Will EURO survive a Russian invasion?

It is by no means certain whether the EU and the European Monetary Union will even be able to survive the currently detonating financial crisis. And there ought to be an investigation into whether the European Central Bank's incessant injections of liquidity into foundering Spanish banks—which German taxpayers, too, will ultimately have to foot the bill for—is consistent with the ECB's own statutes, which assert that it neither desires, nor is permitted to become a "lender of last resort."

http://www.larouchepub.com/hzl/2008/3533rus_enemy_partner.html

WASHINGTON DC- The Bush administration appears to have pulled off its latest military fiasco in the Caucasus. What was supposed to have been a swiftly and painless takeover of rebellious South Ossetia by America's favourite new ally, Georgia, has turned into a disaster that left Georgia battered, Russia enraged, and NATO badly demoralized. Not bad for two days work.    http://www.ericmargolis.com/archives/2008/08/crisis_in_the_c.php

http://www.nytimes.com/2008/08/20/world/europe/20diplo.html?hp

The stupid party suggests war with Russia – how long before USD is affected?

Stuart Mill, called his conservative party, the Republican Party, "the stupid party."    http://www.aljazeera.com/news/newsfull.php?newid=150105

George Bush said earlier this month that "the age of spheres of influence is over". In that case why push that most potent sphere of influence, Nato, to the Russian border? And what of the sphere-of-influence theory that underpinned Bush's neoconservative plan to conquer the Muslim world for democracy?    http://www.guardian.co.uk/commentisfree/2008/aug/20/nato.usforeignpolicy

http://www.americanprogress.org/issues/2008/08/caucuses.html/print.html     Russia has claimed control of this area for most of the past two centuries despite the very steep price required for that control. From 1804 to 1813, Russia battled Persia for control over the South Caucasus in a war that ended at Lenkoran

Credit crunch may take out large US bank warns former IMF chief

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4563171.ece
The deepening toll from the global financial crisis could trigger the failure of a large US bank within months, a respected former chief economist of the International Monetary Fund claimed today, fuelling another battering for banking shares.

Professor Kenneth Rogoff, a leading academic economist, said there was yet worse news to come from the worldwide credit crunch and financial turmoil, particularly in the United States, and that a high-profile casualty among American banks was highly likely.

"The US is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say the worst is to come," Prof Rogoff said at a conference in Singapore.

In an ominous warning, he added: "We're not just going to see mid-sized banks go under in the next few months, we're going to see a whopper, we're going to see a big one — one of the big investment banks or big banks," he said.

What can the fed do

http://www.bloomberg.com/apps/news?pid=20601087&sid=a0v71H6gketc&refer=home Aug. 18 (Bloomberg) -- Ben S. Bernanke is still trying to define which financial institutions it's safe to let fail. The longer it takes him to decide, the tougher the decision becomes.

In the year since credit markets seized up, the 54-year- old Federal Reserve chairman has repeatedly expanded the central bank's protective role, turning its balance sheet into a parking lot for Wall Street's hard-to-finance bonds and offering loans through its discount window to investment banks and mortgage firms Fannie Mae and Freddie Mac.

EES - What Russian war means for the Euro

The conflict in Georgia is greatly affecting the Euro across the board. What does this all mean, and where should investors go?

FX is extremely sensitive to politics, because a shift in a domestic political system can be directly connected to a currency's value. For example, the Chinese government announcement that the Yuan would float, albeit a 'soft peg' to the USD, shattered the relationship between a previously pegged Yuan and the USD. Many watching the situation in Georgia are unaware how this impacts them, and how it impacts FX. Also, this war, like many wars, is an information war, and the media spin leaves viewers with a less than accurate picture of reality.

The strength of the Euro over the past 5 years has been in part, not European strength as much as American weakness. A combination of economic factors in the US has made investors fear the USD and purchase non-USD based assets in Euros and other foreign currencies. Also, the Fed has been lowering US interest rates to a finally negative real interest rate.

The recent strength in the USD is not USD strength per se, but Euro weakness. The fear is that Europe will be involved in a war with Russia, and energy will be involved. Russia supplies 25% of the EU's energy needs and over 50% to many Eastern European states, and the EU is Russia's largest trading partner, totaling $285 Billion.

Immediately after the 4% drop in the Euro in 2 days, Bank of America issued a warning to its' customers summarizing the situation that, although the USD is showing signs of recovery, a war in Europe does not solve the fundamentally flawed US economy, and they expect further USD weakness.

Russia's involvement in Europe is not only energy. The US has planned military bases in many eastern-bloc countries, one of which has been signed during the crisis in Georgia.

One problem with Europeans is they cannot agree. This is what makes Europe charming and culture-rich but politically complex. USA is a 'melting-pot' which has become a mono-culture based on corporatism, while American's argue their thinking lies in the same direction. Since the US Civil war, US mono-culture has solidified the mainstream in a view that always agrees on some tenets, this is not the case in Europe. Entry into the EU and the Euro passed referendum in many EU states by thin margins, there are those who would like to revert back to national currencies.

One main difference between the Euro and other currencies: the Euro does not have a government behind it. Individual EU states retain their sovereignty, and those states central banks have essentially no power to influence the Euro directly, except for lobbying the ECB. So the Euro is a designer currency hanging on a thin margin, which could be toppled by a severe energy crisis should the situation with Russia escalate. US involvement in Eastern European countries will only increase the chances of Russia's will to turn off the lights.

Russia has already quietly begun selling oil in Rubles, and announced the Ruble is fully convertible (since 2006). While by itself these actions are not market-shattering, combined with the potential conflict in Georgia, and Russia's aggressive policy to capitalize on their vast wealth in natural resources, a situation is brewing in Europe which can be potentially explosive. Any turmoil can be seen as bad for the Euro, regardless of the actual damage done. The disadvantage of Europe is it's history: Europe has been involved in wars and currency devaluations. As poor as the US economic numbers are, the US is involved in foreign wars at its leisure, there is no compelling reason the US should be involved in any war.

Russia can also affect emerging markets which it may be forced to trade with, such as India, China, and Brazil. Russian oil could help a growing Chinese economy and decrease Russia's dependence on European customers. In a complex environment a static forecast is not possible, but it is clear any instability or even the perception of instability close to Europe will be negative for the Euro. Elite E Services believes the next bubble to pop will be the Euro bubble.

Long term, this is a buying opportunity for hard commodities such as Wheat, Swiss Francs, Oil, and Gold. Whatever happens in this war, the supply side in the Oil market is controlled by unfriendly countries such as Venezuela and Iran. If Russia is now added to the list of unfriendly countries, we can expect Oil to increase long term, as Russia will use this as a bargaining chip in any negotiations.

This move has been excellent for CTA's trading momentum and trend-based strategies. For short term gains in the FX or Commodities markets, investors can seek CTA's with established track records or automated trading systems, which are performing very well in environments like this. In fact, desynchronized markets are ideal for systems that monitor and analyze discreet price data vs. fundamentals.

Elite E Services is a registered CTA with the CFTC and NFA Member (#373609). eliteeservices.net

New Cold war politics: It’s not 1968

The West has mishandled Russia at every point from the death of communism.

http://www.theaustralian.news.com.au/story/0,25197,24164768-2703,00.html#

"It is government by mobile phone," says one foreign observer.     http://www.ft.com/cms/s/0/33a7495e-6aed-11dd-b613-0000779fd18c.html

President Bush's new deal with Poland gives that country millions in aid, stokes Russia's paranoia and decreases America's security. It is bad policy.

President Bush has promised Poland tens of millions of dollars in defense assistance to buy its agreement to deploy 10 anti-missile interceptors he says are necessary to counter a future Iranian missile threat. Here is the punch line: the interceptors don't work and Iran doesn't have any missiles that can reach Europe, let alone the United States. Wait, there's more.

After insisting for two years that the anti-missile base had nothing to do with Russia and was all about Iran, missile defense proponents now say it is all about countering Russia. They cite the conflict in Georgia as justification for their rush to deploy a technology that does not work against a threat that does not exist.

The Bush administration had gone to great lengths to assure Russia that the proposed anti-missile bases in the Czech Republic and Poland are not intended to offset a threat from the Kremlin. Director of the Missile Defense Agency, General Trey Obering, said just one month ago.

http://www.huffingtonpost.com/joe-cirincione/georgia-crisis-propels-a_b_119020.html

http://www.spiegel.de/international/world/0,1518,572329,00.html Secretary of State Condoleezza Rice has warned that "this is not 1968 and the invasion of Czechoslovakia where Russia can threaten its neighbors, occupy a capital, overthrow a government and get away with it. ... Things have changed." Defense Secretary Robert Gates has threatened to end military cooperation with Russia -- in both bilateral ties and in NATO. "What happens in the days and months to come will determine the future course of US-Russian relations," Gates said. "My personal view is that there needs to be some consequences for the actions that Russia has taken against a sovereign state."

Where does the  EU stand on the future status of the South Ossetia and Abkhazia provinces that officially belong to Georgia?

We have avoided talking about this and I will also avoid discussing it with you. It's one the points where we said that we as the European Union will of course contribute in negotiations, in a sort of mediation or intervention. And we have said from the very beginning what should happen with this. In any case we are backing the integrity of Georgian territory.

http://www.dw-world.de/dw/article/0,2144,3567398,00.html

Commodities fall as Dollar Rises presenting buying opportunity

``Longer term, we would not be surprised to see gold double,'' the bank's analysts John Hill and Graham Wark wrote in a report. ``We would be aggressive buyers at current levels expecting gold to work higher through 2009/10.''

http://www.bloomberg.com/apps/news?pid=20601087&sid=adea3QtEDjrI&refer=home

Multi Currency Expert Advisors

http://championship.mql4.com/2008/news/374?source=mql4email One of MQL4's advantages is the fact that it allows users to trade all available symbols shown in the Market Watch window. Expert Advisors usually trade only one currency pair - the one, to the chart of which they are attached. However, there are EAs that trade several symbols simultaneously. We call such programs multicurrency Expert Advisors.

The Championship Rules allow trading 12 currency pairs. This is why it is no wonder that multicurrency EAs were submitted for participation in the previous Championships. They were represented in smaller amounts than single-currency ones, though. In this article, we will consider multicurrency EAs that participated in the Championships of 2006/2007.

Georgia: With NATO Shown As Paper Tiger, What Next?

http://www.stratfor.com/audio/download/121773/20080812Stratfor_Daily_Podcast-EDITED.mp3 Whatever happens in Georgia now, NATO's prospects of expansion have been weakened and its rhetoric exposed. In discussion with Colin Chapman, Stratfor CEO George Friedman says Washington and NATO have very little alternative but to stop further NATO expansion and respect the Russian "sphere of influence."

http://www.stratfor.com/podcast/putins_chess_move_paints_nato_paper_tiger

Crisis in Europe deepens as FX markets stabalize

http://www.washingtonpost.com/wp-dyn/content/blog/2008/08/11/BL2008081101093_pf.html Back in 2005, speaking before a crowd of more than 150,000 exuberant Georgians cheering "Bushi! Bushi!", President Bush made a promise to the people of that former Soviet republic: "The path of freedom you have chosen is not easy, but you will not travel it alone. Americans respect your courageous choice for liberty. And as you build a free and democratic Georgia, the American people will stand with you."

So where was Bush as Russia launched a major military attack against Georgia? Monkeying around with the U.S. women's volleyball players -- and otherwise amusing himself at the Beijing Olympics.

This is not to suggest that Bush should have sent in the Marines. But his impotence in the face of such a gravely destabilizing move highlights not only his personal loss of stature, but how deeply he has diminished American authority on the world stage generally and, particularly, in the eyes of Russia.

In the long term, the best way to take Russia down a notch (along with Iran, Venezuela, and other hostile powers overflowing with oil money) is to pursue policies and fund technologies that slash the demand for oil. The Georgia crisis should make clear, if it isn't already, that this is a matter of hard-headed national security.... http://www.slate.com/id/2197281/

Finally, the essentially anti-American and anti-Israeli character of the so-called "anti-imperialist" crowd has been confirmed.... http://www.oregoncommentator.com/2008/08/11/losing-georgia/

Following are comments from security, political and economic analysts on the crisis: ... "It's payback time by the Russians for what the West did in Kosovo. ..."The military action in Georgia is a reminder to financial markets that geopolitical risks remain significant, even if, in recent times, they have been overshadowed by economic and credit risks... http://www.reuters.com/article/newsOne/idUKLB71416020080811

"If the United States and Europe don't stop Russia, I think this is the end of what we thought of as the post-Soviet era," said Sarah Mendelson, a scholar at the Center for Strategic and International Studies in Washington. ... http://www.nytimes.com/2008/08/12/world/europe/12diplo.html?ref=europe

http://www.forbes.com/2008/08/11/russia-georgia-putin-biz-cz_hb_0811russia_print.html

Putin's War Games
Heidi Brown , 08.11.08, 6:03 PM ET

The most surprising thing about the Russian invasion of Georgia this week is neither the incursion into another country's sovereign territory nor the vehemence of the attack.

No, most surprising was how the invasion baldly showcased who's really in charge of Russia. While Prime Minister Vladimir Putin met with commanders in South Ossetia and made statements, his anointed successor and Russia's nominal leader, President Dmitry Medvedev, hung around Moscow holding press conferences, thousands of miles from the action--and the world spotlight.

Georgia accused Russia of attacking its Baku-Ceyhan-Tbilisi pipeline, which transports oil from Central Asia to Western markets via the Black Sea. Russia's foreign ministry has denied the attacks, but Georgia claims it is an attempt by Russia to control its infrastructure.

But Putin's true aim is political. As the U.S. continues to build its missile presence at Russia's back door (missile defense systems are being developed in Poland and the Czech Republic) and Georgia and Ukraine cozy up to NATO, Putin is reminding the countries of Central Asia, as well as the West, that Russia still has the wherewithal to wage a successful war.

"Russia's end game is to reassert its sphere of influence," says George Friedman, director of intelligence-analysis firm Stratfor in Austin, Texas.

There's another purpose as well: helping Putin solidify leadership in Russia, backed by the siloviki, a network of former intelligence officials he has at times tolerated and other times embraced throughout his years in power.

Since the presidential elections in May, Moscow's main parlor game is figuring which government faction will prevail: Putin's network or Medvedev's much smaller circle of technocrats and finance folks. Olga Kryshtanovskaya, a sociologist who has spent much of the last two decades studying the business and government elite, argues that Putin has managed to keep--and expand--a powerful network of former intelligence officials and powerful businessmen eager to fulfill his demands.

Despite the surface changes in leadership, Putin retained almost all of his old crowd--former security services cronies like Igor Sechin and Victor Ivanov, who are rumored to be advising him on this action as well as on Russia's request that Georgia's leadership be replaced.

Many in the West hoped Medvedev would be able to build up a block of allies in the Kremlin and begin to push for progress in the government. It didn't happen, says Kryshtanovskaya. "Medvedev's personnel resource is extraordinarily limited. For now he can count on a small group of officials with whom he had worked in the government previously. But in the main, he is surrounded by Putinite cadres."

The aggression against Georgia, despite some self-important public statements by Medvedev, suggests Putin and his circle still have the upper hand.

Putin can use the war against Georgia to show the greater populace of Russia that his view is relevant--even necessary. "Let the West denigrate our military, let them call us retrograde," he might say, but Georgia's actions only show how desperately Russia needs to be strong.

No matter the level of influence Putin's circle of apparatchiks may have, he is sending them a clear message: Your point of view works for me. And I'll be keeping you around for a while.

That means that those who hope for an end to the Putin era will be left waiting for a while longer too.

http://english.pravda.ru/hotspots/conflicts/11-08-2008/106053-georgia_ossetia_russia-0 US presidential runoff John McCain said that Russia should not interfere in the conflict in South Ossetia. The pro-Georgian propaganda in the US media testifies to the same opinion. It brings up the idea that the Georgian aggression against the unrecognized republic of South Ossetia has been coordinated with the US administration. Nevertheless, all arguments of US politicians and experts (Pravda.ru interviewed some of them) do not withstand any criticism.

The US military was surprised by the timing and swiftness of the Russian military's move into South Ossetia and is still trying to sort out what happened, a US defense official said Monday..... http://www.breitbart.com/article.php?id=080811222408.40e5p19r&show_article=1

Euro drops below 1.50 on War Fears

Aug. 11 (Bloomberg) -- The euro fell to a five-month low against the dollar as fighting between Russia and Georgia spread to a second front, raising concern about stability in Europe. http://www.bloomberg.com/apps/news?pid=20601087&sid=amlkXhI0H7v8&refer=home

The dollar's 4 percent surge against the single European currency this month was enough to prompt Bank of America Corp. to tell its customers to exit trades betting on more gains. Morgan Stanley still forecasts the greenback will approach a record low by October as the U.S. housing slump and credit- market losses keep the Fed from raising interest rates this year.

http://www.ft.com/cms/s/077576b6-670b-11dd-808f-0000779fd18c,dwp_uuid=7c485a38-2f7a-11da-8b51-00000e2511c8,print=yes.html
Georgia on Sunday said it was pulling its troops out of the separatist province of South Ossetia but its appeals for a ceasefire in the widening conflict in the Caucasus failed to halt Russia's mounting military response.

As the focus of the fighting widened from South Ossetia to Abkhazia, another separatist region, Russian aircraft were reported to have struck at targets inside Georgia, including the civilian airport in the capital Tbilisi.

Local officials said Russia also deployed a naval squadron off the coast of Abkhazia where local separatists have historically enjoyed Russia's support.

The United States is denouncing the Russians as aggressors in the UN Security Council and accusing the Kremlin of engaging in a policy of "regime change," in Ambassador Khalilzad's phrase. The Russian response: "regime change" is "an American invention," but, hey, in Saakashvili's case, it might not be such a bad idea.... http://www.antiwar.com/justin/?articleid=13285

"My heart aches at this repetitious history of Russian dominance and aggression, whether Czarist, Bolshevik or Oligarchic," said Thomas Goltz, a US expert on the Caucasus. "We can ask the question: Did Misha [Saakashvili] go too far or get pulled into a trap? But it really makes no difference right now. Russia has just declared the 'post-Soviet era' over and a new age has begun." http://www.todayszaman.com/tz-web/detaylar.do?load=detay&link=149892&bolum=104

http://www.dailymail.co.uk/news/article-1043476/Shamed-loss-empire-Russia-wounded-bear-provoke-grave-peril.html

http://www.washingtonpost.com/wp-dyn/content/article/2008/08/10/AR2008081001871.html

http://www.globalresearch.ca/index.php?context=va&aid=9788 ...Georgia does not act militarily without the assent of Washington. The Georgian head of State is a US proxy and Georgia is a de facto US protectorate.

Who is behind this military agenda? What interests are being served? What is the purpose of the military operation.

There is evidence that the attacks were carefully coordinated by the US military and NATO.

Analysis of Georgian-Russian conflict and articles with feedback

The US media makes such a habit of sticking its foot in its mouth every time any combination of the words "Russian" and "military" occur that I think we'll have to assume it's genetic. http://www.digitaljournal.com/print/article/258399

In Georgia Clash, a Lesson on U.S. Need for Russia

By HELENE COOPER

WASHINGTON — The image of President Bush smiling and chatting with Prime Minister Vladimir V. Putin of Russia from the stands of the Beijing Olympics even as Russian aircraft were shelling Georgia outlines the reality of America's Russia policy. While America considers Georgia its strongest ally in the bloc of former Soviet countries, Washington needs Russia too much on big issues like Iran to risk it all to defend Georgia.

And State Department officials made it clear on Saturday that there was no chance the United States would intervene militarily.

Mr. Bush did use tough language, demanding that Russia stop bombing. And Secretary of State Condoleezza Rice demanded that Russia "respect Georgia's territorial integrity."

What did Mr. Putin do? First, he repudiated President Nicolas Sarkozy of France in Beijing, refusing to budge when Mr. Sarkozy tried to dissuade Russia from its military operation. "It was a very, very tough meeting," a senior Western official said afterward. "Putin was saying, 'We are going to make them pay. We are going to make justice.' "

Then, Mr. Putin flew from Beijing to a region that borders South Ossetia, arriving after an announcement that Georgia was pulling its troops out of the capital of the breakaway region. He appeared ostensibly to coordinate assistance to refugees who had fled South Ossetia into Russia, but the Russian message was clear: This is our sphere of influence; others stay out.

"What the Russians just did is, for the first time since the fall of the Soviet Union, they have taken a decisive military action and imposed a military reality," said George Friedman, chief executive of Stratfor, a geopolitical analysis and intelligence company. "They've done it unilaterally, and all of the countries that have been looking to the West to intimidate the Russians are now forced into a position to consider what just happened."

And Bush administration officials acknowledged that the outside world, and the United States in particular, had little leverage over Russian actions.

"There is no possibility of drawing NATO or the international community into this," said a senior State Department official in a conference call with reporters.

The unfolding conflict in Georgia set off a flurry of diplomacy. Ms. Rice and other officials at the State Department and the Pentagon have been on the telephone with Russia's foreign minister, Sergey V. Lavrov, and other Russian counterparts, as well as with officials in Georgia, urging both sides to return to peace talks.

The European Union — and Germany, in particular, with its strong ties to Russia — called on both sides to stand down and scheduled meetings to press their concerns. At the United Nations, members of the Security Council met informally to discuss a possible response, but one Security Council diplomat said it remained uncertain whether much could be done.

"Strategically, the Russians have been sending signals that they really wanted to flex their muscles, and they're upset about Kosovo," the diplomat said. He was alluding to Russia's anger at the West for recognizing Kosovo's independence from Serbia.

Indeed, the decision by the United States and Europe to recognize Kosovo may well have paved the way for Russia's lightning-fast decision to send troops to back the separatists in South Ossetia. During one meeting on Kosovo in Brussels this year, Mr. Lavrov, the foreign minister, warned Ms. Rice and European diplomats that if they recognized Kosovo, they would be setting a precedent for South Ossetia and other breakaway provinces.

For the Bush administration, the choice now becomes whether backing Georgia — which, more than any other former Soviet republic has allied with the United States — on the South Ossetia issue is worth alienating Russia at a time when getting Russia's help to rein in Iran's nuclear ambitions is at the top of the United States' foreign policy agenda.

One United Nations diplomat joked on Saturday that "if someone went to the Russians and said, 'OK, Kosovo for Iran,' we'd have a deal."

That might be hyperbole, but there is a growing feeling among some officials in the Bush administration that perhaps the United States cannot have it all, and may have to choose its priorities, particularly when it comes to Russia.

The Bush administration's strong support for Georgia — including the training of Georgia's military and arms support — came, in part, as a reward for its support of the United States in Iraq. The United States has held Georgia up as a beacon of democracy in the former Soviet Union; it was supposed to be an example to other former Soviet republics of the benefits of tilting to the West.

But that, along with America and Europe's actions on Kosovo, left Russia feeling threatened, encircled and more convinced that it had to take aggressive measures to restore its power, dignity and influence in a region it considers its strategic back yard, foreign policy experts said.

Russia's emerging aggressiveness is now also timed with America's preoccupation with Iraq and Afghanistan, and the looming confrontation with Iran. These counterbalancing considerations mean that Moscow is in the driver's seat, administration officials acknowledged.

"We've placed ourselves in a position that globally we don't have the wherewithal to do anything," Mr. Friedman of Stratfor said. "One would think under those circumstances, we'd shut up."

One senior administration official, when told of that quote, laughed. "Well, maybe we're learning to shut up now," he said. He asked that his name not be used because he was not authorized to speak publicly on the issue.

http://www.nytimes.com/2008/08/10/world/europe/10diplo.html?_r=1&em=&pagewanted=print&oref=slogin

The streets, largely empty of civilians, were full of Georgian military reservists idling in the shadows of shuttered shops as they waited to move out and join the fight against Russian forces that have bombed the city twice in as many days.

Among them were latter-day Rambos in bandannas and middle-age men with potbellies and red faces... http://www.washingtonpost.com/wp-dyn/content/article/2008/08/09/AR2008080901769.html?hpid=topnews

http://english.aljazeera.net/news/europe/2008/08/200881012239836481.html Georgia said a Russian air raid had "completely devastated" the Black Sea port of Poti in attacks that the country's UN ambassador likened to "a full-scale military invasion".

http://www.independent.co.uk/opinion/leading-articles/leading-article-a-war-on-our-blind-side-889635.html?service=Print

http://www.arabnews.com/?page=7&section=0&article=112587&d=9&m=8&y=2008 ...ONLY one thing is clear about the fighting that has broken out in Georgia and that is that it is madness

Russian military vehicles line the road to the South Ossetia area of Georgia.

The official was not authorized to speak on the record due to the sensitive nature of the diplomacy. http://www.cnn.com/2008/WORLD/europe/08/09/georgia.reax/

http://www.bloomberg.com/apps/news?pid=20601087&sid=aJ7.TtiiQI1Y&refer=worldwide

http://www.newsnow.co.uk/h/Breaking+News/Russia||Georgia||South+Ossetia+Conflict

http://www.nytimes.com/2008/08/10/weekinreview/10traub.html?_r=1&ref=world&pagewanted=print&oref=slogin

MOSCOW (Reuters) - The commander of the Russian troops sent to help separatists in Georgia's breakaway region of South Ossetia was wounded in an exchange of fire with Georgian forces on Saturday, Russian state television reported.

Lt. General Anatoly Khrulyov was wounded when a column of armored vehicles of his 58th army came under fire by Georgian forces outside the rebel capital of Tskhinvali, Vesti-24 channel said in a report early on Sunday.

http://www.reuters.com/article/worldNews/idUSL949449820080809

Georgian conflict affects oil

http://www.ogj.com/display_article/336608/7/ONART/none/GenIn/1/BTC-export-alternatives-on-hold-as-Russia,-Georgia-clash/ BP PLC, already acknowledging a loss of significant throughput along the Baku-Tiblisi-Ceyhan oil pipeline, appears to be facing wider problems in the Caucasus region after the Russian government sent troops and bombarded locations in Georgia.

The Russian incursion came Aug. 8 after Georgia earlier launched a major military offensive to retake the breakaway province of South Ossetia, threatening to ignite a broader conflict.

Analysis: energy pipeline that supplies West threatened by war Georgia conflict ... http://www.timesonline.co.uk/tol/news/world/europe/article4484849.ece

http://poligazette.com/2008/08/09/russias-attack-and-the-united-states/ ... All of this begs the question where the United States are. After all, Georgia is a staunch US ally and Russia the old Cold War enemy.

http://debka.com/article.php?aid=1358

Israel backs Georgia in Caspian Oil Pipeline Battle with Russia

DEBKAfile Exclusive Report

August 8, 2008

Georgian tanks and infantry, aided by Israeli military advisers, captured the capital of breakaway South Ossetia, Tskhinvali, early Friday, Aug. 8, bringing the Georgian-Russian conflict over the province to a military climax.

Russian prime minister Vladimir Putin threatened a "military response."

Former Soviet Georgia called up its military reserves after Russian warplanes bombed its new positions in the renegade province.

In Moscow's first response to the fall of Tskhinvali, president Dimitry Medvedev ordered the Russian army to prepare for a national emergency after calling the UN Security Council into emergency session early Friday.

Reinforcements were rushed to the Russian "peacekeeping force" present in the region to support the separatists.

Georgian tanks entered the capital after heavy overnight heavy aerial strikes, in which dozens of people were killed.

Lado Gurgenidze, Georgia's prime minister, said on Friday that Georgia will continue its military operation in South Ossetia until a "durable peace" is reached. "As soon as a durable peace takes hold we need to move forward with dialogue and peaceful negotiations."

DEBKAfile's geopolitical experts note that on the surface level, the Russians are backing the separatists of S. Ossetia and neighboring Abkhazia as payback for the strengthening of American influence in tiny Georgia and its 4.5 million inhabitants. However, more immediately, the conflict has been sparked by the race for control over the pipelines carrying oil and gas out of the Caspian region.

The Russians may just bear with the pro-US Georgian president Mikhail Saakashvili's ambition to bring his country into NATO. But they draw a heavy line against his plans and those of Western oil companies, including Israeli firms, to route the oil routes from Azerbaijan and the gas lines from Turkmenistan, which transit Georgia, through Turkey instead of hooking them up to Russian pipelines.

Saakashvili need only back away from this plan for Moscow to ditch the two provinces' revolt against Tbilisi. As long as he sticks to his guns, South Ossetia and Abkhazia will wage separatist wars.

DEBKAfile discloses Israel's interest in the conflict from its exclusive military sources:

Jerusalem owns a strong interest in Caspian oil and gas pipelines reach the Turkish terminal port of Ceyhan, rather than the Russian network. Intense negotiations are afoot between Israel Turkey, Georgia, Turkmenistan and Azarbaijan for pipelines to reach Turkey and thence to Israel's oil terminal at Ashkelon and on to its Red Sea port of Eilat. From there, supertankers can carry the gas and oil to the Far East through the Indian Ocean.

Aware of Moscow's sensitivity on the oil question, Israel offered Russia a stake in the project but was rejected.

Last year, the Georgian president commissioned from private Israeli security firms several hundred military advisers, estimated at up to 1,000, to train the Georgian armed forces in commando, air, sea, armored and artillery combat tactics. They also offer instruction on military intelligence and security for the central regime. Tbilisi also purchased weapons, intelligence and electronic warfare systems from Israel.

These advisers were undoubtedly deeply involved in the Georgian army's preparations to conquer the South Ossetian capital Friday.

In recent weeks, Moscow has repeatedly demanded that Jerusalem halt its military assistance to Georgia, finally threatening a crisis in bilateral relations. Israel responded by saying that the only assistance rendered Tbilisi was "defensive."

This has not gone down well in the Kremlin. Therefore, as the military crisis intensifies in South Ossetia, Moscow may be expected to punish Israel for its intervention.

Georgia is key EU energy corridor

http://www.bloomberg.com/apps/news?pid=20601081&sid=awA5_BpkTZT0&refer=australia
Georgia is a key link in a U.S.-backed ``southern energy corridor'' that connects the Caspian Sea region with world markets, bypassing Russia. The BP Plc-led Baku-Tbilisi-Ceyhan oil pipeline to Turkey runs about 100 kilometers (60 miles) south of the South Ossetian capital, Tskhinvali.

The U.S. seeks to connect Central Asia natural gas supplies with European markets, skirting Russia in an attempt to weaken the grip of Russia's state-run OAO Gazprom energy company. One planned pipeline route runs from the Georgia-Turkey border.

http://en.wikipedia.org/wiki/South_Caucasus_Pipeline

http://en.wikipedia.org/wiki/Trans-Caspian_Gas_Pipeline

The Trans-Caspian Gas Pipeline (Turkmen: Transhazar turbaly geçiriji) is a proposed submarine
pipeline between Türkmenbaşy in Turkmenistan, and Baku in Azerbaijan. By some proposals it will also include connection between Tengiz Field in Kazakhstan, and Türkmenbaşy. The aim of the Trans-Caspian Gas Pipeline project is the transportation of natural gas from Kazakhstan and Turkmenistan to central Europe, circumventing both Russia and Iran.

http://en.wikipedia.org/wiki/Baku-Tbilisi-Ceyhan_pipeline

The Baku-Tbilisi-Ceyhan pipeline (sometimes abbreviated as BTC pipeline) is a crude oil pipeline that covers 1,768 kilometres (1,099 mi) from the Azeri-Chirag-Guneshli
oil field in the Caspian Sea to the Mediterranean Sea. It connects Baku, the capital of Azerbaijan; Tbilisi, the capital of Georgia; and Ceyhan, a port on the south-eastern Mediterranean coast of Turkey, hence its name. It is the second longest oil pipeline in the world after the Druzhba pipeline. The first oil that was pumped from the Baku end of the pipeline on May 10, 2005 reached Ceyhan on May 28, 2006.^[1]

http://en.wikipedia.org/wiki/Poti_Sea_Port

In 2007, the total throughput was 7.7 million tons and container handling was 185,000 TEU.^[2]

In April 2008, Georgia sold a 51% stake of the Poti port area to the Investment Authority of the UAE's Ras Al Khaimah (RAK) emirate to develop a free economic zone (FEZ) in a 49-year management concession, and to manage a new port terminal. The creation of a new FEZ was officially inaugurated by the President of Georgia
Mikheil Saakashvili on April 15, 2008.^[3]

Euro Falls the Most in 8 Years on Reduced Bets for Higher Rate

http://www.bloomberg.com/apps/news?pid=20601087&sid=at.u1aw0Pjy8&refer=worldwide

Euro Falls the Most in 8 Years on Reduced Bets for Higher Rate

By Ye Xie and Anchalee Worrachate

Aug. 8 (Bloomberg) -- The euro fell the most in almost eight years against the dollar as traders pared bets the European Central Bank will raise interest rates as the economy slows.

The euro is poised for its biggest weekly loss since January 2005 after ECB President Jean-Claude Trichet yesterday said economic growth will be ``particularly weak'' through the third quarter. An index that tracks the dollar against the currencies of six U.S. trading partners touched the highest since February. Crude oil fell to a three-month low.

``This is the beginning of a new chapter for the dollar as Trichet and other central banks are paying more attention to the downside risk to growth,'' said Dustin Reid, a senior currency strategist at ABN Amro Bank NV in Chicago. ``The decline of oil prices is a significant driver behind this dollar rally because it enables other central banks to turn their eyes away from inflation and focus on growth.''

The euro declined 1.95 percent to $1.5032 at 10:23 a.m. in New York and reached $1.5005, the lowest level since Feb. 27, from $1.5325 yesterday. It dropped as much as 2.08 percent, the biggest one-day drop since Sept. 6, 2000. Against the yen, the European currency traded at 165.84, from 167.70. The dollar rose 0.5 percent to 109.97 yen after touching 110.08, the strongest since Jan. 10.

Moving Average

The euro's decline below $1.53 and the break of the 200-day moving average at $1.5226 ``marks a significant change in sentiment for the dollar,'' pointing to a further decline to $1.46, Kevin Edgeley, a London-based technical analyst at Goldman Sachs Group Inc., wrote in a report today.

The euro has declined 3.1 percent against the dollar in its fourth weekly decline, the worst losing streak since May 2007. Against the yen, the U.S. currency has advanced 2.1 percent, heading for its biggest weekly gain in almost two months.

``The most important aspect of the dramatic collapse in the euro dollar is the absence of confirmation from other markets,'' said David Woo, global head of currency strategy at Barclays Capital Inc. in London. ``None of the typical drivers of the euro-dollar in the past couple of years could have accounted for the magnitude of this move, which leads one to conclude that this is a technical driven move.''

The South African rand led losses among the most-traded currencies as the prices of gold and platinum dropped, reducing prospects for export earnings from the country's biggest exports. The greenback rose to a six-month high against the Australian dollar, and advanced to the highest since September against the New Zealand dollar on speculation the central banks will cut borrowing costs.

Russia's Ruble

The Russian ruble fell by the most in 2 1/2 years against a dollar-euro basket used by the government after Georgia's Interior Ministry said four Russian fighter-jets entered Georgian airspace and bombed the towns of Gori and Kareli, boosting the risk of war. The ruble dropped as much as 0.8 percent against the basket.

The pound fell below $1.93 for the first time since March 2007 as the Bank of England kept its main interest rate steady at 5 percent yesterday after inflation accelerated and the economy teetered on the brink of a recession. It has dropped 2.7 percent this week to $1.9210, its biggest weekly drop in three years.

The Dollar Index on the ICE futures exchange reached 75.713 today, the highest since Feb. 21.

`No Bias'

Trichet said yesterday he has ``no bias'' or ``pre- commitment'' toward future rate movements after the central bank left the main refinancing rate at 4.25 percent. He told reporters in Frankfurt that while inflation remains a threat, risks to economic growth are ``materializing.''

European retail sales dropped by the most in at least 13 years in June, the European Union said on Aug. 5. Consumer confidence slid in July by the most since the Sept. 11, 2001, terrorist attacks, the European Commission said July 30.

Traders pared bets the ECB will lift rates a second time this year after increasing its main rate by a quarter-point last month. The implied yield on the December interest rate futures, an indication of expectations, retreated 2 basis pointsto 4.94 percent today.

The New Zealand dollar slumped as much as 2.2 percent to 69.84 U.S. cents, the biggest loss in two months. Australia's dollar dropped 1.7 percent, falling for a fourth day, to 89.10 U.S. cents, from 90.66 cents yesterday. The Reserve Bank of Australia said it may lower borrowing costs, after keeping its benchmark interest rate at a 12-year high of 7.25 percent this week.

Oil, Metals, Crops

Crude oil, metal and crop prices fell as the dollar climbed, reducing the appeal of commodities as a currency hedge. Oil has declined to $118.15 a barrel since touching the record of 147.27 on July 11.

The euro-dollar exchange rate and oil have had a correlation of 0.9 in the past year, according to Bloomberg calculations. A reading of 1 would mean they moved in lockstep.

``Oil prices have turned out to be much more supportive of the dollar than I expected,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``It does temporarily relieve some concern that the U.S. economy will weaken further. This is a plus for sentiment.''

To contact the reporters on this story: Ye Xie in New York at Yxie6@bloomberg.net; Anchalee Worrachate in London at aworrachate@bloomberg.net;

Last Updated: August 8, 2008 10:32 EDT