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PERSONAL JOURNAL 25

EUROPE EDITION

VOL. XXXII NO. 18

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WSJ.com

TUESDAY, FEBRUARY 25, 2014

EU, U.S. Scramble to Find Aid for Kiev

Western Officials Say Swift Action
Is Needed to Avoid Financial Crisis
But Face Thicket of Rules, Hurdles

FugitiveLeader
Faces Charges
Of ‘MassMurder’

BRUSSELS—Europe and
the U.S. grappled with how to
pull together billions of dollars in financing for Ukraine
to fend off its economic collapse in the aftermath of
weeks of political crisis and
violent street protests.

KIEV—Ukraine’s
acting
government on Monday issued an arrest warrant for
ousted President Viktor Yanukovych and said it was opening a criminal case into the
“mass murder” of civilians
stemming
from
violent
clashes in the capital last
week that left dozens dead.

Talks between Kiev, Brussels and Washington come
amid allegations that the government of former President

Viktor Yanukovych, who fled
Kiev to an unknown location,
raided the government’s coffers before being removed
from power over the weekend.
“The treasury has been
plundered, the country has
been bankrupted,” Arseniy
Yatsenyuk, one of the opposition leaders and a former foreign minister, said Monday,
according to Interfax news
agency.
Amid Ukraine’s increasingly dire financial situation,
European Union negotiators
are facing a thicket of rules
governing how the 28-nation
bloc can lend money to prop
up its neighbors. The EU and
the U.S. want the International Monetary Fund involved to force long-delayed
reforms from Kiev in exchange for cash. But IMF programs can take weeks to negotiate, while Ukraine may

Inside
Thinking small: RBS
bankers are making
the tea and loading
the packing cases as
they get down with
the customers
Business & Finance ... 15

Turkish Finance Minister Mehmet Simsek, in
an article for The Wall Street Journal, says

Turkey will rise above fear
Opinion...............................................................14

By Lukas I. Alpert,
Andrey Ostroukh,
Alan Cullison
and James Marson
The Interior Ministry’s
acting head, Arsen Avakov,
wrote on his Facebook page
that Mr. Yanukovych is believed to be in Crimea, a
southern region dominated by
ethnic Russians that serves as
home to Russia’s Black Sea
naval fleet. A ministry official
who declined to be named
verified the post.
“As of this morning, a
criminal case has been
opened based on the mass
murder of civilians. Yanukovych and some other officials have been put on the
wanted persons list,” Mr. Avakov wrote.
He said Mr. Yanukovych is
believed to have left his native Donetsk late Saturday
and arrived in Crimea on SunPlease turn to page 10
Reuters

By Matthew Dalton,
Andrey Ostroukh
and Laurence Norman

not have that long.
“We have to help them
soon—this
month,
next
month,” said Elmar Brok,
chairman of the European
Parliament’s foreign affairs
committee, who was in Kiev
meeting with Ukrainian officials. “Hopefully everyone is
flexible to do that.”
The U.S., the U.K. and
some other European officials
said the IMF is best placed to
provide aid to Ukraine. U.S.
Treasury Secretary Jacob Lew
backed IMF aid for Ukraine,
after speaking by phone with
IMF chief Christine Lagarde
and Mr. Yatsenyuk, a U.S.
Treasury official said.
"Such support could be
provided quickly once requested by the new government,” U.K. Foreign Secretary
William Hague said.
Meanwhile, Ukraine’s acting finance minister said in a
statement Monday that the
government would seek a loan
from the U.S. and Poland
within one to two weeks. By

the end of 2015, Ukraine
hopes to raise some $35 billion from the IMF and Europe
to revamp the economy and
repay its foreign debt. But to
get that aid, a yet-to-beformed government would
have to carry out unpopular
measures that were shot
down by Mr. Yanukovych and
other Ukrainian authorities.
Those measures include allowing the currency to dePlease turn to page 11

A woman studies a wanted poster in Kiev on Monday seeking the whereabouts of Viktor Yanukovych,
the ousted Ukrainian president. He was believed to be in hiding in the southern Crimea province.

 Not everyone wants the
return of Tymoshenko......... 10
 Opinion: The West must stop
Putin’s interference................ 12

Zuckerberg: WhatsApp Is Worth It
BY SAM SCHECHNER
AND JONATHAN CHENG

BARCELONA—Mark Zuckerberg has a message for
doubters of Facebook Inc.’s
acquisition of mobile-messaging service WhatsApp Inc.:
$19 billion was cheap.
The
FaceMOBILE
book chief execWORLD

utive said MonCONGRESS day that the
five-year-old
mobile application was worth
more than Facebook agreed to
pay for it last week, because
the app is a rare platform that

has the potential to reach
over a billion users.
In a question-and-answer
session here at the yearly Mobile World Congress, Mr.
Zuckerberg said that other
messaging apps are already
monetizing their users at $2
to $3 a head. Meanwhile
WhatsApp, with little revenue
so far, is on a trajectory to
grow quickly from 450 million
users to over a billion, Mr.
Zuckerberg said.
“The reality is that there
are very few services that
reach a billion people in the
world. They’re all incredibly

valuable, much more valuable
than that,” Mr. Zuckerberg
said, referring to the price
tag, which included $16 billion
in cash and stock and $3 billion in restricted stock units.

What’s more, WhatsApp is
soon to offer voice calling to
its users, the startup’s cofounder and chief executive
said at a separate event in
Barcelona on Monday.
Jan Koum said during a
speech at Mobile World Congress that WhatsApp would
first release a version of the
voice service for Apple Inc.’s
iPhone and Google Inc.’s An-

droid platforms, followed by
services for Microsoft Corp.’s
Windows Phone, as well as
some phones by BlackBerry
Ltd. and Nokia Corp.
He also said the WhatsApp
voice product would “focus on
simplicity” as it has with its
text-based messaging service.
With its move into voice
calls, WhatsApp will now
compete more directly with
Microsoft’s Skype service,
which began as a platform for
Please turn to page 18

 More coverage of Mobile
World Congress...................18,19

2 | Tuesday, February 25, 2014

AM

IM

UK

SW FR

IT SP

TK BR

PL

IS

AE

GR

THE WALL STREET JOURNAL.

PAGE TWO

What’s News—
i

i

i

i

i

i

World-Wide

n State-controlled Royal Bank
of Scotland is going to extensive pains to appease its owners and customers after six
years of withering criticism. 15

n Italy’s new prime minister,
Matteo Renzi, was expected to
win two confidence votes this
week and begin implementing
his coalition’s ambitious
agenda. 4

n Novartis is distancing itself
from the era of Daniel Vasella,
the former chairman whose
controversial exit package
blemished the Swiss pharmaceutical company’s image. 15
n China’s yuan hit a fourmonth low, sparking expectations that years of gains may
be nearing an end. 15

n Samsung unveiled an updated flagship smartphone that
reflects an attempt to eschew
flashy features—and to keep
the price competitive. 18
n Mining in the Arctic has
proved a quixotic quest for all
but a few tenacious miners like
Agnico Eagle-Mines. 17
n HSBC said flat revenue and
higher operating costs weighed
on profits last year, adding to
concerns about the bank’s
prospects. 20

Agence France-Presse/Getty Images

Business & Finance

n Ugandan President Yoweri
Museveni signed into law an
antigay bill, setting the stage
for a showdown with Western
donors and rights activists opposed to the legislation. 8

‘It’s really important to us to assert conservative solutions, because so many people are hurting,’ Rep. Eric Cantor says.

n China’s property market is
showing its strongest signs of
a cool-down, as price growth
eases, credit for many developers dries up, and some cut

prices at new projects. 7

Cantor Pushes the GOP
To Spell Out Its Agenda

n A Russian court sentenced
seven activists to prison terms
ranging from 30 months to
four years after they were convicted of being involved in a
“mass riot” during an antiKremlin protest in 2012.

[ Capital Journal. ]
BY GERALD F. SEIB

n Thai Prime Minister Yingluck Shinawatra vowed not to
resign amid continuing antigovernment street protests. 8

n Sony Corp. is rolling out a
new smartphone loaded with
its most advanced camera and
audio technologies. 19

n Afghans mourned 21 soldiers killed in a Taliban attack
as details emerged about an incident that sparked a wave of
outrage in the country. 8

n Jewelers and traders in India are exploiting a legal loophole and using Indians who are
coming home after working in
other countries to ferry the
gold into India. 22

n U.S. Rep. John Dingell, a
Democrat who is dean of the
House and the longest-serving
member of Congress in history,
is retiring after serving more
than 58 years in the House. 6

Getty Images

What’s Online

Very Handy: Samsung Gear2 on show Monday
at the Mobile World Congress in Barcelona
Breaking news and analysis from the MWC: WSJ.com/mobileworld

Rep. Eric
Cantor wants
Republicans to
stop thinking of
themselves as
simply the
opposition party, and to start
acting more like the alternative
party.
Such a distinction is important,
but difficult to realize. As is often
the case when a party doesn’t
occupy the White House,
Republicans have become far

more comfortable simply being
against what President Barack
Obama is for, rather than doing
the tougher work of agreeing on
precisely what they would do
differently.
To some in the party’s more
conservative quarters, in fact,
even calls for targeted
government action are reflexively
being read as unwanted calls for
big-government action, and an
unnecessary distraction from
attacks on the health law
championed by the president. But
in an election year in which
Republicans are asking voters to
give them full control of Congress,
the need to be for something and
not simply against lots of things
becomes crucial.
“Our members are going to get
very excited if we can provide
alternatives, not just be a party
that’s against whatever the
president is for,” Mr. Cantor, the
House majority leader, said in an
interview. “It doesn’t mean we’re
not going to prosecute the case
against the president’s agenda in

the form of a public debate.”
This quest has taken the form
of a series of speeches and
writings in recent weeks in which
the Mr. Cantor has sought to
define what Republicans—at least
House Republicans—ought to
stand for. The effort started a year
ago, when he delivered a speech
at the American Enterprise
Institute that laid out arguments
for, among other things, charter
schools and school choice, and a
federal law that would enable
working parents to convert
overtime into comp time.
Last month, at a retreat of

House Republicans, Mr. Cantor
presented a broad agenda that he
described as “An America That
Works.” In it, he urged
Republicans to embrace reforms
in federal job-training programs,
while also pushing more
predictable ideas for easing
regulations on energy and
manufacturing, and tax reductions
on the middle class. He again
made a push for more charter

schools, but also urged the GOP to
generate ideas for reducing the
cost of college education.
And then, this month, he gave
a speech at the Virginia Military
Institute on national-security
issues in which he called for more
aid for Syria’s rebels, more
economic sanctions on Iran, a
reversal of some planned defensespending cuts and completion of a
free-trade pact in Asia.
In some ways, though, the
question hanging over all this is
the giant, complicated question of
health care. Like virtually every
Republican in sight, Mr. Cantor
has called for repealing the
Affordable Care Act.
But the harder part for
Republicans is spelling out how
they would replace it.
“Honestly, I think Obamacare is
on borrowed time,” Mr. Cantor
says. “We may have an
opportunity for an alternative to
be put in place.” But there isn’t
agreement among congressional
Republicans on whether to
participate in attempts to modify
the law or on any single

alternative to take its place.
House Republicans presented a
plan back in 2009 that would
allow insurance companies to sell
policies across state lines and
expand use of state-based highrisk insurance pools to help
people with pre-existing
conditions find insurance. More
recently, the conservative House
Republican Study Committee
offered its own plan, using tax
deductions to help individuals buy
health insurance, and last month
three Republican senators
released their own. All have
similarities, but aren’t identical.
Mr. Cantor says simply: “Our
conference is working on that.”
His bigger problem is that, to
get to this kind of agenda, House
Republican leaders have been
trying to move past the

arguments about spending and
debt that have left Congress tied
in knots for the last two years and
sent perceptions of Republican
leadership sliding downward.
Yet many in the party’s teaparty and conservative wings
seem more interested in

remaining focused on opposition.
Look at the website of Heritage
Action, the new political-action
arm of the Heritage Foundation
think tank, and you get a visual
image of this impulse.
On the group’s list of
recommended votes on key
congressional issues, the first
seven items are all calls for votes
against something. The group
urged ‘no’ votes on raising the
debt ceiling, on passing the farm
bill, on reforming flood insurance,
on a new federal spending plan,
on extending unemployment
benefits for the long-term
unemployed, on a new budget
outline and on the confirmation of
Janet Yellen as chairwoman of the
Federal Reserve.
Mr. Cantor clearly doesn’t want
that to be the totality of the GOP
message: “It’s really important to
us to assert conservative
solutions, because so many people
are hurting.”

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THE WALL STREET JOURNAL.

Tuesday, February 25, 2014 | 3

NEWS

BY TAMER EL-GHOBASHY

CAIRO—Egypt’s military-backed
interim prime minister and his cabinet abruptly resigned Monday, easing the way for the nation’s popular
defense chief to run for president
and further solidify his power.
Prime Minister Hazem el-Beblawi, in his announcement on live
state television, gave no reasons for
the decision by the interim cabinet
to step down after eight months in
office, saying only that “reform cannot take place through the government alone.”
Interim President Adly Mansour
said in a statement he had accepted
the resignations but gave no indication of when a new government
would be assembled.
While the interim caretaker government was expected to be dissolved, the timing of the resignations raised questions about their
motivation. Some observers said the
military rulers might have engineered the move to sidestep the
scorn for Egypt’s myriad social and
economic problems.
“This government didn’t have
any political role and didn’t offer
suggestions to solve the current crisis,” said Abdel Moneim Aboul Fotouh, a presidential candidate in 2012

and a frequent critic of the militaryled ouster of Egypt’s first democratically elected president in July.
Egypt has been hit by a wave of
rare winter blackouts, cooking-gas
shortages and mounting labor
strikes in recent weeks. And Mr. Beblawi has been criticized by some
politicians and pro-military media
for his delay in declaring the Muslim
Brotherhood a terrorist organization
following an upsurge in insurgent
attacks on army and police installations, and most recently a group of
South Korean tourists.
On the other hand, the designation was also roundly criticized by
rights groups and Western governments as politically motivated. The
government presented no evidence
of the Brotherhood’s involvement in
attacks, while militant groups have
claimed responsibility.
There was no immediate comment on the resignations from Field
Marshal Abdel Fattah Al Sisi, Egypt’s
popular military chief who is expected to easily win election as
Egypt’s next president when voting
takes place later this spring. Field
Marshal Sisi has yet to announce his
bid, but has received a critical endorsement from the military council
he leads.
Some observers said, however,
that with Egypt’s economy faltering
and the public’s discontent rising,
the shake-up may benefit Field Marshal Sisi.
“This is overdue and needed because of the unpopularity of the cabinet in the street,” said an official familiar with the matter. “There needs

to be a positive change before presidential elections are held and actual
results people can see.”
Analysts said the move could
give Field Marshal Sisi room to influence the next cabinet before his
expected run for president while an
interim president is in office, sparing him the political fallout if they
fail to meet the demands of an increasingly frustrated population.
“This will be the first time that
we’ll be seeing his designated
choices in place but they will be ap-

pointed by Mansour,” Josh Stacher,
an Egypt expert at Kent State University, said of the next cabinet. “It’s
a very nice sleight of hand.”
In his televised statement, Mr.
Beblawi said the cabinet had sought
to stabilize Egypt after Mohammed
Morsi, the nation’s first democratically elected president and a top
Brotherhood official, was forced
from power on July 3 by the military
amid large demonstrations against

the Islamist-run government. “We
made every effort to get Egypt out
of the narrow tunnel in terms of security, economic pressures and political confusion,” he said.
After the announcement, Hossam
Eissa, the departing deputy prime
minister and higher education minister, said he and other cabinet members were “relieved” by their decision to resign, which came during a
regularly scheduled cabinet meeting.

European Pressphoto Agency

Egypt’s Prime Minister,
Cabinet Abruptly Resign
Departing Prime Minister Hazem el-Beblawi is seen leaving the government
headquarters in Cairo after he announced his resignation on Monday.


4 | Tuesday, February 25, 2014

THE WALL STREET JOURNAL.

EUROPE NEWS

Center-Right
In Germany
Puts Backing
On Juncker

European Pressphoto Agency

BY GABRIELE STEINHAUSER

Italy’s new premier, Matteo Renzi, delivers a speech to the Senate in Rome on Monday hours before the body was to hold a confidence vote on his government.

Italy’s Renzi Pledges ‘Boldness’
BY CHRISTOPHER EMSDEN
AND GIADA ZAMPANO

ROME—Matteo Renzi spoke of

“haste and boldness” as primary attributes of his new government before a confidence vote on Monday,
pledging that the Italian state would
pay down all of its commercial arrears and focus on improving the
country’s schools.
The 39-year-old Mr. Renzi, sworn
in Saturday as Italy’s youngest
prime minister after leading a party
revolt against his predecessor,
wants to deliver swiftly on an ambitious agenda, which is expected to
include measures to tackle the country’s soaring unemployment rate
and reignite growth in Italy, which
is struggling to exit its longest recession since World War II.
Setting out his governing agenda
in a speech to the Senate, the former mayor of Florence established
three primary pledges: a doubledigit cut to Italy’s payroll tax rates,

the creation of guarantee funds to
boost lending to small companies,
and paying down all of Rome’s arrears to suppliers, a move that
would provide Italy’s private sector
a cash boost.
Mr. Renzi was expected to win a
confidence vote in the Senate scheduled for later in the day, though the
exact size of his majority remains to
be seen. The premier explicitly
courted lawmakers from the opposition Five Star Movement during his
speech.
Last year, Italy promised to pay
down €40 billion ($54.9 billion) of
those debts and achieved just over

half of that in 2013. Total arrears—
and Mr. Renzi insisted he would pay
all of them—may be more than €100
billion, according to some estimates.
Paying down those arrears would
have no impact on Italy’s budget
deficit, but it will raise the country’s
public debt under European Union
accounting rules.
Mr. Renzi also dwelled at length

on what he said was the urgent
need for school repairs around the
country, an effort he said would cost
several billion euros.
He urged lawmakers to free
themselves of “cultural subalternity,” or inferiority to Europe, and a
widespread perception that the
bloc’s rules are too bureaucratic.
“We need to dream bigger,” he said.
Mr. Renzi said Italy’s influence
over EU processes and affairs would
be enhanced if lawmakers agreed to
rapid approval of his reform measures—including changes to labor
and electoral laws—before July 1,
when Rome takes over the EU’s rotating presidency.
His proposed institutional reform would also change the nature
of the Senate, turning the upper legislative chamber into an assembly of
local government representatives
with limited sovereign powers.

“I hope I am the last prime minister ever to have to ask for your
confidence,” said Mr. Renzi, who at

39 wouldn’t be eligible to hold office
in the Senate.
Referring to his demand for radical change, as well as to his ascent
to power through a party vote
rather than a national election, Mr.
Renzi added: “If we fail, it will be all
my fault.”
On Friday, Mr. Renzi unveiled a
new cabinet that represented a mix
of change and continuity. With 16
ministers, the cabinet is leaner than
that of his predecessor Enrico Letta,
who was forced to resign earlier
this month.
Half of the new ministers are
women and several of them are under 40. But six were also members
of the Letta government, a decision
that could expose Mr. Renzi to criticisms of falling short on his promises to make a clean break with the
past. For the key Economy Ministry,
Mr. Renzi picked Pier Carlo Padoan,
64, chief economist of the Organization for Economic Cooperation and
Development.

BRUSSELS—Chancellor Angela
Merkel’s Christian Democratic Union
and its Bavarian sister party, the
Christian Social Union, on Monday

endorsed former Luxembourg Prime
Minister Jean-Claude Juncker to
lead Europe’s center-right into European elections in May.
The CDU-CSU endorsement
means their delegates are expected
to vote for Mr. Juncker at the European People’s Party congress in
March, making Mr. Juncker a clear
favorite ahead of Former Latvian
Premier Valdis Dombrovskis, who
entered the EPP race last week.
Mr. Juncker “is an outstanding
European with whom we want to
campaign together for a strong EPP
in the European Parliament,” Peter
Tauber, the CDU’s general secretary,
told reporters in Berlin.
For May’s European Parliament
elections, European parties for the
first time are selecting lead candidates that they say should also become contenders for president of
the European Commission. However,
EU leaders, including Ms. Merkel,
have in the past said that there is
no direct link between lead candidates and the top post in the EU’s
executive.
The CDU’s Mr. Tauber made no
reference to the commission in his
remarks. But Markus Ferber, a
member of the CSU’s board, took a
clearer line. “Yes of course,” Mr.
Ferber said when asked whether the

CSU wanted Mr. Juncker to become
commission president.
“Among all the candidates, we
believe Mr. Juncker to be the most
capable,” Mr. Ferber said. He
pointed out Mr. Juncker’s experience in dealing with other European
leaders and institutions during his
time as Luxembourg prime minister
and his “ability to build bridges” between the bloc’s rich and poor members.
The European Socialists have already selected Martin Schulz, currently president of the European
Parliament, as their lead candidate.
A recent aggregate poll from all 28
EU countries gave the Socialists a
narrow lead over the EPP in the
May vote.

Iceland Protesters Want EU Referendum
BY LÁRA HILMARSDÓTTIR
AND CLEMENS BOMSDORF

REYKJAVIK—Some 3,500 people
gathered outside the parliament in
Reykjavik on Monday to protest the
Icelandic government’s backtracking
from its election promise to hold a
national referendum on whether to
seek European Union membership, a
move also creating friction within
the government that has been in
power for less than a year.

The protest meeting was called
after the two parties leading the
government coalition said Friday
that the small island nation will
withdraw its EU membership application without holding a referendum
on the issue.
“I’m protesting betrayals of the
election promises that the parties
that are now in power made. They

pulled out from their promise as
soon as they were in power,” said
23-year old Bjarki Guðmundsson, a
music student who took part in the
protest outside the Althingi.
“I’m against EU membership but
I think the people should have the
last say,” he said.
The center-right Progress Party
and Independence Party said Friday
they had agreed on a proposal to
withdraw the application that was
submitted by a previous government
in 2009.
A parliamentary debate on the
issue was postponed Monday, but
lawmakers will probably debate the
bill Tuesday, and “a vote is expected
within the next couple of weeks,”
said Urður Gunnarsdottir, a Foreign

Ministry spokeswoman.
The EU-skeptic government suspended accession talks in Septem-

ber, after coming to power in the
spring of 2013 on an election platform that included putting the EU
membership issue in the hands of
Icelanders in a referendum.
Friday’s agreement sparked controversy among the public and opposition MPs, but the government is
also facing criticism from within its
own ranks.
The Independence Party, while
generally EU-skeptic, also has vocal
supporters of an Icelandic EU membership. One of them, Vilhjálmur
Bjarnason, a member of parliament,
said Iceland should finish the membership application negotiations,
and then bring the issue to the nation in a referendum. Mr. Bjarnason
added that his party “needs to consider the different views of its members.”
Political scientist Eirikur Berg-

mann, a professor at Bifrost University in Iceland, said the government
parties’ move is a clear breach of a
main election promise. “Already,
large parts of the public are unhappy and support for the coalition
is decreasing,” Mr. Bergmann said.
While Mr. Bjarnason said he
wouldn’t leave the Independence
Party over the issue, Mr. Bergmann
said some members from the EUfriendly faction of the party could
take that step.
Since the membership application was submitted in 2009, much of

the discussion in Iceland has centered around possible exceptions
from EU regulations, particularly regarding fisheries. The most recent
polls, from January, indicate strong
opposition to an Icelandic membership, with 60.3% against it and
39.7% in favor.

Agence France-Presse/Getty Images

Luxembourg’s Jean-Claude Juncker


THE WALL STREET JOURNAL.

Tuesday, February 25, 2014 | 5

EUROPE NEWS

Russia Court Sentences Seven Activists
BY OLGA RAZUMOVSKAYA

MOSCOW—A Russian court sentenced seven activists to prison
terms ranging from 30 months to
four years after they were convicted
of being involved in a “mass riot”
during an anti-Kremlin protest in
2012.
An eighth defendant received a
suspended sentence.
Critics at home and abroad have
said the case was politically motivated.

All eight defendants were found
guilty on Friday of taking part in
what police described as mass riots

Pope Begins
Overhaul
Of Financial
Structures
BY LIAM MOLONEY

ROME—Pope Francis on Monday
began the first significant overhaul
of the Vatican’s financial structure
by creating a powerful department
that will control economic and administrative activities, as he aims to
reshape the Holy See bureaucracy to
tackle the needs of the 21st century.
The pontiff established a new
secretariat for the economy to run
the Vatican’s finances more efficiently, slim down existing structures and improve transparency and
oversight of its accounts. Since his
election last year, he has made a priority of overhauling the Vatican’s
administration, known as the Curia,
and its finances.
The new secretariat aims also to
improve the support available for
programs destined to assist the poor
and marginalized, the Vatican said.
“Like a faithful and prudent manager who has the task of carefully
looking after what has been entrusted to him, the Church is aware

of her responsibility to protect and
manage her assets,” said Pope Francis in the order that established the
new secretariat.
The new secretariat, which will
be headed by Australian Cardinal
George Pell, will report directly to
the pontiff. It will have authority
over all economic and administrative activities within the Holy See
and the Vatican City State—the
world’s smallest country nestled in
the center of Rome. The secretariat
will be guided by a council of 15
members, made up of eight cardinals or bishops and seven lay experts from across the globe.
The emphasis on picking professional experts is of particular importance in attempting to bring the financial practices of the 2,000-yearold church in line with current
systems.
“This will greatly assist the Holy
See in improving budgetary management and adopting modern-day
practices that will be more easily
monitored and understood,” said
Francesco Cesareo, president of Assumption College in Worcester,
Mass.
The pope’s decision follows
meetings last week in which cardinals discussed financial, economic
and administrative matters. These
cardinals have also been picked to
discuss a new constitution to run
the Vatican.

on Bolotnaya Square in central Moscow during a rally just before President Vladimir Putin’s inauguration
in May 2012. Investigators had accused the defendants of trying to

overthrow the government and destabilize the country.
The longest sentence of four
years was still below the six years in
prison prosecutors had requested.
The only female activist in the group
received a suspended sentence of
three years and three months.
Defense lawyers told the Interfax
news agency that they would be appealing the court’s decision.
Kremlin spokesman Dmitry Pes-

kov was quoted by Interfax as saying the Bolotnaya case defendants
are free to seek a presidential pardon, which would be reviewed in accordance with Russian law.
Around 200 people who had
come to the court building to support the defendants were detained
for disturbing public order by police, a representative for Moscow
police told Interfax.
Human-rights activists immediately asked for the defendants’ release. Vladimir Lukin, Russia’s
state-appointed human-rights ombudsman, was quoted by Interfax as
saying the sentences were “too

harsh” and that he would support
an appeal.
Former Finance Minister Alexei
Kudrin, who has often criticized the
current government, described the
sentences as “another example of
excessive and selective punishment,”
on his official Twitter account.
The case occurred months after a

wide-ranging, Kremlin-backed amnesty led to several high-profile political prisoners being set free in
late December ahead of the Winter
Olympic Games in Sochi.
Those released included two
members of the punk group Pussy
Riot and several other activists

charged in connection with the 2012
clash with police. Russia’s bestknown prison inmate, former Yukos
oil tycoon Mikhail Khodorkovsky,
was also pardoned that month.
Human-rights activists have said
they feared that Russia would begin
a crackdown on political opponents
after the Winter Olympic Games.
Arrests and detentions resumed
during the Sochi Games with environmental activist Yevgeny Vitishko
being sentenced to three years in
prison for violating his parole by
swearing in public. Members of
Pussy Riot were also briefly detained in Sochi.

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6 | Tuesday, February 25, 2014

THE WALL STREET JOURNAL.

U.S. NEWS

Pentagon’s Budget Plan Shifts Priorities
BY DION NISSENBAUM
AND JULIAN E. BARNES

WASHINGTON—Defense Secretary Chuck Hagel is proposing a new
budget plan designed to turn the military’s attention from the long
ground war in Afghanistan toward
emerging cyberthreats from China
and increasing challenges from al
Qaeda-affiliated groups in Africa.
The Pentagon road map, sure to
face fierce resistance from across the
political spectrum, calls for reducing
the military’s reliance on manpowerheavy troop buildups, investing instead in more agile special forces
and cyberwarriors.

In unveiling the first Pentagon
budget to bear his imprint, Mr. Hagel
is calling for cutting back the size of
the Army to a level opposed by some
top generals, curtailing construction
of a new class of Navy ships cherished by top admirals and scrapping
an Air Force plane used to protect
U.S. forces in Iraq and Afghanistan.
Instead, Mr. Hagel proposes injecting more money into changes defense officials say will make for a
more adaptable and innovative military that is better ready to respond
to changing threats.
Mr. Hagel wants to pare the size
of the active-duty military by 13%
and the reserve force by 5%. But he

is looking to boost the size of U.S.
Special Forces by nearly 6% by adding about 3,000 personnel to the
kinds of teams that killed Osama bin
Laden in Pakistan, rescued an American aid worker in Somalia and freed
U.S. commercial sailors captured by
pirates off the coast of East Africa.
“This is a time for reality,” Mr.
Hagel said Monday in unveiling the
$496 billion budget plan. “This is a
budget that recognizes the reality of
the magnitude of our fiscal challenges, the dangerous world we live
in, and the American military’s
unique and indispensable role in the
security of this country and in today’s volatile world.”

Congress has the final say on the
Pentagon budget and must approve
most of the recommendations in it.
The full details of the proposed budget will be included in President Barack Obama’s budget plan to be unveiled next week. The proposal will
be submitted to Congress, which will
weigh the Pentagon’s proposals over
the course of the year.
Every major element of the
spending plan is certain to face opposition from powerful groups, governors and lawmakers who have different ideas for how the Pentagon
should spend its money.
Veterans groups and their congressional supporters are preparing

to battle Mr. Hagel’s call to curtail
spending on military benefits that
consume a significant portion of the
Pentagon budget.
Influential lawmakers are expected to oppose Mr. Hagel’s proposal to eliminate the entire military
fleet of about 300 A-10 “Warthog”
jets, widely admired as a plane key to
helping U.S. ground forces in battle.
And Congress is likely to reject
Mr. Hagel’s call for creating a commission to examine the closure of
military bases across the country.
But Pentagon officials said Monday if Congress doesn’t make those
cuts, other spending would have to
be curtailed.

Artists Help Bridge Divide
Between Cuba and the U.S.

Associated Press

BY ARIAN CAMPO-FLORES

Democratic Michigan Rep. John Dingell, the longest-serving member of Congress ever, has decided not to seek re-election.

Dingell to Retire From House
BY REBECCA BALLHAUS

WASHINGTON—Democratic Rep.
John Dingell, dean of the House and
the longest-serving member of Congress in history, is retiring after
serving more than 58 years.
Mr. Dingell, 87 years old, said in
prepared remarks to a Michigan
business group that he had “always
known that when the time came
that I felt I could not live up to my
own personal standard for a Member of Congress, it would be time to
step aside for someone else to represent this district.”
In the speech, he had harsh
words for Congress, calling it a
“great disappointment to everyone.”
And he said the blame was with
lawmakers and voters. “There will
be much blaming and finger pointing back and forth, but the members
share fault, much fault; the people
share much fault, for encouraging a
disregard of our country, our Congress, and our governmental system,” he said.
Mr. Dingell first won his House

seat in 1955, through a special election held after the death of his father, who had held the seat since
1933. As the longest-serving member of the House, he swears in the
House speaker at the beginning of
every Congress.
Mr. Dingell’s tenure in Congress
became the longest in history in
June 2013, when he broke the record held by the late Democratic
Sen. Robert Byrd of West Virginia.
Since Congress convened in 1789,
there have been just 26 lawmakers
who served 40 years or more in the
House. Mr. Dingell is the head of the
pack, with fellow Michigan Democrat Rep. John Conyers fifth on the

all-time list.
Mr. Dingell has been involved in
some of Congress’s most celebrated
achievements, including Medicare,
the 1990 Clean Air Act, the Affordable Care Act and the 1964 Voting
Rights Act—which, he said in an interview in June, was the “single
most important vote I cast.”
His retirement is the latest in a
series of departures of “old bulls”
who have been the House’s pillars of
liberal legislating. That group includes California Democrats Henry
Waxman and George Miller, who
this year announced they wouldn’t
run again. With Mr. Dingell’s departure, Mr. Conyers, now in his 25th
term, will become the longest-serving member of Congress. Mr. Conyers began his tenure in 1965.
From 1981 to 1994, and then

from 2006 to 2008, Mr. Dingell was
chairman of the Energy and Commerce Committee. The businessfriendly congressman was a staunch
defender of the auto interests in his
district in Detroit’s working-class
suburbs, and those interests increasingly put him at odds with the
Democratic caucus’s commitment to
tougher antipollution standards. He
frequently stood in the way of proposals to more rapidly increase federal gasoline-mileage standards and
supported less-aggressive proposals
to curb greenhouse gases, including
carbon dioxide. His stance contributed to his ouster as chairman in
2008, when he was successfully
challenged by Rep. Waxman.
Still, under Mr. Dingell’s leadership, the committee passed legislation removing more than 8.6 billion
tons of carbon dioxide from the atmosphere and requiring that a percentage of the country’s electricity

be generated by renewable energy
sources. The committee also widely
broadened the scope of its investigations, targeting Pfizer Inc., the generic-drug industry and Stanford
University, among others.
Known as an intimidating presence on oversight committees, Mr.
Dingell was known for his “Dingellgrams,” information requests that
signaled investigations.
Mr. Dingell also worked on legislation to improve the safety of
drinking water, to address leaking
underground storage tanks and to
improve air quality.
Michigan Democratic Sen. Carl
Levin praised the lawmaker’s “rare
combination of legislative skill, determination, hard work and generosity of spirit,” and his “tireless advocacy” on behalf of the state. Rep.

Gary Peters, another Michigan Democrat, said, “Whether you measure
by years of service, laws passed or
service to constituents, the United
States Congress will never again see
a legislator leave as an indelible a
mark as John D. Dingell.”
Rep. Fred Upton (R., Mich.), current chairman of the Energy and
Commerce Committee, said in a
statement that “it has been a real
pleasure working closely with ‘Big
John’ through the years on a number of issues facing our country.”
His wife, Debbie Dingell, 60, is
said to be considering a bid for the
seat, which is likely to stay in Democratic hands. Ms. Dingell is chairwoman of the Wayne State University board of governors and
previously served as a senior executive at General Motors Co. for more
than 30 years. President Barack
Obama won the district with about
two-thirds of the vote in 2012.

KEY WEST, Fla.—Five years ago,
the cross-border collaboration of
the Cuban artistic trio known as the
Merger would have been unthinkable.
With two members living in Havana and the third in Miami, they
traverse the Florida Straits roughly
once a month to work on their steel
and Plexiglas sculptures. They show
their works regularly at art fairs in
Florida and draw buyers from
across the U.S.—all despite the fivedecade-old American trade embargo

against Cuba.
An exhibit featuring the three—
Mario González, Niels Moleiro and
Alain Pino—along with seven other
Cuban artists opened last week at
five cultural institutions here. The
show, called One Race, the Human
Race, is the counterpart to an exhibit that had its debut last month
at the Museo Nacional de Bellas
Artes in Havana, featuring pieces by
Mario Sanchez, a deceased CubanAmerican artist who lived in Key
West.
Organizers say it is the first example of a cultural exchange between art institutions, as opposed
to art galleries or fairs, in the two
countries.
The dual exhibits underscore the
growing cultural ties between the
countries, facilitated by each loosening travel restrictions in recent
years. The result is a growing thaw
in relations at the grass-roots level,
even as rhetoric between the two
governments remains largely hostile. “These are the first steps toward a rapprochement,” Mr.
González said. “We can’t be neighbors 90 miles away and not get
along.”
In recent weeks, debate over
U.S.-Cuba relations flared once

again, in part because of a poll by
the Atlantic Council in Washington
that found that a majority of Americans, and an even higher percentage

of residents of Miami-Dade County,
Fla., which is heavily Cuban-American, favored normalized relations
with Cuba.
In 2000, 62% of Cuban-Americans in Miami-Dade favored continuing the embargo in a poll by
Florida International University.
A fundamental policy change is
unlikely any time soon, given the
need for congressional approval and
stiff opposition of Cuban-American
lawmakers, said Guillermo Grenier,
a sociology professor at FIU. “So
what is left is clearly on the cultural
level,” he said.
While cultural exchanges between the nations have occurred periodically for decades, they have become more frequent after recent
government moves. In 2011, the
Obama administration loosened restrictions on educational and cultural travel to the island, and last
year, it extended the duration of
nonimmigrant visas for Cubans to
five years from six months, and allowed for multiple entries.
Meantime, Cuba last year eliminated the need for its citizens to obtain exit visas to travel overseas and
extended the period they could stay
abroad to two years from 11 months.
According to Cuban government
data, the number of U.S. citizens, excluding Cuban-Americans, who traveled to the island rose to 98,000 in
2012 from 42,000 in 2008.
The eased rules have allowed
more American painters, playwrights and musicians to travel to
Cuba to collaborate on shows.
Meanwhile, a variety of companies
are organizing educational and cultural tours aimed at exposing Americans to Cuba’s culture.

Cristobal Herrera for The Wall Street Journal

Cuban artistic trio called the Merger, with one of their works in Key West, Fla.


THE WALL STREET JOURNAL.

Tuesday, February 25, 2014 | 7

WORLD NEWS

BY ARIES POON
AND FANNY LIU

TAIPEI—Taiwan’s government,
running a budget deficit for the
sixth straight year, is considering
increasing taxes on high-income
earners and financial institutions, as
the export-dependent economy is
showing more signs of picking up.
Finance Minister Chang Shengford said Monday the government is
looking at raising the top rate of income tax to 45% from 40% on individuals whose annual taxable income exceeds 10 million New
Taiwan dollars (US$329,161).
Additionally, the administration
is considering an increase in the
business-tax rate on banks and insurers to 5%, a level it was at before
the 2008 financial crisis, from the
current 2%.

The government is also looking
at reducing tax credits individuals
can claim if they are subject to both
income and dividend taxes.
“This is only fair,” Mr. Chang said
at a news conference. “The government is trying to establish a concept
of ‘feedback tax,’ and let a small number of high-earning individuals and
sectors give back to the community
and propel the economy forward.”
Taiwan is joining other economies in raising taxes on the wealthy.
Frances constitutional court in December approved President Franỗois
Hollandes millionaire tax,” a 75%
tax rate on individuals who earn
more than €1 million ($1.37 million).
U.S. President Barack Obama is also
expected to unveil a proposal to increase taxes on high-income earners

when he announces his 2015 budget,
The Wall Street Journal reported
Thursday.
Taipei has been spending more
than it collected since 2009, pumping
dollars into infrastructure projects
and social-welfare programs while
the economy was weighed down by
weak exports.
Mr. Chang said tax revenue, if all
proposed increases kick in, should be
boosted by up to NT$90 billion 90
billion New Taiwan dollars a year,

around 5% of the government’s tax
income last year.
The plans come after the government last Tuesday projected 2.82%
economic growth for this year, the
fastest in three years but still below
the average 3.3% annual growth
over the past five years.
Improving exports to developed
economies have led companies in
Taiwan to increase investments and
raise wages in recent months, although a slowing Chinese economy
remains a continuing concern.
Taiwan has no external debt, but
the central government owes its
own citizens NT$5.192 trillion New
Taiwan dollars (US$171 billion) as of
the end of January. Rolling government notes and bonds are about
36.8% of the average gross domestic
product over the previous three
years, according to government
data.
The island’s public debt level,
while already close to its statutory
ceiling of 40.6%, is lower than many
Asian countries such as Japan and
Singapore. Mr. Chang said Monday
the government has no plans to
raise the debt limit.

Beijing Rejects Modi’s

‘Expansionist’ Comments
BY BRIAN SPEGELE

BEIJING—China’s Foreign Ministry on Monday played down a longsimmering border dispute with India, brushing off a blunt comment
by the front-runner to become India’s next prime minister that Beijing is set on territorial expansion.
Over the weekend, Indian opposition leader Narendra Modi traveled
to an area near the country’s disputed Himalayan border with China—
over which the two fought a border
war in 1962—and warned Beijing to
abandon its territorial ambitions. He
said that China “will have to leave
behind its mind-set of expansion.”
Chinese Foreign Ministry spokeswoman Hua Chunying denied that
China has expansionist tendencies
and described the territorial dispute
with India as a complex and sensitive matter “left over from history.”
“I want to say that you can all
see in history China has never actively launched a war of aggression
to invade and occupy one inch of
territory,” said Ms. Hua.
The comments by Mr. Modi followed growing apprehension across
Asia over China’s ambitions. Regional leaders have criticized Beijing for what they view as aggressive measures by China to establish
control over contested territories,
some of which are strategically important and rich in resources.
Ms. Hua’s comments were muted
compared with the rhetorical barrage her agency has directed in recent weeks toward Japan and its

leader, Shinzo Abe. While rejecting
Mr. Modi’s claims, Ms. Hua also
stressed the “joint efforts” taken by

both sides to work through the dispute, which is centered on remote
Himalayan borderlands.
Observers are watching China’s
approach to relations with India,
particularly given recent overtures
by Japan’s government to bolster
ties with New Delhi.
Following a January meeting between Mr. Abe and Indian Prime
Minister Manmohan Singh, the
countries pledged to more closely
work together for stability and
peace in the face of a changing strategic environment.
Harsh V. Pant, an expert on
China-India relations at King’s College London, said China has toned
down its rhetoric against India in
anticipation of a new Indian government. At the same time, he said,
Beijing is concerned about India’s
newly forming partnerships with Japan and others in the region.
“China might be calculating that
further pushing India into the arms
of its regional adversaries might not
be in its best interest, at least in the
short term,” he said.
Concerned about a backlash
among smaller Asian nations fearful
of China’s rise, Beijing has pledged
better relations with its neighbors,
particularly those in Southeast Asia.
But growing assertiveness by Chinese security forces, including an
increasingly capable navy, in disputed waters in the South China Sea

has further strained ties.

Reuters

Taiwan Eyes Higher
Taxes on Wealthy

A worker smashes concrete for recyclable materials at a demolition site near new homes in Taiyuan, Shanxi province.

Data Hint at Cooling
Of China’s Properties
BY ESTHER FUNG

SHANGHAI—China’s
red-hot
property market is showing its
strongest signs yet of a cool-down,
as price growth eases, credit for
many developers dries up, and
some start to cut prices at new
housing projects.
The potential slowdown could
be welcomed by Beijing, which for
more than four years has tried to
cool the market to keep the high
cost of housing from becoming a
political and social problem. But a
sharp slowdown could hit the Chinese economy just as growth is
slowing, and Beijing is looking for
ways to keep it steady.

The latest sign came on Monday, as new home price acceleration in China’s biggest cities
showed its first slowdown in a
year. It follows indications from
banks and developers that lenders
are treating the sector with increasing caution amid worries
about possible bad loans. On Monday, China’s Industrial Bank Co.
confirmed that it stopped issuing
some new loans to property developers.
In some markets, developers are
also worried about an oversupply
of homes. Developer DoThink
Group last week said it cut prices
by 12.2% at its North Sea Park project in the eastern Chinese city of
Hangzhou to 15,800 yuan ($2,592)
per square meter from 18,000 yuan
per square meter. It said on its
website late last week it started
discounting apartments at its 12tower high-rise project, which had
been on sale in phases since April
2012.
Analysts said the price cuts in
Hangzhou and in the nearby city of
Changzhou are an indication that
those places have an oversupply of
housing, which could spread to
larger cities.
“The risk in the property sector
is currently underappreciated, and
the price cuts in Changzhou and
Hangzhou are worrying signals

worth investor attention,” said Nomura economist Zhiwei Zhang in
written comments.

Easing Market

Average change in new home prices
in 70 Chinese cities

10%

Year to year
Month to month

8
6
4
2
0
–2

2011

’12

’13

’14

Sources: National Bureau of Statistics;
WSJ calculations

The Wall Street Journal

“A sharp slowdown in property
investment is possible and would
increase systemic risks,” Mr. Zhang
wrote. He added that the sector’s
“contribution to GDP growth has
been critically important over the
past five years, and the government may not have the proper policy tools to manage a situation
where oversupply eventually causes
property prices to fall, particularly
in third- and fourth-tier cities.”
Shares of property developers
were sharply lower Monday. Shares
of China Vanke, the nation’s largest
property developer by revenue,
closed 6.6% lower, and Poly Real
Estate Group fell 8.5%. The Shanghai Composite Index ended down
1.8%.
China has been grappling with a
resurgent property market in big
cities that has resisted government
curbs aimed at reining in high
prices. The boom has also contributed to growing supplies of new
homes in smaller cities, raising
concerns about a sharp drop in
prices and deteriorating loan quality.
Average new-home prices in 70
Chinese cities rose about 9% in
January from a year earlier, according to Wall Street Journal calculations based on data released on

Monday by the National Bureau of
Statistics. While that figure shows
China’s housing market remains
frothy, it also marks a drop from
December’s 9.2% rise as well as November’s 9.1% rise.
The results released Monday
marked the first slowdown since
home prices began surging in January 2013, after a sluggish 2012.
“The oversupply situation has a
greater bearing on slowing down
the property market this year. The
current liquidity tightness is unlikely to last into the second half,
because economic growth isn’t that
great,” said Nicole Wong, a property analyst at CLSA. “Propertyprice growth this year will decelerate, and in some cities, there will
be price cuts.”
Industrial Bank, a midsize
lender, said on Monday in a filing
to the Shanghai Stock Exchange
that it had halted some types of
property loans until the end of
March, when it will unveil new policies. The bank said the move is
aimed at “adjusting its asset structure and to better serve the real
economy.”
Banks have periodically tightened lending to developers; the last
time was in 2010-12 when the government worried that easy credit
was helping drive up prices. Worries about a slowing economy led
to a loosening in early 2013.
Now banks are growing cautious
about lending to developers, especially those active in smaller cities

that face an oversupply of housing,
and Beijing is concerned about a
buildup of debt and unoccupied
housing.
In Changzhou, the developers of
a 21-tower project announced discounts last week. Prices were reduced to an average of 7,000 yuan
per square meter, with some units
selling for 5,380 yuan per square
meter, down from an 11,000-yuan
price tag in December, according to
data from property broker SouFun
Holdings. One of the developers,
Agile Property Holdings, didn’t respond to requests to comment.
—Grace Zhu in Beijing
contributed to this article.


8 | Tuesday, February 25, 2014

THE WALL STREET JOURNAL.

WORLD NEWS

Thai Leader Obstinate as Crisis Persists
BANGKOK—Thai Prime Minister
Yingluck Shinawatra vowed again on
Monday not to resign amid continuing pressure from antigovernment
street protests, while the army chief
reiterated that the military has no
plan to intervene to end the political

stalemate.
Antigovernment protests here
have entered their fourth month as
demonstrators try to topple Ms.
Yingluck’s administration. Protesters have recently targeted companies linked to her family, especially
those associated with her older
brother, telecom tycoon and former
Prime Minister Thaksin Shinawatra.
“I have to protect democracy and
do my best to hand it over to the
new government,” Ms. Yingluck told
reporters. “Whatever happens, I will
perform my duty until the last minute.”
Protesters believe Mr. Thaksin,
who was ousted in a military coup
in 2006, still runs the country from
behind the scenes. They want to set
up an unelected interim government
to pin back the influence of populist
politicians such as the Shinawatras.
Fears of clashes between rival
political groups have raised concern
that Thailand’s armed forces may be
compelled to step in. Thailand’s
army chief, though, said Monday
that the military intends to keep out
of the conflict, urging rival factions
to talk through their differences and
find a peaceful solution.
“The military doesn’t want to

use force and weapons to fight
against fellow Thai people who have
different political viewpoints,” Gen.
Prayuth Chan-ocha said in a tele-

Reuters

BY WARANGKANA CHOMCHUEN

Antigovernment protesters on Monday pushed ahead with their campaign to topple the prime minister’s government.
vised broadcast.
Gen. Prayuth warned that the
country’s political impasse is worsening and is more complex than a
similar conflict in 2010, when supporters of Mr. Thaksin gathered in
Bangkok to demand the elections
that ultimately brought Ms. Yingluck to power.
Gen. Prayuth urged government
and security officials to find the
people responsible for the attacks,
some of whom he said were linked
to the violence leading up to the

protest crackdown in 2010. He also
asked protesters not to overtake
state offices or use weapons against
security officials.
Three people—a woman and two
young children—were killed and
dozens injured in a grenade blast
near a protest in one of the city’s

busiest shopping districts on Sunday. That explosion came after attackers fired on a political rally in
Trat province, 290 kilometers east
of Bangkok, and threw explosive devices into the crowd, killing a 5-

year-old girl.
A policeman who was shot in the
head during clashes between the police and protesters last week was
pronounced dead on Monday.
Twenty people have died and
more than 700 have been injured
since the protests began.
On Monday, a group of protesters rallied in front of a cable television station run by Mr. Thaksin’s
son, while others entered state compounds to pressure officials to abandon work.

There was little police presence
after the country’s Civil Court last
week barred the government from
using force to disperse protesters.
Ms. Yingluck’s government is
also facing legal threats. Thailand’s
National Anti-Corruption Commission last week said it would charge
her with negligence for continuing a
rice price-support program despite
warnings of financial losses and corruption. She was summoned to appear over the charges of alleged neglect of duty on Thursday.
If Ms. Yingluck were found
guilty, she would be suspended from
duty and would face an impeachment trial in Thailand’s partially
elected Senate.
Ms. Yingluck has repeatedly denied corruption allegations, defending her flagship rice subsidy—which
has incurred paper losses of up to

$8 billion to date—as being designed to raise incomes in rural areas.
Leaders of the mass-membership
“Red Shirts” movement, supporters
of the Shinawatra family and their
policies, said Sunday that they
would protect Ms. Yingluck’s government from being overthrown by
protesters, judges or other independent agencies.
After a pro-Thaksin government
was removed from power for alleged
election violations, tens of thousands of Red Shirt members converged in Bangkok in 2010 to demand a new vote, occupying much
of the city center for nearly two
months. More than 90 people were
killed in those clashes between protesters and security forces, with the
vast majority of the dead being Red
Shirt members.

BY NICHOLAS BARIYO

KAMPALA, Uganda—Ugandan
President Yoweri Museveni signed
into law a controversial antigay bill,
setting the stage for a showdown
with Western donors and rights activists opposed to the legislation.
Although the bill has won praise
in Uganda, especially among religious groups, human-rights activists have decried the measures to
curb what Mr. Museveni has called
“abnormal” behavior.
Hundreds of jubilant antigay activists took to the streets of the capital, Kampala, on Monday, shortly after the president signed the bill into
law.
The president, who signed the

bill at the State House just outside
Kampala, said it represented a response to Western activists who
promoted gay rights in the country.
“This law was provoked by arrogant and careless Western-based
groups that are fond of coming into
our schools to recruit our young
children,” he said in a televised
speech shortly after signing the bill.
“Can somebody be homosexual
purely by nature without nurture?
The answer is: ‘No.’ ”
On first conviction for so-called
homosexual acts, offenders face a
14-year prison sentence. Subsequent convictions for “aggravated
homosexuality,” which include homosexual acts committed by an
HIV-positive person, could bring a
penalty of life in prison.
The United Nations agency on
HIV/AIDS, UNAIDS, warned last
week that the Ugandan law could
compel homosexuals to shun HIV

testing and treatment to evade arrest. Only around 30% of the nation’s 35 million people have been
tested, according to government
data.
Western donors—including the
U.S., Canada and European Union—
have warned that the law could
jeopardize Uganda’s foreign aid,
upon which the country relies for at

least $2 billion every year.
Maria E. Burnett, a senior researcher at Human Rights Watch,
said that by signing the bill into
law, Mr. Museveni has dealt a “dramatic blow” to freedom of expression and association in the country.
She warned that the legislation
would distract police from more important tasks. “By signing this bill,
Museveni has not only let down gay
Ugandans; he has also failed the
very constituencies he claims to be
protecting, including children,” she
said.
Not all opposition has come
from Western countries. South African retired Archbishop and Nobel
Prize Laureate Desmond Tutu appealed for Mr. Museveni not to sign
the bill, “criminalizing acts of
love.”
Mr. Museveni, a Christian, this
month said he would sign the bill,
after citing a report from Ugandan
medical experts who said homosexuality isn’t “genetic but a social behavior.”
The U.S.-based medical group Infectious Diseases Society of America said that Mr. Museveni was relying on “outdated and discredited
science” to justify his decision to
sign the bill.
“Current, evidence-based find-

ings show that the law will have as
devastating an impact on public
health as it will on human rights,”
the group said.
Uganda ranks 10th among the

countries with the highest HIV/AIDS
prevalence in Africa. More than two
million Ugandans are infected with
HIV/AIDS, according to U.N. data.
The latest move by Uganda reinforces an already tough stance
among African governments against
homosexuality. A same-sex relationship is considered taboo in many
African societies, and it is illegal in
around two-thirds of countries on
the continent.
In some countries such as Sudan
and Mauritania, along with southern Somalia, homosexual acts are
punishable by death.
In January, Nigerian President
Goodluck Jonathan signed into law
a bill that makes homosexuality a
criminal offense. The law has
spurred mass arrests of homosexuals.
A colonial-era law in Uganda already criminalizes homosexuality.
Lawmakers say the new bill will
strengthen the existing one by including new prohibitions to bar
“promotion of gay rights and punish anyone who funds or sponsors
homosexuality.”
An original version of the bill introduced in 2009 proposed a maximum penalty of death for homosexual acts, though this was withdrawn
following international criticism.
The White House said Mr. Museveni’s decision to sign the bill
into law reflects poorly on the
country’s commitment to protecting
human rights.

Associated Press

Uganda Clamps Down on Gays

Soldiers’ caskets are draped with Afghan flags during Monday’s funeral service.

Outrage in Afghanistan

BY NATHAN HODGE
AND HABIB KHAN TOTAKHIL

KABUL—Afghans on Monday
mourned 21 soldiers killed in a Taliban attack as new details emerged
about an incident that sparked a
wave of popular outrage in the
country.
Early Sunday, militants staged a
coordinated assault on an Afghan
army outpost near the area of
Shirghaz, in the Ghaziabad district
of eastern Kunar province.
In the course of an hourslong
battle, a group of 40 Afghan soldiers
fought against insurgents armed
with heavy machine guns and mortars, Afghan military officials said.
Help was late to arrive: The attackers seeded a nearby road with
mines to slow the arrival of a column of reinforcements, and the Afghan troops on the ground were un-

able to call in time for air support
from the U.S.-led coalition, Afghan

and coalition officials said.
All told, 21 soldiers were killed,
three were wounded and four were
missing, officials said.
The Afghan army handed over
the bodies of the dead soldiers to
family members in a somber ceremony at the country’s national military hospital Monday morning.
The dead, carried in caskets
draped with Afghan flags, were
borne away by honor guards in parade uniform as senior Afghan officials looked on and military band
played a funereal march.
In a speech, Afghan Defense Minister Bismillah Khan Mohammadi
blamed “foreign supporters and foreign intelligence agencies” for helping to coordinate the attack, shorthand that Afghan officials often use
to refer to neighboring Pakistan.


THE WALL STREET JOURNAL.

Tuesday, February 25, 2014 | 9

WORLD NEWS

Ally of Venezuelan Leader Joins Critics
CARACAS, Venezuela—Venezuela
President Nicolás Maduro, buffeted
by protests against his administration, encountered the first criticism
from within his ruling coalition
Monday when a state governor criticized the government’s crackdown
on a growing student movement.
José Vielma Mora, a governor

from the western state of Tachira
and member of the ruling United
Socialist Party, told a Caracas radio
station that he opposed how the security forces have cracked down on
students in that state. The protests
that have roiled the country began
in Tachira three weeks ago, with
students first demonstrating to protest rampant crime. The protests
then spread to cities nationwide, as
hundreds of thousands of people
joined the rallies to voice anger over
a dysfunctional economy, high inflation and corruption.
“I am against putting down a
peaceful protest with weapons,” the
governor said in an interview with
Onda, the radio station. “No one is
authorized to use violence.” He
characterized the government’s deployment of heavily armed security
forces and the use of Russian Sukhoi
fighter jets that roared over the
Tachira capital of San Cristobal as
excessive and unnecessary.
Mr. Vielma also said he had ordered the replacement of a local
general from the National Guard for
his rough handling of the protesters.
The governor later said in a televised interview in Caracas that he
still backed the Socialist Party and
remained loyal to Mr. Maduro. But
he didn’t back away from his criti-

Agence France-Presse/Getty Images

BY KEJAL VYAS
AND EZEQUIEL MINAYA

A man passes a burning barricade in Caracas on Monday after more protesters were injured in clashes over the weekend.
cism of the government’s handling
of the protests in Tachira, where
they have been particularly large
and unruly.
Mr. Vielma’s comments are particularly bracing in Venezuela because
he is among the first to have joined
Mr. Maduro’s predecessor, Hugo
Chávez, when he rose up against the
government in a failed 1992 coup. Mr.
Vielma, a member of the military like
Chávez, participated in the attempted
coup, which was put down but which
made Chávez a household name. Six
years later, Chávez won office and his

leftist movement was swept into
power.
The governor also told the radio
station that he opposed the imprisonment of Leopoldo López, a 42year-old politician from the affluent
east of Caracas who had surrendered to authorities Feb. 18 after being accused of having incited protesters on Feb. 12 in clashes that left
three people dead.
“One issue for peace is that all of
the people who are prisoners for political reasons—send them home,”
Mr. Vielma said.

The governor stressed that he
hadn’t broken with the government
but noted that others in the progovernment coalition “are calling
me a coward.”
His interview seemed to energize
people such as José Luiz Nunez, 45,
a chauffeur who was protesting
Monday in Caracas. “Look, the
members of their own government
are doing an about-face,” Mr. Nunez
said. “The government knows that
this country is a disaster. They are
scared.”
The governor’s comments came

Mexican Arrest Shifts Focus to ‘El Mayo’

MEXICO CITY—The capture of
Mexico’s most-wanted drug-cartel
boss puts the spotlight on Ismael
“El Mayo” Zambada, an alleged
partner in the Sinaloa cartel, analysts and government officials said.
Mr. Zambada—who analysts said
is known for keeping a low profile
and comes from an older generation
of drug capos that was less violent
than newer drug kingpins—was the
alleged mentor for Joaquín “El
Chapo” Guzmán, who is in a maximum-security prison following his

Saturday arrest in the beach resort
of Mazatlán.
Mr. Zambada, 66 years old, who
has confirmed in the past that he is
in the drug trade, has survived and
thrived for decades through ties to
a variety of trafficking organizations
and his businesslike approach, analysts said.
“Mayo is the natural heir,” said
Guillermo Valdés, who served as
Mexico’s intelligence director from
2007 to 2011. “He’s not on the spotlight, he’s not been chased by the
media, he’s a leader with strong decision capabilities, strategic vision
and a lower profile than El Chapo.”
Mr. Zambada has maintained a
high degree of autonomy despite his
strong ties to the Sinaloa cartel and
is closely allied with Juan José “El
Azul” Esparragoza, who is a key negotiator in the drug underworld,
said George Grayson, a professor at
The College of William & Mary and
expert on the Mexican drug trade.
Mr. Esparragoza hasn’t commented

Agence France-Presse/Getty Images

BY LAURENCE ILIFF
AND JOSÉ DE CÓRDOBA

Marines transported alleged drug boss Joaquín ‘El Chapo’ Guzmán on Saturday.

on that characterization.
The U.S. government indicted Mr.
Zambada for drug trafficking in
2003 and has offered $5 million for
information leading to his arrest,
and the Mexican government is aggressively pursuing him with help
from U.S. law-enforcement agencies.
The U.S. government says Mr.
Zambada’s organization is capable
of moving multiton quantities of cocaine and marijuana and multikilogram quantities of heroin.
One of the keys to Mr. Zambada’s
survival has been his relatively restrained use of violence and his constant efforts to keep the peace, Mr.
Grayson said.
Newer cartels, including the Zetas, La Familia and the Knights Templar, have engaged in bloody turf

wars that have weakened them and
left them no match for the Sinaloa
Cartel.
In a 2010 interview in the Mexican newsmagazine Proceso, Mr.
Zambada portrayed himself as a
family man in love with the countryside. He was quoted as saying that
he was saddened over the extradition of his son, Vicente, or “El Vicentillo,” who is awaiting trial in the
U.S.
For the magazine interview, the
heavyset Mr. Zambada posed for the
cover photo wearing a dark baseball
cap pulled down to his nose and
sporting a thick handlebar mustache.
Not all analysts agree that Mr.
Zambada is up to the job of filling

the vacuum created by El Chapo’s
capture.

“People tend to forget that this
guy is a great-grandfather,” said
Alejandro Hope, an analyst with the
Mexican Competitiveness Institute.
“He’s 66, he’s in poor health, he’s on
the run. He’s definitely not the future of the organization. It may be
Chapo’s sons, but we really don’t
know.”
Mexican President Enrique Peña
Nieto’s gain from the capture of Mr.
Guzmán may be short-lived if Mr.
Zambada’s rule is challenged by younger lieutenants or rivals who may see
in Mr. Guzmán’s capture an opportunity to take over drug routes and
strongholds, some analysts say.
Bruce Bagley, an expert on Latin
America and drug trafficking at the
University of Miami, said the capture will markedly increase violence.
For instance, he said, bloodshed
could rise in strategic cities such as
Tijuana and Ciudad Juárez. These
cities were once among the most violent in Mexico.
“It could be a return to the bad
old days in Tijuana and Ciudad
Juárez,” said Mr. Bagley. “I fully expect there will be fighting for those
cities and the transportation routes
that come up across Mexico from
the Pacific coast through Guatemala,

which will place the organization in
considerable conflict.”
Mr. Bagley said he believes there
will be a sharp increase in violence
in Central America as well, as the
impact from the capture ripples outward.
“The killing fields in Central
America will get bloodier,” he said.
—Santiago Pérez
contributed to this article.

as Attorney General Luisa Ortega
announced that a total 13 people
have died in the protests since they
began. At least one has taken place
in Tachira.
On Monday, there was no end in
sight to the demonstrations, though
Mr. Maduro had said the day before
that they appeared to be losing momentum.
In Caracas, antigovernment protesters set up barricades across the
city, using tree trunks, trash and debris to close off roads. Demonstrators in other cities also blocked
roads, leaving traffic in knots.
Demonstrators reeled off a litany of complaints about the government and said they were trying
to pressure Mr. Maduro into releasing Mr. López, the opposition
leader. Mr. López, now being held
in a military jail on the outskirts of
the capital, has denied committing
any crime.
“We are barricading the streets

to bring the city to a halt and it has
been successful,” said Luisa Malave,
23, a recent university graduate.
“We are out here because of all the
problems of the country, the crime,
the shortages, the lack of opportunity.”
A fellow protester, Carlos
Fronterotta, 26, who is studying to
be an accountant, said demonstrators were enraged by the government crackdown. That, he said, has
given the protests momentum.
“We have been repressed in a
way that you can only describe as a
dictatorship,” he said. “We have
been left blind without media outlets reporting the news. I have never
been part of protests before, but I
just felt like I need to be part of the
marches.”

Whether to Try
‘El Chapo’ in U.S.
Is Open Question

Both the U.S. and Mexican governments would like to extradite
captured drug lord Joaquín “El
Chapo” Guzmán to the U.S. to face
charges on drug-trafficking, officials
from both governments said.
But there’s only one problem:
The drug lord, who escaped from a
maximum-security Mexican prison

in 2001, is halfway through serving
a sentence in Mexico, making it
awkward—and legally questionable—to extradite him to the U.S.
“I don’t think Mexico wants to
keep the guy,” said a person close
to the administration of Mexican
President Enrique Peña Nieto. “Just
imagine how embarrassing it would
be if he escaped again.”
But an official from Mexico’s Attorney General’s office said Mr.
Guzmán should first finish the sentence he was serving when he escaped from prison in 2001 before an
extradition request from the U.S.
could be considered.
Mr. Guzmán also faces about 20
new charges in Mexico, including drug
trafficking, homicide and being a
member of an organized crime group,
Mexican prosecutors said. The prosecutors said Mr. Guzmán on Sunday
made an initial statement at the
maximum security prison where he is
being held.
House Homeland Security Chairman Michael McCaul (R., Texas) on
Sunday called for Mr. Guzmán to be
extradited to the U.S. to stand trial.
—Siobhan Hughes
and David Luhnow


10 | Tuesday, February 25, 2014

THE WALL STREET JOURNAL.

UPHEAVAL IN UKRAINE

Former Leader Gets a Chilly Welcome
KIEV, Ukraine—Yulia Tymoshenko was Ukraine’s most prominent
political prisoner, so it seemed a
perfect political moment when she
was suddenly released from prison
on Saturday and sped to Kiev’s main
square.
As Ms. Tymoshenko, 53 years
old, headed to the square to address
the crowds who had just ousted the
president, her welcome was hardly
one befitting a hero.
“Yulia Vladimirovna, remember
who made this revolution,” a volunteer security officer admonished her
through the window of her car.
Ms. Tymoshenko’s sharp tongue
and political savvy made her the
face of Ukraine’s 2004 revolution.
But during her two stints as prime
minister the economy stumbled and
she faced allegations of graft and
mismanagement.
She denied the allegations, but
her rival, Viktor Yanukovych, was
elected president.
For many of the thousands of

protesters who spent the past three
months on Kiev’s main square trying to drive Mr. Yanukovych from
office, memories of Ms. Tymoshenko’s tenure were fresh, and they
still taint many of the veteran politicians who now seek to lead Ukraine.
A crowd of around one hundred

Getty Images

BY JAMES MARSON

Former Ukrainian Prime Minister Yulia Tymoshenko addresses the crowd in
Kiev’s Independence Square after being freed from prison on Saturday.
people gathered outside Parliament
on Sunday to demand a new crop of
leaders.
“We all understand that [politicians] are the same. Swapping one
for the other is dangerous,” said
Tetyana Karmaiska, a 52-year-old
company director who held a poster
with an arrow pointing from Ms. Tymoshenko to Mr. Yanukovych and
the phrase: “People died for that.”
“We need new people in power.
We need a total renewal,” said Inna

Andriyishina, a 37-year-old consultant. Speaking to the thousands on
the central square here Saturday,
Ms. Tymoshenko gave a characteristically fiery speech, calling on Mr.
Yanukovych to come to the square
to face the people.
The half-hour speech, which

came minutes after an open-air funeral service for protesters killed in
the unrest, struck some as being at
odds with the somberness of the occasion, even when she appeared to

choke back tears to speak of men
who died behind flimsy shields.
Aides said Ms. Tymoshenko, who
uses a wheelchair because of back
pain and had indicated she would
travel abroad for medical treatment,
has changed her mind.
On Sunday, she said she wouldn’t
put herself forward as a candidate
for prime minister.
Still, there were signs she was
preparing a political comeback. Her
longtime right-hand man, Oleksandr
Turchynov, was elected speaker of
parliament and confirmed as acting
president over the weekend. Ms. Tymoshenko spoke by phone with German Chancellor Angela Merkel, EU
enlargement commissioner Stefan
Füle and Senator John McCain, her
party said.
Ms. Tymoshenko’s style represents the kind of politics that protesters were campaigning against
during months of demonstrations.
She was a wealthy businesswoman in the 1990s who ran United
Energy Systems of Ukraine, a wholesale supplier of Russian gas to
Ukrainian companies. She shot to
prominence as a leader of the 2004
Orange Revolution, a street protest

that thwarted Mr. Yanukovych’s first
run at the presidency.
With her firebrand speeches and
blond peasant braid, she became the
darling of the crowds. But the pro-

Western government, with Viktor
Yushchenko as president and Ms.
Tymoshenko as prime minister, soon
fell into bickering, hampering promised reforms to the country’s sclerotic economy and corrupted administration. In 2009, she negotiated
with Mr. Yanukovych to form a coalition government under which he
would be president, elected by parliament, and she would be prime
minister. Mr. Yanukovych pulled out
of the agreement at the last minute.
At the start of 2010, when Moscow cut the flow of gas to Ukraine
over a payment dispute, she flew to
Russia to meet with President Vladimir Putin, cementing a relationship
that protesters now view with suspicion.
After losing a close presidential
runoff to Mr. Yanukovych, she was
jailed for seven years in 2011 on
charges of abuse of office in connection with the Russian gas deal.
During her 2½ years in prison
her popularity waned and she was
eclipsed by other opposition leaders, including boxer-turned politician Vitali Klitschko.
Despite her powerful speeches,
energetic campaigning, and steely
determination, some say her time
may have passed. “It’s probably not
a good thing if she runs,” said one

of her advisers. “But who’s going to
tell her?”

Continued from first page
day, where he stayed in a privately
run sanitarium, avoiding state-run
facilities and his presidential dacha.
Upon learning that the acting
parliament had ousted him from the
presidency, Mr. Yanukovych hastily
left the sanitarium and headed to a
regional airport but never arrived
there, Mr. Avakov said. Instead, he
decided to stay at a private home
with his security detail. He then

Tug of War

The European Union and Russia
have vied for influence in Ukraine
in recent decades
 Aug. 24, 1991 Ukraine declares
independence from Soviet Union.
 January 2005 Viktor
Yushchenko defeats Viktor
Yanukovych for the presidency
after pro-democracy protests
known as the Orange Revolution
force a rerun of disputed vote.
 February 2005 Yushchenko

ally Yulia Tymoshenko becomes
premier.
 February 2010 Yanukovych
defeats Tymoshenko in presidential
election.
 March 2010 Yanukovych’s party
forms new ruling coalition.
 Feb. 20, 2013 The EU and
Ukraine agree on a trade and
political-association pact.
 Nov. 21, 2013 Yanukovych pulls
out of planned EU pact in favor of
closer ties with Russia, provoking
pro-Europe Ukrainians to protest.
Source: Staff reports

asked his guards whether they
wanted to leave or stay with him,
and some left with their weapons.
Mr. Yanukovych and the remaining guards then piled into three cars
and drove away, switching off all
forms of communication. His current whereabouts were still unknown as of late Monday.
The transformation of Mr. Yanukovych from the country’s elected
leader to a hounded fugitive has
been stunning in its speed after his
loyalists in parliament broke ranks
in response to police firing on protesters in Kiev on Thursday. One
member of his political party called
an opposition leader, urging a vote
to end the violence.

“We’re under sniper fire. We
can’t get there,” replied the opposition leader, deputy parliament
speaker Ruslan Koshulinskiy, according to a person who heard the
comments. As darkness fell and the
shooting ebbed, opposition lawmakers made it to the legislature, proposing a proclamation ordering security services to stop firing on
protesters and withdraw.
At about 10 p.m., the vote passed
by a slim majority. Its effect was
enormous and immediate. Police
who didn’t want to shoot protesters
now had official sanction to back
off.
The episode shows how Mr.
Yanukovych was abandoned in
droves by his closest political allies,
driving him out of power and into
hiding. On Sunday, Ukraine’s parliament confirmed an interim leader: a
new parliament speaker injured last
week by a police stun grenade.
Mr. Yanukovych’s political party
on Sunday condemned his “cowardly
flight,” declaring the pro-Russian
president personally responsible for
Ukraine’s ills, including “the loss of
human life, an empty treasury, huge

European Pressphoto Agency

Yanukovych Sought
For ‘Mass Murder’

Activists paid respects to protesters killed in clashes in Kiev last week after police were armed with combat weapons.
debts, shame in the eyes of the
Ukrainian people and the world.”
In Kharkiv, a city near the Russian border where Mr. Yanukovych
never showed up to speak to a
group of supporters, even longtime
allies are keeping their distance.
“He has passed into history now,”
said Gennady Kernes, Kharkiv’s
mayor. “I don’t know where he is. I
don’t go to the sauna with him.”
Like many autocratic governments, Mr. Yanukovych’s was more
fragile than it seemed. While some
of Ukraine’s regions saw clashes
Sunday, fears that his supporters
could spark an instant civil war appeared to fade. Officials in Moscow
appeared dumbfounded by his quick
collapse, calling back Russia’s ambassador from Kiev late Sunday for
“consultations.”
When police began killing dozens
of protester with live ammunition
on Thursday, many lawmakers began to feel pressured to do something because the EU finally indi-

cated it was ready to join the U.S. in
imposing sanctions on Ukrainian officials deemed responsible for the
violence.
Thursday night’s vote was “a Rubicon,” said Mykola Rudkovskiy, a
member of Mr. Yanukovych’s Party
of Regions. “People understood the

situation could swing in any direction, including a command to special forces to destroy thousands of
people and sink the whole country.”
At first, a fistfight broke out
when a pro-government deputy said
the vote should be delayed until Friday. Lawmakers in Mr. Yanukovych’s
party said they were being threatened in text messages to oppose a
withdrawal. The mood calmed when
another lawmaker proposed a minute of silence in honor of protesters
and police killed in the violence.
Parliament’s vote to stop firing
on protesters squeezed Mr. Yanukovych, who was locked in negotiations Thursday night with opposition leaders and European foreign

ministers who came to Kiev to force
the two sides into a deal. In a marathon session at the Ukrainian president’s administrative offices in the
capital, diplomats threatened both
sides.
Mr. Yanukovych was told he
would be a world-wide outcast if
there was more violence. Opposition
leaders were told they risked more
bloodletting.
Parliament then swung back into
motion. In quick-fire votes, the opposition and the ruling party voted
to roll back constitutional changes
that handed the president more
powers. Protesters received amnesty. Lawmakers voted by a huge
majority to fire Mr. Zakharchenko,
the top enforcer for Mr. Yanukovych, and in favor of a law freeing
former Prime Minister Yulia Tymoshenko, a bitter political foe of
Mr. Yanukovych. She was jailed in

2011.
—Katya Gorchinskaya contributed
to this article.


THE WALL STREET JOURNAL.

Tuesday, February 25, 2014 | 11

UPHEAVAL IN UKRAINE

BY PAUL SONNE

Pro-Russian Ukrainian activists gathered Sunday in Crimea’s capital of Simferopol.

Patchwork Nation

Pro-European sentiment is stronger in the western reaches of Ukraine, parts of
which were annexed from Europe during World War II. Crimea, with a Russian
naval base, is more aligned with Moscow, as is eastern Ukraine, where
President Yanukovich has sought refuge.
BELARUS
RU SSIA
P OLAND
Kiev

Lviv

U K R A I N E
LD

O VA

the country on a boat owned by his
son from the Balaklava dock in Crimea.
Since Mr. Avakov mentioned the
fugitive president’s alleged stopover
in the port, locals there have been
joking about his whereabouts.
“He sailed away, kids!” a blond
woman smoking a cigarette and selling trinkets on the seashore called
out as people walked past on Sunday. “We all said goodbye.”
Most, however, said they had
seen no sign of a motorcade or Mr.
Yanukovych.
Crimea is an example of the difficulties Ukraine faces as it looks to
form a united future. The peninsula
belonged to Russia until 1954, when
Soviet authorities transferred the
region to the then-Soviet republic of
Ukraine.
It remained part of independent
Ukraine after the Soviet Union’s collapse in 1991, but it is still home to
Russia’s Black Sea naval fleet, which
is based in the Russian-speaking
city of Sevastopol.
Today, more than half the population of about two million is ethnic
Russians, many of them hostile to
the Ukrainian nationalists from the
country’s west who played a critical
role in Kiev’s protest movement.

Even half a century later, many in
neighboring Russia lament losing
Crimea, which some still describe as
Soviet leader Nikita Khrushchev’s
“present” to his Ukrainian homeland. In a recent poll, more than half
of Russians said they consider Crimea part of Russia.
Though some in Crimea have
called for Russia to rescue them
from the clutches of the opposition
in Kiev, the idea of Crimea rejoining
Russia or seceding divides locals,
even ethnic Russians.
“I want Crimea to be more independent,” said 60-year-old doctor
Vladimir Rodionov, who signed up
to join the militia’s medical brigade.
But Mr. Rodionov, who described
Kiev protesters as bandits, says he

MO

SIMFEROPOL, Ukraine—They
signed up one-by-one, hundreds of
Russian-speaking men pledging to
repel the ascendant pro-Europe uprising in Kiev from any attempt to
infiltrate their city.
They handed over their cellphone numbers for registration and
divided into brigades. Commanders
in fatigues inspected the assembled
troops—a ragtag militia of mostly
middle-aged men.

This is the capital of Crimea, a
peninsula dominated by ethnic Russians that juts out from Ukraine’s
south into the Black Sea. The region
is the last bastion of Ukraine largely
impervious to the uprising on Kiev’s
Independence Square.
Now, it is also the focus of the
new acting government’s hunt for
ousted President Viktor Yanukovych,
who is believed to have headed to
Crimea after leaving his native city
of Donetsk on Saturday night in an
unescorted motorcade.
Arsen Avakov, the acting head of
Ukraine’s Interior Ministry, said on
his Facebook page Monday that the
deposed president purposely eschewed government residences in
the region and instead went to a
private sanatorium in Crimea.
Upon learning that the acting
Parliament had ousted him from the
presidency, Mr. Yanukovych attempted to flee to the local airport
near Sevastopol, but he never made
it there, according to Mr. Avakov,
who said officials from Kiev were already on hand at the facility.
Instead, Mr. Yanukovych stopped
off on Sunday night at a private residence near the Black Sea port of
Balaclava, Mr. Avakov said, where
his convoy huddled.
“He gathered his guards and

said: ‘Who is going to forge on with
me and who is going to remain
here,’ ” Mr. Avakov wrote. “Some of
his security officials expressed a desire to ‘stay here.’ ” Some decided to

stay behind.
In the early hours of Monday,
Mr. Yanukovych bade them farewell
and signed a letter releasing them
from their duty to protect him, a
scanned version of which Mr. Avakov posted on Facebook. The released guards collected the weapons
that officially belong to the government so they can be handed over to
the authorities, Mr. Avakov said.
A smaller group boarded three
cars with Mr. Yanukovych at night,
turned off all their wireless devices
to avoid tracking, and took off in an
unidentified direction, Mr. Avakov
said, noting that the toppled president’s precise whereabouts is unknown. Mr. Avakov said the deposed
president was traveling with Andrei
Klyuyev, who was the head of his
presidential administration.
Balaklava, a somewhat rundown
port now part of the city of Sevastopol, served as a vacation destination
for the Russian Empire’s elite in the
late 19th and early 20th centuries.
Locals there are somewhat accustomed to talk of Mr. Yanukovych.
A company connected to his eldest son, Oleksandr, restored a series of historical waterfront
homes—their white exteriors and
green roofs look pristine from the

outside but remain empty on the inside—and also set up a private
yacht club, according to Anatoly
Kuklenko, the club’s dispatcher.
A three-story maroon and white
yacht named the Bandito that many
locals think belongs to the Yanukovych family showed up in the harbor a few years back but hasn’t appeared in the port since, Mr.
Kuklenko recalled. Some Ukrainians
have speculated that Mr. Yanukovych could leave Crimea by boat.
“I don’t have enough pockets for
all the notes people give me with
addresses of where Yanukovych
could be,” Mr. Avakov told reporters
during a briefing at parliament in
Kiev on Monday, when asked if the
toppled president could be fleeing

Reuters

Ex-Leader Seeks Refuge
In Pro-Russia Bastion

RO M A N I A
200 miles
200 km

Kharkiv
Yanukovych went
here Friday night

Donetsk

On Saturday night, Yanukovych
was stopped trying to
leave on a private jet

Black Sea

CRIMEA

Sevastopol
Home of Russia’s
Black Sea Fleet

Gained as part of World War II-related annexations
Transferred from Russia to Ukraine in 1954
doesn’t want Crimea to be ruled by
President Vladimir Putin.
Not everyone in Crimea is
against the protesters. The Crimean
Tatars, who account for more than
10% of the population, have been
vigorous supporters of the protest
movement.
The Crimean Tatars recall their

Near Balaclava
On Sunday morning, Yanukovych
departed in an unknown direction
Source: U.K. National
Archives
(territorial expansions)

deportation from the peninsula to
Central Asia under Stalin, a tragedy
they associate with Moscow’s rule,
said Server Abdulayev, a 45-year-old
businessman who came to the rally
from Stary Krym.
“There are other people here,” he
said. “The Crimean Tatars, the Ukrainians. We support our own way.”

Continued from first page
value, slashing the budget deficit
and cutting huge government subsidies that keep energy prices contained.
Standard & Poor’s Ratings Services estimates that the government,
the central bank and state-owned
gas company Naftogaz must spend
$13 billion to service foreign-currency debt this year.
Europe and the U.S. face the risk
that Russia could make matters far
worse by raising the price it charges
Ukraine for natural gas. Such a
move would siphon more precious
hard currency reserves out of the
country.
“It might well be that a lot of the
burden could fall on us,” a eurozone finance official said.
Ukraine’s foreign currency reserves have been falling steadily in
recent months, to $17.8 billion at the
start of February from $20 billion at
the beginning of this year. That was

before the Ukrainian crisis turned
deadly, as government security
forces killed scores of protesters
camped out in Kiev’s Maidan square.
Catherine Ashton, the EU’s foreign affairs chief, was in the Ukrai-

European Pressphoto Agency

EU, U.S. Scramble to Pull Together Package for Ukraine

U.S. Treasury
Secretary Jacob
Lew backs IMF aid
for Ukraine, a U.S.
official said.

nian capital on Monday to discuss
possible political and economic assistance. Senior finance ministry officials from the 28 EU nations are
scheduled to meet in Brussels on
Thursday, where the situation in

Ukraine will likely be discussed, officials said.
Over the weekend, European officials said the bloc could provide
more than €20 billion ($27.5 billion.) But that would be long-term

aid tied to an IMF deal that would
be paid out only over the next seven
years. Ukraine’s needs are more immediate.
Moscow has frozen payments
from a $15-billion loan package it

pledged to Ukraine last year, after
disbursing $5 billion. European and
U.S. officials hoped that Russia
would join an international conference of donors that would put together an aid package once a new
Ukrainian government is in place.
“It would be extremely desirable
if the direct neighbor also contributes to an aid package,” said Gernot
Erler, the German government’s
point man on Eastern Europe issues.
Without Russian involvement,
the politics of a bailout organized
by Europe and the U.S. would become more complicated, since a big
chunk of the bailout money would
go toward paying Ukraine’s gas bills
to Russia.
One initial step under discussion
would be to raise the amount of
“macro-financial” assistance that
the EU pledged to Ukraine last year,
officials said. That package came to
€610 million, for 2014 only.
Another potential move, a euro-

zone finance ministry official said,
would be for the European Central
Bank and other central banks, to set
up swap lines with the National
Bank of Ukraine, giving the country
access to desperately needed foreign
currency. But a euro-zone official

said that a swap line for Ukraine
isn’t under discussion at the moment.
The question of whether Ukraine
will sign a broad economic and political agreement with the EU has
been placed on the back burner for
now. Mr. Yanukovych’s rejection of
the deal late last year in favor of
closer ties with Moscow triggered
the crisis. EU officials said on Monday that they want an elected Ukrainian government in place before resuming any talks on the deal.
Ukrainian elections are now scheduled for late May.
“We would like to have a government coming from the elections discussing that with us, to make sure
this a full sovereign choice,” EU
spokesman Olivier Bailly said.
—William Mauldin,
Nicholas Winning
and Andrea Thomas
contributed to this article.


12 | Tuesday, February 25, 2014

THE WALL STREET JOURNAL.

OPINION: REVIEW & OUTLOOK

Aiding Ukraine’s Democrats

T

he latest Ukrainian revolution

moved rapidly on the weekend,
with President Viktor Yanukovych
fleeing Kiev before parliament removed
him from power and scheduled elections to replace him on May 25. The
Obama
Administration
prudently
warned Russia not to intervene militarily, but more creative U.S. and Europe
policy will be needed
to help Ukraine to a
better future.
The good news is
that public order held
as the police backed
down from a week of
violence against protestors. Parliament asserted its constitutional authority and
spent the weekend
Viktor
working to form a new
Yanukovych
government.
One danger is a fracturing stoked by
Vladimir Putin between Ukraine’s Russian-speaking east and European-leaning west. Mr. Yanukovych was Russia’s
man, but by the end he had lost the

support of his own allies in parliament, sians” in the east and Crimea. Foreign
the powerful business tycoons and even Minister Sergei Lavrov this weekend
his base in the east. His own party on called the victors in Kiev “thugs” and
Sunday blamed him for last week’s “armed extremists and pogromists.” It’s
bloodshed and declared itself “a hos- good to hear that John Kerry called him

tage of one corrupt Famtwice to warn Russia to
How the West
ily,” as his entourage is
stay out.
known. Mr. Yanukovych
In contrast to Russia,
can help Kiev resist Ukraine has the building
was last seen in a TV inPutin’s interference. blocks for democracy in a
terview Saturday, calling
his ouster “a coup d’etat”
functioning parliament,
in Russian.
opposition parties and a
The downfall of a fellow Slavic auto- free media. The problem has been the
crat by a democracy movement is a quality of its politicians and corruption.
nightmare for Mr. Putin, who ironically Former prime minister Yulia Tymoshmade it possible by overreaching again. enko, who was released on Saturday afIn 2004 he bet on Mr. Yanukovych to ter three years in jail on political
steal an election and lost after another charges, made her fortune in the 1990s
popular upheaval that became known as from energy dealings. She may run for
the Orange Revolution. Ukraine kept the presidency but is not a unifying figclose economic and cultural ties to Rus- ure.
sia and will try to do so under any new
The country needs a “political releader. The fight in the last three start,” in the words of former heavymonths has been over Ukraine’s right to weight boxing champion and opposition
get closer to the West.
leader Vitaly Klitschko. Fresher faces
Russia may try to destabilize a new would be welcome, and Mr. Klitschko, a
government, and it is already making Russian speaker, has a following in the
noises about protecting “ethnic Rus- east and leads in the polls. He’s inexpe-

rienced but untainted by corruption.
Any new leader will have to carry out
an economic overhaul that will include

some short-term pain.
Now is the time for Europe and the
U.S. to help Ukraine get through the
rough transition. The EU has never offered membership in a way that would
give Ukraine’s leaders an incentive and
roadmap to reform. The U.S. was a
staunch champion of Ukrainian independence in the 1990s, so maybe Bill
Clinton can give President Obama a tutorial. If the International Monetary
Fund has any useful purpose, it should
be helping Ukraine with emergency financing to make up for the $15 billion
bailout that Mr. Putin tailor made for
Mr. Yanukovych and will surely be
pulled.
The stakes go beyond Ukraine. Mr.
Putin knows that a successful democratic Ukraine would be an inspiration
for Russia’s reformers, which is why his
meddling isn’t over and the West needs
to push back with diplomatic attention,
money, and the prospect of closer economic ties.

Hong Kong Journalists Take to the Street

H

ong Kong’s battle over press freedom is escalating, as several
thousand journalists and regular
Hong Kongers marched on Sunday to
protest increasing government pressure
on independent media. The “Free Speech,
Free Hong Kong” rally is the latest sign

that locals won’t quietly let Beijing renege on promises to grant the city democratic self-government by 2017.
Marching to the chief executive’s office, demonstrators condemned this
month’s firing of prominent government
critic Li Wei-ling from Commercial Radio,
an ouster that many suspect is meant to
please local officials currently deciding
whether to renew the station’s broadcasting license. Protesters also highlighted last month’s firing of Ming Pao
newspaper editor Kevin Lau—who had
published aggressive reporting on official
corruption and human-rights abuses—
and December’s news that mainland Chinese companies and international banks

had pulled advertising from pro-democ- nese People’s Political Consultative Conracy outlets.
ference.
“I have been in this industry for 30
Journalists who persist with critical
years. I would say this is the worst time,” reporting risk being fired—the fate of
said protest organizer Shirley Yam, vice former South China Morning Post staffchairman of the Hong Kong Journalists ers Paul Mooney and Willy Lam, among
Association. China guaranmany others—or worse.
teed Hong Kong press
An escalating battle Last June, iSun Affairs
freedom when it took over
publisher Chen Ping was
with Beijing
the city from Britain in
beaten by a group of men
1997, but the ruling Comwith batons. Days later
over press freedom
munist Party still finds dithe pro-democracy Apple
and democracy.

rect and indirect ways to
Daily newspaper faced a
squeeze local journalists.
series of attacks, as thugs
The soft approach is to
twice intercepted deliverencourage self-censorship, which is easy ies and torched thousands of copies,
when most Hong Kong media owners while others crashed a car into the gate
have business interests and political ties of owner Jimmy Lai’s home, leaving an
that they don’t want to jeopardize by an- axe and machete at the scene. Mr. Lai
gering Beijing. According to the Commit- told the Committee to Protect Journalists
tee to Protect Journalists, more than half that local police “can’t chase people into
of local media owners sit on Beijing-ap- China, and that is where these attacks
pointed government bodies such as the come from.”
National People’s Congress and the ChiBook publishing can also be danger-

Pepper . . . and Salt

Notable  Quotable
London Mayor Boris Johnson writing
in the Telegraph on Monday, Feb. 24:
I’ve just got back from the French
Alps and the place is just as beautiful as
it was when I first went there 30 years
ago: the air like champagne, the sky blue,
the snow like gulfs of icing sugar wafting
over your ski—and the mind-numbing
beauty of those high white landscapes,
silent except for the soft clank of the lift.
Yes, it’s still the same, the French skiing
experience—and so is the great skischool scandal: a complete, naked,

shameless and unrepentant breach—by
the French—of the principles of the European Single Market.
It is still the case that if you want to
find someone to teach your kids to ski,
that teacher will have most or all of the
following characteristics. His face will be

deeply tanned and handsomely creased;
his eyes will twinkle roguishly at his female charges; he will say “HOP!” as he
plants his pole to turn; he may or may
not have a paunch, a hip-flask of cognac
and a smell of cheroot.
But one thing is for sure: he will be
dressed in an all-in-one red ski uniform
emblazoned with the logo of the École du
Ski Franỗaisand he will be French, mes
amis. And only French.
In defiance of every basic principle of
the Common Market—free establishment,
free movement of services, you name it—
the French continue to make it virtually
impossible for a U.K. national to set up a
ski school, in the French alps, to cater for
the vast numbers of English speakers
who flock there every winter—and who
think dérapage is something to do with
a woman’s cleavage.

ous. Hong Kong is famous for bookstores
full of salacious exposes about China’s

leaders, but Beijing is now trying to
quash publication of a biography of President Xi Jinping by a U.S-based Chinese
author. Hong Kong publisher Yiu Mantin
was planning to release the biography
but last October he was detained in the
mainland on dubious charges of smuggling. A second publisher was due to issue the book, author Yu Jie told the New
York Times last week, but he received a
threatening phone call this month that
deterred him.
Beijing wants to subvert Hong Kong’s
media because the Communist Party believes that free speech leads inevitably to
chaos and political unrest. The reality is
that Beijing’s policies are the greatest
cause of discontent and protest in Hong
Kong—and the situation will only get
more tense if Beijing continues to push
“mainlandization” over the transition to
democracy it promised.

THE WALL STREET JOURNAL

It is now more than 40 years since
[the U.K.] joined the EEC; it is 10 years
since the protectionists torpedoed the
excellent Bolkestein Directive on liberalisation of the market in services—and we
still have an outrageous and illegal restraint on trade that has probably cost
this country millions in the treatment of
wholly unnecessary broken legs as well
as retarded our progress up the medals
rankings in the winter Olympics.

Why on earth shouldn’t we have British
ski instructors freely touting for hire, on
the snows of the alps, and speaking English? Can you think of any sector of U.K.
business or industry that imposes such restrictions? Come to that, is there any
equivalent over here of the “guilds system” they have in Germany, which means
they are able to restrict the number of
Polish plumbers? Of course there isn’t.

“Welcome back.”


THE WALL STREET JOURNAL.

Tuesday, February 25, 2014 | 13

OPINION

Signs of a Thaw in the Eastern Med
A spate of new developments
suggests that Turkey and Israel are
repairing their strained ties. But
how far will this rapprochement go?
And what does Ankara’s Muslim
Brotherhood-linked government
seek?
Since the days of the Ottoman
Empire, Western observers have
spoken of Turkey-in-Asia and Turkey-in-Europe. Today these labels
are geographically meaningless, and
yet there are still two Turkeys: One

is the free-market Turkey, a model
Muslim democracy, NATO member
and EU aspirant with a vibrant
economy and civil society; the other
is the more Asiatic Turkey ruled by
an increasingly authoritarian, Islamist prime minister, Recep Tayyip
Erdogan.
For Turkey’s neighbors in the
Eastern Mediterranean, this duality
can prove challenging. Not least for
Israel, whose ties with Ankara, an
erstwhile regional ally, reached a
nadir in summer 2010. That’s when
a flotilla of Turkish anti-Israel activists attempted to break Jerusalem’s
naval blockade of Gaza.
Confronted by knife-wielding
thugs aboard the flotilla’s flagship,
the Mavi Marmara, Israeli troops
opened fire, killing nine activists.
Mr. Erdogan in response downgraded relations, canceled joint military exercises and unleashed fiery
rhetoric against the Jewish state.
Now relations appear to be re-

AFP/Getty Images

BY SOHRAB AHMARI

A billboard in Ankara hails Turkish Prime Minister Recep Tayyip Erdogan.
versing course. Israeli Prime Minister Benjamin Netanyahu phoned an
apology to Mr. Erdogan in March.

This was followed in December by a
trip to Istanbul by Israel’s environmental protection minister, the first
cabinet-level Israeli official to visit
Turkey since the Mavi Marmara affair. And the regional press earlier
this month disclosed plans for a
pipeline to deliver natural gas from
Israel’s newly discovered Leviathan
field to consumers in Turkey and
beyond.
The U.S. is hopeful. “There is a
solid deal all ready to be closed, any
day now, for ‘normalization,’” a senior U.S. diplomatic official tells me
via email. “That is to say, returning
to ‘normal’ relations in which there

can be acknowledged, unremarkable, routine, high-level dialogue at
the everyday level of ambassadors
(which is to say, ministers). And
normal everyday relations such as
military-to-military contacts, exercises, etc., without any drama, fanfare, or concerns for political reactions.”
Such normalization, he added,
“is hugely important for both countries, and for their mutual friends,
like us.”
There’s little doubt that Turkey’s
recent economic troubles—its GDP
grew 4.3% last year, according to
the World Bank, compared with 9%
in 2010 and 2011—spurred some of
the recent cooperation with Israel,
particularly in the energy industry.

Delek and Noble Energy—the Israeli
and American companies, respectively, that hold a majority stake in
Leviathan—have opened talks with
a Turkish conglomerate about construction of a pipeline connecting
the Mediterranean gas field to the
Turkish coast.
The pipeline “could provide between 8 to 10 billion cubic meters of
gas per year costing $7 to $9 per
million BTU,” according to the Israeli daily Haaretz. “This makes the
project of major strategic interest
to Turkey which has a great need of
inexpensive natural gas.”
Turkey’s shifting relationship
with its major energy suppliers,
Iran and Russia, is another factor
behind the opening to Israel, according to Soner Cagaptay of the
Washington Institute for Near East
Policy. Turkey’s policy on Syria—
seeking regime change in Damascus—has alienated Ankara from
Tehran and Moscow, which back the
Assad regime. “Turkey wants to diversify,” Mr. Cagaptay says.
The recent overtures are also
driven by Mr. Erdogan’s desire to
register a public diplomatic victory
over Israel at home while scoring
points in Washington. “I would link
the current round of negotiations
perhaps to the Turkish domestic
need to present some achievements

before the local elections scheduled
in March,” says Gen. Amos Yadlin, a
former head of Israeli army intelligence who now directs Tel Aviv University’s Institute for National Secu-

rity Studies. Gen. Yadlin warns that
Mr. Erdogan may not be able to
present “a deal that is acceptable to
Israel as a complete triumph [at
home].”
Two key tests for the thaw’s
depth and permanence will be Mr.
Erdogan’s rhetoric toward Israel
and his handling of the Gaza-blockade question, and if the past is any
guide, he’ll have a hard time passing. In recent months he and his
supporters have blamed the Jewish
state for everything from protests
in Istanbul, to recent corruption allegations against the prime minister’s clique, to the anti-Muslim
Brotherhood coup in Egypt. Anti-Israel conspiracism of this sort
doesn’t bode well for long-term rapprochement.
Meanwhile, Mr. Erdogan continues to conflate Ankara’s disagreements with Jerusalem over the naval blockade of Gaza, which Israel is
unlikely to lift, with the land blockade, which Israel has already eased,
in part to facilitate the construction
of a Turkish hospital on the strip.
And it isn’t hard to imagine Mr. Erdogan being cornered by domestic
opponents, such as the rival Islamist Gülen movement, and responding by firing up the Gaza issue once
more.
As the U.S. diplomatic official
tells me: “No one should expect a
love affair.”

Mr. Ahmari is an assistant books
editor at the Journal.

Anti-Israel Jews and the Vassar Blues
BY LUCETTE LAGNADO
Recently I was contacted by a
fellow Vassar alumna through
Facebook. She wanted to know if I
was aware that our genteel alma
mater had become a hotbed of
anti-Israel, pro-boycott sentiment.
Suddenly, my stomach was in
knots—a feeling that Vassar has
managed to evoke in me ever since
I went there in the 1970s. An Orthodox Jewish girl from Brooklyn
on a full scholarship, I fixated on
this Seven Sister school as my entryway to the American dream, the
epitome of style and grace that
also prided itself on teaching “critical thinking.”
In this case the cause of my
angst was a young woman named
Naomi Dann, the president of the
Vassar Jewish Union. She had
penned a piece for the campus paper strongly supporting the recent
move by the American Studies Association to boycott Israeli academic exchanges—a decision denounced by college presidents
across the country, including Vassar’s.
Her piece strung together all
the familiar buzzwords and clichés
used by Israel’s critics: “atrocities,” “oppressive,” “abuses,” “colonial,” and, of course, “apartheid.”
Signed jointly with the co-president of Students for Justice in Palestine, Ms. Dann even slammed

Vassar’s president and dean of the
faculty for daring to oppose the
boycott against the Jewish state.
There was more to fuel my Vassar angoisse. The head of the Jewish Studies Program, a professor
named Joshua Schreier, had also

expressed support for the boycott
movement. Prof. Schreier was
quoted in the campus paper ruminating that while once
“instinctively against” the boycott,
he had heard more “substantiated,
detailed” arguments on its behalf,
and as a result “I am currently
leaning in favor of it,” he concluded delicately, as if choosing a
flavored tea.
As for Vassar’s rabbi, Rena Blumenthal, she was MIA—on leave in
Israel, no less—and emailed to say
she couldn’t weigh in from afar.
Huh?

The Boycott, Divestment and
Sanctions movement has
added to my ambivalence
about my alma mater.
To be sure, I had been aware
that the Boycott, Divestment and
Sanctions (BDS) movement had
taken off on some American college campuses, even in the Ivy
League. It had become chic to attack Israel even—especially—if you
were Jewish. I heard from an alum

who was stopped by his own child,
a Vassar student, from taking a
public stand against the BDS
movement. The student was fearful of being ostracized for having a
parent who supported Israel.
Suddenly the toxic essence of
this movement to make Israel and
its supporters pariahs in the
groves of academe and the cocktail
parties of polite society hit home
in a way it hadn’t before. It also

brought back painful memories
about my own Vassar experience,
and the shattered illusions that
had marked it.
I had gone to Vassar a naïf, a
sheltered girl from an immigrant
community. Mine was a neighborhood of Jewish exiles thrown out
or pressured out of Arab countries
in the 1950s and 1960s—in my
family’s case, Egypt. We were victims of the Middle East conflict
who were barely mentioned in the
history books. Though we had
been mistreated and denied our
homelands, we suffered alone and
in silence. No cool campus groups
spoke up for us then, or now.
Our values were God, faith,
family and Israel. We were passionate about the Jewish state, a

country that took so many Middle
Eastern Jews in when, one after
another, Arab countries had forced
or pressured us out. I was raised
as a Sabbath observer, a keeper of
dietary laws, and, oh, expected to
marry young and refrain from sex
before marriage.
Those were the quaint values I
carried to Vassar, which I had chosen from among a multitude of
schools for the old-fashioned ideals its name evoked. I had read a
brochure alluding to a tradition of
students drinking sherry with faculty. To someone more familiar
with Manischewitz wine, sipping
sherry with my professors epitomized what I wanted on this earth:
a life of civility and grace. This
was Jackie Kennedy’s Vassar.
Instead, I found myself on a
campus in the throes of a 1970s rebellion. There was a drug culture
and a drinking culture, but no

sherry culture I could find. Vassar
prided itself on being edgy and
embraced open sexuality and every
other cause of the tumultuous era.
My disillusionment came fast.
My first day I wandered to the
“ACDC”—the forbidding central
dining hall—and timidly asked a
manager where I could find the kosher section. She looked at me as

if I were from another planet.
What followed were months of
kosher TV dinners, in big aluminum packages. It was incredibly
decent of Vassar to obtain those
for me, yet every time I lugged one
of these dinners from the kitchen
to the table in their silver foil, I
felt the stares of my fellow-diners.
It never got easier. I could
never take that train from Grand
Central back to Poughkeepsie on
Sunday nights without the blues
setting in. And now, so many years
later, my Vassar blues were back.
The other night I received a
press release from the president of
the Vassar Jewish Union, Ms.
Dann—yes, her again. This time,
she was attacking Hillel, the venerable campus organization that has
offered a home to generations of
Jewish students. Following in
Swarthmore’s footsteps, the Vassar
Jewish Union was becoming an
“open Hillel”—no longer obliged to
heed Hillel’s pesky rule of banning
speakers who demonize Israel or
believe the Jewish state shouldn’t
exist. The release was replete with
more clichés about needing a “diverse range of personal and political opinions” that it argued Hillel
failed to provide.

I am still waiting for the day a
student or faculty member stands

up to these academic hooligans at
the Vassar Quad. Now that would
show some “critical thinking.”
As for Vassar’s Rabbi Blumenthal, she finally agreed to speak to
me from Israel over the weekend.
She firmly opposes the boycott,
she declared, and has been upset
by the anti-Israel sentiments on
campus, noting: “I am here because I love this country. I am a
Zionist.”
Bravo, rabbi. How nice to hear
of one Israel defender at Vassar. I
can only pray that others on campus listen.

Ms. Lagnado, a Journal reporter,
is the author of two memoirs of
her Egyptian-Jewish family, “The
Man in the White Sharkskin Suit”
(Harper Perennial, 2008) and
“The Arrogant Years” (Ecco,
2012).

Thorold Barker, Editor,
Europe, Middle East & Africa
Bruce Orwall, Senior Editor, Europe
Gren Manuel, Executive Editor, Europe
Terence Roth, Managing Editor, Europe

Lauren Berkemeyer, Marketing
Kate Dobbin, Communications
Florence LeFevre, Institutional Sales Europe
Michael Lloyd, Institutional Sales U.K.
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14 | Tuesday, February 25, 2014

THE WALL STREET JOURNAL.

OPINION

[ Americas ]
BY MARY ANASTASIA O’GRADY
The bloodshed
in Caracas over the
past 12 days brings
to mind the 2009
Summit of the
Americas in Port of
Spain, where President Obama
greeted Venezuelan dictator Hugo
Chávez with a huge grin and a
warm handshake. A couple of

months later the State Department
attempted to force Honduras to reinstall pro-Chávez president Manuel Zelaya, who had been deposed
for violating the constitution.
Brows were knitted throughout
the Americas. Why did the U.S.
president favor the Venezuelan
dictator, protégé of Fidel Castro,
over Honduras, which still had a
rule of law, press freedom and pluralism?
Fast forward to last Wednesday,
after four peaceful student-protesters had been confirmed as having been killed by the government’s armed minions. Mr. Obama
took notice, pronouncing the brutality “unacceptable.” That must
have been comforting to hear amid
the gun shots and pummeling on
the streets of Caracas.
That same night the government of Nicolás Maduro—Chávez’s
handpicked successor—unleashed
a wave of terror across the country. According to Venezuelan blogs
and Twitter posts, the National
Guard and police went on a tear,
firing their weapons indiscrimi-

nately, beating civilians, raiding
suspected student hide-outs, destroying private property and
launching tear-gas canisters. Civilian militia on motor bikes added to
the mayhem. The reports came
from Valencia, Mérida, San Cristóbal, Maracaibo, Puerto Ordaz
and elsewhere, as well as the capital.
Venezuela has promised
100,000 barrels of oil per day to

Cuba, and in exchange Cuban intelligence runs the Venezuelan state
security apparatus. The Cubans
clearly are worried about losing
the oil if their man in Caracas falls.

Cuba is worried about losing
100,000 barrels of oil per day
if its man in Caracas falls.
Opposition leader Leopoldo López,
who heads the Popular Will political party, spent several years
building a network of young recruits around the country. Last
week’s unrest is a testament to
that organization, and it is why the
42-year-old Mr. López is now behind bars.
In Ukraine, the European Union
has pressured the government to
reach a compromise with the opposition. Venezuelans are getting
no such help from the neighbors.
Only Colombia, Chile and Panama
have objected to the crackdown.
The rest of the hemisphere doesn’t
have even a passing interest in human rights when the violations
come from the left. The Organiza-

tion of American States is supposed to defend civil liberties, but
since Chilean Socialist José Miguel
Insulza took the OAS helm in 2005,
it has earned a disgraceful record
as a shill for Cuba.
Venezuelans seeking change

face daunting odds. The crowds in
the streets of Caracas in recent
days have not been significantly
bigger than in many prior-year
protests, including 2002, when a
march in Caracas almost unseated
Chávez.
This time the repression has
been fierce. Besides injuries and
death, hundreds have been detained and it would not be surprising if many are given long sentences. Mr. Maduro needs
scapegoats for the violence he unleashed. Iván Simonovis, the former head of the Caracas Metropolitan Police, has been a political
prisoner since 2004. Chávez made
him take the fall for the 17 people
killed in the April 2002 uprising
even though video evidence points
to chavista snipers. Photos of the
once-fit policeman, frail and
gravely ill from the inhuman circumstances of his long incarceration, are chilling.
Another problem is the division
within the opposition. The governor of the state of Miranda, Henrique Capriles, represented a broad
coalition of anti-chavista parties
when he ran for president in 2013.
But when he conceded to Mr. Maduro amid strong evidence that the
election had been stolen, Mr. López and other members of the opposition broke with Capriles supporters.

Reuters

Behind the Turmoil in Venezuela

Antigovernment demonstrators in Caracas, Feb. 22.

Students have also been hamstrung by a communications blockade. The government controls all
Venezuelan television and radio
airwaves. When the violence broke
out, it forced satellite providers to
drop the Colombian NTN channel.
Internet service has been cut in
many places.
Getting the very poor on board
for a regime change is a challenge.
Some still see chavismo as their
government, even if they have no
love for Mr. Maduro and suffer
from high inflation. Others don’t
dare speak out, for fear of losing
state jobs or their lives. The barrios are terrorized by the chavista
militia.
Mr. Maduro says he will use every weapon to quell the unrest. On
Friday afternoon the son of a Venezuelan friend sent me photos
from Caracas of troops massing at
the Francisco de Miranda air base
in the middle of the city. The Cu-

ban-backed Venezuelan high command, Cuban intelligence (the
country is thick with agents) and
plainclothes militia will play
rough.
On the other hand, the government is bankrupt, and food and
other shortages will get worse. Mr.
Maduro may pacify Caracas, but
food is harder to find in the interior of the country than in the capital. It is there that the fires of rebellion, burning for the first time

under chavismo, might race out of
control. Many army officers come
from lower-middle-class families,
and it is not clear that they will
stand by and watch large numbers
of civilians being slaughtered.
Many resent the Cuban occupation.
What comes next is hard to predict. But no one should underestimate Cuba’s comparative advantage: repression.

Write to O’

Turkey Will Rise Above Fear
In his inaugural address on
March 4, 1933, U.S. President
Franklin D. Roosevelt famously asserted his “firm belief that the
only thing we have to fear is fear
itself.” Speaking against the backdrop of the Great Depression and
the social and economic devastation that it caused, FDR wisely defined fear as “nameless, unreasoning, unjustified terror which
paralyzes needed efforts to convert retreat into advance.”

Much of the capital flight from
emerging markets amounts
to what Roosevelt dubbed
‘nameless, unreasoning,
unjustified terror.’
Roosevelt’s words are of special interest in our time. The U.S.
Federal Reserve's “tapering,” the
reduction and eventual halt of liquidity injections, that began last
December has now lead to a panicky withdrawal of capital from
emerging markets. Some of this

represents a natural and not unexpected correction. But much of the
capital flight amounts to what
President Roosevelt would have
dubbed “nameless, unreasoning,
unjustified terror.”
Similar to many emerging
economies, Turkey has not been

spared the current turmoil.
helped us generate an avThe situation is aggravated
erage annual economic
by events that are pergrowth rate of 5% over the
ceived as having increased
past 10 years and create
Turkey’s country-specific
nearly five million jobs
political risk factors.
since 2007—despite the
As a result, since midonset of the global finanDecember the Turkish lira
cial crisis.
has depreciated by around
Furthermore, we have
7% against the U.S. dollar.
taken important steps to
Treasury bonds have risen
improve the quality of our
by around 70 basis points
institutions. Despite all the
and the country’s stocks
news about the recent corhave lost roughly 20% of

ruption probes, perception
their value.
of corruption has declined
However, I consider
markedly over time. Acthese developments to be
cording to Transparency
an overreaction by the
International, Turkey’s cormarket.
ruption-perception rank
First, despite the curimproved to 53rd out of
rent political turmoil in
177 countries in 2013, from
Turkey, political stability is
65th out of 102 countries
not at stake. Recent polls
in 2002. Surely, there is
suggest that the ruling Jusroom to improve, and we
tice and Development (AK)
will continue to do so.
The Turkish economy has experienced average annual
Party has public support
Prudent macroeconomic
growth of 5% over the past 10 years.
between 40% and 50% for
policies and structural reupcoming local elections in
forms have had benefits,
March. Second, for more than 10
ative to the euro zone’s Maastricht such as attracting about $134 bilyears Turkey has pursued struccriteria. In 2013, our fiscal deficitlion of foreign direct investment
tural and macroeconomic reforms,
to-GDP ratio was just one-third of

since 2003. That is nine times the
providing a basis for strong and
the euro zone’s convergence target value of Turkey’s cumulative FDI
sustainable growth.
of 3%, and our debt-to-GDP ratio
in the 1980-2002 period.
Since the AK Party took office
was almost half of the 60% target.
To be sure, the relatively high
in 2002, we have reduced the genAs of the third quarter of 2013,
current-account deficit has been a
eral government fiscal deficit to
only five out of the 18 countries
soft spot for Turkey during the re1% of GDP from 10.8% in 2002.
that use the euro met the Maascent “tapering” turmoil. However,
During that period, public-sector
tricht debt criteria. Among those,
Turkey’s freely floating exchange
debt fell to 35% of GDP from 74%.
only two small economies—Estorate will serve as an automatic
These are enviable figures from
nia and Luxembourg—had better
stabilizer.
the perspective of most countries.
ratios than Turkey.
In addition, Turkish banks are
In fact, we have outperformed relThese prudent policies have
safe and sound. They have capitalGetty Images

BY MEHMET SIMSEK

adequacy ratios far in excess of international requirements. As of
the end of 2013, our banks’ average capital-adequacy ratio was
15.3%, nearly twice the 8% threshold mandated under Basel II regulations.
The changing international environment has led to higher costs
in refinancing external debt. However, Turkey’s external position is
much better than feared. Households are long in foreign exchange
assets by nearly $190 billion.
Moreover, and by virtue of our domestic regulation, households may
not borrow in foreign currency.
Turkey’s banking sector has a tiny
open foreign-exchange position of
$600 million. While the corporate
sector has an open foreign-exchange position of $170 billion,
only $17 billion of that is shortterm debt.
We will continue to maintain
and improve upon our robust policy framework and, with time, capital will return. After all, investors
will continue to search for opportunities in well-diversified emerging markets.
All of this paints a much
brighter picture of Turkey’s economic prospects than current market volatility suggests. In building
this strong economic foundation,
Turkey is well placed to “convert
retreat into advance,” as President
Roosevelt would have said.

Mr. Simsek is the minister of finance of the Republic of Turkey.


Pound/Euro 0.8259 À 0.07%

Yen/$ ¥102.45 g 0.26%

Global Dow 2473.91 À 0.37%

Gold 1338.30 À 1.09%

Oil 102.82 À 0.61%

Carl Icahn Accuses eBay
Of Lapses in Governance

China’s yuan hit a four-month
low Monday, dragging down other
currencies in the region and fueling
speculation that years of gains may
be nearing an end.
In a sign that global investors
are retreating from bets on further
appreciation, the offshore yuan,
which is freely traded, fell to the
same level as its onshore counterpart, which is strictly controlled.
The yuan is entering its second
week of declines triggered by a surprise move by the central bank to
guide it lower.
Analysts say China is aiming to
force out speculators seeking to
profit from gains in the currency,
and to stem heavy inflows from
abroad that flood the country with
excess cash and hurt efforts to curb

credit.
UBS AG, one of the world’s biggest currency traders, said the central bank’s recent moves signal a
change in policy.
“The Chinese government appears to want increased flexibility in
the yuan’s exchange rate, rather
than continued strengthening,” UBS
economist Wang Tao said. “The era
of steady [yuan] appreciation may
be drawing to a close.”
She said exporters were feeling
the pain from a currency that had
been rising until recently, and forecast a largely stable yuan for the
rest of the year at about 6.1 per dollar. The dollar was trading at 6.0984
yuan late Monday, compared with
6.0913 on Friday. A higher number
means a weaker Chinese yuan.
The People’s Bank of China sets a
daily reference rate for the yuan, allowing it to trade 1% higher or
lower each day.
The drop in the currency comes
as concerns mount over slowing
growth in the world’s second-biggest economy and signs of rising financial stress.
Property stocks were slammed
Monday on news that developers in
two cities in eastern China had
started to cut prices of new homes
in a bid to spur sales, raising fresh
concerns about the health of the
market.
“The shift in [yuan] dynamics

was mainly driven by several factors: weakening economic outlook,
policy shift and technical adjustment by market investors,” analysts
from J.P. Morgan said Monday.
The yuan’s slide is having ripple
effects on currencies in other Asian
nations with close trading ties to
China. The South Korean won hit its
lowest level in more than two weeks
against the U.S. dollar. The currencies of Singapore and Taiwan also
had heavy selloffs last week.
Please turn to page 22

THE WA L L STR E ET JOU RNAL.

europe.WSJ.com

RBS Works for Master, Clients
BY MAX COLCHESTER

LONDON—Last summer, Adrian
Eady, a banker with Royal Bank of
Scotland Group PLC, was nearly
crushed hauling a crate of feta
cheese off a forklift truck in a North
London warehouse.
A few months earlier, the statecontrolled bank sent Mr. Eady to
wear an apron and serve cappuccinos in a cafe. Before that, he was
selling novelty greeting cards in a
shop.
Following a political uproar over

a lack of bank lending to small businesses, 81%-government-owned RBS
created its “Working With You” program. All RBS corporate bankers
must spend at least two days a year
working for a customer free of
charge.
“We do anything they ask,” says
Mr. Eady. “If they say ‘make the tea,’
then we make the tea.”
It is an example of the extensive
pains RBS is taking to try to appease its masters and customers after six years of withering criticism
for everything from excessive pay
for executives and top bankers to a
lack of small-business lending.
Efforts to patch things up with
British politicians are kicking into
higher gear after the government
pushed out the bank’s chief executive last year and took a more proactive role calling the shots at the
bailed-out bank.
The new CEO, Ross McEwan,
publicly agreed with U.K. Chancellor
of the Exchequer George Osborne’s
view that RBS must refocus on its
U.K. retail and corporate market.
RBS hired former Bank of England

Daniella Zalcman for The Wall Street Journal

BY FIONA LAW

HEARD ON THE STREET 28

RBS Relationship Director Adrian Eady helps load a Cyprofood customer’s order during a visit to the London company.
official Andrew Large, who produced a 95-page report on how it
could do better at small-business
lending. This week, the bank will
present a new strategy aimed at
cutting back office costs, slimming
its global footprint and restructuring its corporate bank.
It is unclear how long the peace
will last. British Prime Minister David Cameron recently threatened to
personally veto any overall pay increase for RBS bankers this year.

Under new European rules, banks
must get shareholder approval to
pay bonuses of as much as twice the
fixed salary. UK Financial Investments Ltd., which manages the RBS
stake on the government’s behalf, is
still weighing what to do, according
to people familiar with the matter.
Perhaps more damaging are allegations by a government adviser
that the bank is failing its customers. RBS, like its peers, faces rampant complaints that it isn’t lending

enough to small businesses and is
hampering economic growth. The
adviser, Lawrence Tomlinson, alleged to a parliamentary committee
that RBS forced several small businesses into default to seize their assets for a profit. “It seems to be systematic to me,” said Mr. Tomlinson.
RBS denies this allegation.
Given the public debate over
small-business lending, RBS is taking action to shake up its corporate
Please turn to page 20

Novartis Scales Down Following Vasella
BY MARTA FALCONI

ZURICH—Novartis AG is distancing itself from the era of Daniel Vasella, the former chairman whose
controversial exit package blemished the Swiss pharmaceutical
company’s image when he stepped
down a year ago.
In November, Novartis struck a
$1.68 billion deal to sell the bulk of
its diagnostics business to a Spanish
company, the first indication it
would slim down the sprawling
portfolio of businesses Dr. Vasella
had assembled over two decades. A
month later, Novartis said it was
scrapping plans to build a training
center next to his lakeside estate
outside Zurich, a project Dr. Vasella
had shepherded for four years.
The company, which is based in
Basel, also has disbanded two board
subcommittees he had established
to oversee its finances.
Chief Executive Joe Jimenez says
more changes are on the way as Novartis focuses on businesses where
it can achieve scale. “We are now at
a stage where we can look at our
entire portfolio and look at how

Reuters

Traders See
End to Era
Of Steady
Yuan Gains

10-year Treasury g 5/32 yield 2.750%

U.S. Industries Feel
Burn From Chill

BUSINESS & FINANCE 16

Tuesday, February 25, 2014

3-month Libor 0.23435

Daniel Vasella, above last year, turned Novartis into a health-care conglomerate.
we’re positioned for the next 10
years,” Mr. Jimenez said in an interview last fall.
Novartis’s efforts to emerge from
Dr. Vasella’s shadow mark a sea
change for the company, which he
transformed into a health-care conglomerate after engineering the
merger of Sandoz AG and Ciba-

Geigy AG in 1996. His goal: to diversify into businesses ranging from
vaccines to generic drugs to insulate
Novartis from the ups and downs of

the brand-name pharmaceutical
business, where revenue can plunge
when drugs lose patent protection.
Now, the company’s leaders are
unraveling that empire. They say

they plan to sell or pursue joint ventures for Novartis’s over-the-counter drugs, animal-health-products
and vaccines businesses. Its other
three businesses—pharmaceuticals,
eye care and generics—each generate revenue of at least $10 billion a
year and are ranked No. 1 or No. 2 in
their respective fields.
Novartis’s divestiture plans are
likely to be discussed Tuesday, as
the company convenes its first annual meeting without its former
chairman, who left Switzerland last
year for the U.S.
For decades, Dr. Vasella, who declined to comment for this article,
was one of Switzerland’s highestprofile businessmen. As chairman
and chief executive until 2010, he
led Novartis’s purchases of U.S. vaccine maker Chiron Corp. for $7.5 billion and eye-care company Alcon
Inc. for $51.6 billion.
Dr. Vasella, now 60 years old,
also steered Novartis into the generics business, broadening the number
of drugs in its portfolio through acquisitions. By 2012 that had helped
to cement the company’s position as
Please turn to next page


16 | Tuesday, February 25, 2014

THE WALL STREET JOURNAL.

BUSINESS & FINANCE

Icahn Fires Broadside at eBay
BY LAUREN POLLOCK

BY MANUELA MESCO

Reuters

Activist investor Carl Icahn accused eBay Inc. of lapses in corporate governance, including conflicts
of interest on the online marketplace’s board.
Mr. Icahn last month disclosed
that he held a 2% stake in eBay. He
said he was prepared for a proxy
fight to win two seats on the board
and to push the company to separate
its PayPal unit.
But Mr. Icahn said he subsequently determined that a proxy fight
shouldn’t be necessary to change the
board. “In any sane business environment, these directors would simply
resign immediately from the eBay
board, either out of pure decency or
sheer embarrassment at the public
exposure of the extent of their selfserving activities,” he said Monday.
The San Jose, Calif., company said
Mr. Icahn “cherry-picked old news
clips and anecdotes out of context to

attack the integrity” of its top executives. “As we are sure our other
shareholders would agree, we prefer
to engage in more constructive and
substantive discussions of why, in our
view, PayPal and eBay are better together,” eBay said. “Instead, Mr.
Icahn unfortunately has resorted to
mudslinging attacks against two impeccably qualified directors.”
Mr. Icahn said that at least two
directors are directly competing with
eBay, one is demanding that eBay
cease hiring the most talented employees, another is routinely funding
competitors, at least two appear to
have put their own financial gain in
conflict with their fiduciary responsibilities to stockholders and the chief
executive “seems to be completely
asleep or, even worse, either naive or
willfully blind to these grave lapses
of accountability.”

Investor Carl Icahn, seen earlier this month, said that some directors of online marketplace eBay have conflicts of interest.
Mr. Icahn cited director Marc Andreessen’s purchase of stakes in two
former eBay units and said that an
investor group he was a part of preempted a planned initial public offering of Skype and bought 70% of
Skype for less than what eBay had
paid to acquire it.
The online video and voice chat
company later was acquired by Microsoft Corp.
Mr. Icahn also questioned Scott
Cook’s place on the board as the
founder and a current director at Intuit Inc., which competes with PayPal

in payment processing.
But the “best question,” Mr. Icahn
said,” is where Chief Executive John

Donahoe has been during this process. The investor questioned Mr. Donahoe’s ability to make crucial decisions about the future of PayPal.
Mr. Icahn suggested that separating the core eBay and PayPal businesses would highlight the value of
the operations, which currently is
masked by a conglomerate discount.
Separating the business also would
foster innovation and help PayPal attract necessary talent, he said. He
urged shareholders to vote for his
proposal to separate PayPal and for
his director nominees.
The PayPal unit, which has about
143 million users, is on pace to overtake eBay’s namesake marketplace in

sales, accounting for 41% of total revenue in the latest quarter. Revamping
the unit has been a particular focus
for eBay as it battles startups such as
Square Inc. for control of customers’
digital wallets.
EBay last month said its prediction of a weak holiday season came
true, reporting sales at the low end
of its expectations. The company in
October said consumers seemed “tentative about spending,” in part because of the two-week government
shutdown, heading into the final
three months of the year. The period
typically constitutes approximately
30% of the company’s annual revenue.

Novartis Backs Away From Vasella’s Empire

Continued from previous page
Europe’s largest drug maker, up
from fifth in 2004, according to
consulting firm IMS Health.
With patents on some of its bestselling products expired or set to
expire, a factor that has weighed on
its stock, Novartis is looking for
ways to reignite its profit growth.
Over the past year, the company’s
shares have risen more than 15%,
well short of AstraZeneca PLC’s
stock-price run-up of nearly 36%
and crosstown rival Roche Holding
AG’s 26% gain.
In November, Novartis took its
first step to slim down, selling a
blood-transfusion diagnostics business to Spain’s Grifols SA. Dr. Vasella had viewed the business as the
company’s springboard into general
diagnostics.
Among its next moves, traders
and investors have speculated that
Novartis might consider swapping

LVMH Buys
A 45% Stake
In Italian
Design Firm

its animal-health unit for an overthe-counter drug business, which
would eliminate one of its smaller
businesses while bulking up another.
Novartis has declined to comment.
Some investors don’t think the
new strategy will move the needle
much on Novartis’s performance. Its
Consumer Health division, which
includes animal-health and overthe-counter medicines, generated
around 7% of Novartis’s sales in
2013, compared with 56% for its
flagship pharmaceutical unit.
“The businesses in question are
relatively small compared with
Novartis’s total sales,” said Philippe
Comby, a New York-based investment manager at Swiss Helvetia
Fund Inc., which owns around
600,000 Novartis shares. Further
disposals or asset swaps are
unlikely to be game-changing, he
says.

The company, meanwhile, is
looking to smooth relations with
Swiss politicians and its investor
base after a proposed $77 million
exit package for Dr. Vasella brought
it unwanted publicity last February.
The company slashed the hefty payout after intense criticism from investors and the public.
But the flap “had a significant

impact on the company’s reputation,” said Mr. Jimenez, the CEO,
adding that the impact “will take
time to unwind.”
Since then, the company has
sought to distance itself from Dr.
Vasella in many ways. In its recent
annual report, it explicitly stated
that, as the company’s honorary
chairman, Dr. Vasella would receive
no pay and have no influence on the
board or management.
“It strikes me as a deliberate attempt to officially call the end of
the Vasella era at Novartis,” said

Florian Wettstein, director of the Institute for Business Ethics at Switzerland’s University of St. Gallen.
In January, the company disbanded two board subcommittees
that had given Dr. Vasella and the
board more power over many financial decisions. One panel oversaw all
financial reporting, while the other
was responsible for evaluating any
transactions valued at $50 million
to $500 million.
Novartis also is looking to dispose of around 12.4 acres of land
once earmarked for a $110 million
management-training center near
Risch, the village south of Zurich
where Dr. Vasella lived for many
years. In December, Novartis said it
had decided to consider cheaper alternatives closer to Basel. As an immediate neighbor, the former chairman was granted the right to buy
the acreage if plans for the center

didn’t go through.

LVMH Moët Hennessy Louis
Vuitton SA said it is investing in
Marco de Vincenzo’s Italian fashion house, the latest move by the
luxury-goods company to build a
portfolio of young designers to
grapple with an industrywide
slowdown.
LVMH will take a 45% stake in
Marco de Vincenzo, leaving its
namesake founder with the remaining 55%, a person familiar
with the matter said. LVMH didn’t
disclose financial details of the
deal.
The purchase is further evidence that Delphine Arnault, the
daughter of LVMH Chairman Bernard Arnault, is racing to secure a
new generation of fashion talent
for the company. LVMH recently
took stakes in British shoe maker
Nicholas Kirkwood and designer
J.W. Anderson.
“We are convinced that together we will develop successfully
his brand,” Ms. Arnault said in a
written statement Monday. “This
new partnership is in the DNA of
LVMH, which has always supported
young designers.”
France-based LVMH long has
sought to use a wide portfolio of

rising brands to offset slack in
other labels. But booming demand
for labels such as Céline and Kenzo
has been no match for a slump at
flagship Louis Vuitton, where sales
have stagnated as consumers wearied of its ubiquitous logo bags.
Against that backdrop, luxurygoods companies such as LVMH
and France’s Kering SA have been
on the hunt for the next big names
in fashion.
Mr. de Vincenzo has been designing accessories at Fendi, an
Italian brand controlled by LVMH,
for more than a decade. He started
his own line in 2009 while continuing to design for Fendi and has
shown his collections in Milan.
He presented his latest line
during Milan Fashion Week, which
ended Monday, with colorful outfits, graphic prints and black
leather.
Small and midsize Italian fashion houses often consider selling
stakes to fund growth, open stores
or improve distribution and negotiating power—or simply because
they have no heirs ready to take
over.
Krizia SpA on Monday said that
it had been acquired by China’s
Shenzhen Marisfrolg Fashion Co.,
which will support the Italian
ready-to-wear brand’s expansion in
Asia by opening stores in Beijing

and Shanghai.

INDEX TO BUSINESSES
Businesses

This index of businesses mentioned in
today’s issue of The Wall Street Journal
is intended to include all significant
reference to companies. First reference
to the companies appears in bold face
type in all articles except those
on page one and the editorial pages.

Agnico-Eagle Mines...................................17
AK Steel Holding.......................................28
Apple .......................................................... 18
AstraZeneca...............................................16
Barrick Gold ............................................... 17
BHP Billiton ............................................... 17
CF Industries Holdings..............................28
Citigroup.....................................................20
Cyprofood...................................................20
Deutsche Bank...........................................20
eBay............................................................16
Facebook.......................................................1
General Motors..........................................17

Google....................................................18,19
Grifols.........................................................16
HSBC.................................................20,22,28

HTC........................................................18,19
Huawei Technologies.................................18
Intuit .......................................................... 16
J.P. Morgan Chase.....................................20
Kering.........................................................16
Krizia .......................................................... 16
LG Electronics............................................18
LVMH Moët Hennessy Louis Vuitton.......16
Microsoft...............................................16,19
Nokia .......................................................... 19

Nordstrom..................................................25
Norilsk Nickel.............................................17
Novartis......................................................15
Rio Tinto .................................................... 17
Roche Holding............................................16
Royal Bank of Scotland Group..................15
Samsung Electronics............................18,19
Scania.........................................................28
Shenzhen Marisfrolg Fashion...................16
Sony.......................................................18,19
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THE WALL STREET JOURNAL.

Tuesday, February 25, 2014 | 17

BUSINESS & FINANCE

Rio Tinto’s Walsh Still Faces Challenges

BY ALEX MACDONALD

Mining Success

Rio Tinto has seen its stock rise since Sam Walsh took the helm.
Share performance of selected miners since Mr. Walsh was
appointed Chief Executive Officer of Rio Tinto on Jan. 17 2013.
10%

Rio Tinto
2.8%
BHP
Billiton
-4.9%
Glencore
Xstrata
-11.3%

Anglo
American
-18.9%

0
–10
–20
–30
Bloomberg News

LONDON—After a year at the
helm of Rio Tinto PLC, Chief Executive Sam Walsh has trimmed the
mining’s giant’s ballooning debt,
sold off noncore assets and promised to slash capital spending 38%
over the next two years.
In a year when the shares of
most mining peers have fallen
sharply, Rio stock is up almost 3%
since Mr. Walsh took over in January 2013, succeeding CEO Tom Albanese.
Mr. Albanese stepped aside after
Rio wrote down more than $14 billion in assets, stemming from big
aluminum and coal asset purchases
made at the top of the market. It
was the biggest in a series of
charges taken by some of the
world’s largest mining companies,
as a decadelong commodities boom
and deal frenzy came to a sudden
halt.
In the shakeout that followed,

bosses at six of seven of the world’s
biggest publicly listed miners by
market capitalization stepped down.
The world’s top 40 mining companies, from BHP Billiton Ltd. to Barrick Gold Corp., wrote down a total
of $45 billion in 2012, according to
PricewaterhouseCoopers. Miners
have shed assets and employees,
slashed costs and scaled down project ambitions.
It now falls to Mr. Walsh—64
years old and a 23-year veteran at
Rio—to steer the world’s secondlargest miner by market value
through that new landscape. A for-

–40

Sam Walsh said he hopes his contract is renewed when it expires in 2015.
mer auto executive who helped turn
around the Australian unit of General Motors Co., Mr. Walsh said in
an interview that he’d like the board
to consider keeping him on when his
contract expires in 2015.
“I would be very happy to go on,
extend my term,” Mr. Walsh said.
“On the other hand, if someone better comes along in the interim,
that’s fine, too…I would like to meet
them, but that’s a different matter.”
He still faces a number of challenges before then. He has promised
steep cost cutting and reduced capital expenditure over the next two
years. He slashed net debt by $4 billion in the final six months of last
year, to $18.1 billion. That came as

Rio announced or completed $3.5
billion worth of noncore assets sales
during the year.
But he has also publicly taken
the for-sale sign off two other big
assets—Rio’s diamonds operations
and one of its aluminum businesses.
And he has failed so far to find a
buyer willing to pay enough for
Rio’s Canadian iron-ore business, a
process he started around last year.
In the interview, he said he doesn’t
need to sell more assets.
“If somebody wants to offer a
big check, that’s fine. But we don’t
need to actually sell any of our major assets,” he said.
Another key challenge is that Rio
is more heavily exposed to a single

2013

Source: FactSet

commodity—iron ore—than any of
its major peers. Iron ore represented nearly 90% of the company’s
earnings last year. Despite that reliance, he has expanded Rio’s flagship
iron-ore mines in Australia’s Pilbara
region, albeit at a more measured
pace.

Iron ore prices have remained
resilient in recent years. But many
analysts expect growth in China—
the world’s biggest buyer—to ebb.
Mr. Walsh said he can’t do anything about the company’s reliance
on iron ore. “We are what we are,”
he said. “You can’t turn back history, and if having too much iron
ore is a problem, then it’s not a bad
problem to have,” he said.

’14
The Wall Street Journal

Without further asset sales on
the horizon, Mr. Walsh is cutting
costs. He cut $2.3 billion in operating cash costs in 2013. He is also
slashing capital spending, promising
to reduce outlays to $8 billion in
2015, down from $17.6 billion last
year.
He said he also has empowered
managers to find other savings on
the shop floor. Rio’s energy division,
which produces coal and uranium,
set up a “war room” in Brisbane,
Australia, where planners reduced
this year’s forecast for fuel usage at
its Australian coal operations by
calibrating truck engines, upgrading
components for its old trucks, and

reduced revolutions during idling.

Mining for Gold in Canada at Minus 45 Celsius

BY ALISTAIR MACDONALD
AND JOHN W. MILLER

MEADOWBANK GOLD MINE, Nunavut—Gold miner Alain Belanger
contends with 120 kilometer an hour
winds, winter temperatures so cold
they have cracked the steel on his
287-ton excavator and white-out
blizzards that halt mining for days.
This open-pit mine west of Canada’s Hudson Bay had such steep
construction and operating costs—
flying workers in and out, stocking a
year’s worth of food, employee turnover and battling snow drifts that
can reach eight feet—that the project is unlikely to break even over the
long haul, Agnico-Eagle Mines Ltd.
executives now concede.
As the world warms, miners
dream of unlocking trillions of dollars in diamonds, gold, nickel and
other metals in the Arctic, a treeless
cap that spans northern parts of
Canada, Alaska, Russia and Scandinavian countries. So far, it has
proved a quixotic quest for all but a
few tenacious miners like Agnico.
“We know there is extreme
wealth in the Arctic,” said Agnico’s
Chief Executive Sean Boyd in an interview. “The reality, though, is you

have to have a lot going for you to
get it out the ground.”
Meadowbank recently has been
worth it. The mine where Mr. Belanger labors for two-weeks at a
stretch was Agnico’s star performer
last quarter, generating more cash
than any of the company’s six other
mines and contributing to its second
year of record gold production.
But more than 200 Arctic mining
projects that have been announced
in recent years lie either abandoned
or in an early planning stage, according to data from by Raw Materi-

als Group. Only six mines now operate in North America’s vast arctic.
Some of the world’s largest miners are putting off Arctic projects as
metal prices have weakened. Gold
now trades about $1,350 an ounce,
down from $1,850 in 2011. Some
have flown into Meadowbank to better assess the risks and determine
whether Arctic resources can be
within their reach and wherewithal.
“The question they [have to] ask
is whether they want to take the
Arctic on,” Mr. Boyd said.
Early on, Agnico officials estimated they could dig gold at Meadowbank for about $450 an ounce.
But after it opened in 2010, costs
quickly ballooned to $1,000 an
ounce. In the latest quarter, costs
had fallen to $637 an ounce. The

company expects to shave costs by
another $8 an ounce this year.
Agnico’s recent success was hard
fought, and includes US$1.2 billion
in write-downs. It has changed how
it operates: Rock is now stockpiled,
so when a blizzard halts mining, the
mills can still work. To cut down on
fuel usage, the mine uses exhaust
from the massive electricity generators to help heat the camp.
Overall fuel use, the biggest single expense, has fallen to 51,127 gallons (193,537 liters) a day from
54,700 gallons in the fourth quarter
of 2012. Savings: $1.2 million.
“In the Arctic, if you make a mistake it is going to hit you very hard,”
said Jean Beliveau, the mine’s general manager. In 2011, after a fire destroyed Meadowbank’s kitchen, most
of its 550 employees had to be flown
out until a replacement kitchen arrived from Phoenix. Total cost of the
incident was $18 million.
For Agnico and other arctic miners, the biggest problem is the lack

of ports, road and rail links. Agnico
Eagle needed to build a $50 million,
110 kilometer highway. The road is
the longest in Nunavut, which covers
an area the size of Mexico but is
home to only 32,000 people.
The mine has an eight-week window to bring a year’s worth of food
and other supplies before Hudson
Bay freezes, including 200,000 eggs
and 2,500 liters of ketchup. Anything that has been forgotten or in

need replacing must be flown in at a
cost of $6 a kilogram.
The few standouts in these harsh
environments are those that have
well-established ports and knowhow, such as Russia’s MMC Norilsk

Nickel and Sweden’s LKAB. The successes include Arctic mines built by
slave labor under Stalin in the 1930s,
and now operated by Norilsk.
“There is a certain culture there,
and people get used to working in
very difficult conditions,” said Norilsk CEO Vladimir Potanin in an interview last year.
One lesson Agnico learned was
how to better incorporate native Inuit workers. It upgraded numeracy
and literacy skills, improved training
and offered more career advancement to keep locals on the job. All
have helped reduce turnover to 7%
last year from 25% in 2011.
Nunavut resident Billie-Jo Van

Eindhoven, 27, was a kitchen worker
for two years before she landed a
job driving a 17-foot-high truck, ferrying rock out of the pit. “It’s a good
paying job,” said Ms. Van Eindhoven.
Base pay for truck drivers starts at
65,400 Canadian dollars and can go
up to C$97,500 a year.
In the bleak landscape of snow
and rocks, Mr. Belanger, a 55-yearold shovel operator, sees few signs
of the global warming that is predicted to make Arctic mining easier.

Equipment operators start at
C$88,600 a year and can earn up to
C$130,100. His giant steel shovels,
which scoop up 24 tons of rock and
gold ore, have cracked in the cold.
Exposure of bare flesh can lead to
almost immediate frostbite.
As he talks, geology technicians
nearby clamber over piles of newly
blasted rock in minus 45 degree Celsius (-49 Fahrenheit) temperatures,
marking gold bearing ores. Giant
trucks carry 120-tons of rock that
can contain an average of $1,258
worth of gold ore.
After going through a large
crusher, several mills and a chemical
process to separate gold from rock,
the ore is melted to produce 31-kilogram gold bars. Each bar is 85%
pure and worth about $1.2 million.
What tempted the Toronto-based
company to take the risk is high
quality ore here. A ton of earth from
Meadowbank contains more than
three times the amount of gold as
from an average Canadian mine.
Meadowbank may not ever recover its initial costs, but Agnico
hopes to apply the lessons learned
from operating in this inhospitable
climate to a nearby project with
even richer ores. The dream of wild

riches may not be realized here, but
it lives on.


18 | Tuesday, February 25, 2014

THE WALL STREET JOURNAL.

MOBILE WORLD CONGRESS

Latest Samsung Phone Returns to Basics
Core Features Like Battery Life and Photo Capabilities Are Enhanced as Company Seeks ‘Competitive Pricing’

BY JONATHAN CHENG

Samsung’s New Galaxy

Waterproof and dustproof

A rundown of key specs of the Galaxy S5,
which goes on sale in April.

Samsung hasn’t changed its
plastic-casing, but claims
the S5 is both waterproof
and more dust-resistant.

Better camera
A 16-megapixel camera.
This is a boost from its

previous 13-megapixel
camera. It also has
capability to record video
in 4K high definition, as
do new phones from
Sony and LG.
Faster processor
The 2.5-gigahertz
processor is faster
than the 1.6-GHz
(Samsung chip)
or 1.9 GHz
(Qualcomm chip)
processors in
the S4.

Source: the company
The Wall Street Journal

some consumers, who have come to
expect dramatic new features with
each new iteration of devices from
Samsung and rival Apple.
Unlike with the previous model,
Samsung didn’t play up the smartphone’s software capabilities beyond an expanded suite of fitnessand health-related apps.
A model version of the Galaxy S5
seen by The Wall Street Journal featured Google’s applications prominently, a contrast to Samsung’s decision to drop Android for its latest
generation smartwatch, the Gear 2,
which was also publicly unveiled in
Barcelona.

“People are easily excited about
all this ‘disruptive’ and ‘latest technology,’ and we are working on this
too,” Ms. Lee said. “But our philosophy is to listen to consumers.”

Fingerprint sensor

5.1”
scr
e en

BARCELONA—Samsung Electronics Co., eager to maintain its
lead in global mobile-phone sales,
on Monday unveiled an updated
flagship smartphone that reflects a
deliberate attempt to eschew flashy,
but little-used, new features—and to
keep the price competitive.
Instead of going for the wow factor, Samsung executives said the
company wanted to enhance core
features that improve everyday use,
like photo-taking, battery life, download speeds and protection against
water and dust.
Indeed, one of the few new features on the Galaxy S5 is a fingerprint sensor—something already
available on the latest Apple Inc.
iPhone.
The Galaxy S5, which runs on
Google Inc.’s Android operating system, will go on sale April 11 and features a more powerful camera, a
slightly larger 5.1-inch screen and
supports faster download speeds
than its predecessor.

In a nod to the pressures from
low-cost rivals, Samsung executive
vice president Lee Younghee said in
an interview ahead of the launch
that the company would push for
“competitive pricing” of the device.
Ms. Lee said Samsung is striving
for the “optimal mix of feature set
and pricing point,” declining to
elaborate on price.
Samsung will have to slash the
price to compete with some of its rivals.
The 16-gigabyte version of the
previous Galaxy S4 model sold for
about $600 at Verizon Wireless
without a contract. By contrast, Motorola Mobility’s Moto X with equivalent memory costs $399 without a
wireless contract in the U.S. The
Moto X comes from the Motorola
handset business, which is currently
owned by Google Inc. but is in the
process of being sold to China’s Lenovo Group Ltd.
Analysts say the lack of bold innovations will likely disappoint

Bigger screen, same resolution
The 5.1-inch screen is a slight increase from the S4’s
screen but it comes with the same resolution of
1920 x 1080 pixels.
In line with the lower-key approach, Samsung’s event Monday
was held on the sidelines of Mobile
World Congress here, a bustling annual confab where it has had to

compete for attention with a host of
competitors.
The event stands in contrast to
last year’s launch of its flagship
smartphone, which was announced
at a lavish private event at Radio
City Music Hall in New York.
The device’s most unique feature
is one that rival Apple introduced in
its iPhone 5S last year: a fingerprint
scanner that allows a user to unlock
their phone with the swipe of a finger.
Samsung also added several
camera functions typically found on
the digital SLR cameras used by
professional photographers. En-

Zuckerberg: Deal Was Worth It
ramp” Internet service, with free access to some services like Facebook.
Mr. Zuckerberg also reiterated
his view that the U.S. government
had “blown it,” when it came to being transparent about its surveillance activities, following leaks from
former U.S. National Security
Agency
contractor
Edward
Snowden.

The subject, however, did keep
coming back to Facebook’s deep

pockets. Asked if he was prepared to
make another run at messaging-service Snapchat, which Facebook had
explored buying last year, Mr. Zuckerberg chuckled.
“After buying a company for $16
billion,” he said, “you’re probably
done for a little while.”

Getty Images

Continued from first page
computers but also offers messaging
and voice calls over mobile phones.
Mr. Koum said the voice product
would “use the least amount of
bandwidth, and we optimize the hell
out of it.”
Speaking about the Facebook
deal, Mr. Koum said that WhatsApp
wouldn’t change. He alluded to Instagram, the photo-sharing service
that was acquired by Facebook in
2012.
“There are no plans to change
anything that we do with the product today,” he said.
Mr. Koum said that WhatsApp
was likely valuable to Facebook because “we both want to make the
world more connected,” though Mr.
Koum stressed that WhatsApp
wanted to know “as little as possible” about its users, including details such as a user’s name.
Mr. Zuckerberg didn’t focus on
the WhatsApp acquisition during a

45-minute-long discussion in Barcelona Monday. He spoke mostly
about a Facebook-led coalition that
aims to push operators to connect
poor people in emerging countries
to the Internet, by offering “on-

A swipe-enabled
fingerprint sensor is the
biggest change from
the Galaxy S4, but
consumers who had
been anticipating an
iris-scanner will be
disappointed. The
iPhone 5S already
has a fingerprint
sensor.

Mark Zuckerberg spoke on Monday at the Mobile World Congress in Barcelona.

hanced wireless capabilities, meantime, would boost download speeds
by nearly five times in some cases,
the company said.
Samsung said it also has beefed
up the phone’s waterproof and antidust capabilities.
That may not be enough to resonate with consumers at a time when
smartphone growth starts to level off
and as a raft of Chinese competitors
produce cheaper smartphones that
look similar. According to market research firm IDC, China accounted for

one out of every three smartphones
shipped around the world in 2013,
equaling 351 million units. But recently, the surge in growth has
started to slow as smartphones already account for more than 80% of
China’s total phone sales, IDC said.
At the Mobile World Congress

where Samsung unveiled its device, a
number of its rivals, including Sony
Corp., Huawei Technologies Co., LG
Electronics Inc. and HTC Corp., all
introduced competing devices that
also played up more powerful cameras and longer battery life in bodies
that look more like Samsung’s.
Sony, for one, unveiled its Xperia
Z2 smartphone hours ahead of Samsung Monday, loaded with its most
cutting-edge camera and audio technologies.
As a result of the heightened
competition, Samsung has seen its
profit growth slow. The company reported its first quarterly decline in
operating profits in two years in the
fourth quarter.
The worry for Samsung is a lack
of sales drivers, analysts say. Wearable devices, which Samsung
launched in three varieties on Monday, haven't yet proven to be mainstream products, though entries in
the market by companies like Apple
and Google, expected later this year,
could change that.
Samsung’s new wearable devices,
which include the flagship Gear 2

and a fitness band called Gear Fit,
remain limited in their functionality—so much so that Samsung is
marketing them as companion products to its smartphones.
The Gear 2 drops the “Galaxy”
name in a nod to the fact that it is
not powered by Google’s Android
software. Instead, the smartwatch
runs on Tizen, a rival operating system that Samsung has backed prominently.
Analysts said the “back to basics” approach—as Samsung called
the new phone Monday—could fall
flat with the public.
“If it’s just about replacing the
current device with a more powerful
one, it’s not going to be enough for
consumers,” said Thomas Husson,
an analyst at Forrester Research.
“Beyond the specs, expectations are
now increasing for Samsung, now
that they’re the leader. People expect them to lead in terms of innovation.”

Windows, Nokia Phones
Get BlackBerry Messenger
BY SIMON ZEKARIA

BlackBerry Ltd. said Monday it
will make its messaging service
BlackBerry Messenger, or BBM,
available to Windows Phone and
Nokia X smartphone customers in
coming months.

“BBM continues to grow in popularity as millions of people use our
mobile platform for chatting and
connecting with friends or colleagues,” said John Sims, BlackBerry’s president of global enterprise solutions.
Waterloo, Ontario-based BlackBerry launched BBM in 2005. The
service runs on Android-powered
phones, Apple Inc.’s iPhone and
BlackBerry devices.
BBM will be available from the
Windows Phone store this summer.
BBM for Nokia X will be available
from the Nokia store when the
Nokia X platform launches.
Windows maker Microsoft Corp.
is in the process of completing a $7
billion takeover of Nokia’s phone
business.
At the Mobile World Congress

trade show in Barcelona, Nokia unveiled its low-end Nokia X smartphone, the first in a new family of
phones running Google Inc.’s Android software.
Meanwhile, the BlackBerry executive in charge of software design
and one of the key drivers behind
its current operating system has left

BBM, launched in 2005,
has been available on
Android-powered
phones, iPhones and
BlackBerry devices.
the company, the latest in a string

of executive departures under the
new leadership of Chief Executive
John Chen.
Don Lindsay, BlackBerry’s vice
president of user experience since
2009, left the company in January,
according to a person familiar with
the matter.


THE WALL STREET JOURNAL.

Tuesday, February 25, 2014 | 19

MOBILE WORLD CONGRESS

SonyCranksUpCamera Nokia Takes Wraps
Off Android Phone
InItsLatestSmartphone
BY SVEN GRUNDBERG

High Stakes in Mobile After Company Pulls Plug on PC Business

The new phone uses
an ultrahigh-definition
technology known as 4K.
Sony handsets now have a 3.8%
global share by shipments, while
Samsung and Apple Inc. together
hold a 47% share, according to research firm IDC. Sony sells more

than half of its handsets in Japan
and Europe, while its presence is
tiny in the U.S. with just one carrier
distributing its phones. Its market
share in China last year was just
0.5%, according to Canalys, another
research firm.
Sony’s new flagship phone—the
Xperia Z2, unveiled Monday in Barcelona—comes with a larger and
brighter 5.2-inch display, curved
edges and a slimmer body than the
previous model. With two speakers
and a noise-canceling headset, Sony
says users should get quality sound,
even on noisy trains and buzzing

Long Climb

73.3 mm

Sony trails in the global smartphone
market. Share of shipments, 2013
Samsung

31%

Apple

15

Huawei

4.8

LG

4.7

Lenovo

4.5

Sony

3.8

Source: IDC
The Wall Street Journal

planes. Sony also showed off its
slick new Xperia Z2 tablet, which it
claims to be the slimmest and lightest waterproof tablet with a 10.1inch display.
But the new phone’s highlight is a
camera that uses an ultrahigh-definition technology known as 4K for its
horizontal resolution of roughly
4,000 pixels.
Sony and other electronics makers like Samsung are trumpeting 4K
as the key ingredient in their nextgeneration television sets.
In Sony’s new Xperia Z2, 4K
video lets users capture and watch

details normally too small to see,
even though the handset display
uses a lower resolution, said Kichiro
Kurozumi, vice president overseeing
Xperia’s product planning, in an interview in Tokyo ahead of the mobile show.
But the Z2 isn’t the only phone
that takes video in 4K: Samsung’s
Galaxy Note 3—a phablet that is bigger than a smartphone but not quite
a tablet—launched in September
also had 4K video capabilities; LG’s
newest phablet with a 5.9-inch display, the LG G Pro 2, unveiled Sunday, boasts 4K video capture too.
And consumers don’t always
gravitate toward high-end features.
In 2003, Sony released a high-end
home audio and video brand called
Qualia, which failed to gain traction
and was shut down after three
years. Instead, it was the lower-fidelity Apple iPod that became a
megahit.
Even Samsung’s recent attempts
to spur sales with everything from
curved-screen smartphones to the
Galaxy Gear smartwatch haven’t
done much to spark demand.
Analysts also say many users
may not want to shoot high-resolution video on their phones, because
it eats up battery life. Others may

Sony

Sony Corp. is rolling out a new
smartphone loaded with its most
advanced camera and audio technologies. But will the cutting-edge,
high-tech features really help the
phone sell?
That question is a key one for
Sony as well as a host of bigger rivals like Samsung Electronics Co.,
which are showing premium smartphone models at the Mobile World
Congress in Barcelona this week.
The makers are hoping to woo consumers to top-end phones with bigger displays and better cameras, as
a host of new rivals spurs competition and pushes prices of cheaper
models below $100.
The stakes are even higher for
Sony, which earlier this month said
it would pull the plug on its unprofitable personal-computer business,
effectively doubling down on smartphones and tablet computers. Sony
Chief Executive Kazuo Hirai is banking on mobile devices to drive profits in its struggling electronics business, as well as to restore its fading
reputation for cool gadgets.
Results so far are mixed: Sales at
Sony’s mobile-products segment,
which included PCs, jumped 40%
from a year earlier and made up
about 22% of total revenue during
the nine months through December.
Yet Sony also reduced its smartphone sales target by 4.8% for the
year through March, citing slowerthan-expected demand in China and
Europe.

146.8 mm

BY KANA INAGAKI

Bells and Whistles

Features of the Sony Xperia Z2
u Larger display (5.2 inches),

curvier edges and slimmer body
than previous model

u Pixels per inch: 428
u Weight: 163 grams (5.75 ounces)
u Cameras: 20.7 megapixels (rear);
2.2 megapixels (front)

u Video capture: 4K (3840 x 2160p)
not be able to see the difference in
resolution quality on such a small
device.
“Innovation on the smartphone
itself has pretty much reached a plateau,” said IDC research manager
Ramon Llamas. “A lot of times, the
experiences tend to look the same.”
To hedge their bets, premium
handset makers are introducing
cheaper models. Sony is launching
in April a more affordable model
called Xperia M2 with a 4.8-inch
screen and high-speed network capabilities.
But the low-end market is fast

becoming crowded with Chinese and
other Asian brands offering cheap
devices that work on speedy, fourthgeneration cellular networks. Competition will get fiercer after Lenovo
Group Ltd. completes its purchase
of Google Inc.’s Motorola handset
business.
“The scary part about smartphones is that a hit product can instantly flip the industry,” Sony’s Mr.
Kurozumi said. “Both Lenovo and
Motorola have the ability to come
out with such a product so it is a
threat for us.”

HTC Goes Midprice to Lift Phone Sales
BY SVEN GRUNDBERG

BARCELONA—HTC Corp. on
Monday unveiled a new midprice
handset, in a bid by the unprofitable company to boost sales volumes with a lower-priced offering.
The Taiwanese company—traditionally seen as a high-end phone
maker—has pledged that lowerpriced handsets would be a major
focus this year, and that it would

venture into price bands that it had
previously considered too low, as it
struggles to compete with low-cost
handsets from a raft of Chinese
phone makers.
HTC Chief Executive Peter Chou
said the new HTC Desire 816 is a
part of this effort, although the

company didn’t immediately specify the phone’s retail price. “There’s
a huge opportunity in the middle of
the market. People are looking for

affordable smartphones that don’t
compromise,” Mr. Chou said.
The Android-running Desire 816
sports a 5.5-inch screen, fourthgeneration network capability and
a quad-core processor. It is set to
start shipping next month. The
company hasn’t given up on highend phones and said it would unveil the successor to its HTC One
flagship device at an event in New
York on March 25.

BARCELONA—Nokia Corp. took
the wraps off its low-end Nokia X
smartphone, the first in a new line
of phones running Google’s Android software designed to boost
the Finnish company’s eroding position in developing markets.
Priced at €89 ($122) excluding
carrier subsidies and taxes, the
smartphone hits an attractive pricing level in places such as India,
Indonesia and Russia, and fills a
hole in Nokia’s product portfolio.
Nokia also released two other
Android-powered devices, the
Nokia X+, priced at €99, and the
XL, with a larger screen, at €109.
Amid the rise in popularity of
the Android operating system,

thousands of developers are making third-party software for the
platform. The main benefit of the
Nokia X range is that they are able
to run these apps, said Timo Toikkanen, the head of Nokia’s mobile
phones unit.
Still, betting on one of its main
competitors’ software is a risky
move for the Finnish device maker,
which in early 2011 actively opted
out of working together with
Google Inc.—whose Android OS
powers popular phones made by
Nokia competitors like Samsung
Electronics Co.—in favor of backing Microsoft Corp.’s smartphone
push.
The phone also comes weeks
ahead of the expected closure of
Microsoft’s $7 billion takeover of
Nokia’s phone business.
“Three years ago, this would
have been the perfect move, but
not anymore,” said Francisco Jeronimo, an analyst with Interna-

tional Data Corp. “What if these
Androids are a hit, and Nokia
starts to ship tens of millions of
them? What message will that give
developers, consumers and investors about the viability of the Windows Phone platform?”
With Windows Phone sales off
to a shaky start, Nokia’s board of

directors initiated a review of its
collaboration with Microsoft and
began weighing its options in the
summer of 2012. Engineers at
Nokia had been working on the Android phone strategy long before
Microsoft struck its deal to buy
Nokia’s handset business last September. But Microsoft has known
about the push, Mr. Toikkanen
said.
In an update on its official blog
on Monday, Frank X. Shaw, Microsoft’s head of communications,
wrote that Microsoft is “pleased”
to see Microsoft services introduced on Nokia’s new Android devices.
He added however, that Microsoft and Nokia are still operating
as “independent companies” until
the deal closes, and that Microsoft
remains committed to its Windows
Phone strategy.
While giving Nokia yet another
smartphone platform to manage,
the new Android phones will fill a
gap in the company’s product portfolio. The Finnish company has
faced increasing difficulties competing in developing markets,
where consumers and manufacturers have embraced Android.
Globally, Android was installed
on 80% of smartphones sold last
year. In places such as India,
Android has more than 90% market share.

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TRAVEL


20 | Tuesday, February 25, 2014

THE WALL STREET JOURNAL.

MARKETS

Deutsche Bank Will
Cut Its U.S. Assets

Weighed Down

Analysts are concerned about HSBC’s ability to hit its return targets amid an uncertain global economy.
Daily share price

Return on equity*

Cost-efficiency ratio†

680 pence

20 %

65%

Monday:
635.70 pence

670

2.83%

2014-2016 target:

BY ISABEL GOMEZ
AND EYK HENNING

12-15%

15

60

660

2014-2016 target:

10

650

54-56%

55

640
5

630
620

Jan.

Feb.

0

’12

’13

’14

*Measures profits on shareholder funds †Total operating expenses divided by net operating income, before bad loan charges
Sources: WSJ Market Data Group (share price); the company (return on equity, ratios)

50

’12

’13

’14

The Wall Street Journal

HSBC’s 2013 Results
Weaker Than Expected

BY MARGOT PATRICK
AND MAX COLCHESTER

LONDON—HSBC Holdings PLC
said lower revenue and higher operating costs weighed on profit
growth last year, adding to concerns
about the bank’s prospects this year
as some of its key markets cool and
capital requirements rise.
HSBC said 2013 group revenue
fell to $64.6 billion from $68.3 billion in 2012, while its core operating
expenses rose because of an increase
in the U.K. bank levy and higher litigation charges. Net profit, though,
rose 15% to $16.2 billion from $14.03
billion, reflecting a drop in bad loans
in 2013 and a drag on 2012 results
from the bank’s $1.9 billion moneylaundering settlement that year.
The results fell far short of analyst expectations, and HSBC shares
fell 2.8% in London. The bank’s final
2013 dividend of 19 cents was less
than the 21 cents anticipated by investors, highlighting a continuing
tug of war between U.K. banks and
the country’s banking regulator over
rules on capital.
Chief Executive Stuart Gulliver
warned that rising capital requirements could hinder the bank’s ability
to ever hit the upper end of its 12%
to 15% return-on-equity target, a
measure of how much profit a company generates from shareholder

funds. He also dashed hopes of a

share buyback in the near term by
saying he didn’t think it would happen in 2014.
HSBC, with $2.7 trillion in assets,
is regarded as one of the world’s
most stable banks because of its
strong capital ratios and exposure to
rapidly expanding emerging economies. Mr. Gulliver said on Monday
the bank has succeeded in becoming
“leaner and simpler” since starting
a restructuring in 2011 that included
exiting from 63 businesses and shedding tens of thousands of jobs.
But analysts have been concerned about the bank’s ability to hit
its return targets and jump-start
revenue growth in an uncertain
global economy. Return on equity in
the year was 9.2%, up from 8.4% in
2012. The bank missed its cost-efficiency target, too, and said both figures had been affected by repayments to U.K. customers who were
wrongfully sold insurance on loans
and credit cards.
Profit before taxes fell in many of
the regions where HSBC operates. In
Asia Pacific excluding Hong Kong,
pretax profit slipped to $7.76 billion
from $10.45 billion. Latin America
pretax profit fell to $1.97 billion
from $2.38 billion. The decline was
offset, though, by a better performance from Europe, where last year’s
$3.41 billion pretax loss swung to a

$1.83 billion gain.
In Hong Kong, the bank’s largest

profit generator last year, profit before taxes rose to $8.09 billion from
$7.58 billion.
Mr. Gulliver said the recent sharp
selloffs in some emerging markets
are “a reflection of specific circumstances rather than a generalized
threat,” and that the bank remains
“optimistic about the longer-term
prospects of emerging markets and
especially the opportunities for
HSBC, which will arise from the anticipated material expansion in
South-South trade and capital
flows.”
Meanwhile, there were fresh
grumbles from Mr. Gulliver and
other HSBC executives about U.K.
and European Union rules.
Mr. Gulliver outlined a new pay
program for top executives and traders that will see about 665 people
collect new “fixed pay allowances”
that hand them extra cash and
shares in addition to their salaries,
as a way around new European
Union rules limiting annual bonuses
for bank staff to 100% of their fixed
pay, or 200% with shareholder approval.
Although it means Mr. Gulliver’s
fixed pay will rise to around $3.6

million a year, mainly in the form of
shares, from $1.875 million now in
cash, he said “we’d prefer not to
have to do this” but felt compelled
to act in the best interests of shareholders to attract and retain staff.

RBS ‘Makes the Tea’ for Clients

Continued from page 15
bank, introducing new services and
shuffling the unit’s management, according to a person close to the
company.
It is also trying to drum up demand for loans. The bank sent hundreds of relationship bankers, who
work with specific clients, to deliver
letters to small businesses offering
them credit. Since 2011, RBS also
sends corporate bankers to work in
customers’ businesses. The aim is
for bankers to see things from a
customer’s perspective and better
understand the businesses that they
lend to.
Mr. Eady, who is relationship director at RBS, has worked in about
nine different businesses, including
a supermarket. He says he enjoys
spending days with clients. Sometimes his new co-workers worry
that he is spying on their business.

Others make derogatory comments
about bankers. Mr. Eady says he just

grins and gets on with the job.
The roles are varied. Ian Cowie,
chief executive of RBS’s business
and commercial banking, spent a
day collecting trash in East London.
A colleague in Northern England
chased chickens around a farm.
On a recent day, Mr. Eady went
to visit North London food wholesaler Cyprofood. A few months earlier, Mr. Eady had spent a day helping unpack vegetables and carry
food around the airy warehouse.
The day was productive: He learned
about Cyprofood’s booming watermelon business. But things nearly
took a turn for the worse when a
large crate of feta cheese wobbled
perilously as Mr. Eady unloaded it.
A colleague righted the crate, keeping it from falling.
RBS lent Cyprofood money to ex-

pand over the past five years. It
hasn’t always been easy, says Cetin
Agcagul, Cyprofood’s managing director. Despite the company more
than quadrupling its turnover over
the past few years, the bank wasn’t
always eager to lend. “There were
times when we didn’t get what we
were expecting,” says Mr. Agcagul.
He didn’t say how much the bank
had lent the company.
The 29-year-old businessman
was surprised to hear that Mr. Eady

spent a day working in the warehouse. “Did we pay him for that
day?” he said turning to his finance
director, and, of course, the answer
was no.
Mr. Agcagul praised Mr. Eady for
his efforts to better understand his
business, telling him: “You see
things like us.”
—Jason Douglas
contributed to this article.

FRANKFURT—Deutsche Bank
AG plans to reduce its U.S.-based assets by around a quarter to $300
billion in the coming years to comply with new rules for foreign
banks’ subsidiaries published by the
U.S. Federal Reserve last week.
Germany’s largest lender aims to
reassign activities from the U.S. to
other regions such as Europe or Asia,
a spokesman for the bank told The
Wall Street Journal, confirming statements Chief Financial Officer Stefan
Krause made to the Financial Times.
Under the Fed’s new rules, foreign banks with U.S. assets greater
than $50 billion will have to maintain more loss-absorbing capital and
hold a minimum 4% of total assets
in equity capital.
Analysts have said that Deutsche

Bank is the foreign bank most affected by the rule. According to Citigroup analysts, Deutsche Bank could
face a capital shortfall of roughly $7

billion under the new rules.
Mr. Krause said the bank is confident it will be able to meet new requirements on capital and the use of
leverage. Further, he said, a reduction in the bank’s U.S. assets
shouldn’t be viewed as a pullback
from the U.S.
The bank’s U.S. operations include its Mexican arm as well as its
repo business located in Frankfurt
and Tokyo. A spokesman confirmed
the bank plans to reassign these activities to its German or Asian operations. The lender also is set to convert some of its internal funding
lines for the U.S. into hybrid capital,
a financing instrument that is automatically transformed into equity in
times of stress.

U.K. to Ease Banks’ Entry

BY MARGOT PATRICK

LONDON—British regulators are
poised to make it easier for foreign
banks to set up shop in the U.K., a
reversal of years of intensified supervision following the financial crisis.
The U.K.’s Prudential Regulation
Authority, the primary overseer of
banks operating here, plans to unveil a proposed new approach
Wednesday to supervising the U.K.
arms of foreign banks. The overall
message will be that it will become
easier for foreign banks to open
lightly regulated arms known as
branches, assuming the banks don’t

collect retail deposits and that their
home-country
regulators
are
deemed cooperative, according to
people briefed on the PRA’s plans.
The expected shift represents an
attempt by the U.K. to make London
a more attractive financial hub and
thereby increase cross-border trade.
The PRA already has started promoting an open-door policy to Chinese banks looking to do business in
London. The agency’s head, Andrew
Bailey, visited China last December
to help spread the message, although he has said the new policy
isn’t specific to any country.
“The message is that the doors
are open so come and play in our
market—as long as you have the
right sort of business model and
don’t want to do something that
could bring the system down,” said
Bob Penn, a partner at Allen &
Overy LLP. “In part this looks like a
political rear-guard action to put
London back on the agenda for international organizations who may
have felt snubbed in the past.”
The PRA plans to outline the new
approach in a consultation paper
Wednesday that will delve into details such as specific activities that
will be tolerated within the U.K.

branches of foreign banks. Existing
branches of banks from outside the
European Economic Area may have
to meet new requirements to continue operating in their current
form if the PRA’s proposed rules are
adopted.
The planned shift is remarkable
because of the aggressive way in
which the U.K. has cracked down on
foreign-bank branches following the
financial crisis.
Because of the U.K.’s historic position as a center for trade across

the world, foreign banks have operated in the country for centuries.
Foreign bank branches now account
for around £2.4 trillion, or nearly
one-third, of the U.K.’s roughly £7.9
trillion in resident banking assets,
according to the Bank of England.
Assets at local subsidiaries of foreign banks such as Citigroup Inc.,
UBS AG and J.P. Morgan Chase &
Co. account for another £1 trillion.
Local subsidiaries are supervised
by the PRA like domestic banks and
must have their own liquidity and
capital. Bank branches, by contrast,
are more lightly regulated offshoots
of a foreign bank, overseen primarily by the home-country regulator.
Those branches have caused
heartburn for the U.K. in the recent

past. The government is still engaged in legal action with Iceland
over a £2.35 billion bailout of depositors in the local branch of Iceland’s Landsbanki in 2008. The PRA
also encountered concern over the
health of Cypriot banks during the
euro-zone debt crisis, successfully
pressuring their U.K. branches to
convert into subsidiaries.
Since the postcrisis crackdown,
the PRA has continued to press foreign banks to move more of their
activities into local subsidiaries. It
also has taken a tougher line on letting subsidiaries rely on their parents for financial help.
For example, a liquidity line extended to U.K.-incorporated UBS
Ltd. by its Swiss parent, UBS AG,
was cut off by the PRA two weeks
ago as part of an agreement between the regulator and the bank to
make the entity self-sufficient.
The PRA’s new stance stands in
contrast to the U.S., where the Federal Reserve approved new rules
last week requiring large foreign
banks to hold more capital locally.
Fed officials said the move is important to fortify the U.S. financial system, but foreign banks criticized it
as a step toward further Balkanization of the global financial industry.
“If you have a subsidiary you
have local capital and local liquidity
and the capacity to carry out your
own domestic regulation effectively,” said Clifford Smout, a former Bank of England official. “If it’s
a branch, you are completely reliant
on the supervision of another party
because the capital and the liquidity
of the firm is available for global

creditors.”


THE WALL STREET JOURNAL.

Tuesday, February 25, 2014 | 21

MARKETS

Fed as Top Cop Is Something to Bank On
ranging from capital levels and
bankers’ bonuses to the legal
structure of subsidiaries.
To critics—and there are many
on Wall Street—the drive to erect
national barriers threatens to
Balkanize the banking sector and
hit world economic growth by
constraining the free flow of
capital. “While we haven’t seen a
new protectionism, we have seen
fragmentation in rules and capital
which is not useful for
coordinated global growth,” Kevin
Warsh, who was on the board of
the Federal Reserve from 2006 to
2011, told me.
Last Tuesday marked an
important point in the postcrisis
regulatory shakeout, because the

Fed asserted its right to become
the world’s banking policeman.
What the central bank did is as
important as what it said.
What the Fed did was pass rules
that require large foreign banks to
keep high levels of capital in their
U.S. units. The aim is simple: to
make sure that, in times of trouble,
overseas lenders don’t rely on U.S.
financial help, as some of them did
in 2008.
What the Fed, through governor
Daniel Tarullo, said was: “The most

[ Current Account ]
BY FRANCESCO GUERRERA
“Financial
institutions may be
global in life, but
they are national in
death.” The words
of Thomas Huertas,
a British banking watchdog, in
2009 sum up the most important
piece of unfinished regulatory
business left over from the
financial crisis.
Unlike most other sectors,
finance is a global industry

regulated by national authorities.
When the failure of a company
with headquarters near Times
Square, as Lehman Brothers
Holding Inc. was, can hit traders in
London, regional banks in Germany
and churches in Australia, domestic
regulators have their work cut out.
The problem has been that,
since the crisis, national agencies
have been even more preoccupied
with their home turfs, trying to
bolster domestic defenses against
banking crises. The urge is
understandable but it has created a
cacophony of rules on issues

NAV
GF AT LB DATE CR

NAV

n ALEXANDRA INVESTMENT MANAGEMENT
AlexandraConvertibleBondFundI,Ltd.(ClassA) OT

OT VGB 08/31 USD

2155.22

—%RETURN—

YTD 12-MO 2-YR
NS

NS

NS

n BANC INTERNACIONAL D'ANDORRA. BANCA MORA.
Avgd. Meritxell 96, Andorra la Vella. Andorra. Ph. +376.884884 www.bibm.ad
Andfs. Anglaterra
Andfs. Borsa Global
Andfs. Emergents
Andfs. Espanya
Andfs. Estats Units
Andfs. Europa
Andfs. Franca
Andfs. Japo
Andfs. Plus Dollars
Andfs. RF Dolars
Andfs. RF Euros
Andorfons
Andorfons Alternative Premium
Andorfons Mix 30
Andorfons Mix 60

UK
GL
GL
EU
US

EU
EU
JP
US
US
EU
EU
GL
EU
EU

EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
BA
BD
BD
BD
EQ
BA
BA

AND
AND
AND

AND
AND
AND
AND
AND
AND
AND
AND
AND
AND
AND
AND

11/16
02/21
11/02
02/21
02/21
02/21
02/21
02/21
10/22
02/21
02/21
02/21
12/31
02/21
12/19

GBP

EUR
USD
EUR
USD
EUR
EUR
JPY
USD
USD
EUR
EUR
EUR
EUR
EUR

8.47
6.70
14.77
15.60
21.03
8.05
10.98
660.78
9.66
12.22
11.71
15.79
109.45
10.42
8.96

2.8
0.6
-20.4
10.4
0.6
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-5.3
2.3
0.6
0.5
0.8
16.9
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3.6
11.8
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49.2
25.5
29.2
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24.3
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1.4
3.0
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6.1
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14.9
5.1
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22.2
14.2
12.8
13.6
22.0
6.2
1.4
1.7
3.0
8.3
3.6
-2.5

FUND NAME

NAV
GF AT LB DATE CR

GH FUND S GBP
GH Fund S USD
GH Fund USD
Hedge Investments
Leverage GH USD
MultiAdv Arb CHF Hdg

MultiAdv Arb EUR Hdg
MultiAdv Arb GBP Hdg
MultiAdv Arb S EUR
MultiAdv Arb S GBP
MultiAdv Arb S USD
MultiAdv Arb USD

OT
OT
OT
OT
OT
OT
OT
OT
OT
OT
OT
OT

OT
OT
OT
OT
OT
OT
OT
OT
OT
OT

OT
OT

CYM
CYM
GGY
GGY
GGY
JEY
JEY
JEY
JEY
JEY
JEY
JEY

01/31
01/31
01/31
08/16
01/31
01/31
01/31
01/31
01/31
01/31
01/31
01/31

GBP

USD
USD
USD
USD
CHF
EUR
GBP
EUR
GBP
USD
USD

163.37
183.43
318.33
158.48
148.62
100.74
112.34
122.34
126.73
133.92
144.88
212.29

0.6
0.6
0.5
NS
0.9

0.8
0.8
0.8
1.0
0.9
0.8
0.8

7.8
7.8
6.5
NS
11.1
3.6
4.0
4.4
5.3
5.6
5.2
4.1

7.6
7.6
6.4
3.6
10.7
3.9
4.2
4.7
5.6

6.0
5.7
4.5

OT
OT
OT
OT
OT
OT
OT
OT
OT
OT
OT

EQ
EQ
EQ
EQ
EQ
EQ
OT
OT
OT
OT
OT

JEY
JEY

JEY
JEY
JEY
JEY
JEY
JEY
GGY
GGY
GGY

01/31
01/31
09/28
09/28
06/30
06/30
04/30
04/30
01/31
01/31
01/31

EUR
USD
USD
EUR
EUR
USD
EUR
USD

USD
EUR
GBP

97.06
181.80
151.22
82.99
127.84
135.07
104.69
105.31
126.86
114.61
122.37

-0.4
-0.4
3.4
2.8
-3.4
2.0
1.3
1.5
-2.6
-2.2
-2.6

4.9
5.0

-2.4
-3.0
-1.3
4.3
-9.5
-8.8
-12.0
-12.0
-12.0

4.0
4.7
-5.5
-5.9
2.2
5.1
-1.9
-1.7
-8.6
-8.6
-8.5

86.28
8577.68
9032.12
79.01
121.37
10807.34
11130.39
96.94

102.83

23.3
-9.3
4.6
-12.2
-9.0
3.5
17.9
-0.9
-4.6

-24.9
-8.4
11.0
-11.1
-8.8
5.1
25.6
0.7
-4.1

-22.3
0.3
13.2
-1.0
8.1
11.3
23.9
8.4

6.9

n HSBC Uni-folio

Asian AdbantEdge EUR
Asian AdvantEdge
Emerg AdvantEdge
Emerg AdvantEdge EUR
Europ AdvantEdge EUR
Europ AdvantEdge USD
Real AdvantEdge EUR
Real AdvantEdge USD
Trading AdvantEdge
Trading AdvantEdge EUR
Trading AdvantEdge GBP

NAV

—%RETURN—
YTD 12-MO 2-YR

n CG Portfolio Fund Ltd

NAV
OT OT CYM 06/07 GBP 25839.68
5.3
10.9
9.8 n HSBC Trinkaus Investment Managers SA
n CHARTERED ASSET MANAGEMENT PTE LTD - TEL NO: 65-6835-8866 E-Mail:
Fax No: 65-6835 8865, Website: www.cam.com.sg, Email: Telephone: 352 - 47 18471

CAM-GTF Limited

OT

OT MUS 02/14 USD 337077.84

n Citadele
Republikas square 2a, Riga, LV-1522, Latvia

Citadele Eastern Europ Bal EU BD LVA 02/21 EUR
Citadele Eastern Europ Bd EU BD LVA 02/21 USD
Citadele Russian Eq
EE EQ LVA 02/21 USD

16.54
20.34
19.93

1.5

-20.1

-2.3

-0.2
-0.2
-11.3

1.0
1.7

-13.0

5.9
6.0
-6.4

n DJE INVESTMENT S.A.
internet: www.dje.lu email: phone:+00 352 269 2522 0 fax:+00 352 269 25252
DJE Real Estate P
DJE-Absolut P
DJE-Alpha Glbl P
DJE-Div& Substanz P
DJE-Gold&Resourc P
DJE-Renten Glbl P
LuxPro-Dragon I
LuxPro-Dragon P
LuxTopic-Aktien Europa
LuxTopic-Pacific

OT OT LUX 02/24 EUR
OT OT LUX 02/24 EUR
OT OT LUX 02/24 EUR
OT OT LUX 02/24 EUR
OT EQ LUX 02/24 EUR
EU BD LUX 02/24 EUR
AS EQ LUX 07/20 EUR
AS EQ LUX 07/20 EUR
EU EQ LUX 02/24 EUR
OT OT LUX 02/24 EUR

n HERMITAGE CAPITAL MANAGEMENT LTD.
Tel: +7501 258 3160 www.hermitagefund.com
The Hermitage Fund

GL EQ JEY 03/12 USD

4.31
252.94
187.42
279.50
132.06
150.29
144.57
140.29
20.31
19.58

-0.7
0.1
-3.6
-1.2
8.9
1.0
-8.5
-8.8
-0.3
-1.2

-8.0
6.4

6.6
6.3
-14.4
2.8
5.0
4.4
6.8
-8.8

-7.2
7.4
5.2
9.1
-18.6
4.4
7.6
7.0
5.4
0.1

963.12

4.5

105.6

HSBC Trinkaus Golden Opportunities
Prosperity Return Fund A
Prosperity Return Fund B
Prosperity Return Fund C

Prosperity Return Fund D
Renaissance Hgh Grade Bd A
Renaissance Hgh Grade Bd B
Renaissance Hgh Grade Bd C
Renaissance Hgh Grade Bd D

OT
JP
EU
EU
EU
EU
EU
EU
EU

OT
BD
BA
BA
BA
BA
BA
BA
BA

LUX
LUX
LUX
LUX

LUX
LUX
LUX
LUX
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02/21
12/06
12/06
12/06
12/06
12/06
12/06
12/06
12/06

USD
JPY
JPY
USD
EUR
JPY
JPY
USD
EUR

-23.2

n MP ASSET MANAGEMENT INC.
Tel: + 386 1 587 47 77

MP-BALKAN.SI
MP-TURKEY.SI

EE
OT

EQ SVN 08/12 EUR
OT SVN 02/21 EUR

19.29
33.35

-1.9
-7.9

-8.4
-31.1

n HORSEMAN CAPITAL MANAGEMENT LTD.
T: +44(0)20 7838 7580, F: +44(0) 20 7838 7590, www.horsemancapital.com n MERIDEN GROUP
Horseman EurSelLtd EUR EU EQ GBR 01/31 EUR
349.13
4.3
31.3
29.1 Tel: + 376 741 175 Fax: + 376 741 183 Email:
Horseman EurSelLtd USD
Horseman Glbl Ltd EUR
Horseman Glbl Ltd USD

EU EQ GBR 01/31 USD

GL EQ CYM 01/31 USD
GL EQ CYM 01/31 USD

349.13
577.71
577.71

NS
NS
NS

n HSBC ALTERNATIVE INVESTMENTS LIMITED
T +44 20 7860 3074 F + 44 20 7860 3174 www.hail.hsbc.com
HSBC ALTERNATIVE STRATEGY FUND
Special Opp EUR
Special Opp Inst EUR
Special Opp Inst USD
Special Opp USD

OT
OT
OT
OT

OT
OT
OT
OT

GGY

GGY
GGY
GGY

n HSBC Portfolio Selection Fund
GH Fund CHF Hdg
GH Fund EUR Hdg (Non-V)
GH Fund GBP Hdg
GH Fund Inst USD
GH FUND S EUR

OT
OT
OT
OT
OT

OT
OT
OT
OT
OT

postcrisis regulatory response. The
worst because the rules are
unabashedly unilateral and
predicated on the belief, spelled
out by Mr. Tarullo, that the U.S.
can tell other countries what to do
in order to keep the financial

system safe.
That won’t go down well with
the Europeans and other critics,
who argue that the U.S. abdicated
that role after failing to police its
own banks in the run-up to the
crisis.
Yet, the Fed’s decision cuts
through the regulatory quicksands
that have mired the international
financial system since 2008.
Instead of the morass of
committees, international forums
and tepid communiqués from the
Group of 20 (there was another
one this past weekend), banks and
their investors have the prospect of
having the Fed and its rules as a
global model. If the Fed is the
global lender of last resort, it
should also be the global banking
regulator.
In itself, that won’t eliminate
the maze of diverging national
rules but could go a long way
toward simplifying it, even if the
EU retaliates. Unless Mr. Barnier

imposes wildly different
restrictions on the European units

of U.S. banks, which already have
to observe international capital
rules, the resulting outcome should
be tighter capital and risk controls
across the two regions.
The Fed’s rules—and the EU’s
response—could help plug two
other holes in the regulatory net:
the lack of a system to let a large
bank fail without disrupting global
markets, and the sluggish efforts
by European banks to bolster
capital levels.
According to Chris Brummer, a
law professor at Georgetown
University, the impetus to pass
foreign-bank rules partly reflects
“the absence of a credible crossborder resolution mechanism, as
well as lingering concerns with the
recapitalization efforts in Europe.”
Despite the controversy, last
week’s move by the Fed could be
the start of a race to the top of the
regulatory tree. After all, these are
“our” banks and our problem.
Francesco Guerrera is The Wall
Street Journal’s financial editor.
Write to him at: and follow him on
Twitter: @guerreraf72

INTERNATIONAL INVESTMENT FUNDS

Advertisement
FUND NAME

important contribution we can
make to the global financial system
is to ensure the stability of the U.S.
financial system.”
As a statement of regulatory
intent, Mr. Tarullo’s words echo
those of John Connally, Richard
Nixon’s Treasury secretary, who
told a group of European finance
ministers that the dollar was “our
currency but your problem.”
Not surprisingly, the Fed’s
actions elicited outrage in the
European Union, which abhors the
idea of having U.S. regulators
setting capital levels for EU banks.
Michel Barnier, the European
commissioner for the internal
market, called the measures
discriminatory and issued a not-sothinly-veiled threat to retaliate.
When I spoke to Mr. Tarullo on
Thursday, he didn’t back down.
“The stability of the U.S. financial
system is very important,” he said.
“Contrast the 1997-1998 Asian

market crisis, when the U.S. was
very solid and as a result, the
contagion never could engulf the
entire financial system. In 2007,
when the U.S. wasn’t solid, the
contagion did spread.”
The Fed’s ruling encapsulates
both the worst and the best of the

GGY
GGY
GGY
GGY
CYM

12/31
03/31
03/28
12/31
01/31
01/31
01/31
01/31
01/31

EUR
EUR
USD
USD

CHF
EUR
GBP
USD
EUR

122.21
88.51
123.18
129.13
125.95
140.23
154.96
133.63
156.05

14.2
0.7
4.2
14.0
0.5
0.5
0.5
0.6
0.6

NS
NS
NS

NS
NS
NS

14.2
-0.3
18.5
14.0

Antanta Combined Fund
Antanta MidCap Fund
Meriden Opps Fund
Meriden Protective Div

EE
EE
GL
GL

EQ
EQ
OT
EQ

AND
AND
AND
AND

01/24

01/24
02/05
11/24

USD
USD
EUR
EUR

207.19
373.49
22.68
NS.00

-1.3
3.5
0.0
-2.8

-19.3
-7.3
-11.2
NS

-10.9
-6.8

-17.5
-11.6
-11.0

NS

17.0
13.3
10.6
17.3

6.7
6.3
6.9
7.3
7.7

6.1
6.0
6.7
7.0
7.2

FUND NAME

NAV
GF AT LB DATE CR

Pictet-Brazil Index-P USD
Pictet-CHF Bonds-P
Pictet-China Index-P USD
Pictet-Clean Energy-P USD
Pictet-Digital Comm-P USD
Pictet-Eastern Europe-P EUR

Pictet-Em Corp Bds-P USD
Pictet-Em Loc Curr Dbt-P USD
Pictet-Em Mkts Hgh Div-P USD
Pictet-Em Mkts Index-P USD
Pictet-Em Mkts Sust Eq-P USD
Pictet-Emerging Markets-P USD
Pictet-Envir Megatr Sel-P EUR
Pictet-Eu Equities Sel-P EUR
Pictet-EUR Bonds-P
Pictet-EUR Corp Bds Ex Fin-P
Pictet-EUR Corporate Bonds-P
Pictet-EUR Government Bonds-P
Pictet-EUR High Yield-P
Pictet-EUR Inflation Lkd Bds-P
Pictet-EUR SM-Term Bds-P
Pictet-EUR ST High Yld-P
Pictet-Euroland Index-P EUR
Pictet-Europe Index-P EUR
Pictet-European Sust Eq-P EUR
Pictet-Generics-P USD
Pictet-Glo Bds Fundamental-P USD
Pictet-Glo Em Currencies-P USD
Pictet-Glo Emerging Debt-P USD
Pictet-Glo Megatrend Sel-P USD
Pictet-Greater China-P USD
Pictet-High Dividend Sel-P EUR
Pictet-India Index-P USD
Pictet-Indian Equities-P USD
Pictet-Japan Index-P JPY
Pictet-Japanese Eq Opp-P JPY

Pictet-Japanese Eq Sel-P JPY
Pictet-Latam Index-P USD
Pictet-Latin Am Loc Curr Dbt-P USD
Pictet-Pac (ExJpn) Idx-P USD
Pictet-Piclife-P CHF
Pictet-Premium Brands-P EUR
Pictet-Quality Gl Eq-P USD
Pictet-Russia Index-P USD
Pictet-Russian Equities-P USD
Pictet-Security-P USD
Pictet-Short-T Money Mkt CHF-P
Pictet-Short-T Money Mkt EUR-P
Pictet-Short-T Money Mkt JPY-P
Pictet-Short-T Money Mkt USD-P
Pictet-Small Cap Europe-P EUR
Pictet-Sov. ST Money Mkt-P EUR
Pictet-Sov. ST Money Mkt-P USD
Pictet-Timber-P USD
Pictet-US Eq Grwth Sel-P USD
Pictet-US Eq Value Sel-P USD
Pictet-US High Yield-P USD
Pictet-USA Index-P USD
Pictet-USD Government Bonds-P
Pictet-USD Short Mid-Term Bds-P
Pictet-Water-P EUR
Pictet-World Gvt Bonds-P EUR
PTR-Banyan-P USD
PTR-Corto Europe-P EUR
PTR-Kosmos-P EUR
PTR-Mandarin-P USD

OT
CH
AS
OT
OT
EU
OT
OT
GL
GL
GL
GL
OT
EU
EU
EU
EU
EU
EU
EU
EU
EU
EU
EU
EU
OT
OT
OT
GL

GL
AS
OT
EA
EA
JP
JP
JP
GL
OT
AS
OT
OT
GL
EE
EE
GL
CH
OT
OT
OT
EU
OT
OT
GL
US
US
US
US
US

US
OT
OT
OT
OT
OT
OT

OT
BD
EQ
OT
EQ
EQ
OT
OT
EQ
EQ
EQ
EQ
OT
EQ
BD
BD
BD
BD
BD
BD
BD
BD

EQ
EQ
EQ
EQ
OT
OT
BD
EQ
EQ
OT
EQ
EQ
EQ
EQ
EQ
EQ
OT
EQ
OT
EQ
EQ
EQ
EQ
EQ
MM
OT
OT
OT
EQ
OT

OT
EQ
EQ
EQ
BD
EQ
BD
BD
OT
OT
OT
OT
OT
OT

LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX

LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX

LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX

02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21

02/24
02/21
02/21
02/24
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/24
02/21
02/21
02/24
02/24
02/24
02/24
02/21

02/21
02/24
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/21
02/20
02/21
02/21
02/24

USD

CHF
USD
USD
USD
EUR
USD
USD
USD
USD
USD
USD
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
USD
USD
USD
USD
USD
USD

EUR
USD
USD
JPY
JPY
JPY
USD
USD
USD
CHF
EUR
USD
USD
USD
USD
CHF
EUR
JPY
USD
EUR
EUR
USD
USD
USD
USD
USD
USD
USD
USD
EUR

EUR
USD
EUR
EUR
USD

NAV
63.09
466.05
99.84
86.51
210.81
319.28
100.73
175.15
105.97
234.57
91.03
492.50
121.49
540.93
475.82
132.87
179.13
139.02
221.30
116.85
132.15
115.89
116.12

148.48
188.80
210.97
128.53
103.84
308.82
210.73
380.86
129.21
81.25
303.32
12560.47
6969.12
10616.89
72.39
135.30
361.62
903.38
123.15
123.23
75.27
61.24
167.75
124.25
137.73
10127.88
132.31
860.51
102.68
102.02

151.31
172.80
185.77
145.23
156.77
579.97
125.82
197.58
132.15
95.94
130.87
106.89
103.23

Data provided by:

—%RETURN—
YTD 12-MO 2-YR
-8.0
1.2
-5.2
1.3
2.2
-7.5
1.0
-2.6
-5.7
-4.2
-6.0
-5.3

0.3
-1.2
2.4
1.6
1.7
2.5
1.6
0.8
0.5
0.9
2.0
2.4
2.5
10.6
0.4
-1.1
0.6
3.4
-5.1
0.5
-2.4
0.3
-6.7
-7.0
-8.0
-7.8
0.3
0.7
0.4
-3.2

-0.4
-8.8
-10.2
1.7
0.0
0.0
0.0
0.0
4.7
0.0
0.0
0.4
2.0
-0.5
1.6
-0.5
1.5
0.2
0.9
2.5
-6.5
4.3
0.5
-2.8

-22.5
1.4
-1.9
31.0
38.3

-13.1
-1.7
-14.3
-8.3
-7.3
-10.8
-7.1
12.8
8.1
3.5
3.3
4.0
4.6
10.9
-2.1
2.3
6.2
25.2
20.2
18.3
34.4
-3.5
-4.1
-4.5
25.9
-1.4
12.0
-6.9
-2.8
28.2

28.3
25.7
-20.7
-13.8
-0.8
4.8
13.6
16.4
-10.2
-8.5
21.3
0.0
0.0
0.0
0.1
31.2
-0.1
0.1
9.0
33.5
21.4
6.1
23.9
-1.5
0.2
12.3
-3.8
-9.2
15.3
1.2

6.3

-20.7
2.5
1.5
12.5
22.2
-4.4
NS
-4.7
NS
-3.3
NS
-4.4
9.7
10.0
6.2
4.7
6.4
5.9
13.0
0.9
2.6
7.0
16.3
14.8
13.5
24.6
-1.0
-1.9

2.9
18.4
2.4
12.3
-5.8
-2.5
23.1
25.0
21.7
-14.9
-7.0
7.6
6.5
11.9
NS
-7.5
-6.3
15.1
0.0
0.0
0.0
0.2
23.9
-0.1
0.1
14.8
18.7
15.0
8.4
17.6

0.3
0.3
11.0
-2.6
-4.5
16.7
1.6
3.7

FUND NAME

NAV
GF AT LB DATE CR

Paragon Limited USD A
UK Fund USD A

EU
OT

n Pictet Funds (Europe) SA, ROUTE DES ACACIAS 60, CH-1211 GENEVA 73
Tel: + 41 (58) 323 3000 Web: www.pictetfunds.com
Pictet-Abs Ret Gl Div-P EUR
Pictet-Agriculture-P EUR
Pictet-Asian Eq ExJpn-P USD
Pictet-Asian Loc Cur Dbt-P USD
Pictet-Biotech-P USD

GL OT LUX
OT OT LUX

OT OT LUX
AS BD LUX
OT EQ LUX

02/21
02/21
02/24
02/24
02/21

EUR
EUR
USD
USD
USD

113.74
149.57
179.60
142.84
658.29

-0.3
-2.1
-2.4
0.2
18.9

-3.7
-1.4

-0.2
-7.8
70.8

-0.9
3.1
1.5
-2.2
45.8

OT
JP
OT
OT

EQ
EQ
EQ
EQ

IRL
IRL
IRL
IRL

02/21
02/24
02/21
02/21

USD
USD
USD
USD

n Hemisphere Management (Ireland) Limited
Discovery USD A
Elbrus USD A
Europn Conviction USD B
Europn Forager USD B
Latin America USD A

GL
OT
EU
EU
GL

OT
OT
EQ
EQ
EQ

CYM
CYM
CYM
CYM
CYM

12/31
01/31
01/31
01/31
06/30

USD
USD
USD
USD
USD

23.53
21.17
33.46
32.82

3.0
-6.2
18.0
17.9

31.7
13.8
71.3
70.8

15.4
5.9
47.1

46.5

101.35
10.10
161.54
324.09
NS.00

NS
NS
0.3
2.6
NS

NS
NS
1.1
11.7
NS

NS
NS
5.3
11.9
NS

EQ CYM 12/31 USD
OT CYM 04/13 USD

NS.00

157.94

—%RETURN—
YTD 12-MO 2-YR
12.7
1.8

12.7
NS

14.2
NS

n PT CIPTADANA ASSET MANAGEMENT
Tel: +6221 25574 883 Fax: +6221 25574 893 Website: www.ciptadana-asset.com
Indonesian Grth Fund

GL

EQ BMU 02/19 USD

154.09

13.0

-16.5

-10.2

1127.97

1372.98
10.69

1.1
6.0
17.3

5.8
28.6
84.6

6.7
18.4
52.3

13472.00

-6.4

37.6

28.2

16498.00

-4.3

50.8

34.8

n THE NATIONAL INVESTOR
PO Box 47435, Abu Dhabi, UAE Web:www.tni.ae
MENA Special Sits Fund
MENA UCITS Fund
UAE Blue Chip Fund

OT
OT
OT

OT BMU 01/31 USD
OT IRL 02/13 USD
OT ARE 02/13 AED

n YUKI MANAGEMENT & RESEARCH
n YMR-N Series
YMR-N Growth Fund

JP

EQ IRL 02/24 JPY

n Yuki Asia Umbrella Series
Yuki Rebounding Gro Fd

JP

EQ IRL 02/24 JPY

n Yuki Mizuho Series
Yuki Mizuho Jpn Dyn Gro

JP

EQ IRL 02/24 JPY

5745.00

-6.7

36.4

27.1

Yuki Mizuho Jpn Inc

JP

EQ IRL 02/24 JPY

10031.00

-4.0

27.0

22.4

Yuki Mizuho Jpn Lg Cap

JP

EQ IRL 02/24 JPY

6167.00

-8.4

25.1

18.0

Yuki Mizuho Jpn LowP

JP

EQ IRL 02/24 JPY

18512.00

-6.3

49.8

35.6

Yuki Mizuho Jpn Val Sel

AS

EQ IRL 02/24 JPY

9158.00

-4.9

51.2

39.7

n OTHER FUNDS
For information about these funds, please contact us on Tel: +44 (0) 207 842 9694/9633
Medinvest Plc Dublin

OT EQ IRL 09/30 USD

NS.00

n WINTON CAPITAL MANAGEMENT LTD
Tel: +44 (0)20 7610 5350 Fax: +44 (0)20 7610 5301
Winton Evolution EUR Cls H
Winton Evolution GBP Cls G
Winton Evolution USD Cls F
Winton Futures EUR Cls C
Winton Futures GBP Cls D
Winton Futures JPY Cls E
Winton Futures USD Cls B

GL

GL
GL
GL
GL
GL
GL

n POLAR CAPITAL PARTNERS LIMITED
International Fund Managers (Ireland) Limited PH - 353 1 670 660 Fax - 353 1 670 1185
Global Technology
Japan Fund USD
Polar Healthcare Class I USD
Polar Healthcare Class R USD

NAV

OT
OT
OT
OT
OT
OT
OT

CYM
CYM
CYM
VGB
VGB
VGB

VGB

01/31
01/31
01/31
01/31
01/31
01/31
01/31

EUR
NS.00
GBP
NS.00
USD
NS.00
EUR
245.63
GBP
267.48
JPY 17199.60
USD
876.58

NS

1.3

-4.4

-3.1
-3.1
-3.1
-2.4
-2.4
-2.3
-2.4

7.2
7.6
7.6
3.8
4.1
4.4
4.2

1.5
1.9
1.8
0.9
1.3
1.0
1.2

INDICES
FUND NAME

NAV
——————%RETURN ——————
GF DATE CR NAV 1-WK 1-MO 1-Q 1-YR 2-YR

n ARIX ABSOLUTE RETURN INVESTABLE INDEX
Feri Institutional Advisors, www.feri.de
ARIX Composite Gross USD OT

OT GBR 01/31.00

USD1603.76

0.1

5.8

6.1

NAV

OT CYM 06/07.00

GBP25839.68

5.3

10.9

9.8

n CG Portfolio Fund Ltd
OT

Data as shown is for information purposes only. No offer is being made by Morningstar, Ltd. or this publication. Funds shown aren’t registered with the U.S. Securities and Exchange Commission and aren’t available for sale to United States citizens and/or residents
except as noted. Prices are in local currencies. All performance figures are calculated using the most recent prices available. 12-month and 2-year returns may be calculated over 11- and 23-month periods pending receipt and publication of the last month end price.

For information about listing your funds, please contact: Lauren Berkemeyer tel: +44 20 7572 2102; email:


22 | Tuesday, February 25, 2014

THE WALL STREET JOURNAL.

MARKETS

India Migrant Workers
Bring Home the Gold
CALICUT, India—More than 50
passengers on a recent Air India
flight from Dubai arrived in this
small city on India’s Malabar Coast
carrying gold bars that customs officials valued at $2.5 million.
The passengers arrived at the
customs line in the dusty airport
here, handed over declaration forms
for the gold and paid the 10% duty,
many saying that they had bought
the bars for a relative’s coming
wedding.
The customs officials weren’t
surprised to see the caravan of gold.
With normal avenues of import
closed, officials say, jewelers and

traders in this gold-obsessed country are exploiting a legal loophole
and using Indians who are coming
home after working in other countries to ferry the precious metal
into India. It is an example of what
happens when a government tries
to restrict a much sought-after
commodity.
“We’ve seen this sharp increase,” said Peter Abraham, Calicut’s airport director. “These people
just don’t have the capacity to buy
all this gold. They are just poor
people working in the Middle East.
Probably they are acting as couriers.”
In December, passengers declared a total of more than 4,000
pounds of gold at the Calicut airport alone, valued at roughly $80
million. That is up from 518 pounds
in November and 70 pounds in October.
India’s insatiable demand for
gold has been rising over the past
decade. The metal is considered the
best form of life savings by the vast
majority of the country’s one-billion
plus people.
Very few Indians own stocks or
bonds and close to half don’t even
have a bank account. The yellow
metal is also thought to bring both
good fortune and prosperity. India’s
gold demand jumped to around 864
metric tons in 2012, up around 30%
from a decade earlier.

“India’s demand for gold cannot
simply dry up” because the government is blocking imports said
Bachhraj Bemalwa, director in the
All India Gem and Jewelry Trade
Federation. “People are crazy for
gold in this country.”
Desperate to shrink a chronic
trade deficit that has threatened to
destabilize the economy, India
started trying to curb gold imports
last year. The import tax on gold
was raised to 10% of the value of
the gold from 2%. Importers are
also required to re-export at least
20% of the gold they bring into the
country. Because of the restrictions,
gold prices in India are out of

Associated Press

BY BIMAN MUKHERJI

Indian customers shop for gold jewelry at a shop in Mumbai.
whack with those in the rest of the
world. A kilogram of gold sells for
about $40,300 on global markets. In
India, it is fetching $48,400.
But there is a way around the
curbs. Indians who have lived
abroad for at least six months are

allowed to bring home up to 1 kilogram, or 2.2 pounds, of gold. They
need only to pay the 10% duty.
There is no re-export requirement.
The difference in domestic and international gold prices provides an
ample margin for traders to cover
the cost of airfare and even a little
something extra for couriers to
bring the metal home.

‘Whole families are
walking in with their
pockets stuffed with
gold,’ said one Calicut
customs official.
Millions of Indian migrant workers come and go every year from
Calicut and other Indian cities to
Middle East destinations such as
Dubai. Many work as construction
workers and domestic helpers, often
earning a monthly salary of about
$1,000.
“Whole families are walking in
with their pockets stuffed with
gold,” said one Calicut customs official. “They all tell us stories about
needing the gold for weddings in
the family, but we all know are just
couriers.”
And one after the other, they
meet people just outside the airport, hand over their gold and move
on.

Customs officers say the passengers aren’t breaking the law as long
as they have worked overseas for
six months. They could even openly
declare that they have been paid to

bring in gold for others, customs officials said, but most are reluctant
to declare the real source of their
gold because they feel like they may
be breaking the law.
“So long as it comes within the
legal provisions, then there is no
cause of worry for the government,”
said D.S Malik, a Finance Ministry
spokesman. “If it still continues to
increase, then the government may
take a call at the appropriate time”
about closing the loophole, he said.
Meanwhile, outright gold smuggling is also on the rise, officials
said. India arrested 206 people in
the first half of this fiscal year for
smuggling the yellow metal, compared with 38 people a year earlier.
The value of gold seized from
smugglers between April and October was $33.6 million, almost double the $17.3 million seized in the
full financial year to March 31, 2013,
according to India’s finance ministry.
People have been trying to
smuggle gold by ingesting it, hiding
it in their underwear or even disguising it as staples, batteries or
the internal parts of televisions. It
is like a return to the 1980s, when

India was more socialist and restricted most imports, creating a
thriving smuggling trade in every
town.
The Indian government may
soon cut its import tax on gold to
between 6% and 8% from the current 10%, according to government
and industry officials.
While gold supplies through official channels such as banks have
dried up and posed problems for
jewelry shops across India, some in
Calicut say there is no dearth of
supply, as long as they don’t ask too
many questions.
“People bring in coins and bars
all the time,” said Shirish K.P., a 39year-old jeweler at Calicut’s gold
hub of Palayam. “We don’t really
need to ask where it comes from.”

Global Investors Reverse Course on the Yuan

Continued from page 15
Bullish bets had buoyed the yuan
since the beginning of the year, according to traders and analysts,
driven by hopes that the currency
would keep appreciating as China
continued to promote its international use.
“There were way too many structured products [betting on yuan appreciation] bought by private-bank
investors and wealthy individuals,”

said Eric Yum, head of offshore yuan

and Hong Kong dollar trading at J.P.
Morgan Chase & Co. “Panic selloff
was triggered when the PBOC kept
fixing the yuan at weaker levels.”
Hot-money inflows—defined as
net capital inflows not intended for
foreign direct investment—accounted for more than $150 billion
of the $433 billion increase in
China’s foreign-exchange reserves in
2013, UBS said. That had been help-

ing to push up the yuan.
Some reckon, though, that
China’s long-term policy to let the
yuan appreciate won’t change much,
given Beijing’s plan to internationalize its currency.
Plus, they figure, the central
bank may be reluctant to let the
yuan become too weak because that
could trigger outflows from investors and multinational companies
operating in China.

S&P 500 Advances
To Intraday Record

BY CLARE CONNAGHAN
AND NEELABH CHATURVEDI

$170 billion. He said he expects more
volatility in stocks this year, though

he still favors corners of the market
that will benefit from economic expansion, including consumer-discretionary, industrial and technology
stocks.
The Dow Jones Industrial Average
gained 105.83 points, or 0.7%, to
16209.13. The Nasdaq Composite Index advanced 29.56 points, or 0.7%,
to 4292.97, its highest close since
April 2000.
While the S&P 500 finished close
to its all-time high, the Dow remains
2.2% away from its record of
16576.66 reached Dec. 31. The Nasdaq
Composite Index remains 15% from
its all-time high of 5048.62 reached
at the height of the dot-com bubble
in 2000.
In Europe, shares got a lift from
German confidence data. The Ifo institute’s business-confidence index
climbed to 111.3 in February, from an
unrevised 110.6 in January, hitting
its highest level since July 2011 and
smashing economists’ forecasts.
“The rise in February’s German
Ifo survey suggests that the economic recovery has continued to
pick up some momentum in the
early months of 2014,” said Jonathan Loynes, chief European economist at Capital Economics.
Yields on Ukraine government
bonds fell sharply on expectations
the European Union and other authorities will offer a financial-assistance package. The yield on
Ukraine’s benchmark dollar-denominated 10-year bond fell by nearly a

percentage point to 9.17%, according
to Tradeweb.
HSBC Holdings shares fell 2.8%
in London after the bank’s full-year
results came in short of analyst expectations.
Gold for February delivery
gained $14.40 a troy ounce, or 1.1%,
to $1,338.30 on the Comex division
of the New York Mercantile Exchange. Nymex crude for April delivery gained 62 cents a barrel, or
0.6%, to $102.82.
—Dan Strumpf
contributed to this article.

The S&P 500 rose to finish just a
fraction below its record closing high
Monday, as a mixed bag of recent
U.S. economic data and corporate
earnings has failed to damp investors’ enthusiasm for stocks.
European shares also climbed,
boosted by the gains in the U.S. and
by better-than-expected data on German business confidence. The Stoxx
Europe 600 rose 0.6% to
MARKET 338.19, its highest close
REPORT since January 2008.
The U.K.’s FTSE 100
index added 0.4% to 6865.86, its seventh consecutive gain, leaving it at
its highest close since December
1999. Germany’s DAX rose 0.5% to
9708.94, and France’s CAC 40 advanced 0.9% to 4419.13.
The S&P 500 closed up 11.46

points, or 0.6%, at 1847.71, just below
its Jan. 15 record closing level of
1848.38. It hit an all-time intraday
high of 1858.71 Monday.
The rally over the past few weeks
has wiped out the S&P 500’s earlier
year-to-date loss of 5.8%, underscoring investors’ willingness to shrug off
a bevy of disappointing U.S. economic reports and a mixed fourthquarter earnings season. Many market watchers have dismissed the bad
news as unduly influenced by unusually harsh winter weather and are
confident growth will pick up again
later in the year.
One upbeat indication has been
the recent pickup in gross domestic
product. U.S. GDP expanded at a pace
of 3.7% in the final two quarters of
2013, the best second half of a year
since 2003. Meanwhile, the Federal
Reserve’s willingness to continue
reining in its stimulus program has
been viewed by investors as a vote of
confidence in the U.S. economy.
“The markets should be at an alltime high because we have an alltime high in GDP and an all-time
high in earnings, so it’s reflecting
that reality,” said Ron Florance, deputy chief investment officer for Wells
Fargo Private Bank, which manages

Fund Scorecard
EUR Inflation-Linked Bond
Funds that invest principally in inflation-linked bonds denominated in or hedged-into
the Euro. Ranked on % total return (dividends reinvested) in Euros for one year ending

February 24, 2014

Leading 10 Performers
FUND FUND
RATING * NAME

3
3
NS
5
NS
4
4
NS
4
4

FUND MGM'T CO.

LEGAL
CURR. BASE

CamGestion
CamGestion
EURFRA
Oblicycle Inflation O
LFP
La Franỗaise des
EURFRA
MultistratộgiesObligatairesI Placements

Fon Fineco
G.I.I.C. Fineco
EURESP
Inflación FI
ComStage
Commerz Funds
EURLUX
iBoxx€SovInfLnkEu-InfTRETF Solutions S.A.
Duemme SICAV Duemme
EURLUX
BondInflation LinkedIAcc International Luxembourg SA
Aviva
Aviva Investors
EURFRA
Investors Inflation Euro A France
Vanguard
Vanguard Group
EURIRL
EurznInfl-LnkdBdIdxInsEUR (Ireland) Limited
MEAG
MEAG Munich Ergo
EURDEU
RealReturn
KAG
FIM Real
FIM Varainhoito Oy
EURFIN
Lyxor ETF
Lyxor
EURFRA

EuroMTSInfLinkInvstGrdA/I International Asset Management

NOTE: Changes in currency rates will affect performance and rankings.
KEY: ** 2YR and 5YR performance is annualized
NA-not available due to incomplete data;
NS-fund not in existence for entire period

YTD

% Return in $US **
1-YR 2-YR 5-YR

2.31

4.70

8.37

4.05

1.87

4.53

4.88

3.35

1.19

2.43

3.92

NS

1.97

2.14

6.33

NS

1.37

1.88

2.85

NS

1.23

1.84

4.65

NS

1.47

1.70

6.74

4.82

1.71

1.38

3.77

NS

1.37

1.37

4.23

4.43

1.48

1.33

5.39

4.51

Source: Morningstar, Ltd
1 Oliver’s Yard, 55-71 City Road
London EC1Y 1HQ United Kingdom
www.morningstar.co.uk; Email:
Phone: +44 (0)203 107 0038; Fax: +44 (0)203 107 0001


THE WALL STREET JOURNAL.

Tuesday, February 25, 2014 | 23

GLOBAL MARKETS LINEUP
Major stock market indexes

Stock indexes from around the world, grouped by region. Shown in local-currency terms.
Close

PERFORMANCE
Percentage change
Yr.-to-date

PREVIOUS SESSION

Region/Country

Index

Net change

EUROPE

Stoxx Europe 600

338.19

2.10

Stoxx Europe 50

0.62%

3.0%

52-wk.
17.2%

Region/Country
Spain

Close
10193.10

2976.76

15.65

0.53

2.0

13.1

Sweden

OMX Stockholm

Euro Stoxx

322.93

2.27

0.71

2.7

21.7

Switzerland

SMI

Euro Stoxx 50

3157.31

25.64

0.82

1.6

20.0

Turkey

Austria

ATX

2678.01

14.74

5.2

10.6

Belgium

Bel-20

3044.76

25.32

4.1

19.4

Czech Republic

PX

1039.29

-6.77

5.1

3.9

Euro Zone

0.55
0.84
-0.65%

Denmark

OMX Copenhagen

645.07

7.84

Finland

OMX Helsinki

7557.09

34.58

France

CAC-40

4419.13

38.07

Germany

DAX

9708.94

51.99

BUX

18221.94

110.96

ISEQ

5054.19

49.34

Italy

FTSE MIB

20477.50

85.60

AEX

401.76

1.40

0.35

Norway

All-Shares

0.38

Poland

WIG

Portugal
Russia

614.21
7307.70

79.21

RTSI

1318.98

3.44

64185.96

300.3

U.K.

FTSE 100

6865.86

27.80

ASIA-PACIFIC

DJ Asia-Pacific TSM

1414.39

-1.52

Australia

SPX/ASX 200

5440.20

1.50

30.1

China

Shanghai Composite

20.4

Hong Kong

Hang Seng

22388.56

2076.69

-179.68

19.2

India

S&P BSE Sensex

20811.44

Japan

Nikkei Stock Average

14837.68

-3.4

Singapore

Straits Times

3105.84

South Korea

Kospi

1949.05

8.0

26.1

AMERICAS

DJ Americas

468.01

18.2

Brazil

Bovespa

47476.97

Mexico

IPC

40010.97

19.5

-8.6

0.26%

17.7

11.4

1.10

18.6

2.45%18.52
2.99 17.72
3.05 13.47
3.17 19.15
2.39 19.37
2.99 13.07
3.33 18.44
3.24 21.17
3.80 17.32
3.61 8.55
1.93 19.85

1699.11
224.68

0.63% 14.7%
0.78 10.4

1377.79
1369.50
1437.32
362.82

0.65 17.1

0.71 21.5
0.64 17.4
-0.05 -14.3

PERFORMANCE (U.S.dollars)
Last
Daily
52-wk.

3248.66
2478.72
230.53
3490.22
3279.81
245.47
1701.43
1713.88
2095.31
475.20
19602.53
203.42

0.72%
0.56
0.73
0.56
0.76
0.10
0.79
0.85

0.50
-0.10
1.13
-0.18

Price-toDividend earnings
yield*
ratio* S&P Dow Jones Index

-1.9

-1.7

-0.19

7.7

-8.9

0.53

27.2

-1.9

-5.6

-3.1

0.19

-0.45

-3.0

0.5

19.5

-7.8

-16.3

-6.4

1.03
0.20
0.72

-8.8

Sources: SIX Financial Information; WSJ Market Data Group

17.5%
19.2
14.7
23.2
20.6
-8.2
22.2
26.8

22.0
-10.9
26.3
3.8

6.35%14.98
6.71 14.35
3.29 29.14
2.16 19.16
2.50 17.18
3.29 21.22
3.97 22.93
1.94 13.55

Developed and emerging-market regional and country indexes
from MSCI as of February 24, 2014

PERFORMANCE (euros) PERFORMANCE (U.S.dollars)
Last
Daily
52-wk.
Last Daily 52-wk.

Turkey Titans 20 -c
Global Select Div
Asia/Pacific Select Div 280.86
U.S. Select Dividend -d
S&P Glb Nat Resources 2006.01
Islamic Market
Islamic Market 100

Islamic Turkey -c
Sustainability Europe
111.06
S&P Glb Infrastructure 1513.97
Luxury
DJ-UBS Commodity -p 118.73

654.95
254.43
1.27% -9.0% 329.93
1249.09
0.46
2737.94
-4.6
2780.27
3020.59
3971.31
0.59
167.56
15.4
0.63
2349.33
8.1
2074.75
0.37
134.18
-2.4

0.55%
0.83

1.13
0.90
0.40
0.84
0.78
0.44
0.45
0.58
0.40
0.37

-16.0%
14.0
-5.5
24.1
-0.8
17.9
18.9
-7.8
19.9
12.3
17.4
-2.1

Price-toDividend earnings
yield
ratio MSCI Index

LOCAL-CURRENCY
Last

PERFORMANCE

Daily

YTD

52-wk.

2.50% 16

MSCI ACWI*

406.40 -0.30% -0.5%

2.50

17

World (Developed Markets) 1,659.85

-0.23

-0.1

18.1

2.40

17

World ex-EMU

-0.17

-0.3

17.7

2.40

17

World ex-UK

1,668.51 -0.20

-0.3

18.5

3.10

16

EAFE

1,924.84

-0.85

0.5

14.1

2.70

11

Emerging Markets (EM)

959.26 -0.90

-4.3

-10.3

201.88

14.4%

3.30

16

EUROPE

114.62

0.38

2.2

15.9

3.20

18

EMU

200.87

-0.61

1.6

20.7
17.5

USD

GBP

CHF

SEK

RUB

NOK

Australia

1.1061

1.8405

1.2448

0.1703

0.0312

0.1835

Canada

1.1059

1.8401

1.2446

0.1703

0.0312

0.1834

Denmark

5.4300

9.0351

6.1110

0.8362

0.1531

0.9007

Euro

0.7277

1.2107

0.8189

0.1121

0.0205

JPY

0.1207

ILS

EUR

0.0108

0.3145

0.0108

0.3144

0.0530

1.5438

7.4624

...

0.0071

0.2069

...

0.1340

3.00
1.80

4.8337

0.6477

3.1805

3.1798

140.7995

18.8679

92.6440

92.6252

Norway

6.0290

10.0316

6.7850

0.9285

0.1700

...

0.0588

1.7141

8.2855

1.1103

5.4517

5.4506
32.0693

Russia

35.4722

59.0221

39.9204

5.4627

...

5.8836

0.3462

10.0852

48.7486

6.5326

32.0758

Sweden

6.4936

10.8046

7.3079

...

0.1831

1.0771

0.0634

1.8462

8.9240

1.1959

5.8718

0.8886

1.4785

...

0.1368

0.0250

0.1474

0.0087

0.2526

1.2211

0.1636

0.8035

0.6010

...

0.6764

0.0926

0.0169

0.0997

0.0059

0.1709

0.8259

0.1107

0.5435

...

1.6639

1.1254

0.1540

0.0282

0.1659

0.0098

0.2843

1.3743

0.1842

0.9043

LIFFE
LIFFE

Copper ($/lb.)
Gold ($/troy oz.)
Silver ($/troy oz.)
Aluminum ($/ton)*
Tin ($/ton)*
Copper ($/ton)*
Lead ($/ton)*
Zinc ($/ton)*
Nickel ($/ton)*

COMEX

Crude oil ($/bbl.)
Heating oil ($/gal.)
RBOB gasoline ($/gal.)
Natural gas ($/mmBtu)
Brent crude ($/bbl.)
Gas oil ($/ton)

NYMEX

COMEX
COMEX
LME
LME
LME
LME
LME
LME
NYMEX
NYMEX
NYMEX
ICE-EU
ICE-EU

3.2360
1336.70
22.065
1,777.50
23,100.00
7,151.00
2,154.00
2,056.00
14,450

-0.0240
13.10
0.250
16.50

100.00
19.00
11.00
20.50
145

102.72
3.0546
3.0045
4.709
110.65
931.50

0.52
0.0157
0.0015
-0.303
0.80
4.25

0.81

2.46
-0.74
0.99
1.15
0.94
0.43
0.27
0.51

1.01
1.01
0.51
0.52
0.05
-6.05
0.73
0.46

14.0

770.11

0.59

-2.8

-4.1

1,133.05

0.89

-0.4

12.8

13

AC ASIA PACIFIC EX-JAPAN 459.61

-0.72

-1.8

-3.9

16

Japan

2.31

-6.4

29.9
-8.5

South Africa

753.80

9

China

59.91

0.21

-5.1

16

India

798.76

0.89

-2.3

2.6

10

Korea

569.05

1.97

-3.5

0.6

16

Taiwan

301.76

1.03

-0.3

7.0

1.90

19

US BROAD MARKET

2,103.29

0.13

-0.1

24.1

1.50

30

US Small Cap

3,266.82

-0.23

1.2

30.6

3.20

Source: ICAP Plc.

-0.51
-0.05

8.5

2.8

2.90

0.9041

Currencies

1.2

0.52

1.20

0.5433

U.S.

Russia

0.37

207.29

1.50

0.8033

U.K.

2,016.12

3.40

5.8706

Switzerland

LIFFE

Nordic Countries

4.9091

...

ICE-US

UK

17

0.6579

29.1289

3.45
3.46

13

4.9101

...

ICE-US

-16.6

0.6580

0.0343

ICE-US

33.8

-5.1

4

0.5834

ICE-US

5.5

0.70

18

16.9935

-0.09
-0.37

0.53

260.70

3.70

2.8883

CME

275.07

EM Europe

3.00

0.0992

CBOT

Europe Small Cap

6

...

0.5417

1.01%
1.94

23

0.9998

15.7777

-0.16%

14.5

...

3.9583

-0.75
13.75
11.75
-0.125
-11
5.85
0.59
0.72
-2.00
-1
48

1.3

1.0002

115.3012

458.25
1374.00
617.25
141.325
2,939
175.35

17.66
89.07
390.00
1,847
2,003

0.25

0.2037

5.8524

CBOT

108.04

0.2037

170.4724

CBOT

Europe Growth

1.5198

3.5173

Corn (cents/bu.)
Soybeans (cents/bu.)

Wheat (cents/bu.)
Live cattle (cents/lb.)
Cocoa ($/ton)
Coffee (cents/lb.)
Sugar (cents/lb.)
Cotton (cents/lb.)
Rapeseed (euro/ton)
Cocoa (pounds/ton)
Robusta coffee ($/ton)

17.1

21

1.5201

102.4535

Prices of futures contracts with the most open interest

3.1

CDN

Israel

EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.MDEX: Bursa Malaysia
Derivatives Berhad; LIFFE: London International Financial Futures Exchange; COMEX: Commodity Exchange; LME: London Metals Exchange;
NYMEX: New York Mercantile Exchange;ICE-EU: ICE Futures Europe *Data as of February 21, 2014
ONE-DAY CHANGE

Commodity
Exchange
Last price
Net
Percentage

2.2

0.51

DKK

Japan

Commodities

0.42

117.01

3.30

AUD

122.98

Europe Value

3.70

U.S.-dollar and euro foreign-exchange rates in global trading

Europe ex-UK

13

2.40

Source: S&P Dow Jones Indices

18

3.60

Cross rates

3.20
4.20
2.30

*Fundamentals are based on data in U.S. dollar. Footnotes: a-in US dollar. b-dividends reinvested. c-in local currency. Note:All data as of 2 p.m.ET.

14

EM LATIN AMERICA

2,942.72

-0.58

-8.1

-25.3

*Twenty-four developed and 21 emerging markets

Source: MSCI

London close on Feb. 24

AMERICAS
Year
high

Year
low

463.00
1,378.00
617.75
143.200
3,002
179.35
17.79
90.44
398
1,871
2,045

414.50

1,247.50
553.75
135.375
2,636
112.50
14.92
82.60
349
1,674
1,575

3.4110
3.1775
1,339.20 1,203.70
22.215
19.030
1,813.00 1,686.50
23,175.00 21,410.00
7,422.00 7,051.00
2,242.00 2,097.50
2,110.00 1,964.00
14,730
13,425
103.45
3.0901
3.0394
5.2090
110.82
940.50

91.48
2.8758
2.7831
3.8580
104.75
890.00

Sources: SIX Financial Information; WSJ Market Data Group

WSJ.com>>

-10.7

MSCI indexes

PERFORMANCE (euros)
Last
Daily 52-wk.

Global TSM
Global DOW
Global Titans 50
Dev Europe TSM
Developed Markets TSM
S&P BMI Emg Markets
S&P Europe 350
S&P Euro
Europe Dow
BRIC 50
U.S. TSM

Kuwait Titans 30 -c

-1.9

-15.7

Note: Americas index data are as of 3:00 p.m. ET.

S&P Dow Jones Indices
Price-toDividend earnings
yield*
ratio* S&P Dow Jones Index

4.1
7.6

-3.9

286.39

1.9

8.4

1.6

-0.80

96.73

5.4

1.24

1.7
-2.4

4.78

-0.01

11.7

0.03

-8.78

17.6
-15.4

0.41

5.91

36.8

4.3
-5.3

-0.11%

-27.99

-1.8

52-wk.
24.6

3.4

0.47

110.69

26.7

1.80
0.64

-37.01 -1.75

11.3

0.99

663.49

PSI 20

0.87

2.35

54063.60

BIST 100

1.6

0.42

Netherlands

7.80
53.70

2.9

0.61

Ireland

441.88
8485.48

3.0

0.54

Hungary

Net change
122.10

14.0

1.23
0.46

PERFORMANCE
Percentage change
Yr.-to-date
2.8
1.21

PREVIOUS SESSION

Index
IBEX 35

Follow the markets throughout the day with updated stock quotes, news and
commentary at WSJ.com. Also, receive email alerts that summarize the day’s trading in Europe
and Asia. To sign up, go to WSJ.com/email.

Per euro

In euros

Per
U.S. dollar

In
U.S. dollars

Argentina peso-a

10.8187

0.0924

7.8723

0.1270

Euro zone euro

1

1

0.7277

1.3743

Brazil real

3.2043

0.3121

2.3317

0.4289

1-mo. forward

1.0000

1.0000

0.7277

1.3743

EUROPE

Per euro

In euros

Per
U.S. dollar

In
U.S. dollars

Canada dollar

1.5198

0.6580

1.1059

0.9043

3-mos. forward

1.0000

1.0000

0.7276

1.3743

Chile peso

762.17

0.001312

554.60

0.001803

6-mos. forward

0.9999

1.0001

0.7276

1.3744
0.0502

Colombia peso
Ecuador US dollar-f
Mexico peso-a

2804.07 0.0003566

2040.40 0.0004901

Czech Rep. koruna-b

27.354

0.0366

19.904

1.3743

0.7277

1

1

Denmark krone

7.4624

0.1340

5.4301

0.1842

18.1483

0.0551

13.2057

0.0757

Hungary forint

309.96

0.003226

225.54

0.004434

Peru sol

3.8555

0.2594

2.8055

0.3564

Norway krone

8.2855

0.1207

6.0290

0.1659

Uruguay peso-e

30.955

0.0323

22.525

0.0444

Poland zloty

4.1557

0.2406

3.0239

0.3307

U.S. dollar

1.3743

0.7277

1

1

Russia ruble-d

48.749

0.02051

35.472

0.02819

8.73

0.114591

6.35

0.157480

Sweden krona

8.9240

0.1121

6.4936

0.1540

Switzerland franc

1.2211

0.8189

0.8886

1.1254

Venezuela bolivar
ASIA-PACIFIC
Australia dollar

1.5201

0.6579

1.1061

0.9041

1-mo. forward

1.2209

0.8191

0.8884

1.1256

1-mo. forward

1.5229

0.6566

1.1082

0.9024

3-mos. forward

1.2202

0.8195

0.8879

1.1263

3-mos. forward

1.5293

0.6539

1.1128

0.8986

6-mos. forward

1.2191

0.8203

0.8871

1.1273

6-mos. forward

1.5386

0.6499

1.1196

0.8932

Turkey lira

2.9885

0.3346

2.1746

0.4598

U.K. pound

1.6639

China yuan

8.3801

0.1193

6.0978

0.1640

0.8259

1.2107

0.6010

Hong Kong dollar

10.6637

0.0938

7.7595

0.1289

1-mo. forward

0.8261

1.2105

0.6011

1.6636

India rupee

85.0402

0.0118

61.8800

0.0162

3-mos. forward

0.8265

1.2099

0.6014

1.6628

6-mos. forward

0.8271

1.2091

0.6018

1.6616
2.6525

Indonesia rupiah
Japan yen

15915 0.0000628
140.80

11580 0.0000864

0.007102

102.45

0.009761

1-mo. forward

140.78

0.007103

102.44

0.009762

MIDDLE EAST/AFRICA
Bahrain dinar
0.5181

1.9301

0.3770

3-mos. forward

140.73

0.007106

102.41

0.009765

Egypt pound-a

9.5690

0.1045

6.9630

0.1436

6-mos. forward

140.65

0.007110

102.35

0.009771

Israel shekel

4.8337

0.2069

3.5173

0.2843

Malaysia ringgit-c

4.4920

0.2226

3.2687

0.3059

Jordan dinar

0.9731

1.0277

0.7081

1.4123

New Zealand dollar

1.6487

0.6065

1.1997

0.8335

Kuwait dinar

0.3871

2.5833

0.2817

3.5501

144.292

0.0069

104.995

0.0095

Lebanon pound

Philippines peso

Pakistan rupee

61.177

0.0163

44.516

0.0225

Saudi Arabia riyal

5.1542

0.1940

3.7505

0.2666

Singapore dollar

1.7368

0.5758

1.2638

0.7912

South Africa rand

14.8569

0.0673

10.8107

0.0925

5.0478

0.1981

3.6731

0.2723

South Korea won

1476.65 0.0006772

1074.50 0.0009307

Taiwan dollar

41.722

0.02397

30.360

0.03294

Thailand baht

44.702

0.02237

32.528

0.03074

United Arab dirham

2065.81 0.0004841

1503.20 0.0006652

a-floating rate b-financial c-government rate c-commercial
rate d-Russian Central Bank rate.
Source: ICAP Plc.


24 | Tuesday, February 25, 2014

THE WALL STREET JOURNAL.

BLUE CHIPS & BONDS

Major players & benchmarks

Dow Jones Industrial Average

Below, a look at the Dow Jones Stoxx
50, the biggest and best known
companies in Europe, including the U.K.

LAST: 16209.13
YEAR TO DATE:
OVER 52 WEEKS

Stoxx Europe 50: Monday's best and worst...
Company

Country

Industry

Banco Bilbao Vizcaya Argn

Spain

Banks

AstraZeneca

United Kingdom

Deutsche Telekom

Germany

Unilever

Previous
close, in
local currency

Volume

P/E: 16

s 105.83, or 0.66%
t 367.53, or 2.2%
s 2,424.96, or 17.6%

High

STOCK PERFORMANCE
Previous session

YTD

52-week

18,215,553

9.07

Pharmaceuticals

3,011,298

4,100

1.80

14.7

8,407,968

12.48

1.63

0.4

52.4

United Kingdom

Food Products

2,941,995

2,474

1.44

-0.3

-5.9

BG Grp

United Kingdom

Integrated Oil & Gas

6,060,474

1,118

1.41

-13.9

-4.5

HSBC Hldgs

United Kingdom

Banks

68,493,705

635.70

-4.0

-11.9

Rio Tinto

United Kingdom

General Mining

5,641,168

3,537

3.7

1.7

Standard Chartered

United Kingdom

Banks

5,569,046

1,305

-0.84

-4.0

-25.2

-0.75

17000

Close
Low

38.9

Mobile Telecommunications

United Kingdom

General Mining

28,271,022

Food Retailers & Wholesalers

20,880,603

-1.79

336.50

United Kingdom

-2.83%

333.40

22.3%

7.6

16000

50–day
moving average

-10.4

15000

...And the rest of Europe's blue chips
Company/Country (Industry)

Volume

Total
4,724,384

France (Integrated Oil & Gas)
Banco Santander S.A.
31,134,813
Spain (Banks)
BASF
2,151,875
Germany (Commodity Chemicals)
Deutsche Bank
4,460,154
Germany (Banks)
Allianz SE
1,386,363
Germany (Full Line Insurance)
BNP Paribas
2,884,975
France (Banks)
Unilever CVA
3,531,437
Netherlands (Food Products)
125,768,004
Lloyds Banking Group PLC
United Kingdom (Banks)
Moet Hennessy Louis Vuitt
569,134
France (Clothing & Accessories)
Reckitt Benckiser Grp
1,088,730
United Kingdom (Nondurable Household Products)
Siemens
1,560,480

Germany (Diversified Industrials)
British American Tobacco
3,548,310
United Kingdom (Tobacco)
Roche Holding Part. Cert.
1,272,323
Switzerland (Pharmaceuticals)
BP PLC
32,337,102
United Kingdom (Integrated Oil & Gas)
Daimler
3,834,572
Germany (Automobiles)
Diageo
3,820,396
United Kingdom (Distillers & Vintners)
Anheuser-Busch InBev
1,559,270
Belgium (Brewers)
Telefonica S.A.
14,962,746
Spain (Fixed Line Telecommunications)
Bayer
1,083,442
Germany (Specialty Chemicals)
National Grid
7,180,815
United Kingdom (Multiutilities)

Latest,

in local
currency

46.24

14500

STOCK PERFORMANCE
Latest
YTD 52-week

Company/Country (Industry)

1.39%

3.8%

1.37

2.0

16.0

83.26

1.33

7.4

11.0

35.70

1.32

2.9

-1.4

130.80

1.32

0.3

23.7

59.34

1.21

4.7

36.0

28.90

1.03

-1.3

-3.0

81.60

1.00

3.4

48.7

138.75

0.95

4.6

4.8

5,025

0.90

4.8

11.3

95.69

0.89

-3.6

Novartis AG
4,259,110
Switzerland (Pharmaceuticals)
Financiere Richemont
788,403
Switzerland (Clothing & Accessories)
Nestle
3,880,964
Switzerland (Food Products)
L'Air Liquide
672,057
France (Commodity Chemicals)
Zurich Insurance Group
292,249
Switzerland (Full Line Insurance)
Credit Suisse Group AG
2,830,082
Switzerland (Banks)
ABB
4,298,080
Switzerland (Industrial Machinery)
Sanofi SA
1,797,323
France (Pharmaceuticals)
37,938,685
Barclays
United Kingdom (Banks)

ENI
9,578,434
Italy (Integrated Oil & Gas)
ING Groep
10,083,180
Netherlands (Life Insurance)
Royal Dutch Shell A
4,897,225
United Kingdom (Integrated Oil & Gas)
SAP
2,206,697
Germany (Software)
UBS
4,945,523
Switzerland (Banks)
Telefon L.M. Ericsson B
7,636,828
Sweden (Telecommunications Equipment)
GlaxoSmithKline
9,700,920
United Kingdom (Pharmaceuticals)
AXA
4,930,931
France (Full Line Insurance)
Vodafone Group
299,780,125
United Kingdom (Mobile Telecommunications)
Schneider Electric
1,491,688
France (Electrical Components & Equipment)

BHP Billiton
8,536,826
United Kingdom (General Mining)

21.5%

6.57

20.1

3,183

0.87

-1.7

-7.8

270.00

0.86

8.3

27.2

505.90

0.84

3.7

13.9

67.69

0.83

7.6

49.2

1,910

0.82

-4.5

-3.2

74.66

0.80

-3.4

5.9

11.45

0.79

-3.3

15.7

102.20

0.79

0.2

38.6

840.00

0.78

6.6

Volume

17.4

29

Latest,
in local
currency

STOCK PERFORMANCE
Latest
YTD 52-week

74.40

0.74%

4.5%

88.60

0.62

-0.2

0.61

1.7

3.1

99.24

0.58

-3.5

7.1

267.50

0.56

3.5

4.8

28.23

0.53

3.5

8.2

22.40

0.49

-4.6

4.6

74.30

0.41

-3.7

2.0

259.00

0.39

-4.8

-15.6

17.42

0.35

-0.4

-0.7

10.62

0.33

5.1

13

20 27

3
Jan.

10

17

24

Credit derivatives
Spreads on credit derivatives are one way the market rates
creditworthiness. Regions that are treading in rough waters
can see spreads swing toward the maximum—and vice versa.
Indexes below are for five-year swaps.
Markit iTraxx Indexes
Index: series/version

Mid-spread,
in pct. pts.
Mid-price

Europe: 20/1
Eur. High Volatility: 20/1
Europe Crossover: 20/1
Asia ex-Japan IG: 20/1
Japan: 20/1

SPREAD RANGE, in pct. pts.
since most recent roll
Maximum Minimum
Average

Coupon

68.4

16.1%

0.29

2.8
-6.6

18.55

0.22

9.6

83.00

0.12

5.7

4.8

1,683

0.12

4.4

13.8

19.64

0.10

-2.8

44.3

250.70

...

15.4

67.7

65.72

-0.26

3.7

11.2

1,960

-0.51

4.9

Volume,
in millions

Latest

Points

AT&T
AmExpress
Boeing
Caterpillar
Chevron
CiscoSys
CocaCola
Disney
DuPont
ExxonMobil
GenElec
GoldmanSachs
HomeDpt
Intel
IBM
JPMorgChas
JohnsJohns
McDonalds
Merck
Microsoft

Nike B
Pfizer
ProctGamb
3M
TravelersCos
UnitedTech
UtdHlthGp
Verizon
VISA ClA

23.8

-6.4

T
AXP
BA
CAT
CVX
CSCO
KO
DIS
DD
XOM
GE
GS
HD
INTC
IBM
JPM

JNJ
MCD
MRK
MSFT
NKE
PFE
PG
MMM
TRV
UTX
UNH
VZ
V

27.2
2.4
3.9
3.6
5.9
30.5
20.1
5.3
3.7
12.4
29.2
2.7
9.2
19.3
3.7
12.6

6.4
3.1
8.8
24.8
4.5
32.3
6.0
1.9
1.6
2.6
8.3
144.7
1.9

$32.52
90.07
129.92
97.60
114.28
22.20
37.57
80.84
64.71
96.63
25.38
166.78
77.94
24.70
183.87
58.05

91.35
96.61
56.38
37.78
78.01
32.04
78.09
132.65
83.65
116.65
75.98
46.87
226.05

–0.28
1.32
1.64
0.10
1.60
0.07
0.39
0.72
–0.16
1.60
0.44
2.28
0.20
0.28
1.08
0.44

–0.17
0.16
0.35
–0.20
1.53
0.58
0.12
1.08
–0.14
1.27
2.17
–0.40
2.69

–0.85%
1.49
1.28
0.10
1.42
0.29
1.05
0.89
–0.25
1.68
1.75
1.39
0.26
1.17
0.59
0.76

–0.19
0.17
0.62
–0.53
2.00
1.84
0.15
0.82
–0.17
1.10
2.94
–0.85
1.20

WMT

5.3

73.44

0.32

0.44

Showing the biggest improvement...

1.04

0.69

0.81

1.61

1.01

1.23

Norske Skogindustrier

2.74

109.75

0.05

4.08

2.74

3.24

1.36

98.37

0.01

1.57

1.24

0.76

101.13

0.01

0.97

0.68

t

–165

–393

–682

SODEXO

61

–3

–4

–6

1.38

REPSOL

109

–4

–5

–8

0.82

Valeo

90

–3

–4

–9

1.00

CHANGE, in basis points

Yesterday Yesterday Five-day 28-day
2107

2.00

Australia

And the most deterioration

CHANGE, in basis points

0.01%

Index roll

Source: WSJ Market Data Group

At its most basic, the pricing of credit-default swaps measures how much a buyer has to pay to purchase-and
how much a seller demands to sell-protection from default on an issuer's debt. The snapshot below gives a
sense which way the market was moving yesterday.

0.01

3.00

Veolia Environnement

106

–3

–2

–7

Unitymedia KabelBW

251

–8

–34

–69

Iberdrola

106

–3

–2

–6

Yesterday Yesterday Five-day 28-day
Bay Landbk Giroz

104

4

10

8

CIR SpA CIE Industriali
Riunite

232

8

13

8

Landbk Baden Wuertbg

73

2

3

4

IMPERIAL Chem Inds

25

1

...

1

Holcim

121

3

2

...

ONO Fin II

–99

120

3

1

47

1

1

2

ENEL

106

–3

–2

–16

Kabel Deutschland Vertrieb
und Service

VIRGIN MEDIA Fin

284

–8

–44

–81

HBOS

57

1

–2

–7

Gas Nat

106

–3

–3

–6

SAFEWAY

161

2

34

52

Fresenius

99

1

6

6

0

Japan

Source: Markit Group

–1
Sept. Oct. Nov. Dec. Jan. Feb.
2014
2013
Source: Markit Group

WSJ.com>>

Follow the markets throughout the day, with updated
stock quotes, news and commentary at WSJ.com.
Also, receive emails that summarize the day’s trading in
Europe and Asia. To sign up, go to WSJ.com/Email.

CHANGE
Percentage

Credit-default swaps: European companies

99.64

t

Spreads on
five-year swaps
for corporate
debt; based on
Markit iTraxx
indexes.

21

Symbol

Stock

-3.8

101.29%

Spreads

14

DJIA component stocks

3.2

0.22

1.08

In percentage points

Feb.

7

WalMart

2,223
58.22

0.73

Note: Data as of February 21

31

Note: Price-to-earnings ratios are for trailing 12 months

20.1

66.40

Dec.

6

Sources: SIX Financial Information

Tracking
credit
markets &
dealmakers

15500

-9.9

-0.3

-0.52

16500

t

Glencore Xstrata PLC
Tesco

1.4%

1.93%

US: Bank revenues from equity capital markets
Behind every IPO,
follow-on or
convertible equity

offering is one or
more investment
banks. At right,
investment banks
historical and
year-to-date
revenues from global
equity-capital-market
(ECM) deals

n Equity capital markets n Debt capital markets (both in billions, left axis)

ECM as a percentage of total

6

75%

(right axis)
t

4

50

2

25

0

2005

2006

2007

2008

2009

2010

2011

2012

2013

0
2014

Source: Dealogic


THE WALL STREET JOURNAL.

Tuesday, February 25, 2014 | 25

Illustration by Michael Witte

PERSONAL JOURNAL

Professional Makeup Advice in Your Home
But These New Online Services Aren’t Ready to Replace Old-Fashioned Beauty Counters Just Yet

BY ALINA DIZIK
You may not need to go to the
nearest beauty counter to find the
perfect shade of lipstick. New online services let customers consult
professional makeup advisers at
home.
To combat feeling washed out
in the winter, we asked four services for recomCRANKY
mendations for
CONSUMER foundation and
powder, a new
stylish lip color and subtle eyeliner shade. We were able to chat
almost instantly with beauty professionals online, many of whom
are trained makeup artists. Jill
Glaser—a makeup artist and
founder of the Makeup First
School of Makeup Artistry, a
vocational school for makeup artists in Chicago, who isn’t affiliated with a specific brand—
helped us apply the makeup the
various services suggested and assess the results.
We either chatted with a live
makeup expert about our needs or
filled out an online survey. Companies also provided makeup tutorials or virtual try-on tools
where we learned more about the
products.

The one-on-one attention from
online makeup professionals was
a plus since it can be difficult to

get at a busy store beauty counter. Shopping online also allowed
us to easily browse customer reviews and get more information
on a product.
Nordstrom, Estée Lauder and
its Bobbi Brown unit offer flexible
return policies, so in each case
people have the option to return
the products even if they were
used or opened.
There were some hitches. To
get a list of the recommendations,
we had to scroll through an
emailed chat transcript each site
sent afterward. We had trouble
pinpointing our skin type and
tone with online surveys. Also, we
wanted to know more than just
the first name of the person and
what made them an expert.

Nordstrom

Nordstrom.com
Service: Online chat function included product hyperlinks and
one-on-one attention.
Best recommendation: YSL Glossy

Stain.
What we liked: Site offered various
brands.
What we disliked: A lip gloss brand
was recommended without a
shade. Foundation was too sheer
for our skin.
Favorite tip: Some companies can
use a foundation shade you currently own to help find a compa-

rable match in another brand.
Our recommendations via a
30-minute chat were from the
store’s entire array of products.
We didn’t always understand why
a product was being recommended. For example, the beauty
specialist recommended a bronzer
because it was matte and a subtler option for wintertime. But
she also recommended a $60
foundation that Ms. Glaser said
matched our skin tone but was
too sheer. “We should be asking
more probing questions,” of the
customers, says Nordstrom
spokeswoman Pamela Lopez, regarding the issue.
Overall, we liked the recommendations, including brands
we’ve never tried before, such as
the Balm and Stila. Ms. Glaser
liked the consistency of a recommended lip gloss, but we weren’t
provided a shade and were left to

choose from dozens of colors.

Bobbi Brown

BobbiBrown.com
Service: Upload a photo of yourself
before online chat.
Best recommendation: Pot Rouge in
pale pink.
What we liked: Included detailed
application instructions and various tutorials on building a beauty
routine.
What we disliked: Bronzer wasn’t a

good fit.
Favorite tip: Apply a creamy blush
on the apples of the cheeks with
our fingers for a “lit-from-within
glow.”
We were asked to answer a
few questions about our preferences and upload a photo before
the online makeup artist, Cassandra, gave us advice. We liked the
blush and lip color, but Ms. Glaser
pointed out the bronzer looked
“flat” on the face and didn’t give
the desired glow.

L’Oréal

lorealparisusa.com

Service:: Quizzes help determine
product suggestions.
Best recommendation: True Match
Super-Blendable Compact Makeup
in creamy natural.
What we liked: Online assessments
were useful and fun to complete
What we disliked: Some questions
were confusing, such as one asking us to describe our makeup
style from choices like “alternative,” “girly” or “fashion forward.”
Favorite tip: Twist the mascara
wand as we pull it out of the tube,
to evenly coat each part of the
brush and avoid clumps.
With just a short quiz, the
foundation was perfect for our
skin tone and type, said Ms. Glaser.
She liked the “staying power”

of the gel-based black eyeliner but
thought the shade was too harsh.
A blush that was recommended
was sheer and chalky. The company declined to comment.

Estée Lauder

EsteeLauder.com
Service: Virtual makeover tool and
chat function manned by makeup
experts.

Best recommendation: Double Wear
Stay-in-Place Eye Pencil in midnight blue.
What we liked: Thorough chat with
detailed product recommendations. Virtual makeup tool let us
test products on a headshot of
our face.
What we disliked: We had to
search the website to order products ourselves.
Favorite tip: Navy-colored eyeliner
would make the whites of our
eyes seem brighter.
The company has 12 virtual
beauty advisers who have an average of 16 years experience within
Estée Lauder, says Beth Zurn, a
senior vice president.
We liked our product recommendations, especially a wine-colored lip gloss shade that turned
out to be perfect for winter. As
for the issue of having to search
for products online, Ms. Zurn says
it’s up to each expert to send hyperlinks.