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UK credit rating downgraded due to Brexit uncertainty — “Moody Blues”

September 24, 2017

Moody’s agency said it is “no longer confident that the UK government will be able to secure a replacement free trade agreement with the EU which substantially mitigates the negative economic impact of Brexit”

By Ben Kentish

The Independent

The UK’s credit rating has been downgraded by Moody’s Investor Service because of economic uncertainty surrounding Brexit.

The downgrade came just hours after a major speech by Theresa May, which she had hoped would clarify the UK’s position on Brexit.

Moody’s also said an easing of austerity was behind its decision to lower the UK’s rating.

The news will come as a huge blow to Ms May just hours after her speech in Florence, Italy, in which she confirmed that Britain will leave the European single market but offered little clarity on plans for an alternative economic relationship.

In response, Moody’s warned of “uncertainty for businesses” and said the current plans for Brexit will cause the “erosion of the UK’s medium-term economic strength”.

In a damning assessment of the Government’s negotiating strategy to date, analysts said: “Moody’s is no longer confident that the UK government will be able to secure a replacement free trade agreement with the EU which substantially mitigates the negative economic impact of Brexit.

“While the government seeks a ‘deep and comprehensive free trade agreement’ with the EU, even such a best-case scenario would not award the same access to the EU Single Market that the UK currently enjoys.

“It would likely impose additional costs, raise the regulatory and administrative burden on UK businesses and put at risk the close-knit supply chains that link the UK and the EU.”

It also cited a relaxation of spending restrictions imposed between 2010 and 2015, warning of “increasing political and social pressures to raise spending after seven years of spending cuts”.

The Government announced last week that the public sector pay cap will be lifted from next year, and has taken a number of other steps to ease austerity, including increasing spending on health and adult social care.

The ratings agency said: “Overall, Moody’s expects spending to be significantly higher than under the government’s current budgetary plans and higher than the rating agency expected when the negative outlook was assigned in June 2016.”

As a result, it said, it expects the UK’s budget deficit to remain around 3.5 per cent of GDP – significantly higher than the below 1 per cent by 2020-21 that ministers have promised.

The UK is “among the few highly-rated European sovereigns where the public debt ratio continues to rise”, the agency added.

In a further blow to Ms May, Moody’s said the Conservatives’ deal with the DUP was another reason for the downgrade. It highlighted the £1bn given to Northern Ireland as part of the parliamentary pact as another cause of increased public spending.

Despite downgrading the country’s credit rating, analysts raised the UK’s overall outlook from “negative” to “stable” because they believe “some form of a free trade agreement [with the EU] is in the interest of both sides and will ultimately be agreed”.

Moody’s said hints that the UK government was “softening its negotiating stance in a number of areas”, especially on the need for a transitional period before Britain fully leaves the EU, was behind the change to “stable”.

The Government hit back within hours of the downgrade being announced, claiming the decision was based on “outdated” evidence.

A spokesperson said: “The assessments made about Brexit in this report are outdated. The Prime Minister has just set out an ambitious vision for the UK’s future relationship with the EU, making clear that both sides will benefit from a new and unique partnership.

“The foundations on which we build this partnership are strong. The government has a robust economic record which has delivered four and half years of continuous growth and a record number of people in work. We have made substantial progress in reducing the deficit while finding extra money for the NHS and social care at the same time. We are not complacent about the challenges ahead but we are optimistic about our bright future.”

http://www.independent.co.uk/news/business/credit-rating-brexit-uk-downgraded-latest-news-theresa-may-aa2-moodys-a7962532.html

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From Moody’s

Rating Action:  Moody’s downgrades UK’s rating to Aa2, changes outlook to stable
Global Credit Research – 22 Sep 2017

 Image result for photos, london, the city, financial district

London, 22 September 2017 — Moody’s Investors Service, (“Moody’s”) has today downgraded the United Kingdom’s long-term issuer rating to Aa2 from Aa1 and changed the outlook to stable from negative. The UK’s senior unsecured bond rating was also downgraded to Aa2 from Aa1.

The key drivers for the decision to downgrade the UK’s ratings to Aa2 are as follows:

1. The outlook for the UK’s public finances has weakened significantly since the negative outlook on the Aa1 rating was assigned, with the government’s fiscal consolidation plans increasingly in question and the debt burden expected to continue to rise;

2. Fiscal pressures will be exacerbated by the erosion of the UK’s medium-term economic strength that is likely to result from the manner of its departure from the European Union (EU), and by the increasingly apparent challenges to policy-making given the complexity of Brexit negotiations and associated domestic political dynamics.

Concurrently, Moody’s has also downgraded to Aa2 the Bank of England’s issuer and senior unsecured bond ratings from Aa1. The rating on its senior unsecured medium-term note (MTN) program was downgraded to (P)Aa2 from (P)Aa1. The short-term issuer ratings were affirmed at Prime-1. The ratings outlook was also changed to stable from negative.

The foreign and local currency bond ceilings and the local-currency deposit ceiling remain unchanged at Aaa/P-1. The foreign-currency long-term deposit ceiling was lowered to Aa2 from Aaa, and the short-term deposit ceilings remain P-1.

RATINGS RATIONALE

RATIONALE FOR THE DOWNGRADE TO Aa2

FIRST DRIVER: WEAKENING PUBLIC FINANCES WITH HIGHER BUDGET DEFICITS IN THE COMING YEARS AMID PRESSURE TO RAISE SPENDING

Moody’s expects weaker public finances going forward, partly linked to the economic slowdown under way but also reflecting the increasing political and social pressures to raise spending after seven years of spending cuts. Since 2015, the government has been finding it increasingly difficult to implement the spending cuts that it has been targeting, in particular on welfare spending. More recently, the government has yielded to pressure and raised spending in several areas, including for health and adult social care. It also agreed to above-budget pay increases for some public sector workers. While these additional expenditures will be funded out of current budgets, the pressure to continue to increase spending in the coming years is likely to remain high, in particular on health care and the public sector wage bill.

In addition, in order to secure a working parliamentary majority, the new government agreed a ‘confidence and supply’ arrangement that increases public spending by GBP1 billion for Northern Ireland. It also abandoned a pre-election promise to review the costly so-called “triple lock” on state pensions after 2020. Overall, Moody’s expects spending to be significantly higher than under the government’s current budgetary plans and higher than the rating agency expected when the negative outlook was assigned in June 2016.

At the same time, revenues are unlikely to compensate for higher spending. Earlier this year, the government abandoned a planned increase in national insurance contributions for the self-employed. Instead, the government has become reliant on highly uncertain revenue gains from tackling tax avoidance to fund tax cuts, as the Office for Budget Responsibility recently pointed out. Hence, while last year’s general government budget deficit turned out somewhat lower than expected (3.0% of GDP on a calendar year basis), Moody’s expects the (general government) budget deficit to remain at levels of 3-3.5% of GDP in the coming years, against the government’s plan of a gradual reduction to below 1% of GDP by 2021/22.

The UK’s broader fiscal framework — previously one of the strengths of the sovereign’s credit profile — has also weakened in recent years as illustrated by repeated revisions to medium-term fiscal targets and delays in reversing the rising debt trend. In contrast to the government’s earlier plans to have public sector net borrowing in surplus by 2019-20, the current objective is for the structural deficit to be below 2% by 2020-21; and the supplementary objective of having net debt as a percentage of GDP decline every year has been delayed to 2020-21 (from 2015-16 before). While these targets may be more realistic, the changes signal weaker predictability.

Weaker public finances will imply a further delay in reversing the rising public debt ratio. This places the UK among the few highly-rated European sovereigns where the public debt ratio continues to rise. Moody’s expects the ratio to increase to close to 90% of GDP this year and to reach its peak at close to 93% of GDP only in 2019, two years later than the latest government plans. Moreover, while the UK government benefits from one of the longest average maturities of its debt stock among advanced economies, the cost of the debt is comparatively high with Moody’s preferred metric — interest payments as a share of government revenues — at 6.3% compared to a ratio of around 3.6% for most other Aa2-rated peers.

SECOND DRIVER: EROSION OF ECONOMIC STRENGTH AS A RESULT OF EU EXIT DECISION AND INCREASING CHALLENGES TO POLICYMAKING

Moody’s believes that the UK government’s decision to leave the EU Single Market and customs union as of 29 March 2019 will be negative for the country’s medium-term economic growth prospects. Aside from the direct impact on the UK’s credit profile, the loss of economic strength will further exacerbate pressures on fiscal consolidation.

Growth has slowed in recent months, with average quarterly growth of just 0.26% in the first two quarters, versus an average of 0.6% over the 2014-2016 period. Private consumption has slowed sharply and business investment has been weak since 2016, most likely linked to the Brexit-related uncertainty. While future years may see some recovery, Moody’s expects growth of just 1% in 2018 following 1.5% this year and 2.25% on average in recent years.

More importantly for the UK’s credit profile, Moody’s does not expect growth to recover to its historic trend rate over the coming years. The UK is a relatively open economy, and the EU is by far its largest trading partner. Research by the National Institute of Economic and Social Research (NIESR) suggests that leaving the Single Market will result in substantially lower trade in goods and services with the EU. In a similar vein, both the NIESR and the Bank of England estimate that private investment will be materially lower in the coming years than in a non-Brexit scenario.

Moody’s is no longer confident that the UK government will be able to secure a replacement free trade agreement with the EU which substantially mitigates the negative economic impact of Brexit. While the government seeks a “deep and comprehensive free trade agreement” with the EU, even such a best-case scenario would not award the same access to the EU Single Market that the UK currently enjoys. It would likely impose additional costs, raise the regulatory and administrative burden on UK businesses and put at risk the close-knit supply chains that link the UK and the EU. Also, free trade arrangements do not as a standard cover trade in services — which account for close to 40% of the UK’s exports to the EU and 80% of Gross Value Added in the economy — given the prevalence of non-tariff trade restrictions and the need to align regulations and standards. In Moody’s view, the differences of outlook between the UK and the EU suggest that the most likely outcome is now a rather more limited free trade agreement which may exclude services: the UK’s desire to pursue its own regulatory policies and to avoid the jurisdiction of the European Court of Justice will make finding an agreement on services challenging. Moreover, any free trade agreement will likely take years to negotiate, prolonging the current uncertainty for businesses.

Aside from the direct impact on the UK’s credit profile, weakening growth prospects are likely to exacerbate the government’s evident fiscal challenges. And this is likely to be happening during a period in which policymakers will be increasingly distracted by the twin challenges of sustaining a domestic political consensus on how to operationalise Brexit and reaching agreement with EU counterparts.

Brexit carries with it a heavy policy and legislative agenda which will dominate policymaking in the years to come. In addition to ensuring a smooth exit from the EU, the UK authorities aim for significant changes to the UK’s immigration policy, its broader trade policies as well as regulatory policies. With Brexit dominating the government’s legislative priorities for the coming years, there is likely to be limited political capital and civil service capacity to address other challenges relating to the UK’s growth potential and weak productivity growth. While Moody’s continues to assess the UK’s institutional strength to be very high, the challenges for policymakers and officials are substantial and rising. The recent loss of the UK government’s parliamentary majority further obscures the future direction of economic policy.

RATIONALE FOR STABLE OUTLOOK

The fiscal deterioration that Moody’s expects is balanced by the UK’s continued economic and institutional strengths, that compare well to peers at the Aa2 rating level. While the ongoing Brexit negotiations introduce a high level of uncertainty over the economic outlook for the UK, Moody’s base case remains that some form of a free trade agreement is in the interest of both sides and will ultimately be agreed. Such a scenario would mitigate the negative economic implications of the UK’s departure from the EU to some extent.

In that context, Moody’s notes that the UK government may be softening its negotiating stance in a number of areas, including on the European Court of Justice, on continuing budget contributions in the transition phase and most importantly on the need for a transitional agreement beyond March 2019 to limit the disruption to trade following the UK’s exit.

WHAT COULD CHANGE THE RATING UP/DOWN

The combination of eroding fiscal and economic strength which drove today’s action implies limited upside to the rating following the downgrade. Over the longer term, a more rapid and sustained recovery in fiscal strength, together with evidence that the economic impact of Brexit is less material than Moody’s currently estimates would be positive for the rating.

The rating would come under further downward pressure if Moody’s concluded that public finances were likely to weaken further than Moody’s currently expects. It would also be under pressure if Moody’s concluded that the economic impact of the decision to exit the EU would be more severe than Moody’s currently expects, perhaps because the negotiations with the EU failed to secure an effective transition agreement that would allow for an orderly transition to new trade arrangements.

GDP per capita (PPP basis, US$): 42,481 (2016 Actual) (also known as Per Capita Income)

Real GDP growth (% change): 1.8% (2016 Actual) (also known as GDP Growth)

Inflation Rate (CPI, % change Dec/Dec): 1.6% (2016 Actual)

Gen. Gov. Financial Balance/GDP: -3% (2016 Actual) (also known as Fiscal Balance)

Current Account Balance/GDP: -4.4% (2016 Actual) (also known as External Balance)

External debt/GDP: [not available]

Level of economic development: Very High level of economic resilience

Default history: No default events (on bonds or loans) have been recorded since 1983.

On 19 September 2017, a rating committee was called to discuss the rating of the United Kingdom, Government of. The main points raised during the discussion were: The issuer’s economic fundamentals, including its economic strength, have materially decreased. The issuer’s fiscal or financial strength, including its debt profile, has materially decreased. Other views raised included: The issuer’s institutional strength/framework, have decreased. Susceptibility to political event risk has increased.

The principal methodology used in these ratings was Sovereign Bond Ratings published in December 2016. Please see the Rating Methodologies page on http://www.moodys.com for a copy of this methodology.

The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on http://www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see http://www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on http://www.moodys.com for additional regulatory disclosures for each credit rating.

https://www.moodys.com/research/Moodys-downgrades-UKs-rating-to-Aa2-changes-outlook-to-stable–PR_372649

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Asylum seekers in Europe left waiting, says study — Even after they live through Mediterranean journey

September 21, 2017

By the start of this year, more than half of Europe’s asylum-seeker arrivals over a two-year period had yet to be processed, a study shows. For many, the pace hinged on which nation was handling their applications.

Griechenland Lesbos Ankunft von Flüchtlingen an der Küste (DW/Diego Cupolo)

The Washington-based Pew Research Center said that permits to stay – at least temporarily – had been granted to some 40 percent of the 2.2 million who had arrived in 2015 and 2016.

By the begining of 2017, 52 percent of those who entered in the previous two years were still waiting for decisions. Only three percent had been ejected from the European country in which they had applied for protection.

Afghanistan abgeschobene Asylbewerber kehren zurück (Getty Images/AFP/W. Kohsar)An Afghan deported from Germany arriving in Kabul

Wednesday’s look at past data, based on information from the EU’s statistical agency (Eurostat) and sourced from all 28 EU members plus Switzerland and Norway, found that Germany had been relatively quick in processing applications.

Germany’s adjudication period for applicants from war-torn Syria was about three months. Belgium managed waiting times of only one month. By contrast the average Syrian waiting time in Norway had been more than a year.

Among the 650,000 Syrians who arrived in Europe over the period, only 130,000 had not received decisions by late 2016.

Longest wait for Albanians

Across the EU-plus group as a whole, Germany and Sweden had processed about half of their arrivals. The applicants who were left waiting the longest overall were Albanians.

The variations meant that asylum seekers’ prospects “largely” depended on where their applications were submitted, said Pew, intimating that Europe was far from fulfilling equal protection under UN conventions.

Also left waiting for a long time were applicants from Afghanistan and Iraq, despite conflicts in both those countries.

By late 2016, 77 percent of Afghans were waiting for first-time or final decisions on appeal; likewise 66 percent from Iraq and 77 percent from Iran.

Also left waiting were people from Kosovo (77 percent), Serbia (74 percent) Russia (72 percent), Pakistan (67 percent), Somalia (56 percent) and Nigeria (55 percent).

Half arrived in Germany

Of the 2.2 million, Germany received 1,090,000 applicants over the two years, Pew concluded. By late 2016, 49 percent of its intake was waiting for decisions.

Other nations with better than average decision rates were Sweden, Belgium, the Netherlands and Italy, Pew said.

Hungary, whose government remains anti-immigrant, had the worst rate, with 94 percent of its 70,000 applicants still awaiting asylum rulings by late 2016.

Serbien Kelebija Fotoreportage Diego Cupolo an ungarischer Grenze (DW/D. Cupolo)Languishing on the Serbian-Hungarian border in 2016

ipj/rc (AP, KNA)

http://www.dw.com/en/asylum-seekers-in-europe-left-waiting-says-study/a-40613486

Theresa May Briefs Cabinet to Reboot Brexit Talks

September 21, 2017

LONDON — The Latest on Britain’s talks to leave the European Union (all times local):

12:05 p.m.

British Prime Minister Theresa May is briefing her Cabinet on plans to reboot faltering Brexit negotiations, as she struggles to unite the government after a public rift.

May is outlining details of a speech she will deliver in Florence, Italy on Friday. She has chosen the historic heart of Europe as the location for an address that the government says will stress Britain’s desire for a close and special relationship with the bloc.

Divorce negotiations have made little progress on key issues including the status of the Ireland-Northern Ireland border and the amount Britain must pay to settle its financial commitments to the bloc.

EU leaders will be looking for May to signal Britain’s willingness to pay up. But some members of her Cabinet oppose paying a multibillion-pound (dollar, euro) bill.

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11:30 a.m.

A senior European Union official is doubtful that Britain’s talks on leaving the EU can advance to a new phase next month, fueling concern that a Brexit deal might not be found by the 2019 deadline.

EU leaders meet Oct. 19-20 and were expected to assess whether negotiations have made “sufficient progress” on Britain’s departure for talks on future relations and trade to begin.

But a senior EU official said Thursday that “it’s too early to tell” whether the leaders can decide. The official briefed reporters only on condition that she not be named.

She affirmed that the October summit is not a deadline, saying “we all know that negotiations don’t usually go according to our time plan, so we will take all the time needed.”

In Libya, Islamic State Seeks Revival in Gateway to Europe

September 18, 2017

Small cells of fighters are operating in the country a year after the group lost its main Libyan stronghold

Image may contain: 12 people, crowd, sky and outdoor

Libyans attended a funeral west of Tripoli last month for people killed in an attack the previous day that was claimed by Islamic State.Photo: Agence France-Presse/Getty Image

Islamic State has formed a number of clandestine cells in Libya a year after losing its main stronghold in the chaotic North African country, part of the militant group’s efforts to regroup on Europe’s doorstep.

The small cells, some comprised of up to several dozen fighters, have set up new bases outside Libyan towns in the past several months and started making money by hijacking commercial trucks and extorting migrant smuggling rings, according to Libyan and European security officials.

Islamic State has also told fighters to go to Libya from Syria, where a U.S.-led coalition is pushing the terror group from its de facto capital of Raqqa, according to a defector and security officials.

“They consider Libya to be the main entrance to Europe,” said Abu Baara al-Ansari, a Syrian who defected from Islamic State in June.

Mr. al-Ansari said he worked in Raqqa for Islamic State in the office that tracked visitors to the group’s territory. He is now in Turkey and was interviewed via the Telegram messaging system.

The group’s efforts to stage a comeback in Libya after losing control of the coastal city of Sirte last year have sparked concern among European officials. Attackers who traveled from Syria to Europe have taken part in a number of deadly terrorist attacks in recent years, including in Paris and Brussels.

A resurgent Islamic State “is definitely becoming a problem in Libya,” a European security official said. The terror group can raise revenue in Libya by tapping lucrative rackets and take advantage of weapon stockpiles in a country that is both vast and politically unstable, he said.

Members of Libya’s Presidential Council, which presides over the Tripoli government, didn’t respond to requests for comment about Islamic State’s activities in the country.

Islamic State said two years ago that it planned to infiltrate migrant groups and carry out attacks in Europe. Tens of thousands of migrants have crossed the Mediterranean Sea from Libya and arrived in Italy this year.

Salman Abedi, a British citizen of Libyan descent, blew himself up outside a concert in Manchester in May, killing 22 people. Abedi had recently returned from a trip to Libya, and European security officials say the type of bomb he used indicates he may have been trained by Islamic State fighters there.

Forces allied with the U.N.-backed government in Libya fought Islamic State fighters in the coastal city of Sirte last year.Photo: Goran Tomasevic/REUTERS

Since the death of Col. Moammar Gadhafi in 2011, warring factions have carved Libya into fiefs and fought over its oil fields, leaving the economy in tatters.

“Daesh is exploiting the security vacuum,” said an intelligence officer from the city of Misrata who works with forces loyal to Tripoli, using the Arabic acronym for Islamic State.

Militias from Misrata—who support the United Nations-backed Government of National Accord in the capital, Tripoli—led the successful campaign to oust Islamic State from Sirte.

An estimate by the U.S. Africa Command, which oversees American military operations on the continent, indicates there are only 500 Islamic State members active in Libya now. That is down from a peak of about 3,000 fighters when the group held Sirte in 2016.

But other officials said it is difficult to know how many Islamic State fighters are currently in Libya. And they say the group’s ability to operate relatively unhindered around the country raises concerns.

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Since driving Islamic State out of Sirte, the U.S. has seen “a marked decrease” in the number of foreign fighters traveling to or from the conflict in Libya, according to a U.S. State Department official.

European security officials and the Islamic State defector say the group’s fighters—including Syrians and Iraqis, as well as Libyans—have been trying to enter Libya in hopes of reaching Europe to launch attacks.

Islamic State members have in the past flown from Turkey to Sudan before going overland to Libya, according to European security officials. Meanwhile, Libyan forces in the south are monitoring a group of Islamic State recruits who made their way to Sudan from Syria and are trying to cross into Libya, according to a security official from the area with forces loyal to Tripoli.

Sudan is aware some fighters have taken advantage of its porous western border to infiltrate Libya, according to Rabie Abdelaty, who heads the political bureau at Sudan’s ruling National Congress Party. He says the government has deployed forces to stem the infiltration and to crack down on cross-border crime.

Libyans were among those who trained at Islamic State’s weapons lab in Raqqa, according to another Islamic State defector. Some of the devices were intended both for battlefield use and for carrying out attacks in Europe, said the defector, who said that he was involved in their design and that he left the group in 2016. Components are cheap and easy to get, and Islamic State videos show how to assemble them, he added.

Forces allied with the U.N.-backed government patrolled last month on the outskirts of Sirte.Photo: ismail zitouny/Reuters

In Libya, a rival government operates in the east of the country, where a group allied with Islamic State was ousted earlier this year from the city of Benghazi. In late May, around the time of the ouster, two members of the allied group were dispatched by Islamic State from Benghazi to go to Istanbul, according to a third person who said he had defected from Islamic State and who said he remains in contact with the group in Raqqa.

They were directed to make their way from Istanbul to Athens and to wait for orders about carrying out an attack in Europe, the defector said. A European security official said last month the movements of the two men were being monitored.

Islamic State fighters who escaped Sirte fled to other parts of Libya such as Bani Walid, west of Sirte. The fighters remained hidden in the surrounding valleys for months, but now have started to “set up checkpoints at times and hijack trucks and any goods in them,” said the intelligence officer from Misrata.

Other fighters escaped to the southwestern town of Ghat, near the Algerian border. The group has since expanded its presence in that part of the country to the desert oasis of Ubari, with fighters holding regular meetings in the town and moving freely in the vicinity of Libya’s largest oil field, according to the security official from southern Libya.

In May, Islamic State seized three fuel trucks en route to Jufra, a district between Sirte and Ubari, according to an Aug. 22 report from the U.N. Security Council.

Islamic State has forged business ties in the area with a local Islamist warlord who specializes in fuel smuggling, according to a European security official.

Islamic State also has a presence in other Libyan cities and towns, and groups that can range from five to 50 fighters roam outside urban areas, the intelligence officer from Misrata said. Those groups often travel in a small number of cars to try to avoid becoming a target, he said.

In January, the U.S. launched airstrikes on Islamic State training camps southwest of Sirte and other targets in Libya, killing dozens of militants, the Pentagon said.

—Ben Kesling, Nicholas Bariyo, Nour Malas, Nour Alakraa and Jenny Gross contributed to this article.

Write to Benoit Faucon at benoit.faucon@wsj.com

 https://www.wsj.com/articles/in-libya-isis-seeks-revival-in-gateway-to-europe-1505678113
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Migrants trying to reach a rescue boat in the Mediterranean Sea, north of Sabratha, Libya, in July.Credit Santi Palacios/Associated Press

CAIRO — As they scrambled to curb the flow of migrants, Europe’s leaders wrestled with a vexing question: How to stop the ruthless Libyan militias that control the human-trafficking trade from dispatching countless boats across the Mediterranean?

Now Italy, after striking out on its own, appears to have found a solution — one that, though wildly successful for the moment, is provoking questions about its methods and the humanitarian costs.

Arrivals of migrants in Italy have plunged in recent months. In August alone, they fell 85 percent, leading some to charge that Italy was paying off Libya’s most rapacious warlords at the risk of further destabilizing the fractured North African country, while condemning migrants to misery.

Human rights activists liken the grimy conditions at militant-run detention centers inside Libya to concentration camps, while the top United Nations human rights official, Zeid Ra’ad al-Hussein, recently warned that the Italian-led tactics were “very thin on the protection of the human rights of migrants inside Libya and on the boats.”

Italian ministers deny giving even a single euro to Libya’s armed militias. Instead, they attribute their success to painstaking diplomacy and other inducements, like the possibility of rejoining a regularly paid, national army.

“We approached the issue slowly, slowly, Italian style,” Mario Giro, deputy foreign minister, said in an interview. “We spoke to everyone.”

Many are skeptical: Money and the threat of brute force are the usual considerations when it comes to persuading the fractious militias that hold sway across Libya. But if Italy’s aggressive new approach to migration includes dealing with unsavory strongmen, it would not be the first time.

Read the rest:

US Urges China to Use Oil Leverage on North Korea

September 14, 2017

LONDON — The Latest on U.S. Secretary of State Rex Tillerson’s trip to London (all times local):

6:05 p.m.

U.S. Secretary of State Rex Tillerson is urging China to use its leverage as North Korea supplier of oil to get the North to “reconsider” its development of nuclear weapons.

The United States has sought an embargo on oil imports to North Korea at the U.N. Security Council in response to North Korea’s most powerful nuclear test to date.

But the U.N. has agreed to weaker measures against the North — although the U.N. is banning ban textile exports, an important source of its revenue for the North.

Tillerson says it was going to be “very difficult” to get China to agree to an oil embargo. Still he’s urging China as a “great country and a world power” to use its leverage as the supplier of virtually all North Korea’s oil.

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10:25 a.m.

U.S. Secretary of State Rex Tillerson is holding talks in London with British and French officials on North Korea’s nuclear and missile programs.

Image may contain: 3 people, people smiling, suit

The U.S., Britain and France are permanent members of the U.N. Security Council, and the council this week approved new sanctions to punish North Korea’s latest nuclear test explosion.

The officials also intend to discuss the response to Hurricane Irma, which struck the southeastern United States and the Caribbean.

And expect the situation in Libya to come up during talks with representatives from the U.N., Italy, Egypt and the United Arab Emirates.

It’s Tillerson’s second visit to Britain since taking office in February.

Related:

UK’s May Stressed Importance of Iran Nuclear Deal to Tillerson — Trump Seems Ready To Keep Iran Nuclear Deal — But After North Korea, Will Iran Have Nuclear Weapons?

September 14, 2017

LONDON — British Prime Minister Theresa May stressed the importance of a 2015 international agreement on Iran’s nuclear program to U.S. Secretary of State Rex Tillerson on Thursday during a brief meeting at her London office.

Tillerson is visiting Britain to discuss the relief effort following Hurricane Irma, North Korea’s nuclear test, and to meet foreign ministers from several different countries about breaking the political deadlock in Libya.

Although not officially on the agenda for the trip, the subject of Iran was raised at the meeting between Tillerson, May and Britain’s national security adviser.

“(They) touched on the Iran nuclear deal, the PM underlining its importance in preventing Iran from procuring nuclear weapons,” May’s spokesman told reporters.

U.S. President Donald Trump has previously expressed doubts about the Iran nuclear deal, which is designed to curb Iran’s nuclear program in return for lifting most Western sanctions.

Trump is weighing a strategy that could allow more aggressive U.S. responses to Iran’s forces, its Shi’ite Muslim proxies in Iraq and Syria, and its support for militant groups.

Tillerson has publicly said he disagrees with Trump’s views on the nuclear deal, and that it could be used to advance the United States’ relationship with Iran.

“(Tillerson and May) also discussed North Korea and its continuing destabilizing activities,” May’s spokesman said. “They agreed on the importance of the international community continuing to work together to put pressure on the regime.”

North Korea carried out its sixth and largest nuclear test earlier this month.

Tillerson will meet British foreign minister Boris Johnson and a representative from the French government to discuss Hurricane Irma and North Korea.

The three will then be joined by foreign ministers from Italy, Egypt, and the United Arab Emirates to discuss Libya with U.N. envoy Ghassan Salame.

Backed by Western governments, the United Nations is trying to heal a rift between Libya’s rival factions in order to stabilize the country and to tackle militant violence and people-smuggling from Libya’s northern coast.

(Reporting by William James; Editing by Alison Williams)

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US set to extend Iran sanctions relief under nuclear deal

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The Associated Press  In this Sept. 12, 2017, photo, President Donald Trump speaks in the Cabinet Room of the White House in Washington. The Trump administration is poised to extend sanctions relief to Iran under the landmark 2015 nuclear deal even as the White House seeks ways to find the Islamic republic is not complying with the agreement. Administration officials say President Donald Trump is likely to extend sanctions waivers first issued by the Obama administration by a Sept. 14, deadline. However, they say Trump remains determined to “decertify” Iranian compliance by an October deadline. (AP Photo/Alex Brandon)

The Trump administration is poised to extend sanctions relief to Iran, avoiding imminent action that could implode the landmark 2015 nuclear deal.

But the move expected Thursday comes as the White House seeks ways to find that Tehran is not complying with the agreement. President Donald Trump has repeatedly criticized the deal, but has yet to pull out of it.

Trump is working against a Thursday deadline to decide whether to extend the sanctions waivers, which were first issued by the Obama administration.

In exchange for Tehran rolling back its nuclear program, the U.S. and other world powers agreed to suspend wide-ranging oil, trade and financial sanctions that had choked the Iranian economy.

Administration officials say Trump is ready to extend the waivers and that no serious alternatives have been presented. But they cautioned that Trump could still change his mind, and they said he remains determined to “decertify” Iranian compliance with the nuclear deal by a separate, mid-October deadline — a finding that would jeopardize further sanctions relief.

The officials were not authorized to discuss internal deliberations and spoke on condition of anonymity.

Both the sanctions relief and the certification deadlines come amid a broader administration review of Iran policy that is likely to lead to the adoption of a harder line, including the imposition of significant new non-nuclear sanctions, when it is completed next month.

The extension of sanctions relief is expected to be accompanied by a strong statement outlining the administration’s oft-stated complaints that Iran is a destabilizing force in the region.

The statement will set the stage for discussions on the future of the agreement with European allies and others during next week’s United Nations General Assembly as well as the internal administration debate over whether Trump should report to Congress that Iran is in compliance with the deal.

The U.N. atomic watchdog said earlier this week that Iran continues to meet its obligations under the accord negotiated among Iran, the U.S., the other four permanent members of the U.N. Security Council and Germany. But Iran deal opponents inside and outside the administration argue that Tehran’s full compliance, particularly on allowing inspections at military sites, has not been tested and is not yet proven. They also argue that at the very least Iran is violating the spirit of the agreement with destabilizing behavior such as ballistic missile tests that is not specifically covered by the terms of the nuclear deal.

Trump himself, in an interview with the Wall Street Journal, said he is inclined not to certify Iranian compliance after having twice found it compliant at earlier deadlines.

Supporters of the deal, including some nuclear experts and former Obama administration officials involved in negotiating the agreement, have made the case that decertification would be counter to U.S. national security interests because it would provide Iran with a pretext to claim Washington is in breach of the deal and undermine American credibility in future international negotiations.

Under U.S. law, the president must certify to Congress every 90 days whether Iran is meeting its commitments to the agreement. If the president does not certify compliance, Congress would have 60 days to decide whether to re-impose sanctions that were lifted under the agreement.

The next certification deadline is Oct. 15.

Officials familiar with the administration debate say Trump is weighing several options, only one of which would certify that Iran is abiding by the deal. The others call for decertification but differ on the next steps, ranging from walking away from the agreement and immediately re-imposing sanctions to remaining a party to the deal while trying to strengthen it through congressional action and supplemental accords.

The certification option, presented earlier this week by Secretary of State Rex Tillerson, would find Iran to be in compliance in line with the IAEA conclusion. Yet it would also make clear that the deal is flawed and must be fixed if it is to be preserved, according to the officials.

It would maintain sanctions relief but say that if the flaws in the deal are not addressed by January, Iran should be decertified on the grounds that the accord is no longer in U.S. national security interests. The fixes, involving the extension of now time-limited restrictions on Iran’s ability to enrich uranium, would be negotiated with the other parties to the agreement.

The most well-known of the decertification options was presented publicly last week by U.S. Ambassador to the United Nations Nikki Haley, which would declare Iran to be in violation of the deal, maintain sanctions relief, and leave it to Congress to determine the next steps. Haley also suggested that because Iran has continued its ballistic missile program in defiance of the U.N. Security Council resolution that enshrined the nuclear deal, it could be held in breach.

A third option would decertify Iran on national security grounds under U.S. legislation but not immediately walk away from the deal. It would instead have Trump issue a new executive order setting out a timeline for the agreement to be amended or supplemented with bans or further limitations on uranium enrichment and ballistic missile testing, according to the officials.

Another option being floated is to decertify Iran and threaten to restore nuclear sanctions on Iran at any point as well as so-called “secondary sanctions” that could cut off European and other banks and businesses that do business with Iran from the U.S. financial system.

U.N. Rights Chief Says EU Deal on Libya Migrants Falls Short

September 8, 2017

GENEVA — A European and African deal to stem the flow of migrants coming through Libya to Europe fails to tackle the abuses they face, the top U.N. human rights official wrote on Friday.

The Aug. 28 deal struck in Paris by France, Germany, Italy, Spain, Chad, Niger and Libya failed to provide “a detailed blueprint to tackle the hidden human calamity that continues to take place within Libya, and along its coast,” U.N. High Commissioner for Human Rights Zeid Ra’ad al Hussein said.

(Reporting by Tom Miles; Editing by Hugh Lawson)

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U.N. High Commissioner for Human Rights Zeid Ra’ad al Hussein

Aid Group Calls on Libya to End Detention of Refugees — Doctors Without Borders wants to end “squalid detention conditions and ill treatment” in Libya

September 2, 2017

CAIRO — An international medical aid group has called on Libyan authorities to end arbitrary detention of refugees, migrants and asylum seekers, slamming conditions inside detention facilities in the North African country as “dire,” ”unhealthy” and “.”

Doctors Without Borders, known by the French acronym MSF, said in a statement Friday that medical conditions in detention centers in Tripoli, where the United Nations-backed government is based, are either caused or aggravated by “squalid detention conditions and ill treatment.”

The European Union earmarked tens of millions of euros to improve conditions for migrants inside Libyan detention centers. But the group says international funding to Libya is not the solution and fears the narrow focus on improving facilities legitimizes the arbitrary detention system that harms and exploits people without recourse to the law.

Italy Denies Supporting Libyan Traffickers to Stop Migrants

August 30, 2017

ROME — Italy denied on Wednesday that it supported a deal to pay armed groups implicated in human trafficking to prevent migrants crossing the Mediterranean.

The Associated Press reported on Tuesday that Libya’s U.N.-backed government in Tripoli, as part of a deal backed by Italy, was paying militias and giving them equipment and boats to prevent migrant vessels setting off.

“The foreign ministry firmly denies that there is an agreement between Libyan traffickers and the Italian government,” an official from the Italian ministry’s press office said.

“The Italian government does not deal with traffickers”, the official added.

A new force in the Libyan coastal town of Sabratha is preventing people leaving, often by locking them up, sources in the area have told Reuters, prompting a sudden drop in departures at what is usually the busiest time of year for migration.

Arrivals from North Africa dropped by more than 50 percent in July and more than 80 percent so far in August. Some 600,000 have made it to southern Italy by sea since 2014.

© AFP | New figures have revealed a sharp drop in the number of Migrants arriving in Italy from Libya

Progress in Libya is likely to be fragile, as two governments are vying for power, and local militias are battling over territory and smuggling profits.

(Reporting by Isla Binnie; Editing by Robin Pomeroy)