of its aluminum businesses

And he has failed so far to find abuyer willing to pay enough forRio’s Canadian iron-ore business, aprocess he started around last year

In the interview, he said he doesn’tneed to sell more assets

“If somebody wants to offer abig check, that’s fine But we don’tneed to actually sell any of our ma-jor assets,” he said

Another key challenge is that Rio

is more heavily exposed to a single

commodity—iron ore—than any ofits major peers Iron ore repre-sented nearly 90% of the company’searnings last year Despite that reli-ance, he has expanded Rio’s flagshipiron-ore mines in Australia’s Pilbararegion, albeit at a more measuredpace

Iron ore prices have remainedresilient in recent years But manyanalysts expect growth in China—

the world’s biggest buyer—to ebb

Mr Walsh said he can’t do thing about the company’s reliance

any-on irany-on ore “We are what we are,”

he said “You can’t turn back tory, and if having too much ironore is a problem, then it’s not a badproblem to have,” he said

his-Without further asset sales onthe horizon, Mr Walsh is cuttingcosts He cut $2.3 billion in operat-ing cash costs in 2013 He is alsoslashing capital spending, promising

to reduce outlays to $8 billion in

2015, down from $17.6 billion lastyear

He said he also has empoweredmanagers to find other savings onthe shop floor Rio’s energy division,which produces coal and uranium,set up a “war room” in Brisbane,Australia, where planners reducedthis year’s forecast for fuel usage atits Australian coal operations bycalibrating truck engines, upgradingcomponents for its old trucks, andreduced revolutions during idling

Rio Tinto has seen its stock rise since Sam Walsh took the helm

Share performance of selected miners since Mr Walsh was appointed Chief Executive Officer of Rio Tinto on Jan 17 2013.

The Wall Street Journal Source: FactSet

10

–40–30–20–100

%

’142013

Rio Tinto

2.8%

BHP Billiton

-4.9%

Glencore Xstrata

-11.3%

Anglo American

-18.9%

Mining for Gold in Canada at Minus 45 Celsius

MEADOWBANK GOLD MINE, navut—Gold miner Alain Belangercontends with 120 kilometer an hourwinds, winter temperatures so coldthey have cracked the steel on his287-ton excavator and white-outblizzards that halt mining for days

Nu-This open-pit mine west of ada’s Hudson Bay had such steepconstruction and operating costs—

Can-flying workers in and out, stocking ayear’s worth of food, employee turn-over and battling snow drifts thatcan reach eight feet—that the proj-ect is unlikely to break even over the

long haul, Agnico-Eagle Mines Ltd.

executives now concede

As the world warms, minersdream of unlocking trillions of dol-lars in diamonds, gold, nickel andother metals in the Arctic, a treelesscap that spans northern parts ofCanada, Alaska, Russia and Scandi-navian countries So far, it hasproved a quixotic quest for all but afew tenacious miners like Agnico

“We know there is extremewealth in the Arctic,” said Agnico’sChief Executive Sean Boyd in an in-terview “The reality, though, is youhave to have a lot going for you toget it out the ground.”

Meadowbank recently has beenworth it The mine where Mr Be-langer labors for two-weeks at astretch was Agnico’s star performerlast quarter, generating more cashthan any of the company’s six othermines and contributing to its secondyear of record gold production

But more than 200 Arctic miningprojects that have been announced

in recent years lie either abandoned

or in an early planning stage, cording to data from by Raw Materi-

ac-als Group Only six mines now ate in North America’s vast arctic

oper-Some of the world’s largest ers are putting off Arctic projects asmetal prices have weakened Goldnow trades about $1,350 an ounce,down from $1,850 in 2011 Somehave flown into Meadowbank to bet-ter assess the risks and determinewhether Arctic resources can bewithin their reach and wherewithal

min-“The question they [have to] ask

is whether they want to take theArctic on,” Mr Boyd said

Early on, Agnico officials mated they could dig gold at Mead-owbank for about $450 an ounce

esti-But after it opened in 2010, costsquickly ballooned to $1,000 anounce In the latest quarter, costshad fallen to $637 an ounce Thecompany expects to shave costs byanother $8 an ounce this year

Agnico’s recent success was hardfought, and includes US$1.2 billion

in write-downs It has changed how

it operates: Rock is now stockpiled,

so when a blizzard halts mining, themills can still work To cut down onfuel usage, the mine uses exhaustfrom the massive electricity genera-tors to help heat the camp

Overall fuel use, the biggest gle expense, has fallen to 51,127 gal-lons (193,537 liters) a day from54,700 gallons in the fourth quarter

gen-of its 550 employees had to be flownout until a replacement kitchen ar-rived from Phoenix Total cost of theincident was $18 million

For Agnico and other arctic ers, the biggest problem is the lack

min-of ports, road and rail links AgnicoEagle needed to build a $50 million,

110 kilometer highway The road isthe longest in Nunavut, which covers

an area the size of Mexico but ishome to only 32,000 people

The mine has an eight-week dow to bring a year’s worth of foodand other supplies before HudsonBay freezes, including 200,000 eggsand 2,500 liters of ketchup Any-thing that has been forgotten or inneed replacing must be flown in at acost of $6 a kilogram

win-The few standouts in these harshenvironments are those that havewell-established ports and know-

how, such as Russia’s MMC Norilsk

Nickel and Sweden’s LKAB The

suc-cesses include Arctic mines built byslave labor under Stalin in the 1930s,and now operated by Norilsk

“There is a certain culture there,and people get used to working invery difficult conditions,” said No-rilsk CEO Vladimir Potanin in an in-terview last year

One lesson Agnico learned washow to better incorporate native In-uit workers It upgraded numeracyand literacy skills, improved trainingand offered more career advance-ment to keep locals on the job Allhave helped reduce turnover to 7%

last year from 25% in 2011

Nunavut resident Billie-Jo Van

Eindhoven, 27, was a kitchen workerfor two years before she landed ajob driving a 17-foot-high truck, fer-rying rock out of the pit “It’s a goodpaying job,” said Ms Van Eindhoven.Base pay for truck drivers starts at65,400 Canadian dollars and can go

up to C$97,500 a year

In the bleak landscape of snowand rocks, Mr Belanger, a 55-year-old shovel operator, sees few signs

of the global warming that is dicted to make Arctic mining easier.Equipment operators start atC$88,600 a year and can earn up toC$130,100 His giant steel shovels,which scoop up 24 tons of rock andgold ore, have cracked in the cold.Exposure of bare flesh can lead toalmost immediate frostbite

pre-As he talks, geology techniciansnearby clamber over piles of newlyblasted rock in minus 45 degree Cel-sius (-49 Fahrenheit) temperatures,marking gold bearing ores Gianttrucks carry 120-tons of rock thatcan contain an average of $1,258worth of gold ore

After going through a largecrusher, several mills and a chemicalprocess to separate gold from rock,the ore is melted to produce 31-kilo-gram gold bars Each bar is 85%pure and worth about $1.2 million.What tempted the Toronto-basedcompany to take the risk is highquality ore here A ton of earth fromMeadowbank contains more thanthree times the amount of gold asfrom an average Canadian mine.Meadowbank may not ever re-cover its initial costs, but Agnicohopes to apply the lessons learnedfrom operating in this inhospitableclimate to a nearby project witheven richer ores The dream of wildriches may not be realized here, but

it lives on

BY ALISTAIR MACDONALD AND JOHN W MILLER

A spate of new developments suggests that Turkey and Israel are repairing their strained ties But how far will this rapprochement go?

And what does Ankara’s Muslim Brotherhood-linked government seek?

Since the days of the Ottoman Empire, Western observers have spoken of Turkey-in-Asia and Tur-key-in-Europe Today these labels are geographically meaningless, and yet there are still two Turkeys: One

is the free-market Turkey, a model Muslim democracy, NATO member and EU aspirant with a vibrant economy and civil society; the other

is the more Asiatic Turkey ruled by

an increasingly authoritarian, Isla-mist prime minister, Recep Tayyip Erdogan

For Turkey’s neighbors in the Eastern Mediterranean, this duality can prove challenging Not least for Israel, whose ties with Ankara, an erstwhile regional ally, reached a nadir in summer 2010 That’s when

a flotilla of Turkish anti-Israel activ-ists attempted to break Jerusalem’s naval blockade of Gaza

Confronted by knife-wielding thugs aboard the flotilla’s flagship, the Mavi Marmara, Israeli troops opened fire, killing nine activists

Mr Erdogan in response down-graded relations, canceled joint mil-itary exercises and unleashed fiery rhetoric against the Jewish state

Now relations appear to be

re-versing course Israeli Prime Minis-ter Benjamin Netanyahu phoned an apology to Mr Erdogan in March

This was followed in December by a trip to Istanbul by Israel’s environ-mental protection minister, the first cabinet-level Israeli official to visit Turkey since the Mavi Marmara af-fair And the regional press earlier this month disclosed plans for a pipeline to deliver natural gas from Israel’s newly discovered Leviathan field to consumers in Turkey and beyond

The U.S is hopeful “There is a solid deal all ready to be closed, any day now, for ‘normalization,’” a se-nior U.S diplomatic official tells me via email “That is to say, returning

to ‘normal’ relations in which there

can be acknowledged, unremark-able, routine, high-level dialogue at the everyday level of ambassadors (which is to say, ministers) And normal everyday relations such as military-to-military contacts, exer-cises, etc., without any drama, fan-fare, or concerns for political reac-tions.”

Such normalization, he added,

“is hugely important for both coun-tries, and for their mutual friends, like us.”

There’s little doubt that Turkey’s recent economic troubles—its GDP grew 4.3% last year, according to the World Bank, compared with 9%

in 2010 and 2011—spurred some of the recent cooperation with Israel, particularly in the energy industry

Delek and Noble Energy—the Israeli and American companies, respec-tively, that hold a majority stake in Leviathan—have opened talks with

a Turkish conglomerate about con-struction of a pipeline connecting the Mediterranean gas field to the Turkish coast

The pipeline “could provide be-tween 8 to 10 billion cubic meters of gas per year costing $7 to $9 per million BTU,” according to the Is-raeli daily Haaretz “This makes the project of major strategic interest

to Turkey which has a great need of inexpensive natural gas.”

Turkey’s shifting relationship with its major energy suppliers, Iran and Russia, is another factor behind the opening to Israel, ac-cording to Soner Cagaptay of the Washington Institute for Near East Policy Turkey’s policy on Syria—

seeking regime change in Damas-cus—has alienated Ankara from Tehran and Moscow, which back the Assad regime “Turkey wants to di-versify,” Mr Cagaptay says

The recent overtures are also driven by Mr Erdogan’s desire to register a public diplomatic victory over Israel at home while scoring points in Washington “I would link the current round of negotiations perhaps to the Turkish domestic need to present some achievements before the local elections scheduled

in March,” says Gen Amos Yadlin, a former head of Israeli army intelli-gence who now directs Tel Aviv Uni-versity’s Institute for National

Secu-rity Studies Gen Yadlin warns that

Mr Erdogan may not be able to present “a deal that is acceptable to Israel as a complete triumph [at home].”

Two key tests for the thaw’s depth and permanence will be Mr Erdogan’s rhetoric toward Israel and his handling of the Gaza-block-ade question, and if the past is any guide, he’ll have a hard time pass-ing In recent months he and his supporters have blamed the Jewish state for everything from protests

in Istanbul, to recent corruption al-legations against the prime minis-ter’s clique, to the anti-Muslim Brotherhood coup in Egypt Anti-Is-rael conspiracism of this sort doesn’t bode well for long-term rap-prochement

Meanwhile, Mr Erdogan contin-ues to conflate Ankara’s disagree-ments with Jerusalem over the na-val blockade of Gaza, which Israel is unlikely to lift, with the land block-ade, which Israel has already eased,

in part to facilitate the construction

of a Turkish hospital on the strip And it isn’t hard to imagine Mr Er-dogan being cornered by domestic opponents, such as the rival Isla-mist Gülen movement, and respond-ing by firrespond-ing up the Gaza issue once more

As the U.S diplomatic official tells me: “No one should expect a love affair.”

Mr Ahmari is an assistant books editor at the Journal.

A billboard in Ankara hails Turkish Prime Minister Recep Tayyip Erdogan.

Signs of a Thaw in the Eastern Med

Recently I was contacted by a fellow Vassar alumna through Facebook She wanted to know if I was aware that our genteel alma mater had become a hotbed of anti-Israel, pro-boycott sentiment

Suddenly, my stomach was in knots—a feeling that Vassar has managed to evoke in me ever since

I went there in the 1970s An Or-thodox Jewish girl from Brooklyn

on a full scholarship, I fixated on this Seven Sister school as my en-tryway to the American dream, the epitome of style and grace that also prided itself on teaching “crit-ical thinking.”

In this case the cause of my angst was a young woman named Naomi Dann, the president of the Vassar Jewish Union She had penned a piece for the campus pa-per strongly supporting the recent move by the American Studies As-sociation to boycott Israeli aca-demic exchanges—a decision de-nounced by college presidents across the country, including Vas-sar’s

Her piece strung together all the familiar buzzwords and clichés used by Israel’s critics: “atroci-ties,” “oppressive,” “abuses,” “colo-nial,” and, of course, “apartheid.”

Signed jointly with the co-presi-dent of Stuco-presi-dents for Justice in Pal-estine, Ms Dann even slammed Vassar’s president and dean of the faculty for daring to oppose the boycott against the Jewish state

There was more to fuel my

Vas-sar angoisse The head of the

Jew-ish Studies Program, a professor named Joshua Schreier, had also

expressed support for the boycott movement Prof Schreier was quoted in the campus paper rumi-nating that while once

“instinctively against” the boycott,

he had heard more “substantiated, detailed” arguments on its behalf, and as a result “I am currently leaning in favor of it,” he con-cluded delicately, as if choosing a flavored tea

As for Vassar’s rabbi, Rena Blu-menthal, she was MIA—on leave in Israel, no less—and emailed to say she couldn’t weigh in from afar

Huh?

To be sure, I had been aware that the Boycott, Divestment and Sanctions (BDS) movement had taken off on some American col-lege campuses, even in the Ivy League It had become chic to at-tack Israel even—especially—if you were Jewish I heard from an alum who was stopped by his own child,

a Vassar student, from taking a public stand against the BDS movement The student was fear-ful of being ostracized for having a parent who supported Israel

Suddenly the toxic essence of this movement to make Israel and its supporters pariahs in the groves of academe and the cocktail parties of polite society hit home

in a way it hadn’t before It also

brought back painful memories about my own Vassar experience, and the shattered illusions that had marked it

I had gone to Vassar a nạf, a sheltered girl from an immigrant community Mine was a neighbor-hood of Jewish exiles thrown out

or pressured out of Arab countries

in the 1950s and 1960s—in my family’s case, Egypt We were vic-tims of the Middle East conflict who were barely mentioned in the history books Though we had been mistreated and denied our homelands, we suffered alone and

in silence No cool campus groups spoke up for us then, or now

Our values were God, faith, family and Israel We were pas-sionate about the Jewish state, a country that took so many Middle Eastern Jews in when, one after another, Arab countries had forced

or pressured us out I was raised

as a Sabbath observer, a keeper of dietary laws, and, oh, expected to marry young and refrain from sex before marriage

Those were the quaint values I carried to Vassar, which I had cho-sen from among a multitude of schools for the old-fashioned ide-als its name evoked I had read a brochure alluding to a tradition of students drinking sherry with fac-ulty To someone more familiar with Manischewitz wine, sipping sherry with my professors epito-mized what I wanted on this earth:

a life of civility and grace This was Jackie Kennedy’s Vassar

Instead, I found myself on a campus in the throes of a 1970s re-bellion There was a drug culture and a drinking culture, but no

sherry culture I could find Vassar prided itself on being edgy and embraced open sexuality and every other cause of the tumultuous era

My disillusionment came fast

My first day I wandered to the

“ACDC”—the forbidding central dining hall—and timidly asked a manager where I could find the ko-sher section She looked at me as

if I were from another planet

What followed were months of kosher TV dinners, in big alumi-num packages It was incredibly decent of Vassar to obtain those for me, yet every time I lugged one

of these dinners from the kitchen

to the table in their silver foil, I felt the stares of my fellow-diners

It never got easier I could never take that train from Grand Central back to Poughkeepsie on Sunday nights without the blues setting in And now, so many years later, my Vassar blues were back

The other night I received a press release from the president of the Vassar Jewish Union, Ms

Dann—yes, her again This time, she was attacking Hillel, the vener-able campus organization that has offered a home to generations of Jewish students Following in Swarthmore’s footsteps, the Vassar Jewish Union was becoming an

“open Hillel”—no longer obliged to heed Hillel’s pesky rule of banning speakers who demonize Israel or believe the Jewish state shouldn’t exist The release was replete with more clichés about needing a “di-verse range of personal and politi-cal opinions” that it argued Hillel failed to provide

I am still waiting for the day a student or faculty member stands

up to these academic hooligans at the Vassar Quad Now that would show some “critical thinking.”

As for Vassar’s Rabbi Blumen-thal, she finally agreed to speak to

me from Israel over the weekend She firmly opposes the boycott, she declared, and has been upset

by the anti-Israel sentiments on campus, noting: “I am here be-cause I love this country I am a Zionist.”

Bravo, rabbi How nice to hear

of one Israel defender at Vassar I can only pray that others on cam-pus listen

Ms Lagnado, a Journal reporter,

is the author of two memoirs of her Egyptian-Jewish family, “The Man in the White Sharkskin Suit” (Harper Perennial, 2008) and

“The Arrogant Years” (Ecco, 2012).

Anti-Israel Jews and the Vassar Blues

BY LUCETTE LAGNADO

Thorold Barker, Editor,

Europe, Middle East & Africa

Bruce Orwall, Senior Editor, Europe Gren Manuel, Executive Editor, Europe Terence Roth, Managing Editor, Europe Lauren Berkemeyer, Marketing Kate Dobbin, Communications Florence LeFevre, Institutional Sales Europe Michael Lloyd, Institutional Sales U.K Jonathan Wright, Circulation Sales Kelly Leach, Publisher

Published since 1889 by

Dow Jones & Company

© 2014 Dow Jones & Company All Rights Reserved

The Boycott, Divestment and Sanctions movement has added to my ambivalence about my alma mater.

Volvo 28

Wells Fargo 22

Nordstrom 25

Norilsk Nickel 17

Novartis 15

Rio Tinto 17

Roche Holding 16

Royal Bank of Scotland Group 15

Samsung Electronics 18,19 Scania 28

Shenzhen Marisfrolg Fashion 16

Sony 18,19 Square 16

UBS 15,20,28 U.S Steel 28

Volkswagen 28

Google 18,19 Grifols 16

HSBC 20,22,28 HTC 18,19 Huawei Technologies 18

Intuit 16

J.P Morgan Chase 20

Kering 16

Krizia 16

LG Electronics 18

LVMH Moët Hennessy Louis Vuitton 16

Microsoft 16,19 Nokia 19

Agnico-Eagle Mines 17

AK Steel Holding 28

Apple 18

AstraZeneca 16

Barrick Gold 17

BHP Billiton 17

CF Industries Holdings 28

Citigroup 20

Cyprofood 20

Deutsche Bank 20

eBay 16

Facebook 1

General Motors 17

INDEX TO BUSINESSES

Businesses

This index of businesses mentioned in

today’s issue of The Wall Street Journal

is intended to include all significant

reference to companies First reference

to the companies appears in bold face

type in all articles except those

on page one and the editorial pages.

Corrections  Amplifications

Readers can alert the London news-room of The Wall Street Journal to any errors in news articles by

email-ing wsjcontact@wsj.com or by

call-ing +44 (0)20 7842 9901.

BUSINESS & FINANCE

Icahn Fires Broadside at eBay

Activist investor Carl Icahn

ac-cused eBay Inc of lapses in

corpo-rate governance, including conflicts

of interest on the online

market-place’s board

Mr Icahn last month disclosed

that he held a 2% stake in eBay He

said he was prepared for a proxy

fight to win two seats on the board

and to push the company to separate

its PayPal unit

But Mr Icahn said he

subse-quently determined that a proxy fight

shouldn’t be necessary to change the

board “In any sane business

environ-ment, these directors would simply

resign immediately from the eBay

board, either out of pure decency or

sheer embarrassment at the public

exposure of the extent of their

self-serving activities,” he said Monday

The San Jose, Calif., company said

Mr Icahn “cherry-picked old news

clips and anecdotes out of context to

attack the integrity” of its top

execu-tives “As we are sure our other

shareholders would agree, we prefer

to engage in more constructive and

substantive discussions of why, in our

view, PayPal and eBay are better

to-gether,” eBay said “Instead, Mr

Icahn unfortunately has resorted to

mudslinging attacks against two

im-peccably qualified directors.”

Mr Icahn said that at least two

directors are directly competing with

eBay, one is demanding that eBay

cease hiring the most talented

em-ployees, another is routinely funding

competitors, at least two appear to

have put their own financial gain in

conflict with their fiduciary

responsi-bilities to stockholders and the chief

executive “seems to be completely

asleep or, even worse, either naive or

willfully blind to these grave lapses

of accountability.”

Mr Icahn cited director Marc An-dreessen’s purchase of stakes in two former eBay units and said that an investor group he was a part of pre-empted a planned initial public offer-ing of Skype and bought 70% of Skype for less than what eBay had

paid to acquire it

The online video and voice chat

company later was acquired by

Mi-crosoft Corp.

Mr Icahn also questioned Scott Cook’s place on the board as the

founder and a current director at

In-tuit Inc., which competes with PayPal

in payment processing

But the “best question,” Mr Icahn said,” is where Chief Executive John

Donahoe has been during this pro-cess The investor questioned Mr Do-nahoe’s ability to make crucial

deci-sions about the future of PayPal

Mr Icahn suggested that separat-ing the core eBay and PayPal busi-nesses would highlight the value of the operations, which currently is masked by a conglomerate discount

Separating the business also would foster innovation and help PayPal at-tract necessary talent, he said He urged shareholders to vote for his proposal to separate PayPal and for

his director nominees

The PayPal unit, which has about

143 million users, is on pace to over-take eBay’s namesake marketplace in

sales, accounting for 41% of total rev-enue in the latest quarter Revamping the unit has been a particular focus for eBay as it battles startups such as

Square Inc for control of customers’

digital wallets

EBay last month said its predic-tion of a weak holiday season came true, reporting sales at the low end

of its expectations The company in October said consumers seemed “ten-tative about spending,” in part be-cause of the two-week government shutdown, heading into the final three months of the year The period typically constitutes approximately 30% of the company’s annual

reve-nue

BY LAUREN POLLOCK

Investor Carl Icahn, seen earlier this month, said that some directors of online marketplace eBay have conflicts of interest.

LVMH Buys

A 45% Stake

In Italian Design Firm

LVMH Moët Hennessy Louis Vuitton SA said it is investing in

Marco de Vincenzo’s Italian fash-ion house, the latest move by the luxury-goods company to build a portfolio of young designers to grapple with an industrywide

slowdown

LVMH will take a 45% stake in Marco de Vincenzo, leaving its namesake founder with the re-maining 55%, a person familiar with the matter said LVMH didn’t disclose financial details of the

deal

The purchase is further evi-dence that Delphine Arnault, the daughter of LVMH Chairman Ber-nard Arnault, is racing to secure a new generation of fashion talent for the company LVMH recently took stakes in British shoe maker Nicholas Kirkwood and designer

J.W Anderson

“We are convinced that to-gether we will develop successfully his brand,” Ms Arnault said in a written statement Monday “This new partnership is in the DNA of LVMH, which has always supported

young designers.”

France-based LVMH long has sought to use a wide portfolio of rising brands to offset slack in other labels But booming demand for labels such as Céline and Kenzo has been no match for a slump at flagship Louis Vuitton, where sales have stagnated as consumers wea-ried of its ubiquitous logo bags

Against that backdrop, luxury-goods companies such as LVMH

and France’s Kering SA have been

on the hunt for the next big names

in fashion

Mr de Vincenzo has been de-signing accessories at Fendi, an Italian brand controlled by LVMH, for more than a decade He started his own line in 2009 while con-tinuing to design for Fendi and has

shown his collections in Milan

He presented his latest line during Milan Fashion Week, which ended Monday, with colorful out-fits, graphic prints and black

leather

Small and midsize Italian fash-ion houses often consider selling stakes to fund growth, open stores

or improve distribution and nego-tiating power—or simply because they have no heirs ready to take

over

Krizia SpA on Monday said that

it had been acquired by China’s

Shenzhen Marisfrolg Fashion Co.,

which will support the Italian ready-to-wear brand’s expansion in Asia by opening stores in Beijing

and Shanghai

Novartis Backs Away From Vasella’s Empire

Europe’s largest drug maker, up

from fifth in 2004, according to

consulting firm IMS Health

With patents on some of its

best-selling products expired or set to

expire, a factor that has weighed on

its stock, Novartis is looking for

ways to reignite its profit growth

Over the past year, the company’s

shares have risen more than 15%,

well short of AstraZeneca PLC’s

stock-price run-up of nearly 36%

and crosstown rival Roche Holding

AG’s 26% gain

In November, Novartis took its

first step to slim down, selling a

blood-transfusion diagnostics

busi-ness to Spain’s Grifols SA Dr

Va-sella had viewed the business as the

company’s springboard into general

diagnostics

Among its next moves, traders

and investors have speculated that

Novartis might consider swapping

over-the-counter drug business, which would eliminate one of its smaller businesses while bulking up another

Novartis has declined to com-ment

Some investors don’t think the new strategy will move the needle much on Novartis’s performance Its Consumer Health division, which includes animal-health and over-the-counter medicines, generated around 7% of Novartis’s sales in

2013, compared with 56% for its flagship pharmaceutical unit

“The businesses in question are relatively small compared with Novartis’s total sales,” said Philippe Comby, a New York-based invest-ment manager at Swiss Helvetia Fund Inc., which owns around 600,000 Novartis shares Further disposals or asset swaps are unlikely to be game-changing, he

says

The company, meanwhile, is looking to smooth relations with Swiss politicians and its investor base after a proposed $77 million exit package for Dr Vasella brought

it unwanted publicity last February

The company slashed the hefty pay-out after intense criticism from

in-vestors and the public

But the flap “had a significant impact on the company’s reputa-tion,” said Mr Jimenez, the CEO, adding that the impact “will take

time to unwind.”

Since then, the company has sought to distance itself from Dr

Vasella in many ways In its recent annual report, it explicitly stated that, as the company’s honorary chairman, Dr Vasella would receive

no pay and have no influence on the board or management

“It strikes me as a deliberate at-tempt to officially call the end of the Vasella era at Novartis,” said

Florian Wettstein, director of the In-stitute for Business Ethics at Swit-zerland’s University of St Gallen

In January, the company dis-banded two board subcommittees that had given Dr Vasella and the board more power over many finan-cial decisions One panel oversaw all financial reporting, while the other was responsible for evaluating any transactions valued at $50 million

to $500 million

Novartis also is looking to dis-pose of around 12.4 acres of land once earmarked for a $110 million management-training center near Risch, the village south of Zurich where Dr Vasella lived for many years In December, Novartis said it had decided to consider cheaper al-ternatives closer to Basel As an im-mediate neighbor, the former chair-man was granted the right to buy the acreage if plans for the center

didn’t go through

In his inaugural address on

March 4, 1933, U.S President

Franklin D Roosevelt famously

as-serted his “firm belief that the

only thing we have to fear is fear

itself.” Speaking against the

back-drop of the Great Depression and

the social and economic

devasta-tion that it caused, FDR wisely

de-fined fear as “nameless,

unreason-ing, unjustified terror which

paralyzes needed efforts to

con-vert retreat into advance.”

Roosevelt’s words are of

spe-cial interest in our time The U.S

Federal Reserve's “tapering,” the

reduction and eventual halt of

li-quidity injections, that began last

December has now lead to a

pan-icky withdrawal of capital from

emerging markets Some of this

represents a natural and not

unex-pected correction But much of the

capital flight amounts to what

President Roosevelt would have

dubbed “nameless, unreasoning,

unjustified terror.”

Similar to many emerging

economies, Turkey has not been

spared the current turmoil

The situation is aggravated

by events that are ceived as having increasedTurkey’s country-specificpolitical risk factors

per-As a result, since December the Turkish lirahas depreciated by around7% against the U.S dollar

mid-Treasury bonds have risen

by around 70 basis pointsand the country’s stockshave lost roughly 20% oftheir value

However, I considerthese developments to be

an overreaction by themarket

First, despite the rent political turmoil inTurkey, political stability isnot at stake Recent pollssuggest that the ruling Jus-tice and Development (AK)Party has public supportbetween 40% and 50% forupcoming local elections inMarch Second, for more than 10years Turkey has pursued struc-tural and macroeconomic reforms,providing a basis for strong andsustainable growth

cur-Since the AK Party took office

in 2002, we have reduced the eral government fiscal deficit to1% of GDP from 10.8% in 2002

gen-During that period, public-sectordebt fell to 35% of GDP from 74%

These are enviable figures fromthe perspective of most countries

In fact, we have outperformed

rel-ative to the euro zone’s Maastrichtcriteria In 2013, our fiscal deficit-to-GDP ratio was just one-third ofthe euro zone’s convergence target

of 3%, and our debt-to-GDP ratiowas almost half of the 60% target

As of the third quarter of 2013,only five out of the 18 countriesthat use the euro met the Maas-tricht debt criteria Among those,only two small economies—Esto-nia and Luxembourg—had betterratios than Turkey

These prudent policies have

helped us generate an erage annual economicgrowth rate of 5% over thepast 10 years and createnearly five million jobssince 2007—despite theonset of the global finan-cial crisis

av-Furthermore, we havetaken important steps toimprove the quality of ourinstitutions Despite all thenews about the recent cor-ruption probes, perception

of corruption has declinedmarkedly over time Ac-cording to TransparencyInternational, Turkey’s cor-ruption-perception rankimproved to 53rd out of

177 countries in 2013, from65th out of 102 countries

in 2002 Surely, there isroom to improve, and wewill continue to do so

Prudent macroeconomicpolicies and structural re-forms have had benefits,such as attracting about $134 bil-lion of foreign direct investmentsince 2003 That is nine times thevalue of Turkey’s cumulative FDI

in the 1980-2002 period

To be sure, the relatively highcurrent-account deficit has been asoft spot for Turkey during the re-cent “tapering” turmoil However,Turkey’s freely floating exchangerate will serve as an automaticstabilizer

In addition, Turkish banks aresafe and sound They have capital-

adequacy ratios far in excess of ternational requirements As ofthe end of 2013, our banks’ aver-age capital-adequacy ratio was15.3%, nearly twice the 8% thresh-old mandated under Basel II regu-lations

in-The changing international vironment has led to higher costs

en-in refen-inancen-ing external debt ever, Turkey’s external position ismuch better than feared House-holds are long in foreign exchangeassets by nearly $190 billion

How-Moreover, and by virtue of our mestic regulation, households maynot borrow in foreign currency

do-Turkey’s banking sector has a tinyopen foreign-exchange position of

$600 million While the corporatesector has an open foreign-ex-change position of $170 billion,only $17 billion of that is short-term debt

We will continue to maintainand improve upon our robust pol-icy framework and, with time, cap-ital will return After all, investorswill continue to search for oppor-tunities in well-diversified emerg-ing markets

All of this paints a muchbrighter picture of Turkey’s eco-nomic prospects than current mar-ket volatility suggests In buildingthis strong economic foundation,Turkey is well placed to “convertretreat into advance,” as PresidentRoosevelt would have said

Mr Simsek is the minister of nance of the Republic of Turkey.

fi-The bloodshed

in Caracas over the

past 12 days brings

to mind the 2009

Summit of the

Americas in Port of

Spain, where President Obama

greeted Venezuelan dictator Hugo

Chávez with a huge grin and a

warm handshake A couple of

months later the State Department

attempted to force Honduras to

re-install pro-Chávez president

Man-uel Zelaya, who had been deposed

for violating the constitution

Brows were knitted throughout

the Americas Why did the U.S

president favor the Venezuelan

dictator, protégé of Fidel Castro,

over Honduras, which still had a

rule of law, press freedom and

plu-ralism?

Fast forward to last Wednesday,

after four peaceful

student-pro-testers had been confirmed as

hav-ing been killed by the

govern-ment’s armed minions Mr Obama

took notice, pronouncing the

bru-tality “unacceptable.” That must

have been comforting to hear amid

the gun shots and pummeling on

the streets of Caracas

That same night the

govern-ment of Nicolás Maduro—Chávez’s

handpicked successor—unleashed

a wave of terror across the

coun-try According to Venezuelan blogs

and Twitter posts, the National

Guard and police went on a tear,

firing their weapons

indiscrimi-nately, beating civilians, raidingsuspected student hide-outs, de-stroying private property andlaunching tear-gas canisters Civil-ian militia on motor bikes added tothe mayhem The reports camefrom Valencia, Mérida, San Cris-tóbal, Maracaibo, Puerto Ordazand elsewhere, as well as the capi-tal

Venezuela has promised100,000 barrels of oil per day toCuba, and in exchange Cuban intel-ligence runs the Venezuelan statesecurity apparatus The Cubansclearly are worried about losingthe oil if their man in Caracas falls

Opposition leader Leopoldo López,who heads the Popular Will politi-cal party, spent several yearsbuilding a network of young re-cruits around the country Lastweek’s unrest is a testament tothat organization, and it is why the42-year-old Mr López is now be-hind bars

In Ukraine, the European Unionhas pressured the government toreach a compromise with the op-position Venezuelans are getting

no such help from the neighbors

Only Colombia, Chile and Panamahave objected to the crackdown

The rest of the hemisphere doesn’thave even a passing interest in hu-man rights when the violationscome from the left The Organiza-

tion of American States is posed to defend civil liberties, butsince Chilean Socialist José MiguelInsulza took the OAS helm in 2005,

sup-it has earned a disgraceful record

as a shill for Cuba

Venezuelans seeking changeface daunting odds The crowds inthe streets of Caracas in recentdays have not been significantlybigger than in many prior-yearprotests, including 2002, when amarch in Caracas almost unseatedChávez

This time the repression hasbeen fierce Besides injuries anddeath, hundreds have been de-tained and it would not be surpris-ing if many are given long sen-tences Mr Maduro needsscapegoats for the violence he un-leashed Iván Simonovis, the for-mer head of the Caracas Metropol-itan Police, has been a politicalprisoner since 2004 Chávez madehim take the fall for the 17 peoplekilled in the April 2002 uprisingeven though video evidence points

to chavista snipers Photos of the

once-fit policeman, frail andgravely ill from the inhuman cir-cumstances of his long incarcera-tion, are chilling

Another problem is the divisionwithin the opposition The gover-nor of the state of Miranda, Hen-rique Capriles, represented a broad

coalition of anti-chavista parties

when he ran for president in 2013

But when he conceded to Mr duro amid strong evidence that theelection had been stolen, Mr Ló-pez and other members of the op-position broke with Capriles sup-porters

Ma-Students have also been strung by a communications block-ade The government controls allVenezuelan television and radioairwaves When the violence brokeout, it forced satellite providers todrop the Colombian NTN channel

ham-Internet service has been cut inmany places

Getting the very poor on boardfor a regime change is a challenge

Some still see chavismo as their

government, even if they have nolove for Mr Maduro and sufferfrom high inflation Others don’tdare speak out, for fear of losingstate jobs or their lives The bar-

rios are terrorized by the chavista

militia

Mr Maduro says he will use ery weapon to quell the unrest OnFriday afternoon the son of a Ven-ezuelan friend sent me photosfrom Caracas of troops massing atthe Francisco de Miranda air base

ev-in the middle of the city The

Cu-ban-backed Venezuelan high mand, Cuban intelligence (thecountry is thick with agents) andplainclothes militia will playrough

com-On the other hand, the ment is bankrupt, and food andother shortages will get worse Mr

govern-Maduro may pacify Caracas, butfood is harder to find in the inte-rior of the country than in the cap-ital It is there that the fires of re-bellion, burning for the first time

under chavismo, might race out of

control Many army officers comefrom lower-middle-class families,and it is not clear that they willstand by and watch large numbers

of civilians being slaughtered

Many resent the Cuban occupation

What comes next is hard to dict But no one should underesti-mate Cuba’s comparative advan-tage: repression

pre-Write to O’Grady@wsj.com

[ Americas ]

BY MARY ANASTASIA O’GRADY

The Turkish economy has experienced average annual growth of 5% over the past 10 years.

Turkey Will Rise Above Fear

Behind the Turmoil in Venezuela

if its man in Caracas falls.

Carl Icahn Accuses eBay

Of Lapses in Governance

BUSINESS & FINANCE 16

U.S Industries Feel Burn From Chill

HEARD ON THE STREET 28

Traders See End to Era

Of Steady Yuan Gains

China’s yuan hit a four-monthlow Monday, dragging down othercurrencies in the region and fuelingspeculation that years of gains may

be nearing an end

In a sign that global investorsare retreating from bets on furtherappreciation, the offshore yuan,which is freely traded, fell to thesame level as its onshore counter-part, which is strictly controlled

The yuan is entering its secondweek of declines triggered by a sur-prise move by the central bank toguide it lower

Analysts say China is aiming toforce out speculators seeking toprofit from gains in the currency,and to stem heavy inflows fromabroad that flood the country withexcess cash and hurt efforts to curbcredit

UBS AG, one of the world’s

big-gest currency traders, said the tral bank’s recent moves signal achange in policy

cen-“The Chinese government pears to want increased flexibility inthe yuan’s exchange rate, ratherthan continued strengthening,” UBSeconomist Wang Tao said “The era

ap-of steady [yuan] appreciation may

be drawing to a close.”

She said exporters were feelingthe pain from a currency that hadbeen rising until recently, and fore-cast a largely stable yuan for therest of the year at about 6.1 per dol-lar The dollar was trading at 6.0984yuan late Monday, compared with6.0913 on Friday A higher numbermeans a weaker Chinese yuan

The People’s Bank of China sets adaily reference rate for the yuan, al-lowing it to trade 1% higher orlower each day

The drop in the currency comes

as concerns mount over slowinggrowth in the world’s second-big-gest economy and signs of rising fi-nancial stress

Property stocks were slammedMonday on news that developers intwo cities in eastern China hadstarted to cut prices of new homes

in a bid to spur sales, raising freshconcerns about the health of themarket

“The shift in [yuan] dynamicswas mainly driven by several fac-tors: weakening economic outlook,policy shift and technical adjust-ment by market investors,” analystsfrom J.P Morgan said Monday

The yuan’s slide is having rippleeffects on currencies in other Asiannations with close trading ties toChina The South Korean won hit itslowest level in more than two weeksagainst the U.S dollar The curren-cies of Singapore and Taiwan alsohad heavy selloffs last week

Please turn to page 22

BY FIONA LAW

RBS Works for Master, Clients

LONDON—Last summer, Adrian

Eady, a banker with Royal Bank of

Scotland Group PLC, was nearly

crushed hauling a crate of fetacheese off a forklift truck in a NorthLondon warehouse

A few months earlier, the controlled bank sent Mr Eady towear an apron and serve cappucci-nos in a cafe Before that, he wasselling novelty greeting cards in ashop

state-Following a political uproar over

a lack of bank lending to small nesses, 81%-government-owned RBScreated its “Working With You” pro-gram All RBS corporate bankersmust spend at least two days a yearworking for a customer free ofcharge

busi-“We do anything they ask,” says

Mr Eady “If they say ‘make the tea,’

then we make the tea.”

It is an example of the extensivepains RBS is taking to try to ap-pease its masters and customers af-ter six years of withering criticismfor everything from excessive payfor executives and top bankers to alack of small-business lending

Efforts to patch things up withBritish politicians are kicking intohigher gear after the governmentpushed out the bank’s chief execu-tive last year and took a more pro-active role calling the shots at thebailed-out bank

The new CEO, Ross McEwan,publicly agreed with U.K Chancellor

of the Exchequer George Osborne’sview that RBS must refocus on itsU.K retail and corporate market

RBS hired former Bank of England

official Andrew Large, who duced a 95-page report on how itcould do better at small-businesslending This week, the bank willpresent a new strategy aimed atcutting back office costs, slimmingits global footprint and restructur-ing its corporate bank

pro-It is unclear how long the peacewill last British Prime Minister Da-vid Cameron recently threatened topersonally veto any overall pay in-crease for RBS bankers this year

Under new European rules, banksmust get shareholder approval topay bonuses of as much as twice thefixed salary UK Financial Invest-ments Ltd., which manages the RBSstake on the government’s behalf, isstill weighing what to do, according

to people familiar with the matter

Perhaps more damaging are gations by a government adviserthat the bank is failing its custom-ers RBS, like its peers, faces ram-pant complaints that it isn’t lending

alle-enough to small businesses and ishampering economic growth Theadviser, Lawrence Tomlinson, al-leged to a parliamentary committeethat RBS forced several small busi-nesses into default to seize their as-sets for a profit “It seems to be sys-tematic to me,” said Mr Tomlinson.RBS denies this allegation.Given the public debate oversmall-business lending, RBS is tak-ing action to shake up its corporate

Please turn to page 20

Va-In November, Novartis struck a

$1.68 billion deal to sell the bulk ofits diagnostics business to a Spanishcompany, the first indication itwould slim down the sprawlingportfolio of businesses Dr Vasellahad assembled over two decades Amonth later, Novartis said it wasscrapping plans to build a trainingcenter next to his lakeside estateoutside Zurich, a project Dr Vasellahad shepherded for four years

The company, which is based inBasel, also has disbanded two boardsubcommittees he had established

to oversee its finances

Chief Executive Joe Jimenez saysmore changes are on the way as No-vartis focuses on businesses where

it can achieve scale “We are now at

a stage where we can look at ourentire portfolio and look at how

we’re positioned for the next 10years,” Mr Jimenez said in an inter-view last fall

Novartis’s efforts to emerge from

Dr Vasella’s shadow mark a seachange for the company, which hetransformed into a health-care con-glomerate after engineering themerger of Sandoz AG and Ciba-

Geigy AG in 1996 His goal: to sify into businesses ranging fromvaccines to generic drugs to insulateNovartis from the ups and downs ofthe brand-name pharmaceuticalbusiness, where revenue can plungewhen drugs lose patent protection

diver-Now, the company’s leaders areunraveling that empire They say

they plan to sell or pursue joint tures for Novartis’s over-the-coun-ter drugs, animal-health-productsand vaccines businesses Its otherthree businesses—pharmaceuticals,eye care and generics—each gener-ate revenue of at least $10 billion ayear and are ranked No 1 or No 2 intheir respective fields

ven-Novartis’s divestiture plans arelikely to be discussed Tuesday, asthe company convenes its first an-nual meeting without its formerchairman, who left Switzerland lastyear for the U.S

For decades, Dr Vasella, who clined to comment for this article,was one of Switzerland’s highest-profile businessmen As chairmanand chief executive until 2010, heled Novartis’s purchases of U.S vac-cine maker Chiron Corp for $7.5 bil-lion and eye-care company AlconInc for $51.6 billion

de-Dr Vasella, now 60 years old,also steered Novartis into the gener-ics business, broadening the number

of drugs in its portfolio through quisitions By 2012 that had helped

ac-to cement the company’s position as

Please turn to next page

BY MARTA FALCONI

Daniel Vasella, above last year, turned Novartis into a health-care conglomerate.