by Nathaniel Harrison
WASHINGTON, Jan 6 (AFP)
The sharp slide in the dollar against the yen could boost US exports over the long term but could also harm US interests by slowing Japan�s recovery, analysts said here Wednesday.
The dollar fell to a two-year low � 110.7 � against the yen in Tokyo on Tuesday before rallying slightly in early trading Wednesday to 112.50 yen.
But the recent trend toward a weaker dollar and stronger yen represented a sharp turnaround from trading ranges seen in August, when the greenback was at 145 to the yen.
The yen has risen steadily in recent months as Japanese investors have shown a reluctance to place large amounts of money overseas while shoring up their positions at home in the face of Tokyo�s worst post-war recession.
Interest rate cuts in the United States, making the dollar less attractive to currency dealers, and concerns in Japan about future US economic momentum have also contributed to strengthen the yen.
If sustained, the trend could help slow the burgeoning US trade deficit, increasing the price of Japanese imports while lowering prices on US exports, making them more competitive.
Among individual countries, the largest US trade deficit is with Japan, which came to six billion dollars in October. Overall, the shortfall was 139 billion dollars from January to October of 1998, compared with 110.2 billion for all of 1997.
In the face of slumping exports to sluggish economies elsewhere in Asia, US officials have warned that the deficit for 1998 could swell to at least 220 billion dollars.
�What the United States needs to reduce that deficit is a weaker dollar,� said trade analyst Brian Horrigan with the research firm Loomis Sayles of Boston.
But he warned that the positive effects of a declining dollar would not become evident for almost two years.
�We have had a dollar that has been firming over the least three years and that has had a cumulative effect on worsening the trade deficit. It�s going to take a long process of going down before the situation turns around.
�Even with a dollar slide all the way through 1999 I still expect the trade deficit to deteriorate.�
In Japan, the healthier yen � and its likely negative effect on exports � is already seen as threatening to destroy any chances for a Japanese economic recovery this year.
�With the yen near 110 it means there is not much chance of the recession ending this coming year,� said Richard Jerram, chief economist at ING Barings in Tokyo.
�We need to see the yen at a weaker level.�
For US analyst David Gilmore of Foreign Exchange Analytics, the rise in the yen �is the worst thing that could happen to the Japanese economy, given that its only strength in the private sector is from exports.�
US officials have repeatedly prodded Japan to galvanize its economy and to absorb more exported products from other struggling Asian nations.
�At this stage of the game there�s probably a greater interest (in the United States) in having a stronger Japan and a stronger Asia than in addressing the widening trade deficit with Japan,� according to Gilmore.
At Salomon Smith Barney, economist Kermit Schoenholtz has predicted that the current surge in the yen will be short-lived.
�Fundamentals suggest that the yen will be the weakest industrial currency in 1999, reflecting the continued plunge of the Japanese economy and the deterioration of the financial system,� he wrote in a recent report.
He saw the Japanese currency sliding back to 140 to the dollar later this year.
by Jim Mannion
WASHINGTON, Jan 5 (AFP)
US warplanes clashed twice Tuesday with Iraqi fighters in the no-fly zone in southern Iraq, firing air-to-air missiles but missing their targets in the first aerial duels in six years, Pentagon officials said.
Iraqi MiG-25s southwest of Baghdad turned their radar on two US Air Force F-15 fighters, which responded by firing four air-to-air missiles that missed their target, Pentagon spokesman Kenneth Bacon said.
About 15 minutes later, two US Navy F-14 Tomcats fired two air-to-air missiles at two Iraqi MiG-25s some 100 kilometers (82 miles) away in the no-fly zone south of the 33rd parallel and southeast of the Iraqi capital, Bacon said.
The Iraqi jets veered out of the no-fly zone and escaped, he said.
Separately, US military officials said an Iraqi MiG-23 apparently crashed as it was coming into land, but Bacon said it was not involved in the clashes.
US fighters returned safely to their bases in the Gulf and aboard the aircraft carrier USS Carl Vinson, the Pentagon said.
The last time US and Iraqi fighters dueled in the south was December 27, 1992, when a US Air Force F-16 Falcon shot down an Iraqi MiG-25 after being illuminated by radar, the Pentagon said. An F-16 shot down another Iraqi MiG on January 17, 1993 in northern Iraq.
The clashes Tuesday came amid a rash of Iraqi challenges to the southern no-fly zone in a show of defiance by Baghdad, which last month weathered four days of US and British air strikes.
Bacon said between 13 and 15 Iraqi warplanes � MiG-23s, MiG-25s and F-1 Mirages � crossed into the no-fly zone on eight occasions during the day, challenging US aircraft with deeper and longer penetrations than in the past.
The Pentagon suspected that the Iraqi aircraft were trying to lure the US fighters into a trap, Bacon said.
But, he acknowledged, �we don�t know exactly what is going on here. In the broad sense, it does appear that Saddam Hussein is frustrated, and maybe even desperate after Operation Desert Fox.�
Bacon claimed that the US-British air strikes were more damaging than originally believed and that Arab opinion had failed to rally around Baghdad in the wake of the bombing. He cited anecdotal reports of assassinations, and unrest in the south and within the military.
�We have a variety of options, we�ve shown that we�re willing to use force, and significant force, quickly and by surprise, at the time of our own choosing. And that remains an option on the table,� he said.
A White House spokesman said the response by the US fighters �underscores our determination to meet any challenges that Iraq may pose.�
�It�s an important element of our containment policy and we will continue to confront any threat that the Iraqis pose in the air or on the ground,� said P.J. Crowley, spokesman for the National Security Council.
The clashes followed incidents last week in which US warplanes attacked Iraqi air defense sites after surface-to-air missiles were fired at US and British warplanes in no-fly zones in the north and the south.
Bacon said the first of Tuesday�s clash�s occurred at 10:15 a.m. Gulf time (0715 GMT) Tuesday, followed quickly by the second at 10:30 a.m. (0730 GMT).
The F-15s and the F-14s fired among the most advanced and most expensive air-to-air missiles in the US arsenal, but failed to hit their targets.
Asked why, Bacon said: �It�s not an easy type of engagement. It looks easy in the movies. It is not easy in real life.�
The two Phoenix missiles fired by the F-14s cost nearly 500,000 dollars each and can be fired from a distance of 184 kilometers (115 miles). The three radar guided AMRAAM missiles fired by the F-15s are designed to hit targets at ranges of more than 32 kilometers (20 miles). They cost 386,000 dollars each. An older generation Sparrow missile also was fired by an F-15.
Since the Operation Desert Fox air campaign last month, Baghdad has vowed to attack US and British aircraft in its airspace.
Last week, US fighters attacked Iraqi air defense positions twice after they fired surface-to-air missiles at US fighters in the northern no-fly zone and at British fighters in the southern zone.
The no-fly zones, which cover Iraqi territory below the 33rd parallel in the south and above the 36th parallel in the north, were imposed after the 1991 Gulf War and have only rarely been defied by Baghdad.
Iraq is determined �to tear down the lines� delimiting the no-fly zones, Iraqi air force chief General Khaldoun Khattab Omar said in an interview published Tuesday by an Iraqi government daily.
�Iraqi fighter planes are totally free to fly the skies of Iraq, in the north and the south,� Omar told the Al-Qadissiya daily.
�They have the right to defend our territory and no one can stop them,� he was quoted as saying.
by Alain Bommenel
BASRA, Iraq, Jan 5 (AFP)
Iraq is maintaining a tough military presence in the south of the country with thousands of troops deployed to discourage potential uprisings among the simmering Shiite Moslem population.
In the southern Basra region, officials say they are convinced a second wave of US and British bombings will be unleashed to encourage insurrection of the sort seen following the 1991 Gulf War.
In Baghdad on Monday, the top leadership met to discuss the readiness of the armed forces. President Saddam Hussein vowed to continue attacking US and British planes patrolling the �no-fly� zones in the south and north.
Last week saw two clashes and both the Western allies and Iraq have made it clear they will not hesitate to engage in new face-offs.
Anti-aircraft guns line the road to the south, from Kut to Iraq�s second largest city, Basra, which has remained a military stronghold since the four days of US and British bombings that ended December 20.
The road is also lined with military encampments and barracks, some partially buried, some storing dozens of tanks. Checkpoints are commmon and increasingly frequent on the outskirts of this port city.
Small double-barrelled cannons are on most streets, used to shoot at the US F-16s or British Tornados that patrol the no-fly zones. But there were no signs of mobile missile batteries.
The main purpose of this show of force is to dissuade trouble on the ground, not in the air.
Prior to the bombings, Saddam split Iraq into four military zones in a bid to stop areas breaking away from Baghdad.
Members of the ruling Baath party, most of them in their 40s and carrying Kalshnikovs, patrol the city streets and crossroads.
Tribesmen have based themselves in tents along the road, flags flying and tribal names emblazoned across the canvass.
�We are here to protect Saddam Hussein,� said Sheikh Sabah al-Batat, as he met with his family under their main tent.
�The Americans will find a new pretext for attacking. We have taken important measures. The population obeys our instructions,� said Basra�s governor, Ahmad Ibrahim Hamash.
�They want to stir trouble, like after the Gulf War, when people came in from Iran to create disorder by releasing prisoners,� the governor said. The border with Shiite Moslem Iran is only 30 kilometres (18 miles) away.
He dismissed with a wave of his hand the idea of an armed Shiite opposition operating mainly from the marshes along the border.
But �there are armies around. Roads are not safe at night. People are hungry and desperate,� one resident said.
In 1991, Shiite rebels tried to seize control of several southern cities, before being crushed by Saddam�s elite, and mostly Sunni Moslem, Republican Guard.
�There are Shiites among us,� said 50 year-old Fami, who commands a small detachment of the Baath�s armed members in Basra.
�We must check all attempts at infiltration by American agents and mercenaries supported by Iran,� he said.
The city�s streets are deserted at night, despite it being the Moslem dawn-to-dusk fasting month of Ramadan, when most activity takes place after sunset.
Pick-ups, complete with attached machine-guns, are stationed outside the main government buildings.
�We will stay mobilised as long as the American threats persist,� said 40-year-old Sabah, the head of the Baath party in Al-Dair, near Basra.
In the four days of deadly bombing last month, Basra�s telecommunications site at the central post office was hit. The nearby refinery was also damaged.
The refinery is one of Iraq�s most important economic resources, but US officials after the bombing said the refinery was supplying fuel for smugglers in the Gulf.
by Anne Penketh
UNITED NATIONS, Jan 5 (AFP)
The United Nations on Tuesday rejected an Iraqi demand for the replacement of US and British humanitarian workers in Iraq, following Anglo-American air strikes against Iraqi targets.
UN legal counsel Hans Corell faxed a letter to Iraqi Ambassador Nizar Hamdoon responding to Monday�s formal Iraqi request for the replacement of 14 US and British nationals in Iraq, on the grounds that their safety could no longer be guaranteed.
The United Nations is �not in a position to accede to the request to replace the personnel in question on grounds of their nationality,� the UN document said.
Corell noted that the UN charter bars UN staff from receiving orders from any government, and said that it was up to UN chief Kofi Annan to make staff decisions.
�It is for the secretary-general of the United Nations ... to determine in the light of all the available information ... which personnel should be assigned to provide humanitarian assistance to Iraq,� the UN aide-memoire said.
A senior aide to Annan, Rolf Knutsson, informed the 15-member Security Council earlier Tuesday of the UN decision to reject the Iraqi move, which was immediately welcomed by US and British envoys.
Western diplomats said that nine British citizens and one US national had been informed that the Iraqi authorities would not renew their entry visas. The visas of four other Britons working for UN contractors would expire following the completion of their mission.
All but two are in Kurdish-controlled northern Iraq. However three US nationals in Baghdad are unaffected by the move.
Knutsson also circulated to the council what he stressed was a �limited assessment� of the impact of the air strikes on the humanitarian programme, under which sanctions-hit Iraq is allowed to export up to 5.2 billion dollars worth of oil in return for food and medicine.
He said that Iraq had informed the United Nations in Baghdad that conditions did not permit a UN investigation, and that Iraq would make its own assessment of the damage from the December 16-19 strikes, carried out after Iraq failed to fully cooperate with UN weapons inspectors.
The damage report, the first independent assessment to be carried out since the strikes, was compiled by the UN Children�s Fund, the World Food Programme and the UN Baghdad office.
In terms of human casualties, the report only mentioned two guards seriously injured when the Iraqi Labour Ministry took a direct hit. One trucker was meanwhile slightly hurt when a warehouse in Tikrit was hit.
Damage to hospitals and schools in Baghdad, the southern city of Basra, and northern Kirkuk was mainly restricted to broken glass and some demolished ceilings and doors.
A Baghdad water main took a direct hit from a cruise missile, and there was also damage to the water distribution network in Basra.
The UN staff did not visit the Basra oil refinery which was targeted in the raids.
A secondary school of agriculture in Kirkuk also sustained a direct hit. A UNICEF team was not able to accurately assess the damage �as the possibility of cluster bombs still intact in the premises prevails,� the report said.
The report confirmed extensive damage on a World Food Programme warehouse in Tikrit, north of Baghdad, containing 2,600 metric tonnes of rice.
At least half was destroyed or burned by a missile on the first day of the four-day strikes, which left �a vast crater in the stockpiles of rice,� the nine-page report said.
The WFP was able to visit all 18 warehouses where food was stocked.