The.Economist-2006-01-07.pdf

Politics this week

Jan 5th 2006

From The Economist print edition

Israeli politics were thrown into confusion as prime minister Ariel Sharon suffered a severe stroke. As Israelis

contemplated the prospect that he may never return to frontline politics, deputy prime minister Ehud Olmert

assumed Mr Sharon's powers. See article

Iraq witnessed its bloodiest week since parliamentary elections in mid-December. At least 130 people were killed

and scores more injured in a spate of suicide-bombings (which included attacks on a funeral and religious shrines)

targeting the country's Shia population. See article

The ruler of Dubai , Sheikh Maktoum bin Rashid al-Maktoum, died while on a visit to Australia. He had presided

over the rapid development of the emirate in recent years, mainly planned and inspired by his brother, Sheikh

Mohammed bin Rashid al-Maktoum, who now succeeds him.

A spat between Russia and Ukraine over gas prices became serious when Russia turned off the taps. The rest of

Europe was swiftly hit, protests erupted all round the world—and the Russians turned the gas back on. See article

Two Turkish children died of bird flu , the first human deaths from the new disease outside South-East Asia.

Jack Abramoff , the Washington lobbyist at the centre of a corruption investigation, pleaded guilty to conspiracy,

fraud and tax-evasion charges. As part of his plea, Mr Abramoff agreed to testify in any potential indictments

(which are expected soon) brought against members of Congress. See article

George Bush stepped up pressure on congressmen to extend provisions of the Patriot Act . Late last month,

Congress agreed to a short-term extension of the legislation, which was due to expire on December 31st, until

February 3rd.

Evo Morales, a leftist who won Bolivia's recent presidential election, visited Venezuela, where he pledged to join

President Hugo Chávez in fighting “neoliberalism and imperialism”. Mr Chávez offered to give Bolivia diesel in

return for farm products.

Colombia's FARC guerrillas rejected a plan for talks with the government over an exchange of its hostages, who

include Ingrid Betancourt, a politician, for jailed guerrillas. Earlier, the FARC killed 29 soldiers protecting workmen

eradicating coca, in the most serious attack since Álvaro Uribe became Colombia's president in 2002. See article

Jiang Weiping, a Chinese journalist imprisoned after writing articles about corruption, was freed, a year ahead of

time, according to a human-rights group. There was speculation that the move was tied to a possible visit by

China's president to America.

A suicide car bomb in Tirin Kot, the capital of Afghanistan's Uruzghan province, killed ten people. It was

rumoured that the attack was timed to coincide with a visit by the American ambassador to the city. See article

Business this week

Jan 5th 2006

BASF , a German chemicals manufacturer, launched a $4.9 billion hostile bid to buy Engelhard (the firm's

management rejected BASF's initial offer). Engelhard, which is based in New Jersey, developed catalytic converters

for cars in the mid-1970s. BASF thinks the market for car-emissions products is set to boom as several countries,

including China, introduce tougher pollution controls for vehicles.

The bidding war continued for Dofasco , a steelmaker based in Canada. Germany's ThyssenKrupp raised its

friendly offer to C$4.9 billion ($4.2 billion), matching a hostile bid from Arcelor that the Luxembourg-based firm

increased just before Christmas.

Dow Jones , which publishes the Wall Street Journal , named Richard Zannino as its new boss. Many had expected

that Karen Elliott House, the wife of the retiring chief executive, Peter Kann, would assume the position (she is now

leaving the group). The firm has suffered more than most other media organisations from the advertising slump

following the dotcom bust.

America's Securities and Exchange Commission published guidelines on fining companies found guilty of fraud.

The regulator is responding to critics who complain of discrepancies between the amount that some firms were

charged for apparently similar offences.

Eurex , the world's biggest derivatives exchange, confirmed it was in talks with exchanges in the United States

about plans that would “further develop” its American operations. Rudi Ferscha resigned as the German-Swiss

firm's chief executive last month following criticism of a strategy (seen to have failed) to try to compete directly

with Chicago's established exchanges.

Economists pored over the minutes of December's Federal Open Market Committee meeting of America's Federal

Reserve. Much was made of the fact that “views differed” among members over how much further to tighten

monetary policy. The runes pointed to another interest-rate rise of one-quarter of a percentage point at the next

FOMC meeting on January 31st.

Israel without Sharon

After Sharon

Jan 5th 2006

From The Economist print edition

The death or departure of Israel's superhawk will darken hopes for peace

SO HISTORY repeats itself after all. For the second time in the modern

history of Israel, a tough and popular leader who had come to see the

need for compromise with the Palestinians appears to have been cut

down in mid-stride. Ariel Sharon may yet survive the massive stroke

that felled him on January 4th. But even if he does, his chances of

remaining prime minister and delivering the massive victory his new

Kadima party was expecting in Israel's general election in March look

remote. Like the assassination of Yitzhak Rabin in 1995, this could

revive the prospects of Israel's bedraggled hawks and make the path to

peace still harder.

Many non-Israelis, and especially the Palestinians, will find it hard to

accept the notion that Mr Sharon's departure could be bad for peace.

Even before earning notoriety as the architect of Israel's invasion of

Lebanon in 1982, Mr Sharon had established himself as a superhawk. As a young officer in the 1950s he gained a

reputation for trigger-happiness as commander of Israel's cross-border “retaliation” raids. After the Lebanon war,

he was forced out of his job as Menachem Begin's defence minister after a commission of inquiry found him

indirectly responsible for allowing a Christian militia to massacre hundreds of Palestinians in Beirut's Sabra and

Chatila refugee camps. As housing minister in the 1990s, he was responsible for building many of the Jewish

settlements in the occupied West Bank and Gaza strip. And in 2000, his provocative walk on Jerusalem's Temple

Mount is said to have sparked the second Palestinian intifada and so delivered a fatal blow to Bill Clinton's attempts

to broker a peace settlement between Ehud Barak and Yasser Arafat. Most Arabs reacted with scorn in 2002 when

George Bush called him “a man of peace”. The Arab media more often calls him a war criminal.

Only hawks can make peace

For all that—and like Rabin before him—Mr Sharon seemed this past year to offer Israelis a unique mixture of

qualities. On the one hand, and specially after leading a ruthless counter-insurgency fight against the intifada , his

credentials as a security hawk could not be challenged. On the other, he claimed to accept the need for Israel to

make painful territorial concessions and permit the emergence of an independent Palestine. Last August came

proof that this was not just talk. Unfazed by the resistance of his own ruling Likud party, Mr Sharon evacuated all

of Israel's settlements from the Gaza strip. No one knows whether following up on the West Bank formed part of

his thinking. But the fence he started to build around the West Bank has always looked like an attempt to mark out

a political border as well as a security barrier. Such a border would give Israel 15% or so of the West Bank. That is

still unacceptable to the Palestinians, but to Israelis on the national-religious right, offering up 85% of divinely

promised “Judea and Samaria” is a betrayal verging on apostasy. When the rightists in the cabinet mutinied, Mr

Sharon simply broke with them, quit the Likud, and formed his brand-new Kadima party.

Even by the standards of Israel's volatile and fractious democracy, this was a colossal gamble. But until this week's

stroke it seemed to be working. A party of the centre, ready for a two-state solution but tough on security, is just

what the secular Israeli mainstream seems to want. Opinion polls suggest that with Mr Sharon at its helm, Kadima

would have trounced Likud at the election in March. The question now is whether it could do so without its

paramount leader. So new is the party that Mr Sharon had not nominated his ministers and lieutenants before

going into hospital. No natural successor stands out. Israel's acting prime minister, Ehud Olmert, is a capable

politician who thinks along Mr Sharon's lines, but lacks a national following. Shimon Peres, who defected from

Labour to Kadima, is a serial loser of elections and widely distrusted. As in 1996, in the first election following

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