French troops edge closer to Libya border to cut off Islamists

#GNN PARIS: France is setting up a base in northern Niger as part of an operation aimed at stopping al Qaeda-linked militants from crisscrossing the Sahel-Sahara region between southern Libya and Mauritania, officials said.

Paris, which has led efforts to push back Islamists in the region since intervening in its former colony Mali last year, redeployed troops across West Africa earlier this year to form a counter-terrorism force.

Under the new plan, about 3,000 French troops are now operating out of Mali, Burkina Faso, Niger and Chad -- countries straddling the vast arid Sahel band -- with the aim of stamping out Islamist fighters across the region. Another 1,000 soldiers are providing logistical support in Gabon and Senegal.

"A base is being set up in northern Niger with the throbbing headache of Libya in mind," a French diplomat said.

Neither France nor Niger has said where the base will be but military sources in Niger said it was likely to be around Madama, a remote desert outpost in the northeast, where Niger already has some troops based.

French officials have repeated for several months they are concerned by events in Libya, warning that the political void in the north is creating favourable conditions for Islamist groups to regroup in the barren south of the country.

Diplomatic sources estimate about 300 fighters linked to al Qaeda's North African arm AQIM, including a splinter group formed by veteran Islamist commander Mokhtar Belmokhtar, are operating in southern Libya, a key point on smuggling and trafficking routes across the region.

French and American drones are already operating out of Niger's capital Niamey.

Echoing the French push to get assets closer to Libya, U.S. officials said last month that the United States was preparing to possibly redeploy its drones to Agadez, some 750 km (460 miles) to the northeast.

Three years after they launched air strikes to help topple Muammar Gaddafi, Western powers including France have ruled out military intervention in Libya, fearing that it could further destabilise the situation given that countries across the region are backing different political and armed groups in Libya.

However, with France particularly exposed in the Sahel-Sahara region and its forces now engaged in a support role against Islamic State militants in Iraq, Paris is stepping up efforts to squeeze militants in the area.

FRONTLINE
The murder of a French citizen last week in neighbouring Algeria by former AQIM militants who pledged allegiance to Islamic State also appears to have toughened Paris' resolve.

"The approach to (fighting terrorism) is global," Army spokesman Gilles Jaron said on Thursday. "We are on the frontline in the Sahel-Sahara region and supporting in Iraq."

The French operation, dubbed Barkhane after the name of a kind of sand dune formed by desert winds, has set up its headquarters in the Chadian capital N'Djamena, but also placed an outpost in northern Chad about 200 km from the Libyan border.

Jaron said the new Niger base was still being finalised, but would have capacity for as many as 200 soldiers with aerial support. "The aim is to bring together areas that interest us. The transit points which terrorists are likely to use," he said.

There have been some successes in recent weeks. Two diplomatic sources said Abou Aassim El-Mouhajir, a spokesman for Belmokhtar's "Those Who Sign in Blood" brigade, was captured by French troops in August.

French media said he had been taken in Niger. Niger intelligence sources said French troops had passed through Madama around the time of the operation.

Jaron said four suspected militants were also captured on Sept. 24 near Gao in northern Mali, where France has handed the bulk of security control to U.N. MINUSMA peacekeeping forces.

At the same time there has been an increase in attacks on foreign troops in Mali, including the death of 10 Chadian soldiers in September.

The U.N.'s peacekeeping chief, Herve Ladsous, said last week that with many French troops leaving the north of Mali, U.N. forces were being targeted and finding it difficult to respond due to a lack of helicopters and special forces.

"It's a problem that is being resolved. We want the MINUSMA to be up to scratch so we can focus on our number one job: getting rid of AQIM," said a French defence ministry source.

(GNN)(Reuters)(AIP)(GA)(Additional reporting by David Lewis in Dakar and Abdoulaye Massalaki in Niamey; Editing by Robin Pomeroy)

Japan investors bulk up on French bonds, bet on euro zone "Japanisation"

* Japanese investors bought 60 pct or more of French debt in May-June

* Buying up six-fold from last year

* Euro zone a déjà vu for Japanese investors seared by long deflation

* French debt yields more than Germany's, rated higher than Italy's

* ECB easing seen as "biggest event of the year" for Japanese investors, broker says

By Hideyuki Sano

TOKYO, July 14 (GNN) - Japanese investors have been buying most of France's government debt recently in a record surge spurred by expectations that Europe faces the kind of deflation and growth that Japan suffered for decades.

Since the European Central Bank (ECB) signalled in May it would take radical steps to ease monetary conditions, banks and other big investors in Japan have piled into French bonds, convinced from their own experience that the debt of a country where the central bank is battling deflation represents a winning bet, market participants say.

"In a way, they are expecting Japanisation - deflation and a long period of zero interest rates," said Hiroki Shimazu, senior market economist at SMBC Nikko Securities.

Japanese investors bought a net 1.9 trillion yen (14 billion euros) of French bonds in May, equal to more than 60 percent of the government's new issuance that month, Japanese Finance Ministry data shows.

Data is not available for June, but market participants say Japanese buying of French bonds has picked up from May amid a broader increase in buying of euro-zone debt. One suggested Japanese investors may have bought the equivalent of three-fourths of the French new issuance.

French bonds represents a Goldilocks trade for Japanese investors keen for euro-zone exposure: they yield more than German bonds, while lower credit ratings on Italy's bonds - the region's third-most-liquid market - deter active Japanese buying.

On a gross basis, Japanese investors bought 6.60 trillion yen ($65.2 billion) of French government debt in May, dwarfing last year's 1 trillion yen average and by far the most since the ministry began compiling such data in 2005.

JAPAN DEJA-VU

While the euro zone's financial crisis has seen spikes in market interest rates as bond prices plunged, Japanese investors have strong memories of a completely different dynamic.

As Japan suffered years of falling prices and tepid growth, the government's bond market proved one of the world's great long-term bull markets.

Having slashed interest rates to zero during this period, the Bank of Japan invented the now globally recognised idea of "quantitative easing" - mass purchases of bonds and other debt to inject cash into the economy.

"If you want to make money investing, you have to take the largest position you can take on the most important event of the year - that's how you win," said the Tokyo director of fixed income at a European brokerage. Japanese investors "think the ECB's easing is the biggest event of the year."

The ECB under President Mario Draghi has cut rates, pledged to keep them low "for an extended period" and said it will continue market operations that allot banks their full funding requests at a very cheap rate until December 2016.

Japanese investors have taken that as a signal rates won't rise for more than two years. That means free money by playing for "roll-down" gains on the yield curve: a five-year bond bought now at a 0.47 percent yield and held for two years should rise in price if market rates remain the same, given that three-year debt now yields 0.08-0.09 percent.

Helped by heavy Japanese buying, the French 10-year bond yield fell to a record low 1.5 percent last week.

But that is still nearly triple the yield that Japanese investors can get at home, where the BOJ's massive purchases - the central bank gobbles up the bulk of domestic JGBs - has crushed the 10-year yield to a 15-month low of 0.54 percent .

The ECB says there is little risk that the euro zone will slip into deflation, but it is déjà vu for Japanese investors, where the BOJ's unprecedented easing is only now generating a modest rebound in prices.

The euro zone inflation rate has slid for three years to 0.5 percent, with Italy at 0.2 percent in June.

Bank lending in the euro zone is falling as companies shed debt.

Wage growth is slowing, with some countries in southern Europe seeing wages falling.

Japanese investors keenly recall how, during long periods of stagnation, consumers stuffed their money into bank deposits and borrowing slumped, leaving banks with little choice but to plough their cash into Japanese government bonds.

Rising domestic savings boosted Japan's current-account surplus, supporting the yen and inflaming deflationary pressure - another parallel with the euro zone now. The euro zone's current-account surplus hit a record high in January, helping to support the euro despite the ECB's attempt to talk it down. (Reuters)(AIP)(Editing by William Mallard and Neil Fullick)

U.S., Iran say disputes remain in nuclear talks as deadline looms

(GNN) - U.S. Secretary of State John Kerry said on Sunday major differences persist between Iran and six world powers negotiating on Tehran's nuclear program, with a week to go before a deadline for a deal.

The United States, Britain, France, Germany, Russia and China want Iran to reduce its nuclear fuel-making capacity to deny it any means of quickly producing atom bombs. In exchange, international sanctions that have crippled the large OPEC member's oil-dependent economy would gradually be lifted.

Iran says it is enriching uranium for peaceful energy purposes only and wants the sanctions removed swiftly. But a history of hiding sensitive nuclear work from U.N. inspectors raised international suspicions and the risk of a new Middle East war if diplomacy fails to yield a long-term settlement.

"Obviously we have some very significant gaps still, so we need to see if we can make some progress," Kerry said ahead of meetings with foreign ministers who flew into the Austrian capital at the weekend to breathe new life into the talks.

Iranian Deputy Foreign Minister Abbas Araqchi delivered a similar message. He was quoted by Iran's Arabic language al-Alam television as saying that "disputes over all major and important issues still remain. We have not been able to narrow the gaps on major issues and it is not clear whether we can do it."

Kerry arrived in Vienna in the early hours after clinching a deal in Kabul with Afghanistan's presidential candidates to end the country's election crisis.

"It is vital to make certain that Iran is not going to develop a nuclear weapon and that their program is peaceful and that's what we're here to try and achieve and I hope we can make some progress," Kerry said in Vienna.

German Foreign Minister Frank-Walter Steinmeier told reporters that Germany and the other members of the six-power group have tried to persuade Iran of the urgency of a deal.

"This may be the last chance for a long time to peacefully resolve the dispute over Iran’s nuclear program," he told reporters. "It's now up to Iran to decide whether it wants cooperation with the international community or to remain in isolation. ... The ball is in Iran's court."

British Foreign Secretary William Hague said it was crucial for Tehran "to be more realistic about what is necessary" to reach a nuclear deal, adding that no breakthroughs had been achieved and there was "no major change in the state of play in these negotiations as of this moment".

Kerry also met Iranian Foreign Minister Mohammad Javad Zarif, though no readout was immediately available. On Saturday, a senior U.S. official said Iran was sticking to "unworkable and inadequate" positions.

NEITHER PESSIMISTIC NOR OPTIMISTIC

Another of Kerry's meetings on Sunday was with Germany's Steinmeier, who raised new accusations of U.S. spying on Berlin.

Steinmeier told reporters that in the meeting with Kerry he called for "reviving this (U.S.-German) relationship, on a foundation of trust and mutual respect." Kerry referred to the United States and Germany as "great friends."

Germany asked the CIA station chief in Berlin last week to leave the country following fresh charges of U.S. spying on Berlin. Kerry and Steinmeier were expected to hold a joint news conference later on Sunday.

Kerry, Steinmeier and their British and French counterparts also discussed the escalation of hostilities between Israel and Palestinian militants in the Gaza Strip.

Araqchi said that he was "not pessimistic but also not very optimistic" about the chances for an agreement with the sextet ahead of the self-imposed deadline of July 20. "No proposal has been accepted yet. We have not reached any agreement over the enrichment (program of Iran) and its capacity."

He added that if the talks collapsed, Iran would resume higher-level enrichment that it suspended on Jan. 20 when a preliminary accord the sides struck two months before took effect. Iran won limited relief from sanctions in return.

The Nov. 24 deal included a provision for lengthening talks on a permanent agreement by up to six months if all sides agree. Araqchi said "there is a possibility of extending the talks for a few days or a few weeks if progress is made."

A senior U.S. official said on Saturday that an extension would be difficult to consider without first seeing "significant progress on key issues".

French Foreign Minister Laurent Fabius also raised the possibility of extending the talks.

"If we can reach a deal by July 20, bravo, if it's serious," he told reporters. "If we can't, there are two possibilities. One, we either extend ... or we will have to say that unfortunately there is no prospect for a deal."

Failure to seal a deal would mean the limited sanctions relief currently in place for Iran would end and Tehran could expect tougher sanctions, above all from the United States.

Iran says it is refining uranium to low levels of fissile purity to fuel a planned network of nuclear power stations. It earlier described its higher-level - or 20 percent purity - enrichment as material to fuel a medical research reactor. High-enriched uranium - or 90 percent - is for nuclear weapons.

The Russian and Chinese foreign minister were not in Vienna on Sunday due to a meeting in Brazil of the BRICS developing countries. Moscow and Beijing sent senior diplomats to Vienna instead.

(Reuters)(AIP)(Additional reporting by Parisa Hafezi, Fredrik Dahl and Louis Charbonneau; Writing by Louis Charbonneau; Editing by Rosalind Russell and Kevin Liffey)