Archive for February, 2015

U.S. Rethinks Plan to Retake Mosul

February 28, 2015

The U.S. military is considering a months-long campaign of airstrikes to squeeze Islamic State fighters in the Iraqi city

In this Feb. 10 photo released by the U.S. Army, a Danish trainer helps Iraqi army trainees as part of multinational efforts in helping combat Islamic State militants in Iraq.  
In this Feb. 10 photo released by the U.S. Army, a Danish trainer helps Iraqi army trainees as part of multinational efforts in helping combat Islamic State militants in Iraq. Photo: U.S. Army/Associated Press
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By Adam Entous and Julian E. Barnes
The Wall Street Journal
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WASHINGTON—The U.S. military is considering a months-long campaign of airstrikes to squeeze Islamic State fighters in Mosul before inserting Iraqi ground forces to retake the city, officials said Friday.

The on-the-ground fight to retake Mosul isn’t likely to start until the fall at the earliest, after an intensified air campaign to target Islamic State leaders and cut off supply lines in and around the city, the officials said.

The emerging plan is at odds with a briefing by a U.S. military’s Central Command official in February in which he said the U.S. and Iraq were looking at starting a campaign to liberate Mosul, Iraq’s second-largest city, by April or May.

Afterward, Iraqi and American officials cast doubt on the likely readiness of Iraqi forces.

U.S. military officials now say they believe that Iraqi’s best military units are many months away from being in a position to successfully conduct such an operation. Those forces haven’t yet begun their training at the bases set up by American military officers in Iraq.

“When we feel that the Iraqi forces are ready to go and win decisively, we will go and advise the Iraqis to begin the operation,” a military official said.

Under the evolving plan, the U.S. would use its air power in the coming months to further isolate Mosul and weaken the hold of Islamic State fighters on the city. Under this approach, U.S. airstrikes would be focused on picking off Islamic State leaders to undermine their ability to command and control their forces.

Kurdish forces have already cut off one of the main approaches into Mosul from Syria.

Another approach could be cut off from Anbar province.

Iraqi forces could focus first on clearing Islamic State militants out of pockets of Anbar before turning to Mosul, which is expected to more difficult.

Under this scenario, ground operations in Mosul would take place in the fall, if not later.

The U.S. believes that a force of around 20,000 fighters will be needed to liberate and hold Mosul, officials said.

Central Command officials had originally looked at April or May to start the ground operation in Mosul, before temperatures rise in the summer. But the units which U.S. officials hoped to take the lead in the Mosul offensive won’t have time to complete their training.

At a briefing on Friday, Rear Adm. John Kirby, the Pentagon press secretary, wouldn’t rule out an April operation in Mosul, saying the military wouldn’t set a timeline. He noted that any strike to liberate Mosul would be a tough fight.

“We’re not going to be able to go, nor do we want to go any faster than the Iraqis are ready to go,” Adm. Kirby said.

Write to Julian E. Barnes at julian.barnes@wsj.com and Adam Entous at adam.entous@wsj.com

http://www.wsj.com/articles/u-s-rethinks-plan-to-retake-mosul-1425086143

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Kirby: Iraqi Leaders, Troops Will be Force Against ISIL

By Jim Garamone
DoD News, Defense Media Activity

WASHINGTON, Feb. 27, 2015 – Any operation in Iraq against the Islamic State of Iraq and the Levant “is going to be and must be” an Iraqi-led and Iraqi-manned operation, Pentagon Press Secretary Navy Rear Adm. John Kirby told reporters today.

Any operation against ISIL will be dependent on the Iraqi military being able to perform the mission, the admiral said during a Pentagon press briefing.

Kirby was speaking about reports that Iraqi forces would take back the city of Mosul from ISIL in April.

No Certain Date for Mosul Offensive

“I just can’t put a date certain on there and say it is going to happen at a certain time, nor am I prepared to rule something out and tell you definitively, ‘Well, April is out,'” he said.

Mosul is the second-largest city in Iraq and ISIL occupied it when they swept out of Syria last year. U.S. Central Command commander Army Gen. Lloyd J. Austin III has said it will be a tough fight to retake the city.

“We’re only going to be able to do it if and when the Iraqis are ready to do it, and that we can ensure success, that we can prevail,” Kirby said.

U.S. forces are working to train, advise and assist Iraqi forces, including the Kurdish peshmerga.

“They are in the fight right now, retaking terrain that ISIL has either recently tried to take, or is trying to defend,” Kirby said. “So supply lines up in the north, the peshmerga are cutting off supply lines of ISIL into Syria.”

Defense Secretary Ash Carter is very interested in the progress of the train, advise and assist mission, said Kirby, noting Carter is concerned about how well the Iraqis are doing and how many have been trained.

“We’ve graduated some 2,500 or so [Iraqis] already from this [training],” the admiral said.

And, Carter is interested in how the Iraqis are doing on the battlefield, Kirby said.

“With respect to Mosul, [Carter] doesn’t want to go any faster than the Iraqis are ready and no faster than what we can assure ourselves of success,” Kirby said.

(Follow Jim Garamone on Twitter: @garamoneDoDNews)

 

Yemen Signs Aviation Deal With Iran

February 28, 2015

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Reuters

SANAA — Yemen and Iran signed a civil aviation deal on Saturday, Yemeni state news agency SABA reported, a move that may reflect Tehran’s support for the Shi’ite Muslim militia that now controls Sanaa.

The deal signed in Tehran by the aviation authorities of both countries allows Yemen and Iran each to fly up to 14 flights a week in both directions, SABA said. The websites of the Iranian and Yemeni national airlines indicated there were currently no flights between the two.

The Shi’ite Muslim Houthi militia seized Yemen’s capital in September, which eventually led President Abd-Rabbu Mansour Hadi to flee this month to the port city of Aden where he is seeking to set up a rival power centre.

Sunni countries in the Gulf fear that events in Yemen show Shi’ite power Iran asserting its influence, something Tehran denies.

U.S. officials have also expressed concern that the rule of the resolutely anti-American Houthis will harm their counter-terrorism efforts in a country that has one of the most active branches of the Sunni Islamist militant group al Qaeda.

(Reporting by Mohamed Ghobari; Editing by Robin Pomeroy)

Obama, Netanyahu on Collision Course 6 Years in the Making

February 28, 2015
WASHINGTON — Feb 28, 2015, 8:34 AM ET

Obama and Kerry Seem Unable or Unwilling To Engage in War of Ideology and Moral Conviction, Giving Iran and the Islamic State a Key Advantage

February 28, 2015

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As former secretary of state Henry Kissinger put it in a congressional hearing last month, what began as an effort to deny Iran’s nuclear military capability has since become a negotiation over that capability’s scope.

Washington’s attitude toward Iran’s nuclear quest increasingly resembles its attitude toward Soviet disarmament since 1969, but lacks those years’ moral conviction.

Having admonished young Russians to fight corruption and demand freedom, Joe Biden stared at a packed Moscow University auditorium and said: “Don’t compromise on the basic elements of democracy. You need not make that Faustian bargain.”

Four years on, the US vice president’s boss is the one brewing a pact with the devil, ceding moral values for mortal gains. That, at least, is how both Prime Minister Benjamin Netanyahu and opposition leader Isaac Herzog see the evolving deal between Iran and the P5+1 world powers.

The deal has yet to be formally presented, but its reported contours are clear: a supervision regime that would force the Iranians to slow down and expose their industrial progress toward the ability to build a nuclear bomb, keeping the capability at least a year away at any point during the agreement’s duration.

The Iranian capability to weaponize would be curtailed by three restrictions concerning Tehran’s high-grade uranium: its quantity would be cut; its grade would be capped; and its processing would be shrunk.

The cutting would be done the way it already was last year, when Tehran diluted a portion of its high-grade uranium; the capping would be to 5 percent, which is sufficient for civilian purposes but insufficient for producing a bomb; and production would be squeezed by limiting the amount of centrifuges, the tools of uranium’s enrichment.

This formula’s rationale is that the sanctions, which would be lifted gradually in return for transparency and slowdown, could be restored at any point. If by the time the deal’s duration expires the powers agree that Iran has fulfilled its commitments, Tehran would be allowed to use nuclear power for civilian purposes without international supervision.

The time frame for this structure is, reportedly, 10 years – during which Iran’s production of nuclear fuel would be drastically cut, followed by five years during which it would be incrementally restored. The deadlines for the framework and final agreements are, respectively, March 24 and June 30.

The Islamic Republic’s interlocutors are not made of one skin. Russia and China don’t feel threatened by Iran’s quest, as opposed to the Western powers.

Moscow, at the same time, has an economic interest that Iran’s oil remain in its wells, lest it further flood an already glutted energy market – where Russia wins most of its bread.

Beijing’s interest is the opposite of Russia’s, as it lacks the latter’s oil and gas, and at the same time has a sprawling industrial sector the size of which Russia will not have even a generation from now. China therefore has an interest in oil prices’ further fall and in Iran’s oil returning to the markets, and in fact sees in Tehran a strategic business partner. Then again, Beijing also sees an unruly and provocative Iran as bad for business.

Despite these variations, the talks’ tone is set by the Western powers, and within them by the US – whose negotiators reject the comparison between their dialogue with Tehran’s mullahs and that of Neville Chamberlain’s with Hitler.

The way US President Barack Obama and Secretary of State John Kerry are conducting this negotiation, its analogy is to them not the Munich Pact with Nazi Germany but the Strategic Arms Limitation Talks (SALT), which produced limited disarmament agreements between the US and USSR.

The American-Soviet arms limitation talks began in 1969 in Helsinki, and resulted three years later in an agreement signed festively in Moscow by president Richard Nixon and Soviet leader Leonid Brezhnev. The two superpowers agreed to limit their anti-ballistic missiles operations to one site each.

The American rationale was twofold: military and diplomatic. Militarily, the deal left most of the sides’ vast lands exposed to each other’s potential attack, thereby upholding each others’ nuclear deterrence.

Diplomatically, it triggered and cultivated a culture of dialogue that the Americans hoped would, in due course, help sensitize the formidable Soviets.

The analogy to the Iranian situation lies in the staunchly anti-Communist Nixon’s conclusion that dealing with America’s arch-rival was worthwhile – even though it clung to its Communist faith, human rights abuses and global interventions.

That is how the two superpowers continuously conducted dialogue and bargained, even while their proxies clashed worldwide, ultimately producing further deals about limiting the number of strategic launchers.

Unlike Hitler’s deals, which he violated one by one, the Soviets abided by theirs. In fact, the spirit of those talks was so positive that even after US president Jimmy Carter halted the SALT II agreement’s ratification process following Afghanistan’s invasion, Moscow and Washington still fulfilled its terms, voluntarily.

The Iranian situation is obviously different. Iran is not a superpower, its interlocutors don’t perceive it as threatening them directly and it is no match for any of them on any possible parameter – militarily, industrially or economically. Moreover, by the time SALT was negotiated, the Soviet nuclear arsenal had long been intact and growing – whereas the Iranians have yet to hold their first bomb.

Even so, the unfurling American attitude is inspired by the same mentality with which Washington treated the unconventional arms of the USSR in its last decades.

It is a dramatic shift. As former secretary of state Henry Kissinger put it in a congressional hearing last month, what began as an effort to deny Iran’s nuclear military capability has since become a negotiation over that capability’s scope.

Henry Kissinger. Bloomberg photo

This unfolding nuclear acquiescence comes coupled with a political free ride that Washington never gave the USSR.

WHILE NIXON’S diplomats negotiated disarmament with the Soviets, American politicians pressured the USSR on its human rights record.

This effort’s main weapon was the 1974 Jackson-Vanik Amendment to the US Trade Act, which tied US foreign trade to its partner’s human rights record. By withholding the USSR’s “most favored nation” status, the US waged on this front the war it avoided on the disarmament front: the war of ideas.

The war of ideas is for now a non-factor in the dialogue between Washington and Tehran. Obama’s tone for such tolerance was already set in his Cairo Speech of June 2009, where after faintly mentioning that “Iran has played a role in acts of hostage-taking and violence against US troops and civilians,” he affirmed that the US is “prepared to move forward” and that “the question now is not what Iran is against, but rather what future it wants to build.”

That is how the sanctions against Iran remain confined to the nuclear situation, while for instance, Iran’s serial executions – 664 in 2013 and 721 last year, according to the Iran Human Rights Documentation Center – and the ayatollahs’ jailing of thousands of dissidents, are treated as the Islamic Republic’s “internal affairs” and left diplomatically unopposed.

So is Iran’s regional meddling. With its recent snatching of Yemen, Tehran’s already decisive sway in Baghdad, Damascus and Beirut is now well on its way to its next strategic milestone, the Bab el-Mandeb strait – where Asia and Africa are but 28 kilometers apart, and where 4% of the world’s oil passes annually en route to the Suez Canal.

Iran’s expansionism is apparently under-appreciated by Obama.

A Yemen that orbits Iran is intolerable to nearby Egypt, which already has responded to the Iranian nuclear quest by two weeks ago signing a deal with Russia to build its own reactor. Similarly, Egyptian and Saudi messages of concern to Washington over the evolving deal with Iran have thus far fallen on deaf ears.

These aspects of Iran’s conduct are no factor in the negotiations, not to mention its role in the Syrian people’s butchery. As such, if sanctions are lifted without any Western demand concerning Iran’s domestic and regional conduct, the deal would be interpreted in Tehran as approval of its oppression and imperialism, not to mention its Islamism.

It follows, that all those displeased with the Obama administration’s Iranian policy will likely respond to his overtures by seeking a parallel sanctions effort that will aim not at Iran’s nuclear program, but at its treatment of its citizens and neighbors.

Responding to Israeli statements concerning the current negotiations, Iranian Foreign Minister Mohammad Javad Zarif said they were “a smoke screen” intended to divert attention from the Jewish state’s “atrocities against the Palestinians.”

It was the kind of broadside Soviet officials used to habitually make while talking arms control with the US, obviously unaware that their polity’s years were numbered. Then again, at no time since backing its establishment in 1948 did the Soviet Union deny the Jewish state’s right to exist.

In this regard, the current talks’ analogy is to Munich 1938 – and the bargain that Biden’s boss seems eager to strike is with the devil.

http://www.jpost.com/International/Obamas-Faustian-bargain-392378

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This image taken from Iranian state TV, shows damage to a mock U.S. aircraft carrier during large-scale naval and air defense drills by Iran’s Revolutionary Guard, near the Strait of Hormuz, Iran, Wednesday, Feb. 25, 2015. The drill, named Great Prophet 9, was the first to involve a replica of a U.S. carrier. Cmdr. Kevin Stephens, the spokesman for the U.S. Navy’s 5th Fleet in Bahrain, said they were monitoring the drills, but downplayed the simulated attack on the carrier, saying the U.S. military was “not concerned about this exercise.”(AP Photo/Iran TV)

File:Barack Obama at Cairo University cropped.jpg

U.S. President Barack Obama speaking at Cairo University on 4 June 2009

Egypt courts list Hamas as terrorist group, give Brotherhood leader life

February 28, 2015

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CAIRO Sat Feb 28, 2015 8:28am EST

(Reuters) – An Egyptian court listed the Palestinian group Hamas as a terrorist organization, judicial sources said on Saturday, part of a sustained crackdown on Islamists in the most populous Arab state.

In a separate case earlier in the day, a court sentenced the Egyptian Muslim Brotherhood’s top leader Mohamed Badie to life in prison while other members received the death penalty.

Hamas is an offshoot of the Brotherhood, which the authorities have also declared a terrorist group in Egypt and have repressed systematically since the army ousted one of its leaders, Mohamed Mursi, from the presidency in 2013.

While a court ruled in January that Hamas’ armed wing was a terrorist organization, Saturday’s broader ruling against the entire group has potentially greater consequences for the already strained relationship between Cairo and Hamas, which dominates the Gaza Strip on Egypt’s border.

“The Egyptian court’s decision to list the Hamas movement as a terror organization is shocking and is dangerous, and it targets the Palestinian people and its factions of resistance,” Hamas said in a statement after the ruling.

“It will have no influence on the Hamas movement,” Hamas said.

After the January decision against Hamas’ Qassem Brigades, a source close to the armed wing signaled the group would no longer accept Egypt as a broker between it and Israel.

Cairo has for many years played a central role in engineering ceasefires between Israel and Hamas, including a truce reached between the sides in August that ended a 50-day Gaza war.

A spokesman for the Egyptian government declined to say what actions the government would take to enforce the ruling.

“When a final judgment is issued, we will discuss this,” Hossam al-Qawish said.

BROTHERHOOD LEADER GIVEN LIFE

In the other case, Badie, the top leader of the now-banned Muslim Brotherhood, was among 14 who were sentenced to life, alongside deputy leader Khairat El-Shater and leading figure Mohamed El-Beltagy.

Four lower-level members were sentenced to death for inciting violence that led to the killing of protesters demonstrating outside a Brotherhood office days before Mursi’s ouster.

Two of those sentenced to death and three sentenced to life were tried in absentia.

The death sentences are subject to appeal and many of the defendants are already serving lengthy sentences on other charges.

Badie has already been sentenced to multiple life terms, and was one of hundreds given the death sentence in a mass trial that drew international criticism of Egypt’s judicial system.

President Abdel Fattah al-Sisi, who as army chief toppled Mursi, describes the Brotherhood as a major security threat.

The movement says it is committed to peaceful activism.

(Reporting By Ahmed Tolba and Mahmoud Mourad in Cairo and Nidal al-Mughrabi in Gaza; Writing By Shadi Bushra; Editing by Pravin Char and Stephen Powell)

Related:

Sundown’s fading light shows the destruction in the Sha’af neighborhood of Gaza City after the summer war between Israel and Hamas.

U.S. Navy says it has been flying P-8 reconnaissance planes out of Philippines

February 28, 2015

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Pilots perform preflight checks aboard a P-8A before a mission from Perth, Australia, in this file image from April 2014. The plane has now made more than 180 hours of missions from the Philippines. | U.S. NAVY

Reuters

The United States has been flying its most advanced surveillance aircraft, the P-8A Poseidon, out of the Philippines for patrols over the South China Sea, the U.S. Navy said on Thursday, acknowledging the flights for the first time.

The United States, the Philippines’ oldest and closest ally, has promised to share “real time” information on what is happening in Philippine waters as China steps up its activities in the South China Sea.

P-8A Poseidon

China claims most of the potentially energy-rich South China Sea, through which $5 trillion in ship-borne trade passes every year. The Philippines, Vietnam, Malaysia, Brunei and Taiwan also have overlapping claims.

The U.S. Navy said in a statement it demonstrated the capabilities of P-8A in both littoral and open ocean environments, and explained to Philippine forces the functions that the aircraft’s sensors are capable of.

“It was a remarkable opportunity to work alongside the members of the Filipino armed forces,” said U.S. Navy Lieutenant Matthew Pool, Combat Air Crew 4 patrol plane commander.

“Sharing this aircraft’s capabilities with our allies only strengthens our bonds.”

The United States says it does not take sides in disputes between China and other South China Sea claimants and it calls on them to negotiate a formal maritime Code of Conduct.

The Unites States has also called for a freeze on provocative acts in the sea but China rejects U.S. involvement in the dispute.

China accuses the United States of emboldening claimants such as the Philippines and Vietnam with its military “pivot” back to Asia.

The P-8A was deployed in the Philippines for three weeks until Feb. 21, making more than 180 flight hours over the South China Sea, the U.S. Navy said.

Colonel Restituto Padilla, a spokesman for the Philippine armed forces, said the U.S. Navy has been operating P-3C Orions since 2012 from Philippine bases under a bilateral security agreement that sees U.S. forces rotate through the Philippines.

He said P-8A aircraft replaced the Orions on the rotations last year but the allies had made no announcement of its flights.

“We expect more surveillance planes to be deployed in the Philippines, increasing the frequency of rotation,” Padilla said.

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Indonesia’s Maritime Affairs and Fisheries Minister Orders a Crackdown on Illegal Chinese Fishing

February 28, 2015

By Nani Afrida, The Jakarta Post

Maritime Affairs and Fisheries Minister Susi Pudjiastuti was in no better place on Wednesday to vent her anger when it comes to the Navy’s apparent lack of enthusiasm for cracking down on foreign poachers.

SusiPudjiastuti

At the headquarters of the Navy’s Western Fleet in Central Jakarta, the outspoken minister told reporters about a seemingly untouchable Chinese fishing vessel that appeared to operate freely despite the revocation of its license in 2013. The Fu Yuan Yu 80 was caught on the radar of Susi’s office on Tuesday operating off the northern coast of Jakarta, with no sign that the Navy intended to detain the ship despite knowing its location.

“It [the ship’s continued operation] is an extraordinary example of abuse of the NKRI [the Unitary State of Indonesia],” said Susi after attending the inauguration of Western Fleet commander Rear Admiral Taufiqurrahman.

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“I hope the Navy and the PSDKP [the Maritime and Fisheries Monitoring Task Force] can detain the vessel as soon as possible today [Wednesday],” urged Susi, who uses Army personnel as her security detail. According to Susi, the vessel is operated by an Indonesian firm PT. Antartica, which is part of the same group used by the Chinese operators of the MV Hai Fa.

The MV Hai Fa was seized in December and is the biggest ship the ministry has yet captured. The ministry seized the 4,306-ton vessel on suspicion that it was conducting illicit practices in Indonesian territorial waters. It was seized with the assistance of the Navy on Dec. 27.

The ship and its 24-man crew, all Chinese nationals, was chartered by Indonesian fishery companies to export goods to China. Navy spokesperson Commodore Manahan Simorangkir said the Navy had ordered a hunt for the Fu Yuan Yu 80.

“The field command is attempting to find the vessel now,” Manahan said. In December, the Navy sought to capture 22 Chinese vessels, but only eight were actually caught.

The failure has raised questions about the Navy’s commitment to safeguarding the country’s territory. Indonesia is taking a tough stance against China in its fight against illegal, unreported and unregulated fishing, by confiscating Chinese vessels and ending privileges granted to China to fish in Indonesian waters.

The government has revoked a deal signed with China in 2013 that gave Chinese fishermen advantages over other countries fishing in Indonesian waters. After President Joko “Jokowi” Widodo took office on Oct. 20, Indonesia upped the ante in its battle against illegal fishing by capturing many vessels from Thailand, Vietnam, Malaysia, China, Taiwan and Papua New Guinea (PNG).

Citing an annual loss of more than US$2 billion to foreign poachers, Indonesia has sunk more than a dozen vessels from Vietnam, Thailand, PNG and Malaysia. The government has sunk no Chinese vessels yet as it is still awaiting court decisions determining whether the vessels violated the law. –

See more at: http://www.thejakartapost.com/news/2015/02/26/susi-torpedoes-navy-over-chinese-vessel.html#sthash.SC1v7pN9.dpuf

Editors Note: Early in December 2014, Indonesia carried out a threat and sank a Vietnamese fishing boat but it has not effectively rid itself of Chinese fishermen as of now.

See: Indonesia May Sink Chinese Vessels: Jokowi Adviser
http://thediplomat.com/2014/12/indonesia-may-sink-chinese-vessels-jokowi-adviser/

Indonesia sinks Vietnamese boats to stop illegal fishing
http://www.dailymail.co.uk/wires/afp/article-2862091/Indonesia-sinks-Vietnamese-boats-stop-illegal-fishing.html

JAKARTA (AFP) – Indonesia blew up and sank three empty Vietnamese boats Friday, the navy said, as the world s biggest archipelago nation pushes to stop foreigners from illegally fishing in its waters.
http://dunyanews.tv/index.php/en/World/248577-Indonesia-sinks-Vietnamese-boats-to-stop-illegal-f

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An Indonesian warship launches rounds of missiles during the celebration of the 69th anniversary of the Indonesian armed forces in Surabaya in eastern Java i...

An Indonesian warship launches rounds of missiles during the celebration of the 69th anniversary of the Indonesian armed forces in Surabaya in eastern Java island on October 7, 2014 ©Juni Kriswanto (AFP/File)

 

 

India Increases Military Budget By 11% to Nearly $40 Billion

February 28, 2015

South Asian nation looks to expand and modernize armed forces

By Santanu Choudhury
The Wall Street Journal

NEW DELHI—India increased the amount of money it plans to spend on its military next fiscal year by 11% to nearly 2.47 trillion rupees ($40 billion) as the South Asian nation plans to continue to invest in expanding and modernizing its armed forces.

In the year starting April 1, India will boost military spending from 2.22 trillion rupees this year, said Finance Minister Arun Jaitley in his federal budget speech Saturday. He said India will be trying to buy more of its arms domestically.

“We have been overdependent on imports, with its attendant unwelcome spin offs,” Mr. Jaitley said in his budget speech. “We are thus pursuing the ’Make in India policy’ to achieve greater self-sufficiency in the area of defense equipment.”

India has become the world’s biggest arms importer in recent years as it attempts to build up its military to deal with tensions with Pakistan and the growing military strength of China.

India plans to cut its outlay toward new aircraft and engines for the Indian Air Force to 189 billion rupees for the coming fiscal year from 215 billion rupees this year. Mr. Jaitley allocated about 160 billion rupees for the navy to upgrade its fleet, up from a revised 94 billion rupees this year.

India’s Prime Minister Narendra Modi has made military modernization one of his top priorities since his government came to power in May. Soon after taking charge, Mr. Modi’s government started allowing foreign firms to hold up to 49% stakes in defense ventures. Previously, foreign firms were only allowed to own up to 26% stakes in military joint ventures.

Analysts said the government’s push for greater local manufacturing of equipment by foreign firms may not materialize unless the foreign ownership limit is increased.

“The biggest elephant in the room is of course enhancement of the FDI (capt) from 49% to 74%,” said Amber Dubey, head of aerospace and defense practice at KPMG in India. “Not a penny of FDI has come in since the last budget in June 2014.”

India received a meager $5 million worth of foreign direct investment in defense in the last 14 years. The telecommunications and automobile industries have each attracted more than $10 billion each over that period.

Write to Santanu Choudhury at santanu.choudhury@wsj.com

India’s stealth frigate INS Tarkash

Sri Lanka Concerned by China Loans, Rules Out Submarine Visits

February 28, 2015

Reuters

BEIJING — Sri Lanka is concerned with the roughly $5 billion in Chinese loans it has and will send its finance minister to Beijing to discuss the issue, the foreign minister said on Saturday, as he also ruled out future Chinese submarine visits to the country.

New Sri Lankan President Maithripala Sirisena has unnerved China with his re-examination of certain projects that China has invested in, including a $1.5 billion “port city” project in the capital Colombo.

New port of Colombo

New port of Colombo (Artist’s impression)

India, which lost out to China in infrastructure development on the Indian Ocean island, was in particular concerned about the security threat posed by Chinese ownership of land, aggravated by the docking of Chinese submarines in Colombo last year.

India had grown increasingly wary of former president Mahinda Rajapaksa’s pursuit of closer ties with China, which became a key supporter of the island’s economy after its 26-year-civil war ended in 2009.

Speaking in Beijing at the end of a two-day visit, Sri Lankan Foreign Minister Mangala Samaraweera said there were concerns about the manner in which the some $5 billion Chinese loans for his country had been raised.

“During the run up to the last presidential campaign the people of Sri Lanka raised many, many questions about the interest rates especially, and also in certain cases about the manner in which these loans were raised,” he told a news conference.

“So we will, as a government committed to transparency, want to go into each of these matters.”

The country’s finance minister will visit Beijing after President Sirisena’s state visit to China, slated for March 26-28, Samaraweera said.

China has built a seaport and airport in the south of the country, raising fears it is seeking influence in a country with which India has traditionally had deep ties.

India’s concern grew after the Rajapaksa government allowed the Chinese submarines to dock.

Asked whether there would be any Chinese submarine visits in the near future, Samaraweera said: “I don’t see any”.

“I really don’t know which circumstances lead to some submarines coming to the port of Colombo on the very day the Japanese prime minister was visiting Sri Lanka, but we will ensure that such incidents — from whatever quarters — do not happen during our tenure.”

Samaraweera said the re-examination of certain projects was actually a good thing for foreign, including Chinese, investors.

“We want to create a rule-based investor climate because we feel that some of the investments which were decided upon by the previous government were not totally given on merit,” he said.

(Editing by Louise Heavens)

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China’s Central Bank Cuts Rates Again to Boost Economy

February 28, 2015

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People’s Bank of China

The Associated Press

BEIJING — China on Saturday cut interest rates for the second time in three months, adding to signs that Chinese leaders are worried that the economic slowdown is deepening too sharply.

The People’s Bank of China announced a rate cut on one-year loans by commercial banks by 0.25 percentage point to 5.35 percent. The interest rate paid on a one-year deposit was lowered by 0.25 point to 2.50 percent.

Rates were last cut on Nov. 22. The new rates take effect Sunday.

Last year, China’s economic growth fell to 7.4 percent — the lowest since 1990. It is expected to decline further this year, and a steep economic decline can raise the risk of politically dangerous job losses.

The latest round of cuts follow a string of tax reductions and other measures aimed at propping up growth. The government cut business taxes last week and has announced a pay hike for civil servants.

The lower rates are expected to reduce financial costs for state companies and are a signal to state-owned banks to boost lending to them.

Economic growth in the world’s second-largest economy has declined steadily over the past two years, mostly as a result of government efforts to steer the economy to more self-sustaining growth based on domestic consumption and to reduce reliance on trade and investment.

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