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Russia’s Long Road
To the Middle East

Obama’s
Kumbaya
In Hiroshima

REVIEW | A7

OPINION | A10
MONDAY, MAY 30, 2016 ~ VOL. XL NO. 189

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What’s
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Germany and France Show United Front on Europe’s Role

Business & Finance
il-supply outages are
at their highest level in
more than a decade even

as spare capacity shrinks,
contributing to a risk premium in the market. A1
Energy firms are treating with caution the recent
upswing in oil prices, wary
of boosting spending and
production too soon. B1

O

China’s stock exchanges
tightened their rules on
trading halts. B13
Philippine rules allow
untraceable cash to wash
through casinos’ VIP junket
rooms, opening the door
to money launderers. A1
The Fed’s Yellen signaled the central bank will
likely raise rates within
months if the U.S. economy
keeps strengthening. A5
A U.S. study found a
link between cellphones
and cancer in rats, but scientists said it was too early
to draw conclusions. B1
Shipbuilder STX filed
for receivership. B2

World-Wide
Hundreds are thought

to have died attempting to
cross the Mediterranean
Sea from North Africa in
the past few days, the U.N.’s
refugee agency said. A3
Japan’s Abe sounded a
warning on the global
economy, opening the
door to another delay in a
sales-tax increase. A4
Obama focused on victims and survivors and the
ills of nuclear war on the
first visit to Hiroshima by
a sitting U.S. president. A4
Iran canceled its participation in this year’s holy
pilgrimage to Mecca,
blaming Saudi Arabia amid
increasing tensions. A1
Long before EgyptAir
Flight 804’s pilots received a
smoke alert, U.S. watchdogs
documented such warnings
were often erroneous. A3
France is girding for
security challenges at the
Euro 2016 soccer championship in the shadow of
the November attacks. A3
A court in Argentina
sentenced the country’s
last dictator and 14 other

ex-military officials to jail
over Operation Condor. A3
Romney is among the
few Republicans still publicly resisting Trump’s
candidacy, though advisers
discouraged him. A5
CONTENTS
Business & Tech. B1-3
Crossword.............. A12
Heard on Street. B16
Markets Digest... B14
Money & Inv. B13-16

Opinion.............. A10-11
Review................... A7-9
Technology............... B3
U.S. News.................. A5
Weather................... A12
World News....... A2-4

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Concern
About
Output
Aids Oil

SOLEMN GROUND: German Chancellor Angela Merkel and French President François Hollande spoke of the need for a united Europe to
fight terrorism and ease the refugee crisis, at ceremonies Sunday for the 100th anniversary of the Battle of Verdun in Verdun, France.

Gamblers Exploit Loophole
Philippine regulatory
exemption means VIP
junket rooms can be
used to launder money

at the baccarat tables to pay
for their weekend.
But the real action happens
upstairs, in a small but highend part of the Philippines casino scene that is now drawing
scrutiny from Filipino and foreign investigators. There, major junket operators from
China and Macau bring guests
to seven VIP rooms, decorated
with paintings, and their ceilings studded with crystals.
Croupiers wait in silence for
players who might win or lose

BY TREFOR MOSS
AND CRIS LARANO
MANILA—In the main gambling hall at the Solaire Resort
& Casino here one recent afternoon, hundreds of casual

gamblers tried to win enough

millions on a roll of the dice
or the turn of a card.
These rooms, critics say,
represent a loophole in efforts
to stem the flow of ill-gotten
money through the country.
The Philippine Amusement
and Gaming Corp., or Pagcor,
which is both the industry
regulator and a casino operator, succeeded in exempting
casinos from new anti-moneylaundering regulations when
they were introduced in 2013.
That means large amounts of

untraceable cash can wash
through without casino operators having to identify its
source or report it to financial
regulators—something which
simplifies business at the casinos, but also opens the door
to money launderers.
This loophole was exploited
in February, Philippines investigators say, when millions of
dollars stolen from Bangladesh’s central bank were used
to buy large volumes of chips
Please see CASINO page A2

NAVY DEVELOPS NEW SUPERGUN
The experimental railgun is designed to keep the U.S. military’s edge over Russia and China

BY JULIAN E. BARNES
DAHLGREN, Va.—A warning siren
bellowed through the concrete bunker
of a top-secret Naval facility where U.S.
military engineers prepared to demonstrate a weapon for which there is little
defense.
Officials huddled at a video screen
for a first look at a deadly new supergun that can fire a 25-pound projectile
through seven steel plates and leave a
5-inch hole.
The weapon is called a railgun and

requires neither gunpowder nor explosive. It is powered by electromagnetic
rails that accelerate a hardened projectile to staggering velocity—a battlefield
meteorite with the power to one day
transform military strategy, say supporters, and keep the U.S. ahead of advancing Russian and Chinese weaponry.
In conventional guns, a bullet begins
losing acceleration moments after the
gunpowder ignites. The railgun projectile gains more speed as it travels the
length of a 32-foot barrel, exiting the
muzzle at 4,500 miles an hour, or more

than a mile a second.
“This is going to change the way we
fight,” said U.S. Navy Adm. Mat Winter,
the head of the Office of Naval Research.
The Navy developed the railgun as a
potent offensive weapon to blow holes
in enemy ships, destroy tanks and level
terrorist camps. The weapon system

has the attention of top Pentagon officials also interested in its potential to
knock enemy missiles out of the sky
more inexpensively and in greater numPlease see GUN page A6

Oil-supply outages are at
their highest level in more than
a decade, bolstering the “fear
premium” that has helped push
crude prices higher to $50 a
barrel.
About 3.5 million barrels a
day worth of production is off
line because of disruptions such
as militant attacks in Nigeria,
wildfires in Canada and political
unrest in Libya—more than 3%
of the global total, says research
firm ClearView Energy Partners
LLC. That is likely the highest
since the Iraq war hit output
there in 2003, says Jacques
Rousseau, the firm’s managing
director of oil and gas.
At the same time, there is
less slack to fill supply gaps.
Unused production capacity
that the Organization of the Petroleum Exporting Countries
can bring on quickly has dwindled, and the glut of output
from other producers, including
U.S. shale companies, has ebbed

as companies cut back amid
lower prices.
“There isn’t a lot of extra
supply out there,” said AnnLouise Hittle, lead oil-market
analyst at energy-consulting
firm Wood Mackenzie. “That’s
when you start to get a risk
premium back in the market. It
is absolutely to be expected and
it is, in our opinion, just the beginning.”
Natural disasters or political
unrest in oil-producing nations
can halt production and disrupt
shipping routes. Such events
have historically boosted oil
prices because traders worry
about the availability of future
supplies.
In 2014 and 2015, however,
the oil market mostly ignored
occasional supply disruptions,
from sanctions on Iran to export-terminal closures in Libya.
Traders focused instead on the
growing crude surplus produced by U.S. shale companies,
sending prices tumbling 76%
before they bottomed out in
February.
After talks of an output
freeze among major producing
nations fizzled in April, traders

say, the reduced supply from
Please see OIL page A2
Oil firms treat rally with
caution............................................ B1
Everyone, even mom, is
trading crude............................ B13

Isolated Indian Soldiers Create
New Saints to Maintain Sanity
i

i

i
JAVIER SORIANO/AGENCE FRANCE-PRESSE/GETTY IMAGES

Zoomlion ended its pursuit of crane maker Terex,
joining a line of failed efforts by Chinese firms to
buy U.S. rivals. B1, B16

DLR ¥109.90 À 0.12%

BY NICOLE FRIEDMAN

JEAN-CHRISTOPHE VERHAEGEN/EUROPEAN PRESSPHOTO AGENCY

Car makers recalled
millions more vehicles
world-wide with faulty
Takata air bags. B1

ASIA EDITION

WSJ.com

On one base, troops revere a serviceman
who died in 1968; ‘How can I not believe?’
BY SHEFALI ANAND
AND JOANNA SUGDEN

this remote mountainous base,
and the threat of armed conflict is never far away. To get
NATHU LA, India—Indian through the days, and to exarmy enlisted man Jitender plain the inexplicable, troops
Singh Sehrawat has had a few have added a series of beloved
close calls.
figures to the traWhen lightning
ditional
Hindu
tore through the
pantheon.
roof of his bunker
“Without Baba’s
at a high-altitude
blessings, it’s impost on the Chipossible to live up
nese border one
there,” the 24year-old Mr. Sehrecent afternoon,
rawat says. “How
it blasted a hole in
can I not believe?”
a metal mess plate

Baba is an honorHarbhajan Singh
lying feet from
ific bestowed on
where he was
standing. Miraculously, Mr. Hindu saints.
The Hindus are a devout
Sehrawat says, he and his
squad mates were unharmed. people, believing in millions of
He doesn’t think it was gods and numerous saints.
luck. Rather, he believes he Many believe in rebirth, and
was saved by Harbhajan Singh, some in the afterlife. Few rea serviceman who died in 1968 vere a dead person as if he is
and who is revered as a god.
At Nathu La, a strategic pass
watchful spirit by soldiers.
Please see SAINT page A6
It is lonely and hostile in

Rain Can’t
Damp Joy
In Spain
HOMECOMING: Real
Madrid players held
the Champions
League trophy as
fans surrounded
their bus in Madrid
on Sunday. Tens of
thousands turned
out despite gray
weather to

celebrate the team’s
win over Atlético
Madrid on Saturday
in Milan. A4

Iranians Won’t Join in Mecca Pilgrimage
Iran on Sunday canceled its
participation in this year’s
holy pilgrimage to Mecca,
By Aresu Eqbali in
Tehran, Asa Fitch in
Dubai and Ahmed Al
Omran in Riyadh
blaming rival Saudi Arabia, as
the regional powerhouses’
troubled relationship reached
a new low.

“Unfortunately, Iranian pilgrims cannot go to hajj this
year,” Iranian Culture Minister
Ali Jannati told state television.
Iran’s Hajj and Pilgrimage
Organization blamed “Saudi
sabotage” for the cancellation.
“Despite all the Islamic Republic’s efforts, the Saudis ignored the absolute right of
the Iranians to perform the
hajj rituals,” it said.

The annual pilgrimage
takes place in the western

Saudi city, the holiest in Islam.
The decision followed
months of talks over how Iranians would obtain Saudi visas after Riyadh severed diplomatic ties with Iran in
January. The break was a response to attacks on Saudi
diplomatic compounds in Iran
Please see IRAN page A2


THE WALL STREET JOURNAL.

A2 | Monday, May 30, 2016

WORLD NEWS
Problems at the Pumps
Unplanned oil outages are at the highest level in more than a decade, helping to boost crude prices.
Unplanned production disruptions

Nymex crude-oil futures
Non-OPEC

4 million barrels a day

OPEC

$50 a barrel

May forecast

45

3

40
2

1

DARRYL DYCK/BLOOMBERG NEWS

35

30

25
2008

’09

’10

’11

’12

’13

’14

’15

’16

Sources: ClearView Energy Partners; WSJ Market Data Group (crude oil futures)

OIL
Continued from Page One
unplanned outages has been a
primary factor driving U.S. oil
prices from below $27 a barrel
in February to more than $50 a
barrel intraday on Thursday.
U.S. crude settled Friday at
$49.33 a barrel, down 0.3%.
A strike by oil workers in
Kuwait in April briefly shut
down nearly half the Gulf nation’s production. Wildfires in
Alberta, Canada, this month
forced the shutdown of production facilities in the country’s
oil-sands region.
In Nigeria, a militant group
calling itself the Niger Delta

CASINO
Continued from Page One
used in high-stakes VIP junket
rooms at Solaire and another
Manila casino.
The saga began early this
year when investigators found
that hackers planted malware

on computers at the central
bank’s Dhaka headquarters
and accessed an international
funds-transfer system. On Feb.
5, someone instructed the New
York Federal Reserve to withdraw $951 million from Bangladesh Bank’s account there,
transaction records show.
Some $81 million went to
bank accounts in the Philippines and $20 million to Sri
Lanka before the New York
Fed stopped the payments, records show.
The money directed to Sri
Lanka was intercepted and returned.
But in the Philippines, efforts
to trace the cash have been
hampered because money was
transferred to junkets operating
in the casinos, according to
testimony at Philippines Sen-

IRAN

F

M

A

M

THE WALL STREET JOURNAL.

Avengers has claimed responsibility for attacks on a production facility and an export terminal. The country’s output has
fallen to the lowest level since
2009.
Some think the rise in outages is in part a byproduct of
depressed crude prices. When
oil is cheap, producing nations’
budgets suffer. That makes it
harder for some governments
to boost spending to head off
unrest and deprives oil facilities
of money needed for maintenance and recovery.
“At $100 a barrel, you can
paper over a lot of problems
with money,” said Helima Croft,
head of commodities strategy
at RBC Capital Markets. “2016
is proving to be the year of

reckoning for the weakest producers.”
Some analysts think the
boost from the disruptions may
already be waning. Canadian officials have lifted a mandatory
evacuation order on certain
production sites in Alberta, and
Kuwait’s output has returned to
normal. Even in Libya, where
unrest has kept the country’s
production below capacity for

years, some analysts expect exports to increase.
“Some of the bullish sentiment has to ease,” said Rob
Haworth, senior investment
strategist at U.S. Bank Wealth
Management, which oversees
$128 billion. “There’s some limits to how far this can go.”
Others aren’t so sure that

ate hearings on the theft.
“It’s not hard to imagine
why those guys chose Manila
to clean their money,” said
Ben Lee, a gaming-industry
analyst at Macau-based consultancy IGamiX.
In other jurisdictions, notably Macau, the world’s biggest
gambling center by revenue,
anti-money-laundering legislation does apply to casinos. Authorities in the southern Chinese territory recently stepped
up enforcement of the laws
there amid a crackdown on
corruption initiated by China’s
communist leaders.
“We have to put more teeth
in our laws so we could stop
criminal elements from exploiting the deficiencies in our
existing laws,” Emmanuel
Dooc, a member of the Philippines’ Anti-Money Laundering
Council, told the Senate hearings. “There are gaping holes
in our law. We have to include
casinos as covered entities”
under the anti-money-laundering law, he said.

Operating like a casino
within a casino, a junket lures
high rollers to play in its exclusive gambling rooms and guar-

antees a casino a set amount of
revenue. Junkets propelled
Macau’s success, and Pagcor
won a small slice of this business after lobbying for the
money-laundering exemption
for junkets and casinos.
The Solaire was the first
privately operated casino
opened on Manila’s seafront in
2013, by ports magnate Enrique Razon Jr. It was followed by City of Dreams, operated by Laurence Ho and
James Packer, sons of billionaires Stanley Ho and Kerry
Packer. Japanese pachinko billionaire Kazuo Okada is currently building a $2 billion casino nearby. Total gambling
revenue rose 17% to $2.78 billion last year, according to
Pagcor—though still a fraction
of Macau’s $29 billion 2015 casino take.
One junket operator, Kim
Wong, a Chinese national who
has lived in the Philippines for
decades, told the Senate inquiry that he helped clients
from China open the bank accounts that received the stolen
money, but said he had no idea
where the money originated.
The Philippines’ Anti-Money

cials—including Saeed Ohadi,
the head of its hajj organization—the two sides failed to

reach a deal to resolve differences over issues including
how visas would be issued.
Iranian officials insisted on
having visas issued in Iran,
while Saudi officials countered
that Iranians could apply for
and receive hajj visas through
an online portal.
An Iranian official suggested this month that time
had run out to adequately
plan Iranian participation in
the hajj, prompting Saudi’s
Ministry of Hajj and Umrah to
blame Iran for instigating any
disruption.
Mr. Jubeir said Saudi Arabia had worked to organize
the attendance of Iranian pilgrims.
“We believe that if Iran has
intended from the start to maneuver and find excuses to
prevent its citizens from per-

forming hajj, then that’s very
negative,” he said.
“If the matter is over procedures and arrangements,
then we believe we have gone
above and beyond the call of
duty to respond to these
needs and that the Iranians
are the ones who rejected
[them].”

The Saudi cabinet has criticized Iran for allegedly politicizing a religious rite.
“The kingdom rejects Iranian attempts aimed at putting obstacles to prevent the
arrival of Iranian pilgrims in
order to politicize hajj and use
it to insult Saudi Arabia,” it
said recently on the official
Saudi Press Agency.
After the Iranian delegation
left the kingdom on Friday
without reaching an agreement, the Saudi government
said Iranian officials “will be
responsible in front of Allah
Almighty and its people for

Mourners in a procession in Tehran in October for Iranians killed in a stampede at last year’s hajj.

Wildfires raged in early May near an oil hub in Alberta, Canada, reducing oil-sands output.
supply disruptions are going
away. Iraq, Nigeria and Venezuela together produced 25% of
OPEC’s total crude output in
April, according to the International Energy Agency. Each is
struggling with outages or potential disruptions.
Iraq is trying to keep its production high amid the threat of
Islamic State. Many analysts
warn that production could fall
in Venezuela because of chronic
power outages in the cashstrapped nation and disputes
about payments to international oil-field-service providers.
Militant attacks continue in
Nigeria, including one related

to a Chevron Corp. facility on
Thursday. “You could be looking

at a sustained outage for a long
period,” Ms. Croft at RBC said
of the country’s total output.
Unplanned production outages are the highest since at
least 2003, when the war in
Iraq briefly halted nearly all
production in that country, analysts say.
During the 2011 Arab Spring
uprisings and the overthrow of
Libyan leader Moammar Gadhafi, supply disruptions helped
lift global crude prices above
$110 a barrel on average that
year and in 2012, up from an
average of about $80 a barrel in
2010.
Since late 2012, global supply disruptions have held more
than two million barrels a day
off the global crude market, ac-

VIP junket rooms at Manila casinos are under investigation.

ROUZBEH FOULADI/ZUMA PRESS

Continued from Page One
by people angry with the kingdom’s execution of a prominent Shiite cleric and activist.
Saudi Foreign Minister Adel
al-Jubeir on Sunday said the

kingdom had agreed to most
of Iran’s demands, and accused Tehran of asking for
special treatment beyond
what’s usually provided to
other Muslim countries.
“It was demanding the
right to stage semi-protests,
and it was demanding for
privileges outside the framework of the normal organization which would create chaos
during the hajj period,” he
said. “This is unacceptable.”
Despite several visits to
Saudi Arabia to negotiate visas and other logistics for the
September hajj by Iranian offi-

J

cording to ClearView. Fear of
lost production after Islamic
State seized some Iraqi cities
briefly helped push global oil
prices above $110 a barrel in
mid-2014.
If supply was still growing
fast, disruptions might not affect prices as much. But production in the U.S. and other
parts of the world is falling as
companies cut back.
“Today, it doesn’t look like
we will see a return to excess
supply conditions,” said Bo

Christensen, chief analyst at
Danske Invest, which manages
$100 billion in assets. “That
makes the market susceptible
to other types of risks, of
course including geopolitical
risks.”

TAYLOR WEIDMAN/BLOOMBERG NEWS

0

Laundering Council has filed a
criminal complaint against Mr.
Wong, who denies any wrongdoing and has since handed
over to the council $15 million
he received from his clients.
Macau-based junket Gold
Moon said it received some of
the money. In one instance, it
issued 100 million pesos ($2.1
million) of chips for use at its

Solaire VIP rooms, a lawyer
for Gold Moon told the Senate
hearings. Another chunk went
to another Macau-based junket, Suncity, whose lawyer
told the hearings that it was
still checking how much it received.
In Gold Moon’s VIP room,

two Chinese high-rollers allegedly gambled 33 million pesos

inability of the Iranian citizens to perform hajj for this
year.”
Iran last boycotted the pilgrimage for three years between 1988 and 1990, after
clashes between Shiite pilgrims and Saudi security
forces led to the deaths of
more than 400 Iranians during the 1987 hajj. The event
also led Saudi Arabia to lower
the maximum number of Iranians approved to take the
hajj to 45,000. The quota has
since been raised.
The cancellation will force
thousands of Iranians to wait
at least a year to make the pilgrimage, potentially deepening popular anger toward
Saudi Arabia.
“They don’t want to go
there, be fingerprinted or
sniffed by dogs at the airport
for something,” one pilgrimage tour operator in Tehran
said, asking not to be named
because of the political sensitivity of the issue. The tour
operator added, “Iranians
don’t want to be disrespected
by Saudis.”
Travel to Saudi Arabia for
the hajj is tightly controlled,
with visas granted based on
agreements between Saudi
Arabia and other countries.

About 64,000 Iranians participated in last year’s hajj, a religious duty that able-bodied
Muslims are called upon to
perform at least once in their
lifetime.
Tensions between Saudi
Arabia and Iran have risen
sharply since last year, in part
due to disputes over Saudi
Arabia’s handling of the hajj
and off-season pilgrimages
called umrah.
Allegations that Saudi security personnel molested two
Iranian boys returning from
umrah last March led Iran to
briefly suspend umrah pilgrimages pending an investi-

gation. A Saudi court sentenced two men over the
incident in June.
The death of more than
400 Iranians last September
in the worst stampede in the
hajj’s history further stoked
Iranian anger at Saudi Arabia.
Iranian officials criticized Riyadh for failing to manage
large crowds properly and ensure pilgrims’ safety.
Enmity between the countries peaked early this year,
after Iranian demonstrators
angry about Saudi Arabia’s execution of Shiite cleric Nemer
al-Nemer stormed the Saudi
embassy in Tehran and set

parts of it ablaze.
After Saudi Arabia severed
diplomatic and commercial
ties with Iran, several Saudi
allies downgraded their own
relations with the Islamic Republic.
The Iranian decision is a reminder that those tensions are
unlikely to abate in the coming months, said Sabahat
Khan, a senior analyst at the
Dubai-based Institute for Near

Notice to Readers
Simon Nixon’s Europe File
column will resume next week.

CORRECTIONS
AMPLIFICATIONS
The Television Centre in
London will still have three
television studios on the
premises after it is converted
into luxury apartments. A
Mansion article in the FridaySunday edition about the conversion incorrectly said only
one studio would remain.
Readers can alert The Wall Street
Journal to any errors in news articles
by emailing

worth of the chips during a
marathon two-day stint, turning that into 38.5 million pesos before leaving, according

to the junket’s lawyer. The
other 67 million pesos in chips
remain unaccounted for, according to the casino. Gold
Moon’s attorney said the two
men may have walked out
with the chips and could have
sold them to other gamblers.
Solaire declined to comment. Midas, a Pagcor-run casino where investigators say
another $11 million of the stolen Bangladesh money was
gambled, didn’t respond to requests for comment.
Executives at the Pagcor
have said stricter anti-moneylaundering rules for casinos
wouldn’t have stopped the stolen money entering the VIP
junket rooms. They blamed
banks for failing to stop the
funds entering the country.
The Philippines’ central
bank Gov. Amando Tetangco
has said the bank will work
with the nation’s Congress to
enhance money laundering
laws.
—Yang Jie
contributed to this article.
East and Gulf Military Analysis.
“Tehran will pin the blame
on Riyadh, but the Saudis will
obviously reject this and
blame the Iranian government,” he said. “For ordinary
Iranians, there will certainly

be anger—for some against
the Saudi government and for
others against their own government.”

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THE WALL STREET JOURNAL.

Monday, May 30, 2016 | A3

WORLD NEWS
Investigators say such
warnings on A320s
can be wrong and
trigger risky reactions
BY ANDY PASZTOR
Long before EgyptAir Flight
804’s pilots received an alert
signaling smoke in a vital electronics compartment, U.S.
safety watchdogs documented
that such warnings on that
airliner model were frequently
erroneous and sometimes
prompted unnecessary and
risky cockpit responses.
Investigators are trying to
determine whether the pilots
reacted to the smoke message
by following an emergency
checklist that can lead to shutting down essential safety systems, including automated
flight-control protections, people familiar with the probe
into the May 19 crash of the
Airbus Group SE A320 said.
Possible pitfalls of that procedure emerged vividly in an

April 2011 incident. Shortly after United Airlines Flight 497
took off from New Orleans, the
pilots of the A320 plane received a smoke alert from its
avionics system, but investigators from the National Transportation Safety Board later
said they found “no evidence
of fire or overheated components.”
The pilots told investigators
that “after they began to re-

spond to the smoke warning,
electrically powered items in
the airplane ceased to function,” according to National
Transportation Safety Board
documents. The crew lost
some radios and a transponder, and needed air-traffic
controllers to direct the jet
back to the runway, where it
landed with impaired steering
and its nose wheel veered into
grass beside the runway. Nobody was injured.
Ten days later, United sent
pilots a bulletin saying its
“Airbus fleet has experienced
cases of spurious avionics
smoke warnings” and stressing that emergency electric
shutdowns are required only
in the event of “perceptible
smoke.”
It isn’t known if the EgyptAir alert was false, or what
actions the crew took. The

newer-model, optical smoke
sensors installed on the 13year-old jet have been deemed
more reliable than older technology like that on the United
plane.
But the more recent variants continued to issue false
warnings—though at significantly lower rates than the
older ones—and were “still
sensitive to dust and some
aerosols,” Airbus told U.S.
crash investigators in 2011.
Recovery of the black-box
voice and data recorders is expected to reveal whether the
aviators got the warning and
began the prescribed series of

KHALED DESOUKI/AGENCE FRANCE-PRESSE/GETTY IMAGES

Flight 804 Smoke Alert Draws Scrutiny

Egyptians lighted candles in Cairo on Friday for the 66 victims of the May 19 EgyptAir plane crash.
complex,
computer-aided
steps intended to isolate the
problem by shedding electrical
load from the main circuits.
Going back to 2011, that
procedure, designed by Airbus,
was controversial among critics who said it could be confusing and overly complicated.
The prospects that the
EgyptAir crew inadvertently

cut off power to some essential systems or otherwise
failed to react appropriately
during the checklist procedure
are among the investigative
strands being pursued by the

international team of experts
involved in the EgyptAir
probe, people familiar with the
issue said. The effort includes
running ground-based simulator sessions to re-create possible sequences of events.
Given the scant information
now available, it isn’t clear
which of the scenarios examined so far—ranging from aircraft malfunctions and pilot
missteps to a terrorist act—
can be considered the most
likely, these people said.
Airbus has been working on
the problem of erroneous avi-

onics smoke alerts since the
late 1990s. An Airbus spokesman on Friday declined to
comment, citing the continuing investigation. EgyptAir officials couldn’t be reached to
comment.
Theories about what might
have occurred in the avionics
bay of Flight 804—an underfloor compartment near the
cockpit that houses the jet’s
electrical brains—don’t seem
to fit with the relatively few

system-failure messages the
aircraft automatically transmitted before it stopped com-

municating with the ground,
safety experts said.
In addition to the avionics
smoke warning, the six other
messages included malfunctions of cockpit-window systems and of a flight-control
system.
The avionics smoke checklist rarely pops up during recurrent training, said several
pilots who fly the workhorse
A320, one of the world’s most
widely used jetliners.
“We only get to practice the
procedure once or twice in the
simulator every couple of
years,” said Ben Riecken, who
flies A320s for a U.S. carrier.
Barely hours after the
EgyptAir crash killed all 66
people on board, Egyptian officials appeared to jump on
the idea of terrorism. But
since then, with President Abdel Fattah Al Sisi saying nothing has been ruled out, public
attention has shifted to other
potential causes spanning an
array of airplane malfunctions
and cockpit errors.
In the case of EgyptAir
Flight 804, safety experts said
turning off both generators

could account for the sudden
loss of automated transmission of system updates as well
as dropping off air-traffic control radar screens. But they
cautioned that other combinations of problems also could
lead to such communication
loss.
—Robert Wall
contributed to this article.

BY WILLIAM HOROBIN
AND JOSHUA ROBINSON

The French public appears
sanguine about the risks. According to a survey of 1,002
French people at the end of
March, 82% thought Euro 2016
and the Tour de France should
go ahead despite the official
state of emergency that was
declared after the Nov. 13 attacks and remains in place.
France has deployed thousands of police and soldiers at
sensitive locations after those

The Euro 2016 tournament will overlap
with the Tour de France bicycle race.
terror threat, for the first time
a SWAT team will accompany
cyclists along the 2,200-mile
race, and 23,000 police and
gendarmes will be deployed on

the route.
For the Euro matches—the
first major men’s soccer championship held in Western Europe in eight years—two million fans from abroad are
expected to flock to French
stadiums and town centers.
Despite the security fears,
30 of the 36 opening-round
games are completely sold out,
according to the official tournament ticketing website.

attacks, which highlighted the
vulnerabilities of so-called soft
targets such as sports events
and concerts.
Police investigators say the
Islamic State operatives who
killed 32 in suicide-bomb attacks in Brussels in March
were planning attacks in
France, including at the soccer
championship.
Tournament
organizers
raised the security budget after Nov. 13 by 15% to €34 million ($38 million) for locations
directly connected to matches
and teams. But fan zones,
where thousands of people

SPEICH FREDERIC/ZUMA PRESS

PARIS—When soccer fans

set off smoke bombs and firecrackers at the Stade de
France on May 21, the explosions did more than add to the
drama of a French cup final
between bitter rivals. They exposed gaps in France’s efforts
to tighten security just two
weeks before hosting Euro
2016, the continent’s largest
sporting event.
Still in a terror-induced
state of emergency after 130
people were killed in the November attacks, French authorities are preparing to
manage eight million fans and
secure around 100 locations
for the European soccer championships.
France’s apparatus was being tested at the Saturday
game between Paris Saint-Germain and Olympique de Marseille, held in the same stadium suicide bombers targeted
in November. Despite new security barriers where all attendees were supposed to be
searched, soccer fans were
able to smuggle in banned
smoke bombs. When they
went off, stewards had to cope

with waves of people moving
through the stands to get
away.
The breaches highlighted
the unprecedented challenge
France faces in securing Euro
2016, a sprawling tournament
that will run in 10 French cities from June 10 to July 10

and overlap with the threeweek Tour de France bicycle
race, for which security is also
being beefed up. Due to the

Fans faced a phalanx of security forces at a game on May 21 at the Stade de France in Saint-Denis.

without tickets gather to
watch the games, have caused
more consternation. In previous tournaments, such as the
2006 World Cup in Germany,
the wide-open areas ringed
with big screens were hailed
as the beating heart of a national celebration.
In Paris, a zone at the foot
of the Eiffel Tower is expected
to draw 90,000 fans on an almost daily basis.
The state and local authorities will spend €17 million securing fan zones and installing
video surveillance at the sites.
Authorities will carry out systematic frisking around the areas and ban open-air screenings and gatherings outside
the fan zones.
The French state will mobilize 73,000 police officers and
gendarmes for Euro 2016 and
redeploy some of the 10,000
soldiers on the homeland antiterror mission.
Some participating teams
have expressed concerns about
security.
“After what happened in
November you can’t just ignore it,” said Germany manager Joachim Löw, who remembers
hearing

the
explosions around the stadium
as his team played France that
Friday night in November.
Each of the 24 squads will
travel with a delegation of police, private security and at
least two French SWAT-team
members.
The high state of alert contrasts with France’s most recent experience with an event
of this scale: the 32-team
World Cup in 1998, when the
national team, Les Bleus, lifted
the trophy on home soil.
“This has led us to deploy
security measures that are
much more complex, much
more complete and much
tougher,” said Jacques Lambert, the head of the Euro
2016 organizing committee
who also ran that World Cup.
“We are taking maximum
precautions to ensure safety,
even if, as everyone knows,
there is no such thing as zero
risk,” said French Interior
Minister Bernard Cazeneuve.

GIOVANNI ISOLINO/AGENCE FRANCE-PRESSE/GETTY IMAGES

French Soccer Tourney Tests Security

A naval ship brought migrants to an Italian port on Sunday.

New Migrant Drownings
Highlight Crossing Risk
BY ERIC SYLVERS
MILAN—About 700 people
are thought to have died attempting to cross the Mediterranean Sea from North Africa
in the past few days, the United
Nations’ refugee agency said on
Sunday, further highlighting
the perils of the world’s deadliest migration route.
That figure is “a conservative estimate,” with most of
the deaths the result of three
large shipwrecks, said Carlotta
Sami, spokeswoman for the
U.N. High Commissioner for
Refugees. Most of the migrants
were from sub-Saharan Africa.
On Wednesday, a ship went
down with about 100 people
thought to have been trapped
inside, Ms. Sami said, citing
witnesses. The following day, a
ship sank with about 550 on
board, migrants watching from
a nearby vessel said. On Friday, several dozen bodies were
recovered from another ship
that sank.
About 15,000 migrants have

left Libya, and to a much
lesser extent Egypt, in the past
week headed toward Italy, the
UNHCR said, putting fresh
strain on the government’s efforts to accommodate new arrivals. The vast majority are
from sub-Saharan Africa—
largely Nigeria, Gambia, Somalia, Ivory Coast and Eritrea.
After a lull over the winter,

the spring weather has led to a
surge in migrants departing
from Libya and attempting to
reach Italy. This year, about
40,000 migrants have arrived in
Italy by sea—largely in line
with the past two years. Excluding the 700 feared dead on Sunday, 1,000 people have lost their
lives this year attempting the
crossing, the International Organization for Migration said.
More than 150,000 arrivals
took the Libya-Italy route last
year, but the phenomenon was
overshadowed by a surge of
migrants arriving in Greece
from Turkey, most from Syria,
Afghanistan and Iraq. A deal
between the EU and Turkey
has helped slow that flow to a
trickle in recent weeks.
Thousands of migrants have
been rescued from rickety

boats in recent days.
On Saturday, 668 were
picked up at sea, with no
deaths reported, said a
spokesman for the Italian
coast guard. Those rescue efforts were carried out by ships
belonging to the Italian coast
guard, the Italian and Irish navies, and nongovernmental organization Sea Watch.
After being rescued, migrants are taken to reception
centers in southern Italy. The
country is currently hosting
125,000 migrants in its reception system, the Interior Ministry said.

Argentine Court Sentences Ex-Dictator for Dissent Crackdown
Associated Press

BUENOS AIRES—An Argentine federal court sentenced
the country’s last dictator and
14 other former military officials to prison for humanrights crimes, in the first ruling that Operation Condor was
a criminal conspiracy to kidnap and forcibly make people
disappear across international
borders.
Six South American dictatorships launched the covert oper-

ation in the 1970s, using secret
police networks in a coordinated effort to track down opponents abroad and eliminate
them. Many leftist dissidents
had sought refuge in neighboring countries and elsewhere.
An Argentine federal court
on Friday sentenced former

junta leader Reynaldo Bignone,
88 years old, to 20 years in
prison for being part of an illicit association, kidnapping
and abusing his powers in the
forced disappearance of more

than 100 people. The ex-general, who ruled Argentina in
1982-1983, is already serving
life sentences for multiple human-rights violations during
the 1976-1983 dictatorship.
In the landmark trial, 14
other former military officials
received prison sentences of
eight to 25 years for criminal
association, kidnapping and
torture. They include an Uruguayan army colonel, Manuel
Cordero Piacentini, who allegedly tortured prisoners inside

Automotores Orletti, the Buenos Aires repair shop where
many captured leftists were interrogated under orders from
their home countries. Two of
the accused were absolved.
The sentences are seen as a
milestone because they mark
the first time a court has
proved that Operation Condor
was an international criminal
conspiracy carried out by U.S.backed regimes in Chile, Argentina, Bolivia, Brazil, Paraguay and Uruguay.

“Operation Condor affected

my life, my family,” Chilean
Laura Elgueta said outside the
courtroom. Her brother, Luis
Elgueta, had taken refuge in
Buenos Aires from Gen. Augusto Pinochet’s forces, only
to be forcibly disappeared in
Buenos Aires in 1976.
The investigation was
launched in the 1990s when an
amnesty law still protected
many of the accused. Argentina’s Supreme Court overturned the amnesty in 2005 at

the urging of then-President
Néstor Kirchner.
“Forty years after Operation
Condor was formally founded,
and 16 years after the judicial
investigation began, this trial
produced valuable contributions to knowledge of the truth
about the era of state terrorism and this regional criminal
network,” said the Buenos Aires-based Center for Legal and
Social Studies, which is part of
the legal team representing
plaintiffs in the case.


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THE WALL STREET JOURNAL.

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WORLD NEWS

Japanese Leader
Hints at Delay
For Tax Increase

Mr. Obama hugged Shigeaki Mori, a survivor of the 1945 atomic bombing of Hiroshima, at the Hiroshima Peace Memorial Park on Friday.

ObamaUrgesNuclearCurbs
BY CAROL E. LEE
AND ALEXANDER MARTIN
HIROSHIMA, Japan—President Barack Obama mourned
the victims of the U.S. atomic
bombing of Japan at the memorial honoring those who
died in the Aug. 6, 1945 attack
on Hiroshima, the first visit to
this city by a sitting U.S. leader.
In solemn comments, Mr.

Obama neither apologized for
nor justified the U.S. atomic
bombs dropped both here and
in Nagasaki that killed more
than 200,000 people, and instead focused on a nonnuclear
future, seeking to avoid inflaming passions on either
side of the Pacific.
After laying a wreath at the
Hiroshima Peace Memorial
Park, the president reflected
on the day “death fell from the
sky” and how America’s decision during World War II
ended the conflict but also
forever changed the world.
“We stand here in the middle of this city and force ourselves to imagine the moment
the bomb fell,” Mr. Obama said,
standing alongside Japanese
Prime Minister Shinzo Abe.
“We remember all the innocents killed across the arc of
that terrible war,” he said.
“We have a shared responsibility to look directly into the

World
Watch
SPAIN

Real Madrid’s Reign
Celebrated in Rain

Tens of thousands of fans

endured rain to greet Real Madrid players as they returned
home to celebrate the Champions League title.
Many waited all night after celebrating the team’s win over crosstown rival Atlético Madrid on Saturday in Milan. The final score was
1-1, with Real prevailing 5-3 in a
penalty shootout.
The players arrived in Madrid
early Sunday and traveled on an
open bus to the club’s traditional
celebration spot, the Cibeles
fountain, where an estimated
30,000 supporters marked the
club’s 11th European title.
Real Madrid captain Sergio
Ramos draped the statue of the
Cibeles goddess with the club’s
scarf and flag.
—Associated Press
BRAZIL

WHO Says Olympics
Are Safe From Zika

The World Health Organization said there is “no public
health justification” for postponing or canceling the Rio de Janeiro Olympics because of the
Zika outbreak.
The assessment came after
150 health experts issued an
open letter to the U.N. health
agency calling for the games to
be delayed or relocated “in the

name of public health.”
The letter cited recent scientific
evidence that the Zika virus causes
severe birth defects. In adults, it

eye of history and ask what we
must do differently to curb
such suffering again.”
Mr. Obama’s focus on victims
and survivors and the ills of nuclear war, after earlier saying
he would leave the thornier
questions to history, was
viewed favorably across Japan.
“It’s like a dream come
true,” said Shigeaki Mori, 79
years old, one of two bombing
survivors who briefly met Mr.
Obama and who created a memorial for U.S. prisoners of
war killed in Hiroshima. The
president hugged Mr. Mori as
the two spoke. “I suffered so
much, so today was the best
day that was given by America,” he said.
Mr. Abe also spoke, saying
it took courage for Mr. Obama
to visit Hiroshima. “Even today there are victims who are
suffering unbearably,” he said.
“This tragedy must not be repeated again.”
The visit was delicate for Mr.
Obama. The military and moral

questions posed by the atomic
bombings have provoked fierce
debate in the U.S. through the
seven decades since the end of
World War II.
Sen. Tom Cotton (R., Ark.)
who often clashes with the
White House on foreign policy,
avoided directly criticizing Mr.
Obama’s comments, but he offered a counterpoint.
“Using nuclear weapons in
World War II was not a mistake—it was a moral necessity
to halt tyranny, save lives, and
end the most destructive war
in history,” he said.
can cause neurological problems.
The authors also noted that
despite increased efforts to wipe
out the mosquitoes that spread
Zika, the number of infections in
Rio have gone up.
WHO, however, said that
“based on current assessment,
canceling or changing the location of the 2016 Olympics will
not significantly alter the international spread of Zika virus.”
—Associated Press
UKRAINE

Fire Kills 17 People
At Home for Elderly

A fire swept through a private home for the elderly in a
Ukrainian village shortly before
dawn on Sunday, killing 17 people and injuring five others, an
emergency official said.
The head of the emergency
services, Mykola Chechetkin, said
35 people were in the house
when the fire broke out. It was
unclear whether any staff members were among the dead.
Police said they are working
to determine the cause of the
fire and to learn whether the
home was operating legally.
The owner of the business
was detained for questioning,
police said.
—Associated Press
FRANCE

Would-Be Migrant,
Hit by Truck, Dies

An Afghan man was killed after being hit by a truck on a
freeway near the French coastal
town of Calais in an apparent
attempt to sneak onto a vehicle
bound for the U.K., officials said.
The 25-year-old man, who
lived in the city’s sprawling migrant camp, is one of at least 20

people killed in the Calais region
while attempting to reach the
U.K. since June 2015.
—Noemie Bisserbe

In the U.S. as well as Japan,
Mr. Obama’s visit was received
with mixed emotions among
arms-control advocates, who
welcomed the president’s gesture but drew a contrast between his call to action and
his administration’s modest
record on arms reductions.
“It was especially meaningful for the hibakusha—the Japanese A-bomb survivors—who
have dedicated their lives not
to the extraction of an apology, but to ensuring that no

Mr. Obama has
struggled to end two
wars and entered
new conflicts.
one else suffers an atomicbomb attack,” said Darryl Kimball, executive director of the
Arms Control Association, a
Washington nonproliferation
advocacy group.
Mr. Obama has conceded
his nonproliferation efforts
have made only modest progress during his two terms. In
that time, he has struggled to
end two wars and entered new
conflicts. Negotiating last

year’s Iran nuclear deal—seen
by the administration as a
nonproliferation achievement
but questioned by critics—has
consumed his administration’s
effort, and a deterioration in
ties with Russia has slowed
disarmament efforts.
In 2009, Mr. Obama delivered an address in Prague in

which he called for specific
measures to avoid the global
development of nuclear weapons. But those measures—such
as U.S. Senate ratification of a
treaty banning nuclear testing
and a new global effort to halt
the production of fissile material—have remained stalled.
Meanwhile, Mr. Obama has
outlined plans to spend nearly
$1 trillion in 30 years to modernize and upgrade the U.S.
nuclear arsenal.
One survivor of the Nagasaki
bombing who attended the
event, 84-year-old Terumi
Tanaka, praised the president’s
speech but was disappointed to
not hear specifics on how to
eliminate nuclear weapons.
Others agreed, saying a
plan for disarmament was

more important than an apology. “It’s far too late to be asking Mr. Obama for an apology.
If there was to be one, it
should have come from previous presidents,” said 73-yearold Masashi Ieshima, who was
at home about a mile and a
half from ground zero when
the bomb fell on Hiroshima.
“Rather than an apology, it’s
my strong wish for him to set
out a course to eliminate all
nuclear weapons.”
At the museum, Mr. Obama
wrote a message in the guest
book: “We have known the agony of war. Let us now find
the courage, together, to
spread peace and pursue a
world without nuclear weapons.”
—Siobhan Hughes
contributed to this article.

Mr. Abe at a news conference during the G-7 summit on Friday.

China Swaps Troupes for Troops

Cultural ensembles with the military are swept up in President Xi’s overhaul
BY JEREMY PAGE
BEIJING—One military
unit in China has racked up
some notable victories.
They’re just not the kind
President Xi Jinping wants

as he undertakes the biggest
revamp of the People’s Liberation Army since the 1950s.
Among them are accolades for performing “Lion
Dance and Trick-Cycling by
Girls” at a festival in France,
“Juggling Umbrellas with
Feet” in Sweden and for
plate spinning in Poland.
Known as the “Advance
Cultural Troupe” of the Shenyang Military Region, the
unit is among dozens of the
PLA’s acrobatic, theatrical
and song and dance groups
in the firing line of Mr. Xi’s
plans to cut 300,000 of its
2.3 million troops—including
many in noncombat roles.
Many have been merged,
renamed or shrunk, and all
have been banned from commercial performances.
Formed in the 1930s to
spread propaganda among illiterate soldiers and peasants, the troupes have performed live across China and
overseas, produced hundreds
of plays, operas, ballets and
films, and been regular features on state television. The
ensembles have created
stars, some linked romantically to Chinese leaders from
Mao Zedong to Mr. Xi,
whose wife Peng Liyuan rose
to fame as a singer in one.

In recent years, however,
PLA performers’ commercial
activities and glamorous lifestyles have fallen foul of Mr.

Xi’s drive to curb military
corruption and focus the
PLA on preparing to “fight
and win wars.” He fired a
warning shot in a 2014
speech when he asked: “If
our PLA cultural workers
don’t have a military flavor,
a taste of war, then why do
they wear uniforms?”
Yang Yujun, a Defense
Ministry spokesman, said recently that authorities were
still researching how to reorganize the troupes.
But the process has already begun. In February,
Mr. Xi eliminated the PLA’s
seven Military Regions, each
with its own troupe, usually
including a dance ensemble,
chorus, orchestra, television
arts center and acrobatic
team. They were replaced

with five new combat zones,
leaving two regional troupes
to be merged with others.
“As noncombat troops, all

the performers are facing
the question of whether they
are staying or leaving,” the
army website cited the
leader of the “Advance Cultural Troupe” as saying.
Mr. Xi has banned surviving cultural troupes from
charging fees, which had
supplemented PLA performers’ salaries. “We used to do
some commercial performances but since we received orders from our headquarters, we stopped doing
that,” said a troupe official.
There were no such restrictions when Tong Yao
joined Beijing’s “Comradesin-arms” troupe in 1999. She

GETTY IMAGES

On visit to Hiroshima,
U.S. president urges
world: ‘Look directly
into the eye of history’

SHIMA, Japan—Prime Minister Shinzo Abe failed last
week to persuade the Group of
Seven industrialized nations
that the world faced a possible
economic crisis, then went on
to issue a warning himself.
His grim view served to
open the door to another delay in a planned sales-tax increase in Japan, a possibility
he acknowledged for the first
time Friday, saying it was

prompted by G-7 commitments to foster growth.
This followed more than a
year of vows by Mr. Abe that
the tax increase would proceed as scheduled next year
unless the world faced conditions similar in magnitude to
the 2008 “Lehman shock” and
global financial crisis.
After the G-7 issued a communiqué that warned of rising
risks to the global economy
but didn’t call for coordinated
fiscal spending, Mr. Abe
pointed to slowing growth in
China and emerging markets,
as well as the long slump in
commodity prices, as conditions that could herald an economic crisis.
“The world economy is at
risk of falling into a crisis” unless an appropriate policy
course is chosen, he said. “The
extent of the decline, comparable to what happened
around the time of the socalled Lehman shock, is causing a major blow to emergingmarket economies that depend
on exports of commodities and
basic materials for growth.”
A grimmer assessment by

the G-7 and a stronger call for
looser fiscal policy would
have helped Mr. Abe counter
the objections of Japan’s fiscal hawks to his plans for a
stimulus package of up to ¥10
trillion ($91 billion).

The prime minister’s move
toward delaying the tax increase, along with the stimulus plan, amounts to a tacit acknowledgment
that
the
“Abenomics” program is in
trouble. Mr. Abe found himself
on the defensive Friday, saying
in a news conference that
“Abenomics is not a failure”
and citing the number of jobs
created during his tenure.
The latest bad news came
earlier in the day, when the
government reported that consumer prices, excluding fresh
food, fell 0.3% in April. The
data showed that the Bank of
Japan’s goal of reaching 2% inflation, a key pillar of Abenomics, remains as elusive as
when it was set in early 2013.
The robust growth promised by Mr. Abe hasn’t materialized either. Though the
economy grew 1.7% on an annualized basis during the first
quarter, it contracted in two of
the three previous quarters.
A previous sales-tax increase in April 2014—to 8%
from 5%—was blamed for derailing a recovery early in Mr.
Abe’s tenure. Consumer spending has yet to fully recover,
and some economists say the
prospect of another tax rise
next year is causing consumers to save more. Mr. Abe said
he would make a decision on
the tax before an upper house

election scheduled for July.

ISSEI KATO/REUTERS

JIM WATSON/AGENCE FRANCE-PRESSE/GETTY IMAGES

BY MITSURU OBE

Vocalist Peng Liyuan, Mr. Xi’s wife, performed during a military
anniversary celebration at the Great Hall of the People in 2007.

was soon in huge demand,
principally as she looked and
sounded like the late Teresa
Teng, a Taiwanese singer.
Ms. Tong performed Teresa Teng medleys in concerts nationwide and toured
Southeast Asia. By 2012, Ms.
Tong was a lieutenant colonel with an official salary of
around 6,000 yuan ($930) a
month, supplemented with
income from commercial
performances, she said.
Comrades in combat units
were jealous. “They felt we
cultural troupe members
were singing and dancing every day, just playing around,
yet we earned more than
them,” she said.
She resigned to pursue an
independent career in 2012,

the year Mr. Xi came to
power. Military propaganda
has shifted focus toward online images of combat exercises and modern weaponry.
“The military propaganda
system and the entire political system is focusing much
more on training and equipment than song and dance
fluff,” said Dennis Blasko, a
PLA expert at the Virginiabased CNA Corporation.
The PLA doesn’t reveal
the exact number of troupes,
but before the overhauls, the
Navy, Army, Air Force and
Armed Police each had one
too. It is unclear how many
will survive: The Navy
troupe, among those that
has, performed songs for
Chinese forces on a disputed
artificial island in the South
China Sea this month.
—Olivia Geng in Beijing
contributed to this article.


Monday, May 30, 2016 | A5

THE WALL STREET JOURNAL.

U.S. NEWS
Republicans’ 2012

nominee stands by
claim that New Yorker
is unfit to be president
BY MONICA LANGLEY
SAN DIEGO—Mitt Romney’s
advisers begged him not to go
to war with Donald Trump. After he decided to go ahead, Mr.
Trump dismissed him as
“lightweight” and a “failed
candidate.” This week, Newt
Gingrich called him “pathetic.”
Mr. Romney, sticking to his
guns, has become a rare figure
in American history—a former
presidential nominee openly
defying the man succeeding
him as his party’s standardbearer.
Sitting at his home on the
Pacific Ocean, Mr. Romney reflected on the waves he created by attacking Mr. Trump,
how his family helped persuade him it was the right
thing to do, and how he increasingly finds himself a voice
in the wilderness.
“Friends warned me, ‘Don’t
speak out, stay out of the fray,’
because criticizing Mr. Trump
will only help him by giving
him someone else to attack,”
Mr. Romney said in an interview—the first time the 2012
GOP nominee discussed in
depth his reasons for going after Mr. Trump.

“They were right. I became
his next target, and the incoming attacks have been constant
and brutal.” He said he had no
illusions he would alter Mr.
Trump’s progress toward the
nomination or spark a meaningful independent candidacy.

His motivation: “I wanted
my grandkids to see that I simply couldn’t ignore what Mr.
Trump was saying and doing,
which revealed a character and
temperament unfit for the
leader of the free world.”
Today, the GOP anti-Trump
chorus is dwindling, leaving
Mr. Romney among the few
making the case publicly.
Mr. Trump, in an interview,
said of Mr. Romney: “Once a
choker, always a choker. I’ve
got a store worth more than he
is.” He said Mr. Romney’s attack “has nothing to do with
his country. It has to do with
me. I’m the one who forced
him out” of running in 2016.
Mr. Romney said he is acting on his own behalf and acknowledged many Republicans
think his Trump attacks could
help the likely Democratic
nominee, Hillary Clinton. Still,
he said, “others, including myself, believe our first priority

should be to stand by our principles and if those are in conflict with the nominee, the
principles come first.”
Hewlett Packard Enterprise
Co. Chief Executive Meg Whitman, who has known Mr. Romney for 25 years, said: “Mitt’s
clarity about his position is
helping others thinking about
their patriotism and their
country.”
After losing in 2012 to President Barack Obama, the former Massachusetts governor
and longtime businessman
moved on to what he called a
“balanced and full life.” He and
his wife, Ann, who has multiple sclerosis, started the Ann
Romney Center for Neurologic
Diseases. For the 2014 midterm elections, he stumped for

MATT ROURKE/ASSOCIATED PRESS

Romney’s Lonely Crusade Against Trump

‘I wanted my grandkids to see that I simply couldn’t ignore’ Mr. Trump’s actions, Mitt Romney says.
GOP candidates in 27 states.
Mr. Romney, 69, wasn’t worried when Mr. Trump joined
the race in June, believing the
16 other Republicans made up
a “very capable, well-experienced, very deep field.” Along
with other politicians, he expected the businessman to implode after his pronouncement
attacking illegal immigrants.
On July 18, Mr. Trump said
he wouldn’t call Arizona Sen.

John McCain, the 2008 GOP
presidential nominee and a
Vietnam prisoner of war, a
“war hero.” Mr. Romney and
many of his 2012 staff, who
were attending a pre-wedding
event in Massachusetts for two
staffers, saw their phones light
up with Mr. Trump’s comment:

“I like people who weren’t captured.”
Mr. Romney tweeted on the
spot: “Trump shot himself
down. McCain and American
veterans are true heroes.”
As Mr. Trump surged ahead
in debates, touting positions
including a temporary ban on
Muslims coming to the U.S.,
Mr. Romney held back in public. Instead, he called an adviser to Florida Sen. Marco Rubio, Lanhee Chen, and
recommended Mr. Rubio hit
Mr. Trump for not releasing
his tax returns, Mr. Chen said,
adding that Mr. Rubio didn’t
oblige.
After Mr. Trump’s January
second-place finish in Iowa to
Texas Sen. Ted Cruz, Mr. Rom-

ney saw a chance to publicly

confront the front-runner
heading into the Feb. 9 New
Hampshire primary, said Stuart
Stevens, his longtime political
strategist.
Political aides advised
against it. “Trump can say
something crazy and inflammatory against you and get
nonstop coverage,” Mr. Stevens
said he told him.
In early March, Mr. Romney
said, he and his wife were getting ready for church when
their son Tagg told them about
Mr. Trump’s refusal to disavow
the endorsement of David
Duke, a former Ku Klux Klan
leader. (Mr. Trump later attributed his ambiguous answer to
a defective earpiece.) Mr. Rom-

ney tweeted: “His coddling of
repugnant bigotry is not in the
character of America.”
Hope Hicks, Mr. Trump’s
communications director, said:
“Mr. Trump has disavowed David Duke on every occasion.”
Days later, Mr. Romney recalled, his son Josh, driving
him to the Salt Lake City airport, inquired: “When the
grandkids ask ‘What did you
do to stop Donald Trump?’
what are you going to say?’ ”

Tagg and Josh Romney,
through a family spokeswoman, confirmed their father’s accounts.
On the plane, he began
drafting a speech that he delivered March 3. He said Mr.
Trump’s policies could lead to
recession and “make America
and the world less safe.” He
tallied what he saw as the candidate’s sins: dishonesty, bullying, greed, misogyny, “absurd
third-grade theatrics.”
Mr. Trump fired back that
day, contending Mr. Romney
had begged for his endorsement for 2012. On Wednesday,
he said: “He shouldn’t have accepted my money if he felt that
way about me.”
Mr. Romney’s speech may
have helped Trump rivals win
in Utah and Wisconsin. Mr.
Trump quickly recovered and
essentially locked up the nomination with his Indiana victory.
At his oceanfront home, Mr.
Romney said he didn’t expect
to criticize Mr. Trump further
but wouldn’t rule it out. “I
know that some people are offended that someone who lost
and is the former nominee
continues to speak, but that’s
how I can sleep at night,” he
said.

Yellen Sees Rate Rise Coming Soon

VITO DI STEFANO/ZUMA PRESS

BY KATE DAVIDSON
AND BEN LEUBSDORF

Donald Trump attacked Judge Gonzalo Curiel by name on Friday.

Judge Sets Release
Of School’s Papers
BY JACOB GERSHMAN
AND REID J. EPSTEIN
A federal judge in San Diego
has ordered the unsealing of
hundreds of pages of internal
documents produced by Donald
Trump’s Trump University in
connection with a fraud lawsuit
against the company, the latest
twist in the long-running lawsuit against the school.
U.S. District Judge Gonzalo
Curiel’s order releasing the
documents came the same day
that the presumptive Republican nominee attacked the judge
by name during a campaign
rally at the San Diego Convention Center.

Students of defunct
Trump University
say the GOP nominee
defrauded them.

“I have a judge who is a
hater of Donald Trump, a hater.
He’s a hater. His name is Gonzalo Curiel,” Mr. Trump said
Friday, as the crowd of several
thousand booed. “He is not doing the right thing. And I figure, what the hell? Why not
talk about it for two minutes?”
Mr. Trump ended up devoting 12 minutes of a 58-minute
address to Judge Curiel and the
Trump University case, which
is scheduled to go to trial in
San Diego federal court on Nov.
28—after the presidential election. Mr. Trump’s attorney said
earlier this month that he will
testify in the six-year-old case.
Mr. Trump also told the audience, which had previously
chanted the Republican standard-bearer’s signature “build
that wall” mantra in reference
to Mr. Trump’s proposed wall
along the Mexican border, that
Judge Curiel, who was born in
Indiana, is “Mexican.”

“What happens is the judge,
who happens to be, we believe,
Mexican, which is great, I think
that’s fine,” Mr. Trump said. A
spokeswoman for the Trump
campaign declined to comment
about the judge’s ruling.
Among the documents to be

unsealed are two sets of Trump
University “playbooks,” outlining rules and procedures for
running Trump University
events and employee scripts for
engaging with customers.
Some of the documents have
already surfaced online. Politico
in March posted a 2010 Trump
University playbook, which instructed employees to rank students by liquid assets to help
determine what kind of course
packages they could afford to
buy.
Other documents would be
made public for the first time,
including a sales playbook the
judge said contained marketing
techniques for selling Trump
University programs. The unsealed versions will redact
phone numbers and noncorporate email addresses.
Judge Curiel ordered the
documents released by June 2.
He was responding to an April
request by the Washington
Post for the records to be unsealed. Lawyers for Mr. Trump
opposed making the documents public, arguing that the
materials contained trade secrets.
In his order, Judge Curiel alluded to Mr. Trump’s recent
commentary, noting that the
candidate has “placed the integrity of these court proceedings at issue.”
The plaintiffs accuse Mr.

Trump and the now-defunct
school of defrauding people
who paid as much as $35,000
for real estate advice. Mr.
Trump said Trump University
received “mostly unbelievable
reviews” from its 10,000 students.

Federal Reserve Chairwoman
Janet Yellen is signaling the
central bank will likely raise interest rates within months if
the U.S. economy keeps gaining
strength.
“It’s appropriate…for the Fed
to gradually and cautiously increase our overnight interest
rate over time, and probably in
the coming months such a
move would be appropriate,”
she said Friday during a panel
discussion at the Radcliffe Institute for Advanced Study at
Harvard University.
This leaves the door open
for a move as soon as the Fed’s
next policy meeting June 14-15
or at its gatherings in July or
September if officials prefer to
wait for more economic data.
One reason for action: After
a couple of weak quarters,
“growth looks to be picking up

from the various data that we
monitor,” Ms. Yellen said.
Gauges of consumer confidence and spending, housingmarket activity and industrial
production all gained steam
during the spring months. Forecasting firm Macroeconomic
Advisers on Friday projected
growth in gross domestic product, a broad measure of the
goods and services produced
across the economy, would accelerate to a 2.5% annual rate
in the second quarter from the
first quarter’s 0.8% pace.
In another positive sign, U.S.
corporate profits show signs of
stabilizing, though American
companies still face earnings
pressure due to rising wage
growth and a still-weak global
economic expansion. A key
measure of corporate profits—
after taxes, without inventory
valuation and capital-consumption adjustments—rose at a
1.9% pace in the first three

U.S.
Watch
DEMOCRATIC PRIMARY

months of 2016 after declining
the prior two quarters, the
Commerce Department said.

Still, on an annual basis,
profits in the first quarter were
down 3.6% for the second
straight quarter, and profits as
a share of the overall economy
remain depressed from the record levels reached earlier in
the expansion.
The resilience of corporate
profits in the months ahead
will be key to supporting the
stock market, which is back
near the record highs reached
in the spring of 2015, and critical to firms’ ability to hire
workers and invest in new
equipment and facilities.
Ms. Yellen’s comments on a
possible rate increase echoed
those of other Fed officials who

have said in recent days they
see two or three rate increases
this year and could see moving
in June or July.
Investors on Friday afternoon saw roughly a 61% chance
that the Fed would raise rates
either in June or July, up from
56% a day earlier, according to
fed-fund futures tracked by
CME Group.
The central bank in December raised its benchmark federal-funds rate, which had been

near zero for seven years, to a
range between 0.25% and 0.5%.
Since then, policy makers have
held rates steady through a U.S.
economic slowdown, financialmarket volatility and worries
about global growth.
Two forces that have
weighed on business earnings

campaign sent a letter to Democratic National Committee officials asking them to disqualify
former congressman Barney
Frank and Connecticut Gov. Dannel Malloy as co-chairmen of the
convention’s rules and platform
committees, respectively.
—Peter Nicholas

ing only.
While widespread use of driverless cars may be years away,
lawmakers and transportation
leaders say the technology is
progressing so rapidly that Michigan must stay ahead of the
curve or risk losing automotive
research and development to
other states.
—Associated press

and the broader economy seem
to be fading: the energy slump
and the strong dollar.
Crude prices touched $50 a

barrel this past week for the
first time since last year, propelled by the most powerful
rally in seven years. Higher
prices are set to ease pressure
on energy firms that have shed
workers and pulled back on
drilling.
The dollar, meanwhile, has
been more or less stable over
the past year after rising
sharply against other major
currencies in late 2014 and
early 2015 as the Fed prepared
to begin raising rates. A stronger dollar has made U.S.-made
products more expensive for
foreign customers, reducing demand for exports and squeezing the domestic manufacturing
sector.
Incomes and Outcomes
The worst may be over from
the oil downturn and effects of
A sharp drop in U.S. corporate profits has pressured businesses
a strong dollar. But a tightening
to cut back on investments in structures and equipment...
labor market is pushing up
Change from a year earlier
wages “and that probably is
8%
Q1 ’16
8%
Corporate

cutting into margins” more
–0.5%
–3.6%
profits,
broadly, said Jesse Edgerton, a
6
6
after tax*
J.P. Morgan Chase economist.
4
4
Ms. Yellen emphasized the
Business
2
2
Fed is likely to raise interest
investment
0
0
rates “gradually and cautiously” because raising them
–2
–2
too quickly could trigger a
–4
–4
downturn to which the Fed may
2013
’14
’15
’16

2013
’14
’15
’16
have limited tools to respond.
...leaving consumers, buoyed by slow-but-steady income growth,
One possible impediment to
to prop up GDP with their sturdy spending habits.
a June rate increase is the
U.K.’s June 23 referendum on
8%
8% Consumer
Disposable
whether to leave the European
3.3%
2.7%
personal
spending
6
6
3.3%
2.7% Union. Several Fed officials
income
4
4
have flagged the so-called Brexit vote—which falls one week
2
2
after the Fed’s June meeting—
0

0
as a possible source of uncer–2
–2
tainty that could cause them to
–4
–4
hold off on another rate rise
2013
’14
’15
’16
2013
’14
’15
’16 until later this summer.
Ms. Yellen wasn’t asked
*Without inventory valuation and capital consumption adjustments
about the risks from a Brexit
Note: All figures are seasonally adjusted; income, investment and spending are also
vote during her appearadjusted for inflation.
Source: Commerce Department via St. Louis Fed
THE WALL STREET JOURNAL. ance Friday.

Sanders Wants Key MICHIGAN
Clinton Allies Ousted Motor State May
Bernie Sanders is fighting to
OK Self-Driving Cars

oust two Hillary Clinton supporters heading key Democratic National Convention committees, despite the party’s refusal to
remove them, in the latest sign of

disunity amid a bitter fight for the
party’s presidential nomination.
An attorney for Mr. Sanders’s

The U.S. auto industry’s home
state of Michigan is preparing
for the advent of self-driving
cars by pushing legislation to allow for public sales and operation—a significant expansion beyond an existing state law that
sanctions such vehicles for test-

NEW YORK

Pilot in Fatal Plane
Crash Found in River

The body pulled from a World
War-II era plane that crashed in
the Hudson River was identified
Saturday as a 56-year-old pilot
from Florida, the New York Police Department said.

William Gordon of Key West,
Fla., had taken off from Republic
Airport on Long Island in a P-47
Thunderbolt and was flying in a
three-plane formation Friday
over the river for a local air
show when he sent a distress
signal at around 7:30 p.m., authorities said.
The single-seat plane crashed

a short while later into the river
across from 79th Street Boat
Basin on the New Jersey side of
the river and then sank in about
25 feet of water, authorities
said. Divers with the NYPD and
Fire Department of New York
secured the boat and pulled Mr.
Gordon’s body from the river, authorities said. He was pronounced dead at the scene.
—Pervaiz Shallwani


THE WALL STREET JOURNAL.

A6 | Monday, May 30, 2016

FROM PAGE ONE

The high-tech
railgun projectile
exits the muzzle at
4,500 miles an hour
The railgun’s prospective
military advantage has made
the developing technology a
priority of hackers in China
and Russia, officials said.
Chinese hackers in particular have tried to penetrate the
computer systems of the Pentagon and its defense contractors to probe railgun secrets,
U.S. defense officials said. Pentagon officials declined to discuss the matter further.

The Navy began working on
the railgun a decade ago and
has spent more than half a billion dollars. The Pentagon’s
Strategic Capabilities office is
investing another $800 million—the largest share for any
project—to
develop
the
weapon’s defensive ability, as
well as to adapt existing guns
to fire the railgun’s high-tech
projectiles.
Some officials expressed
concern the technology has

SAINT
Continued from Page One
to Tibet high in the Himalayas,
the army has built a shrine to
Mr. Singh, who was a sepoy, the
equivalent of a private, when
he drowned in a rushing alpine
stream at age 22.
Believers say he patrols the
frontier, wakes sleeping sentries
and keeps soldiers from harm.
“Life is tough,” says Maj.
Gen. Vinod Karnik, a retired
officer who served in Nathu
La. There is “a lot of snow and

the Chinese are just about 50
yards in front of you, eyeball
to eyeball.”
Though India’s urban youth
are less inclined to believe in
spirits than their elders, Indian army soldiers are an exception. For men stationed at
the Siachen Glacier on India’s
frontier with Pakistan, there is
Om Prakash, or O.P. Baba. Legend says that in the 1980s, Mr.
Prakash
single-handedly
fended off an enemy advance.
His body was never found.
The glacier, at 20,000 feet
above sea level, is the world’s
highest military base. Soldiers
pay their respects to Mr.
Prakash at a shrine at the foot
of the massive ice sheet. It
contains a bust and a few personal effects.
Over in the northeastern In-

Railgun components

Projectile
A non-explosive bullet
filled with tungsten pellets
Weight: approx. 25 pounds

Approx. 24 inches

Power
A 25 megawatt
power plant and
large capacitor bank
are required to
provide enough
pulse power to
fire the weapon
10 times a minute.

Shoe
An aluminum jacket that supports the
bullet in the gun barrel; also provides a
bridge for the current between the rails

Electromagnetic railgun
(as seen in the lab setting)

32 feet

Firing mechanics

Faster, smarter
Electromagnetic field

Rail

Railguns have for years been
limited to laboratories and videogames.

Former President Ronald
Reagan’s Strategic Defense Initiative—the so-called Star
Wars missile defense—at one
time envisioned using the railgun to shoot down nuclear
missiles. Those plans were
stalled by 1980s technology.
One problem was that the gun

barrel and electromagnetic
rails had to be replaced after a
single shot.
The Navy now believes it
has a design that soon will be
able to fire 10 times a minute
through a barrel capable of
lasting 1,000 rounds.
Besides speed, the railgun
also has a capacity advantage.
A typical U.S. Navy destroyer
can carry as many as 96 missiles—either offensive cruise
missiles or defensive interceptors. A ship armed with a railgun could potentially carry a
thousand rounds, allowing the
vessel to shoot incoming missiles or attack enemy forces for
longer periods and at a faster
rate of fire.
Unlike the Reagan-era initiative, the Pentagon doesn’t see
the railgun as a shield against
intercontinental ballistic missiles but defense against
shorter-range
conventional

missiles.
The U.S. has kept its mili-

tary dominance over the past
quarter-century
largely
through such precision weaponry as guided missiles and
munitions. It also has spent billions of dollars on interceptormissile based defense systems
to shoot down ballistic missiles
fired at the U.S. or its allies.
That monopoly is about
over. China is perfecting a
ship-killing ballistic missile.
Russia mostly impressed U.S.
military planners with the
power and precision of its
cruise missiles deployed in
Syria, and its improved artillery precision revealed in
Ukraine.
“I am very worried about
the U.S. conventional advantage. The loss of that advantage is terribly destabilizing,”
said Elbridge Colby, a military
analyst with the Center for a
New American Security.
Defense planners believe the
U.S. needs new military advances. Russia, for example, is

believed to be developing longer-range surface-to-air missiles and new electronic warfare technology to blunt any
forces near its borders.
Prospects for an armed conflict among the great powers

still seem remote. But for the
first time since the end of the
Cold War, the Pentagon is
again looking closely at responses to rising tensions with
China and Russia.
Military planners say the
railgun would be useful if the
U.S. had to defend the Baltic
states against Russia, or support an ally against China in
the South China Sea.
Moscow and Beijing are investing in missile systems
aimed at keeping the U.S. out
of those respective regions. A
railgun-based missile defense
could defend naval forces or
ground troops, making it easier
to move U.S. reinforcements
closer to the borders of Russia
or China, officials said.

Hitting a missile with a bullet—a technical obstacle that
hampered Mr. Reagan’s initiative—remains a challenge. Railgun research leans heavily on
commercial advances in supercomputing to aim and on
smartphone technology to
steer the railgun’s projectile
using the Global Positioning
System.
“Ten years ago, we wouldn’t
have been able to build a projectile like this because the
cellphone industry, the smartphone industry, hadn’t perfected the components,” said

William Roper, the director of
the Pentagon’s Strategic Capabilities Office. “It is a really
smart bullet.”
Development of the railgun
guidance system is about done,
officials said, but circuits in the
projectile must be hardened to
withstand gravitational forces
strong enough to turn most
miniaturized electronics to
scrap.
Missile defense by the railgun is at least a decade away,
but Pentagon officials believe
the weapon’s projectiles can be
used much sooner. They are
filled with tungsten pellets
harder than many kinds of
steel, officials said, and will
likely cost between $25,000
and $50,000, a bargain compared with a $10 million interceptor missile.
The electrical energy required to fire a railgun means
it is likely to be used first as a
ship-mounted weapon. Only
one class of Navy ship, the
Zumwalt-class destroyer, has
such a power plant, officials
said. The Navy is building just
three of those destroyers, so
the Pentagon is working to
adapt the projectile to use in

existing Naval guns on other
vessels, as well as for Army artillery.
While slower than a railgun,
a powder-fired railgun projectile still flies at 2,800 miles an
hour, which extends the range
and power of existing weapons.
At Dalhgren last year, military engineers test-fired 5- and
6-inch Navy guns loaded with a
version of the railgun projectile. The range of the Navy’s 6inch guns was extended to 38
miles from 15 miles.
The Pentagon also tested
the railgun projectile in 155
mm Army howitzers, successfully extending its range.
“The Navy is on the cusp of
having a tactical system, a next
generation offensive weapon,”
Mr. Roper said. “It could be a
game changer.”

dian state of Arunachal
Pradesh, scene of intense fighting during India’s 1962 war
with China, soldiers turn to rifleman Jaswant Singh Rawat,
who is said to have perished
battling a Chinese advance.
In Nathu La, it is all about
Mr. Singh. His shrine includes
a bedroom and office along

with a chapel. Each morning,
an orderly prepares tea for Mr.

Singh, now an honorary captain, and lays out his uniform
for the day. Other meals arrive
with military precision.
The shrine contains a room
where visitors can leave bottles
of water next to a picture of
Mr. Singh to receive his bless-

ings. Believers say drinking
this water will relieve aches
and pains above the waist.
Wearing slippers kept in the
room is said to cure ailments
in the lower extremities.
Mr. Sehrawat, a sepoy, says
acclimatizing to duty at the
Nathu La post, which is 15,000
feet above sea level, was a

challenge. The altitude can
cause headaches and wreak
havoc with soldiers’ digestion.
Soon after he arrived in
Nathu La in 2013, Mr. Sehrawat found himself in a convoy
of army trucks towing artillery
along a winding mountain
road. He watched horrified as
a landslide swept down a hill
toward him. The cascade narrowly missed the vehicles.
“Baba ji is our support,” Mr.

Sehrawat says. “He is protecting us.”
On a recent morning, files
of sepoys jumped out of passing army trucks, headed up to
the shrine and bowed their
heads. Some snapped pictures
of Mr. Singh’s rooms, each of
which contains a picture of
him wearing a uniform and an
olive-drab turban.
Shambhu Jha, 49-year-old
soldier based in Kolkata who
goes to Nathu La periodically
for training, believes Mr. Singh
is guarding the long Chinese
boundary between India and
Tibet and helps keep the area
secure.
“Those who are on duty on
the border are able to live in
peace thanks to Baba ji,” says
Mr. Jha.
Pamphlets available at Mr.
Singh’s shrine propagate the
mystery. “Even Chinese troops
have been reported saying
that they had seen a man in
white clothes on a white horse

patrolling the watershed,”
says the pamphlet.

Like other soldiers and officers in the Nathu La area, Mr.
Sehrawat says he doesn’t eat
meat or drink alcohol on Sundays, as a mark of respect for
the saint. In the bunker where
he sleeps, a picture of Mr.
Singh is placed in a shrine
with images of Hindu gods.
Soldiers offer him daily
prayers. Many set a place for
the soldier-saint when they
eat meals.
Capt. Ashwani Chandel, 25,
says last year he saw a troop
truck skid off a road during a
heavy snowfall, plunge into a
ravine and crumple. No one
was hurt, he says.
“How can someone escape
without a scratch from such
an accident?” the captain says.
“This was because of Baba ji.”
Parthiban Chandrasekharan,
who has been in the army for
nearly 30 years, says he saw a
jeep pass a shrine to another
soldier-saint, rifleman Jaswant
Singh Rawat in Arunachal
Pradesh, without stopping.
The jeep then lost control. One
officer who failed to salute the

Baba died, Mr. Chandrasekharan was told by the driver of
the vehicle—who saluted and
survived.
“For those who don’t pay
their respects, the punishment
is immediate,” says Mr. Chandrasekharan.

Current

1 A surge of electrical current
from a capacitor bank is
sent into one rail, through
the projectile and into the
second rail.

2 Since the current flows in
opposite directions in the rails, an
electromagnetic field is created
that repels each rail from the
other and the projectile.

3 This repulsive force pushes
the projectile forward —
out of the magnetic field —
accelerating it down the barrel
at 4,500 miles an hour.

Star Wars sequel

5 The enormous amount

of energy generated
from the bullet’s speed
is transferred to the
target on impact.

Christopher Kaeser/THE WALL STREET JOURNAL.

Sources: Office of Naval Research

commanded too large a portion
of resources and focus. “This
better work,” one defense official said.
The age of the gun faded after World War II, hampered by
the limited range and accuracy
of gunpowder weapons. Missiles and jet fighters dominated
the Cold War years, prompting
the Navy to retire its big-gun
battleships. The railgun—and
its newly developed projectiles—could launch a new generation of the vessels.
“Part of the reason we
moved away from big guns is
the chemistry and the physics
of getting the range,” said
Jerry DeMuro, the chief executive of BAE Systems, a railgun
developer. “The railgun can create the kind of massive effect
you want without chemistry.”
The Navy’s current 6-inch
guns have a range of 15 miles.
The 16-inch guns of mothballed
World War II-era battleships

could fire a distance of 24
miles and penetrate 30 feet of
concrete. In contrast, the railgun has a range of 125 miles,
officials said, and five times
the impact.
“Anytime you have a projectile screaming in at extremely
high speeds—kilometers per
second—the sheer kinetic energy of that projectile is awesome,” Mr. Work said. “There
are not a lot of things that can
stop it.”

4 After exiting
the barrel, the
bullet’s shoe
falls away.

U.S. DEPARTMENT OF DEFENSE

Continued from Page One
bers than current missile-defense systems—perhaps within
a decade.
The future challenge for the
U.S. military, in broad terms, is
maintaining a global reach with
declining numbers of Navy
ships and land forces. Growing
expenses and fixed budgets
make it more difficult to maintain large forces in the right
places to deter aggression.
“I can’t conceive of a future

where we would replicate Cold
War forces in Europe,” said
Deputy Secretary of Defense
Robert Work, one of the
weapon’s chief boosters. “But I
could conceive of a set of railguns that would be inexpensive
but would have enormous deterrent value. They would have
value against airplanes, missiles, tanks, almost anything.”
Inside the test bunker at
Dahlgren, military officials
turned to the video monitor
showing the rectangular railgun barrel. Engineer Tom
Boucher, program manager for
the railgun in the Office of Naval Research, explained: “We
are watching the system
charge. We are taking power
from the grid.”
Wires splay out the back of
the railgun, which requires a
power plant that generates 25
megawatts—enough electricity
to power 18,750 homes.
The siren blared again, and
the weapon fired. The video replay was slowed so officials
could see aluminum shavings
ignite in a fireball and the projectile emerge from its protective shell.
“This,” Mr. Boucher said, “is
a thing of beauty going off.”
The railgun faces many
technical barriers before it is

battle ready. Policy makers also
must weigh geopolitical questions. China and Russia see
the railgun and other advances
in U.S. missile defense as upending the world’s balance of
power because it negates their
own missile arsenals.

Railgun technology accelerates a hardened projectile to staggering velocity, a battlefield meteorite with the power to one day transform
military strategy and keep the U.S. ahead of advancing Russian and Chinese weaponry, say supporters.

Deputy Secretary of Defense Robert Work, right, after a railgun demonstration in Dahlgren, Va.

SHEFALI ANAND/THE WALL STREET JOURNAL

GUN

“You can’t ignore the fact
that Russia has great ability to
mass conventional munitions
and fire them over great range.
We have to be able to fight
through those salvos,” said Mr.
Work, of the Pentagon. “And
the railgun potentially will give
us the means to do that.”
Russian officials, meanwhile, including Alexander
Grushko, Moscow’s envoy to
the North Atlantic Treaty Organization, have said technological advances by the U.S.,
including missile defense,
could undermine the strategic

stability currently guaranteed
by the relative balance between the Russian and U.S. nuclear arsenal.

Breaking Out the Big Guns

Soldiers at the high-altitude Indian army post keep a shrine to the spirit of Harbhajan Singh.


Do today’s antidepression drugs
help? Yes, says a
doctor who saw
the old days

In Thailand,
where fair skin is
prized, a rapper
has made
tanning a cause

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ART

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IDEAS

Monday, May 30, 2016 | A7

Russia’s
Long Road
to the

Middle East
Vladimir Putin’s intervention in Syria
caught many by surprise, but it is a return
to Russian geopolitical aspirations that
stretch back to the czars.

SOVIET LEADER Nikita Khrushchev and Egypt’s President Gamal Abdel Nasser raised hands during Khrushchev’s visit to the Middle East in 1964, above left. Top right, Muslims
gathered outside the Moscow Grand Mosque for morning prayers during the Eid al-Adha festival on Sept. 24, 2015. Above right, a convoy of Soviet armored vehicles crossed
a bridge in Termez at the Soviet-Afghan border on May 21, 1988, during the withdrawal of the Soviet Army from Afghanistan.

E

BY YAROSLAV TROFIMOV

VERY RUSSIAN SCHOOLCHILD IS TAUGHT about the violent death of Aleksandr Griboyedov in 1829. A poet and playwright whose work is enshrined in the country’s literary
canon, Griboyedov had the misfortune to be Czar Nicholas I’s ambassador to Tehran in
the wake of Persia’s humiliating loss of territory to Moscow’s spreading empire. A Tehran

mob, furious at the czar and his infidel representatives, stormed the embassy, slaughtering the unlucky ambassador and 36 other Russian diplomatic staff. H A century and a
half later, in 1979, those events were almost replayed in Iran (as Persia is now known).
When five leaders of the Iranian revolutionary students gathered in Tehran to decide
which foreign embassy to target, two of them advocated seizing the Soviet legation.

They were persuaded instead to overrun the U.S. embassy, creating a no less historic trauma for another
world power entangled in the politics of the Middle East.
Russia’s long history of involvement—and warfare—in
the region is largely unknown to Westerners, but it helps
to explain President Vladimir Putin’s decision last fall to
intervene in Syria’s civil war. Mr. Putin’s gambit on behalf of the Syrian dictator Bashar al-Assad caught many
in the West by surprise. Critics have assailed it as a miscalculated bid to replace the U.S. as the dominant outside power in the region.
But when viewed from Moscow, Mr. Putin’s Middle
Eastern adventure looks like something very different:
an overdue return to geopolitical aspirations that stretch
back not only to the Soviet era but to centuries of czarist rule. “The Middle East is a way to showcase that the
period of Russia’s absence from the international scene
as a first-rate state has ended,” said Fyodor Lukyanov,
the head of the Council on Foreign and Defense Policy in
Moscow, which advises the Kremlin and other government institutions.
In Syria, Mr. Putin has achieved notable results. Russia has prevented the collapse of the Assad regime,

Salim al-Jabouri, the speaker of the Iraqi parliament and
the country’s leading Sunni politician.
But today’s Russia can no longer dictate outcomes in
the Middle East, as it once did in 19th-century Persia.
Mr. Putin’s Syria campaign is limited by design and necessity—a modest investment by a power that can only
afford to invest modestly. It is an attempt to become relevant again in a region that, historically, Russia has seen
as its strategic backyard.
Russia has been in contact with the Muslim world, often unhappily, for more than a millennium. In the seventh century—long before the emergence of the Slavic

principalities that would eventually form the Russian
state—Arab armies of the early caliphate brought Islam to Derbent, the oldest city in today’s Russian Federation.
Ibn Fadlan, a 10th-century Arab
diplomat and traveler, described meeting early Russians while visiting Muslim towns along the Volga River. He
was struck by their “perfect bodies,”
their poor hygiene and their practice
of burning slave girls in the shipborne funeral pyres of dead noblemen.
Ibn Battuta, a 14th-century Arab
globe-trotter, was less impressed: He
wrote off the Russians as “an ugly and
perfidious people with red hair and blue eyes.” At the
time, the prince of Muscovy was a vassal of the Muslim
khan of the Golden Horde, and Moscow’s coinage bore
Arabic script.
Only in 1480 did Muscovy become fully independent and stop paying tribute to its Muslim overlords.
A few decades later, Czar Ivan the Terrible began a
series of wars that destroyed the vast Muslim khanPlease turn to the next page

Russia’s
history with
Islam goes
back well
over a
millennium.

A BADGE on a serviceman’s uniform at Russia’s
Hmeimim airbase in Syria showing Bashar al-Assad
and Vladimir Putin, March 10.
which seemed imminent just a year ago. It also has positioned itself at the center of the Middle East’s diplomatic
maneuvering, challenging the formerly unrivaled influence of the U.S. in the region.

“Russia sent a message to the Middle East with its direct intervention in Syria: We are more serious in settling the region’s problems than the Americans are,” said

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A8 | Monday, May 30, 2016

REVIEW
MIND & MATTER:
ROBERT M. SAPOLSKY

Continued from the prior page
ates in Kazan, Astrakhan and Siberia, pushing Russia’s boundaries far to the south and east.
In the following centuries, Russia fought more than a dozen
wars against the receding Ottoman Empire and steadily advanced into Persian-held lands. In the “Great Game” of the 19th
century, Russia punched further south toward British India,
gobbling up one Central Asian principality after another and almost coming to blows with the British over Afghanistan.
Moscow also positioned itself as the protector of the Middle
East’s Christians—many of whom, like the Russians, were Orthodox. (The current head of the Russian Orthodox Church, Patriarch Kirill, alluded to this history when he recently described Russia’s military campaign in Syria as a “holy war” and
called Russian troops there “Christ-loving warriors.”)
When World War I erupted, Britain and France promised Russia
that, once the Ottoman Empire was defeated, the ultimate prize of
Constantinople—today’s Istanbul—would come under Russian rule.
That promise went unfulfilled after the 1917 Bolshevik Revolution.
The Soviet Union, which retained most of the territories that
had been conquered by the czars, also hungered for more influence

in the Middle East. In 1941, working as partners during World War
II, the Soviet Union and the U.K. occupied Iran and ousted its shah,
ostensibly to prevent German activities there.
By the 1960s, Soviet weapons, pilots and military instructors
were pouring into Arab client states, transforming the Middle
East into an arena for Cold War competition. While the U.S.
backed Arab monarchies and Israel, the Soviets sided with leftist regimes in Egypt, Syria, Iraq, Libya and South Yemen, which
became the Arab world’s only Marxist state.
With Iran’s revolution in 1979 and the rise of political Islam,
Moscow’s influence began to wane. Egypt, the most populous
Arab state, signed a U.S.-brokered peace treaty with Israel, and
Moscow presided over a textbook case of imperial overreach
by invading Afghanistan—undermining its regional influence
and speeding up the Soviet Union’s own demise.
After Saddam Hussein’s invasion of Kuwait in 1990, Mikhail
Gorbachev went along with the U.S.-led war to expel Iraq from
its conquered neighbor. As Moscow’s influence in the region hit
its nadir, Washington’s involvement grew larger. In the following decade, Russia was too busy trying to prevent the breakup
of its own rump post-Soviet state, bloodied by separatist uprisings in Chechnya and other Muslim regions.
Mr. Putin successfully pacified those borderlands and, at
first, largely left unchallenged the Middle East’s Pax Americana. As recently as 2011, when the Arab Spring started blazing
through the region, Moscow chose not to use its veto in the
U.N. Security Council to block a resolution that paved the way
for the U.S. and its allies to intervene militarily in Libya and
oust dictator Moammar Gadhafi.
But Mr. Putin has repeatedly blocked any such action in
Syria, where 400,000 people have been killed and more than
half the population displaced since 2011, according to the United Nations. Moscow’s relationship with the Syrian regime goes back
many decades—to the days of Hafez al-Assad,
the current president’s father—and the country is also home to Russia’s only naval facility

in the Mediterranean, at Tartus. While the
U.S. has long stated that Mr. Assad must go,
Washington has refrained from openly attacking his regime. Mr. Putin, by contrast, has deployed Russia’s latest weaponry against Mr.
Assad’s opponents, including groups backed
by Washington.
Few people in the Middle East—even Moscow’s beneficiaries—
assign charitable motives to Russia’s new activism in the region.
“The Russians are not doing it because they are part of the Red
Cross. They are doing it because they have interests,” said Yassine
Jaber, a Lebanese Shiite member of parliament and a former cabinet minister. “Now they’ve achieved their historical dream of having bases in the warm waters of the region, and they will make sure
no gas pipelines will come from Central Asia or Qatar without their
approval. They have gained a foothold in the region.”
Mr. Putin’s ambition to re-establish Russia as a major power
in the Middle East (and the rest of the world) has been constrained by his country’s declining economy, now roughly the
size of Italy’s and still shrinking. Already suffering from sanctions imposed by the West after Mr. Putin’s 2014 invasion of
Ukraine, Russia has been hit hard by the low prices of oil and
gas, the country’s main exports. But such limits are familiar to
Russia, which has never been particularly prosperous but has
frequently sought a leading role in global affairs.
“Putin understands that Russia, based on its economic weight
today, can’t be a great power, but he refuses to act in accordance
with this weight,” explained Dmitri Trenin, head of the Carnegie
Center in Moscow and a former Soviet military officer whose career included a stint as an adviser in Iraq. “He aims to punch well
above Russia’s economic might. The worldview is: We are either a
great power, or we disintegrate and are nothing.”
Nor is it just a lackluster economy that limits the reach of Rus-

sian influence. Russia also lacks the kind of soft power that the U.S.
has long exercised world-wide. Young Arabs and Iranians are
not particularly eager to watch Russian movies, listen to Russian pop music or study in Russia.

“No one in this part of the world loves or hates Russia today.
Russia in the Arab mind is just political strategy and weapons.
These are its only commodities,” said the Lebanese writer and
commentator Hazem Saghieh. “It can’t give much because it
doesn’t have much.”
If anything, there is a stronger social and cultural influence
spreading in the other direction. Today’s Russian population
is about 15% Muslim—a proportion that has grown with the influx of millions of migrant workers from Central Asia. Russia
is also, by some counts, the world’s second-largest source of recruits for Islamic State. From a city like Derbent, the distance
to Baghdad is roughly the same as from Boston to Chicago.
“The Middle East is too close to us for Russia to be a mere observer,” said Andrey Kortunov, the head of the Russian International Affairs Council, a think tank affiliated with the Russian foreign ministry. “It’s not remote Australia or Argentina; it is a world
that we see on the streets of our cities, behind the counters of our
stores, among the workers of our construction sites and, yes, also
inside our jails. All of this requires playing an active role.”
An active role does not mean, however, attempting to imitate
the massive Middle East engagements of the U.S. over the past
decade. “The American experience in Iraq is being studied with
great attention,” said Mr. Lukyanov of the Council on Foreign
and Defense Policy. “The lesson is that we can’t get involved too
deeply—but we also can’t withdraw too quickly.”
Despite concern about maintaining limits on its involvement in
Syria, Moscow may yet—as President Barack Obama publicly
warned last year—get “stuck in a quagmire.” Russia also risks
alienating the Muslim world’s majority Sunnis by siding with Mr.
Assad, who is backed by Shiite Iran and Shiite militias in his war
against mostly Sunni rebels. In a region increasingly split across
sectarian lines, such alliances may make Russia more of a target for
Islamic State and other Sunni Islamist terrorist groups.
Aware of that danger, Russia has avoided casting today’s
Middle East as a zero-sum game or seeking to push the U.S.

from the region. Despite occasional bombast, Moscow quietly
welcomed Mr. Obama’s recent decision to extend the deployment of nearly 10,000 U.S. troops in Afghanistan, a move that
could prevent the spread of Islamist militancy into former Soviet states in neighboring Central Asia.
Unlike the U.S.—or the former Soviet Union, whose Middle
Eastern alliances were constrained by ideology—Mr. Putin’s
Russia has the advantage of being on speaking terms with all
of the region’s main powers. (The lone exception is Turkey, a
bitter foe of the Assad regime that, to Mr. Putin’s fury, downed
a Russian warplane in November.)
“While the American influence has receded, Moscow has built
unique relationships in the Middle East. On one side, it has strategic ties with Israel, and on the other, no less
important ties with Iran,” said Yelena
Suponina, a Middle East expert at Russia’s Institute of Strategic Studies, a think tank affiliated with the Kremlin. Moscow also keeps
up ties with Hamas and Hezbollah, which the
West considers terrorist groups. “Not a single Western country can repeat what Russia
is doing,” she added.
This readiness to deal with all sides has
meant, however, that Russia finds itself
with no bedrock allies in the region. Even
as Russia has joined with Iran to save Mr.
Assad’s regime, overall Iranian-Russian relations remain cool,
and the two countries haven’t become major trade partners. The
Iranians resent Moscow’s cooperation with Israel, and Russia
does not want to get dragged into Iran’s sectarian conflict with
Sunni powers led by Saudi Arabia.
“The Iranians feel they are constantly being duped [by the Russians]…and that they are not going to follow through with their
promises,” said Dina Esfandiary, a fellow at King’s College London.
“There is no love for Iran in Russia, and for Russia in Iran. The
beauty of this relationship is that it’s purely pragmatic,” agreed Mr.
Trenin of the Carnegie Center. The only country in the Middle East

with which a significant proportion of Russians empathize, he
added, is Israel, in part because so many Israelis hail from the former Soviet Union and speak Russian. As it happens, of course, Israel is also the closest regional ally of the U.S.
The Russia-Israel connection is likely to grow even warmer with
the return to government of the most prominent of the Soviet-born
Israelis, Avigdor Lieberman, who became Israel’s defense minister
this past week. Mr. Lieberman, an ultranationalist and a former foreign minister, has called the Russian-sponsored deal to remove
Syria’s chemical weapons a major boon to Israeli security.
“My experience is that you can do business with [the Russians].
They are pragmatic, and you can close a deal and get a clear answer,” Mr. Lieberman said in an interview before taking his new
post. “Russia is nearby, and it will never renounce its interests in
the Middle East. It is too big a power to be ignored.”

ALEXEY DRUZHINYN/RIA NOVOSTI/EUROPEAN PRESSPHOTO AGENCY

‘Russia is nearby,
and it will never
renounce its
interests in the
Middle East.’

SYRIAN PRESIDENT Bashar al-Assad and Russian President Vladimir Putin during their meeting at the Kremlin in Moscow, Oct. 20, 2015.

FINE ART IMAGES/HERITAGE IMAGES/GETTY IMAGES

Putin Plays an Old Russian Game

FAMILY FEUD Paolo Guidotti’s ‘Cain and
Abel,’ painted around 1610 (detail).

In Families, Small

Disputes Can Set
Off Major Mayhem
FEW THINGS are more shocking than the intentional, violent killing of one person by
another. But there are circumstances that can compound
the horror. Consider an incident earlier this month in St. Cloud, Fla. Police say that 25-year-old Benjamin Middendorf shot and killed his older brother
Nicholas after an argument over a cheeseburger. (Mr. Middendorf has pleaded not
guilty to a charge of second-degree murder
in Osceola County Circuit Court.)
The mere existence of homicide within
families is a puzzle. Evolutionary success
means passing on copies of one’s genes, typically by reproducing as successfully as possible. But another route is “kin selection.” A
parent and child share half their genes, as do
two full siblings. Thus, mathematically, an organism achieves the same genetic success if
it manages to reproduce once on its own or
to help a full sibling reproduce twice. This
prompted a famous quip attributed to the
British scientist J.B.S. Haldane: “I’d lay down
my life for two brothers or eight cousins.”
So evolution favors cooperation and altruism among relatives. This explains a whole
range of social behaviors: how, for example, a
young, untested female baboon achieves a
relatively high rank in her group because her
older, higher-ranking sister has her back, or
how lion siblings form cooperative coalitions.
Why would humans ever kill a relative? In
research published in several different journals in recent years, the psychiatrists Susan
Hatters Friedman of the University of Auckland, Phillip Resnick of Case Western Reserve and colleagues have reviewed the varied and ghastly literature about such events.
They found a list of causes familiar to any
reader of police reports. Sometimes severe
psychiatric illness is to blame—say, murder/

suicide by someone deeply depressed, or psychotically delusional “altruism,” in which a
parent kills a newborn to prevent a sinful life
and damnation. Revenge may also play a
part: A child attacks an abusive parent or a
spouse kills a partner demanding a divorce.
In some societies, “honor” killings are committed by families against a (usually female)
relative who has violated cultural norms.
Other families will put to death an ill child or
one of the “wrong” sex—again, typically girls.
Then there’s material gain. In Beverly
Hills in 1989, the Menendez brothers shot
their parents; prosecutors said that they
wanted to get their hands on the family fortune. Parents, in
turn, can see
their children
as mere commodities. In
2014, Kenyan
television reported that the
father of a 5year-old albino
girl attempted to sell her, trying to capitalize on a market for albino body parts
thought to have magical properties.
As I said, varied and breathtakingly
ghastly, and utterly puzzling.
One corner of zoology provides an example of vaguely similar behavior: “brood reduction,” which occurs in numerous bird species (and one species of hyena). When a
mother has more offspring than the available
resources can support, the strongest siblings
sometimes kill the others.
This would lead you expect that human
“siblicide” would occur over valuable resources—God’s approval, birthrights or
kingdoms—and it does sometimes, famously. But more typically it results instead

from years of tension prompted by competition, envy or bullying. And the immediate
cause of the killings can be shockingly
petty: a snide comment, music played too
loud, a late arrival at a family get-together.
The historian Richard Mc Mahon has found
a pattern of mundane triggers of intrafamily violence in famine-era Ireland. It’s overwhelmingly rooted in everyday life.
Evolutionary theory often comes up short
in explaining the extremes of human behavior. We sometimes bequeath wealth to charities instead of to our own children. We adopt
and raise other children who are completely
unrelated to us. And brothers may sometimes
do grievous harm to one another over the
smallest disputes. From an evolutionary
standpoint, we are one weird species.

A puzzle that
defies the
rules of
evolution.


THE WALL STREET JOURNAL.

Monday, May 30, 2016 | A9

KEITH NEGLEY

REVIEW

In Defense of
Antidepressants

Studies now question their
effectiveness, but a doctor
has seen dramatic benefits
BY PETER D. KRAMER
DO ANTIDEPRESSANTS WORK? The notion
that they don’t—that Prozac, Lexapro and
other drugs are little more than placebos with
side effects—has become mainstream. “Antidepressant Lift May Be All in Your Head,” a
typical headline reads, atop an article citing
research from medical journals. With as many
as one in eight American adults now taking an
antidepressant, the stakes are high.
Concerned about providing effective care to
my own patients, I have spent the past five
years exploring the evidence on treatment for
depression. As I read the formal findings, they
jibe with what my clinical work as a psychiatrist
had led me to expect. Antidepressants are harmful in a subset of depressed patients but helpful
for most. Little of the benefit comes from the

classic placebo effect—that is, hopeful expectancy based on the fact of pill-taking. Most of it
comes instead from the inherent, chemical properties of the drugs, perhaps through their ability
to restore resilience in the brain.
I base these conclusions largely on the results of randomized trials, in which patients
received medication or dummy pills and were
followed over time. In psychiatry, however,
such outcome studies are often flawed, and
their implications are open to competing interpretations. I read the data with a doctorly eye.
Today, when evidence-based medicine is a byword, mere mention of the practitioner’s viewpoint is transgressive. But I have a further confession to make: There are reasons beyond the
numbers—even beyond the progress of my patients—that make it hard for me to believe that

antidepressants do not work. Chief among them
is the apparent decrease in the sort of end-ofthe-line depression that I encountered regularly
during my medical training in the late 1970s.
Back then I saw men and women who suffered depression at the deepest level. On general
hospital wards, such patients were not rare.

Thin, stooped, immobile suffering souls, prematurely aged, they had the classic depressive habitus, the attitude or physique of the disease.
They spoke slowly and repetitively. They were
hard to interview.
I was known to have an interest in psychiatry,
so when a depressed woman—call her Irma—fell
silent, the team on rounds asked me to sit with
her. In time, she shared her story. Long ago, her
husband had died and then a daughter. Now
Irma had heart disease. She was content to
join them. Depression hardly captures the
bleakness she suffered. Her brain transmitted
a single message: despair.
I trained at Harvard Medical School, a center of American psychoanalysis. Antidepressants had been available
since the late 1950s, but to
prescribe them was considered a failure of imagination.
Psychiatrists believed that
the drugs robbed patients of
their autonomy.
For my psychiatry rotation, I was sent to a hospital staffed by eminent
psychoanalysts. The ward housed many patients
like Irma. In the activity room, depleted depressives sat still, distinguishable from catatonic patients only by their hand-wringing. We offered
psychotherapy. Otherwise, depression was allowed to run its course.
In much of the country, antidepressants had
gained acceptance. In time, I learned to sup-

plement talk therapy with prescribing. Nowhere did I see the volume of end-stage depression I had previously encountered, nor
have I ever again. During 30-plus years of outpatient practice in Providence, R.I., none of my
patients has begun with or, to my knowledge,
moved on to paralyzing melancholy.
Is end-of-the-line, immobilizing depression in
decline? Public Health Service surveys on mental illness are not fine-grained enough to tell us.
But I have asked students and colleagues what
they see. Their response is uniform: little endstage depression—much less of it (say the oldest
doctors) than four decades back.
Of their gravest cases, trainees say: A patient
who had been doing well in treatment lost his
job, could not afford his medicine, resumed
drinking, missed his clinic appointments, and
was brought to the emergency room by the police. Paralyzing melancholy has become an element in a tale of care interrupted.
Further testimony comes from a psychiatrist
at the University of Massachusetts, Anthony
Rothschild—arguably our premier expert on
psychotic depression, which includes hallucinations or delusions. In 2014, I asked him if he was
seeing classic, immobilizing melancholy—in the
absence of psychosis. No, he said. There’s much
less of it. His thought was that primary-care
doctors nip progressive mood disorders in the
bud. People used to move from depression to severe depression to paralyzing melancholy. Since
the 1980s, with the advent of easier-to-use antidepressants, often the slide is interrupted.
With the deinstitutionalization of mentally
ill patients, we should all know people with
catastrophic depression. For the sweep of human history, they have been with us, sufferers with wasting bodies, tortured eyes and
downturned gazes. They were a familiar sight
at church and in family homes. Now, we seldom encounter them.

Diagnoses shift. Increased awareness of dementia, drug abuse and post-traumatic states
has made depression a more limited category.
And diseases come and go, for unknown reasons.
If treatment has helped to reshape the face of
mood disorders, antidepressants may not deserve all the credit. New psychotherapies aim to
target depression directly, to interrupt episodes.
Still, my impression is that end-stage depression is less common in part because—haphazardly, with many cases missed altogether—doctors employ antidepressants. They have broad
effects, preventing recurrences, improving patients’ quality of life. Even partial successes
count. I see patients who, though still afflicted,
function as attentive parents and pursue careers. With depression as with cancer, we can
turn terminal cases into chronic ones.
If that effort matters, then the practice I observed in my training years—of letting depression linger—was, for all its idealism, barbaric.
Imagine Irma at critical junctures, struggling
with worsening symptoms. Should she have
been offered a trial of antidepressants? Surely she should
have—unless they do not
work. Because I rarely see a
patient like her any more, I
believe that they do.
There are weak links in
this chain of reasoning, but
every doctor approaches research findings from a perspective shaped by professional experience. I work
under this influence: time spent with depression when prescribing for it was taboo.

Immobilizing
melancholy
was once a
familiar sight;
now it is rare.

Dr. Kramer is a psychiatrist and professor at
Brown Medical School. His latest book, “Ordinarily Well: The Case for Antidepressants,”
will be published on June 7 by Farrar, Straus
and Giroux.

ARE THAIS READY TO LET THEMSELVES TAN?
TANNED SKIN is a tough sell in Thailand, where
both men and women prize fair complexions
and spend large sums on skin-whitening pills
and lotions. When Thais visit the beach, they often wrap themselves up in beach towels or wear
long-sleeved spandex outfits. Magazine models
are usually ivory-white. Around Siam Square,
Bangkok’s equivalent of New York’s SoHo or
Shibuya in Tokyo, skin-whitening clinics abound.
For young women in particular, the pressure
to have a fair complexion is intense. Sociologists say that skin tone in many Asian countries is widely linked with both social class and
beauty. As in 17th-century Europe, darker skin
is associated with manual laborers or farmers
exposed to the sun, while lighter tones are
seen as a sign of wealth and privilege.
But attitudes may be shifting. A pro-tan camp
has emerged in Thailand, and one of its biggest
advocates is the rapper Joey Boy, who is investing a chunk of his fortune in a magazine called
Tan. “The idea is to go outside and do something.
Don’t stay at home worrying about your skinwhitening cream,” said Joey Boy, who at 41 is one
of Thailand’s best-known performers.
Recent issues of his magazine ran articles
on surfing and skateboarding. Models featured
on the cover often sport deep tans, and one
piece explained how to apply self-tanning

creams to get a bronzed beach look.
These are radical notions across much of
Asia, where the market for skin-whitening products is projected to swell to $20 billion a year by
the end of the decade, according to the consulting firm Global Industry Analysts Inc.
At the same time, however, many Thais are

ATHIT PERAWONGMETHA/REUTERS

BY JAMES HOOKWAY

A CROWD waiting for a boat at Maiton Island in Phuket, Thailand, March 18.
beginning to reflect on the deeper significance
of their attitudes about skin color. The country’s
political upheavals over the past decade, including two military coups, have raised an uneasy
awareness of rural and urban divides in the
country—with darker skin traditionally more associated with rural residents.
Consumers, meanwhile, are beginning to
push back against the aggressive and, in some
cases, offensive advertising of skin-whitening
products. One Bangkok-based firm selling skinlightening pills apologized recently after one of
its commercials provoked an uproar for its slo-

gan: “You just need to be white to win.” Authorities are casting a more critical eye, too, investigating other skin-whitening products claiming
to contain salmon sperm, among other things.
Joey Boy (whose real name is Apisit Opasaimlikit) has helped to expand the debate.
Raised in Bangkok’s Chinatown, where his
parents ran an auto-parts business, he spent
much of his youth skateboarding and dabbling in hip-hop. His rapping career took off
in 1995 with a hit single, “Fun Fun Fun,” that
is still played on Thai radio. Later he collaborated with will.i.am from the Black Eyed Peas

before taking on some movie and TV roles.
His new magazine has struck a chord. At its
launch in February, singers and actors sipped
from glasses of organic cider as they posed for
photographs with fans. Waitresses glided around,
offering Thai beach treats such as black herbal
jelly before Joey Boy entered to the soundtrack
from the “Hawaii Five-O” television series.
Leafing through an issue of Tan during a
break from her job selling cars in a Bangkok
showroom, Kanyana Sontinen, 24, said that she
was struck by the selection of models in the
magazine. “This sends a positive message for
darker-skinned people like me,” she said. “In
the past I wanted to be white, but I can see
that things are beginning to change.”
TV host Patcharasri Benjamas—whose
nickname, Kalamare, refers to a dark Thai
dessert and alludes to her darker skin—also
thinks that Tan is helping Thais open up to
the idea of getting a suntan or revealing their
natural skin color. “If people can see models
on the beach with tanned skin, maybe they
will feel they can do that, too,” she said. “Not
like now, when they cover up their arms and
legs as soon as they arrive at the beach and
sit in the shade all the time.”
Interest from advertisers is picking up. The
biggest so far is Rip Curl, which advertises bikinis and other leisure-wear in the magazine. Others include Brazilian footwear brand Havaianas

and the Italian maker of Vespa scooters. Editorial meetings can still be a little fraught, though.
“Some of the team were complaining that
not all the models are tanned,” Joey Boy said.
“It’s really, really sensitive.”
—Wilawan Watcharasakwet
contributed to this article.


THE WALL STREET JOURNAL.

A10 | Monday, May 30, 2016

OPINION
REVIEW & OUTLOOK

N

Obama’s Hiroshima Genie

o phrase in national security is more fa- define our nations not by our capacity to demiliar than the notion of putting the nu- stroy but by what we build. And perhaps above
clear genie back in the bottle. In his all, we must reimagine our connection to one
speech Friday in Hiroshima,
another as members of one
A ‘moral revolution’
President Obama proposed
human race.”
such a miracle: “Among those
That statement may stand in
won’t stop the spread
nations like my own that hold

history as the apotheosis of Mr.
of nuclear weapons.
nuclear stockpiles, we must
Obama’s view of world affairs.
have the courage to escape the
It also summarizes the basis
logic of fear, and pursue a
for most criticism of the Presiworld without them.”
dent’s foreign-policy legacy, which is its nearly
The genie was not the mere existence of nu- unbounded credulousness. It is belief without ofclear weapons but the technical knowledge to fering adequate evidence for its beliefs.
produce them. North Korea, one of the world’s
Mr. Obama’s sentiments are undeniably nomost economically bereft nations, has nonethe- ble, but they are in conflict with the observable
less acquired knowledge to produce nuclear and growing disorder of the world his successor
bombs and missile-delivery systems. And it dis- will inherit. One word that describes that unplays no inclination to stop producing nuclear- certain inheritance is alliances. As virtually all
weapons technology—for itself or for export to his postwar predecessors understood, limiting
other nations.
war and especially the spread of nuclear weapThis is known as proliferation, the most vex- ons depends crucially on the willing participaing problem of the nuclear age, one that states- tion of other nations.
men have worked tirelessly to address across
Mr. Obama’s policies toward Iran, Russia,
the seven decades since Hiroshima and Naga- Syria, Iraq, China and North Korea have caused
saki, which by the way saved millions of lives important allies in each instance to doubt
by ending World War II.
America’s traditional postwar resolve to supMr. Obama’s contribution at the end of his port and protect them.
Presidency is to anathematize war: “We must
Saying, as he did in Hiroshima, that what the
change our mind-set about war itself. To pre- world needs in the nuclear age is “a moral revovent conflict through diplomacy and strive to lution” is inadequate to the growing proliferaend conflicts after they’ve begun. To see our tion he has presided over. Mr. Obama’s speech
growing interdependence as a cause for peace- was eloquent, but the next President’s policies
ful cooperation and not violent competition. To will have to be much more than that.

N

Democrats vs. Israel

ot too long ago Democrats were Amer- country—including a genuine occupier like
ica’s pro-Israel party. Harry Truman China in Tibet—is being singled out for boyrecognized Israel moments after the cotts the way Israel is. The suggestion that IsJewish state declared inderael deliberately “massacres”
pendence in 1948. JFK sold Sanders puts two hostile innocent Palestinians is false
advanced anti-aircraft misbased on everything we know
voices on the party’s
siles to Jerusalem, ending a
about Israel’s military replatform committee.
de facto U.S. arms embargo.
straint and war practices. If
Bill Clinton was famously
Palestinians wanted to end
close to the late Israeli Prime
Israel’s occupation, they
Minister Yitzhak Rabin.
could have taken the deal offered to them at
If that party isn’t dead, it’s close. This week Camp David in 2000 when Bill Clinton was
Bernie Sanders named James Zogby of the President.
Arab-American Institute and professor Cornel
Pro-Israel Democrats might reply that
West to the party’s platform-drafting commit- Messrs. West and Zogby are only two of a 15tee. The pair are expected to push hard for a person panel, and Hillary Clinton has taken a
more “even-handed” position on the Israeli- more mainstream line. But there’s no gainsayPalestinian conflict, which in practice means ing the increasingly anti-Israel tilt of progresdenouncing Israel at every turn.
sive politics. A Pew poll from April found that
Mr. West offered a flavor of his even-hand- while moderate Democrats still sympathized
edness on Facebook in 2014 during Israel’s last with Israel over the Palestinians by a 53% to
war with Hamas. “Let us not be deceived,” he 19% margin, self-identified liberal Democrats
wrote. “The Israeli massacre of innocent Pales- now tilt to the Palestinians, 40% to 33%.
tinians, especially the precious children, is a

Even Mrs. Clinton is only moderate on Iscrime against humanity! The rockets of Hamas rael when compared to the Democratic left.
indeed are morally wrong and politically inef- Her State Department was notorious for its defective—but these crimes pale in the face of nunciations of Israel, and some of her closest
the U.S. supported Israeli slaughters of inno- advisers are often quicker to denounce Israeli
cent civilians.”
self-defense than Palestinian terror.
Mr. Zogby has prominently endorsed the
The shame of all this is that support for a
Boycott, Divestment and Sanctions (BDS) robust liberal democracy like Israel should
movement against Israel, calling it “a legiti- come naturally to the Democratic Party. Last
mate and moral response to Israeli policy.” we checked, it was better to be a woman, or
BDS has gained steam in recent years on col- homosexual, or environmentalist, or political
lege campuses, where Palestinian victimology dissident in Tel Aviv than in Gaza. As they
plays well and students are easily misled about write their party’s platform, Democrats might
the causes of the Arab-Israeli conflict.
ask why Israel, the one Middle Eastern country
These views go well beyond the usual that fully shares their values, should be the
bounds of fair criticism of Israel. No other one they most seek to condemn.

H

The TSA’s Summer of Lines

ours of standing in line at airports has ployees without security training, while giving
never topped anyone’s list of holiday local directors more flexibility in allocating
pastimes, but the U.S. Transportation staff than they generally have now. TSA must
Security Administration seems
also consider deploying emThey’re from the
intent on imposing this equalployees from headquarters,
ity of misery this summer. On
the bill tells the agency to

government and they’re and
Thursday House Republicans
finish the private partnerships
here to make you wait. that might reduce the hassle
unveiled legislation to reduce
wait times, and the agency deof enrolling in expedited
serves a full body scan.
screening.
For months passengers have languished in
Here’s what the House should add: TSA runs
lines in Chicago, Atlanta, Charlotte, Seattle and a Screening Partnership Program, which in
fill in the blank. American Airlines says more theory allows an airport to “opt out” of TSA and
than 70,000 of its passengers have missed flights bring in a certified private security firm. In a
this year due to lines. Some airports are telling 2011 report, the House Committee on Transporfolks to show up three hours before takeoff—and tation and Infrastructure compared Los Angeles
that’s before you wait on the tarmac. Passenger data with a private operation running San Franoutrage has been so potent that the government cisco’s airport. A contract screener in San Fran
even held someone accountable: TSA’s security moved through 65% more passengers than TSA
chief resigned this week.
employees in L.A.
One reason for the bottlenecks is that TSA
But only a handful of airports participate, as
has reduced screening staff more than 10% since TSA chooses the security company and micro2011, while travelers increased 11%. The agency manages the contract. That isn’t a partnership.
hoped to shuttle people into its PreCheck pro- Congress could stipulate that an airport mangram, which expedites security for those who age its own bidding and operations; the governshow up somewhere for fingerprinting and pay ment would remain a safety regulator. Execu$85. More time at this glorified DMV hasn’t tives at Hartsfield-Jackson in Atlanta and
been as popular as the agency thought. TSA has elsewhere have floated dropping TSA, but withthrice since 2013 invited private companies to out Congress that’s about as useful as hiring cirdevelop new advanced screening techniques. So cus entertainers to distract the disgruntled, as
far, no results.
San Diego International tried recently.
TSA says its $7.6 billion annual budget is a
Congress nationalized airport screening after
pittance, and so Congress freed up $34 million 9/ll, as Democrats saw a political opening to add
more for the agency. Senate Democrats want to thousands of new union workers. But after
pour even more cash into TSA for hiring thou- nearly a decade and a half, TSA’s legend of insands of new staff. But ask anyone who has ever competence grows. Last year Department of

hired an employee how easy it is to find 1,000 Homeland Security Inspector General John Roth
workers, and add that screeners spend weeks told Congress that a secret performance investiin Washington for training. That won’t help gation had turned up “failures in the technology,
summer travelers.
failures in TSA procedures, and human error.”
A better solution is from the House Home- Safety oversights are common.
land Security Committee. Its bill directs TSA to
One bill won’t end the dysfunction, but forcreassign as screening staff some thousands of ing government to shift priorities to serve pas“behavior detection officers” who currently sengers would at least offer relief to anyone unstare or bark at travelers. The bill also instructs lucky enough to pass through an airport over
TSA to reserve jobs like stacking bins for em- the summer.

Trump Rakes
The Clinton Muck
If the political class had
a theme song, it would
be that old Toby Keith
tune, “I Wanna Talk
About Me.” Donald
Trump knows the feelPOTOMAC ing, though of late he
has been focusing on
WATCH
others. He wants to talk
By Kimberley
about Bill. He wants to
A. Strassel
talk about Hillary. He
wants to talk about the
1990s, and Vince Foster, and Juanita
Broaddrick.
He wants to talk about things that
could help him win an election.
That Hillary Clinton today has a shot

at the White House comes down to one
reality: People forget. This is a politician
utterly defined by scandal, and with
more baggage than the carousels at Dulles International. She ought to be disqualified. And yet the Clintons thrive,
the beneficiaries of forgetfulness.
They’ve spent decades bulling through
their messes, blaming their woes on
right-wing plots, and depending on a
fickle press and a busy nation to lose interest in their wretchedness. It works
every time.
Yet Mr. Trump has a way of disrupting the status quo. He does this in part
by behaving in ways most politicians
wouldn’t or couldn’t. Unlike Republicans
who may be wary of resurrecting the
Clinton past, for instance, Mr. Trump is
not afraid of being labeled “obsessive.”
But there is usually a method to his
madness. And his current let’s-campaign-like-it’s-1999 strategy has purpose—it’s part offense, part defense.
On offensive, Mr. Trump’s goal is to
play off the soaring distrust Americans
have in Mrs. Clinton by tying the past to
the present. He wants voters to realize
that the Whitewater land deal and Paula
Jones aren’t dusty, closed chapters in the
Clintons’ history. They are, rather, markers on a long continuum, one that begins
with young Bill’s draft-dodging and continues today with mature Hillary’s private-email-server deletions and Clinton
Foundation money-grubbing. And those
scandals would accompany the Clintons
back to the White House and define the
next eight years.

“[W]hether it’s Whitewater or
whether it’s Vince or whether it’s Benghazi. It’s always a mess with Hillary,”
said Mr. Trump in a recent interview.
The Clintons will claim that nobody
cares. It’s also possible that younger
Americans—some of whom were in diapers during the Clinton administration—
can’t figure out why people are suddenly
talking about blue dresses. Still, give Mr.
Trump marks for doing more than any

politician in recent memory to educate.
The newspapers are suddenly brimming
with synopses of Filegate, Chinagate,
Travelgate, cattle futures, the Marc Rich
pardon, Kathleen Willey and White
House looting.
Which is also part of the Trump offense: Energizing GOP base voters.
Older Republicans in particular remain
frustrated that the Clintons have never
been held to account, and that the media so easily lost interest in the scandals.
Mr. Trump’s hits about the 1990s are
also defensive moves, against what might
otherwise be Mrs. Clinton’s biggest
strength—the “women’s issue.” Democrats have used the “war on women”
theme against Republicans for more than
a decade, and for the most part successfully. Mrs. Clinton is already playing the
women’s card, accusing Mr. Trump of insulting women. His response goes like
this: “You want to talk about women?
Awesome. Let’s talk about Bill.”

The Clintons have never run
into a foe willing to go where
this one goes—gleefully.
His ad on Instagram, featuring Bill
Clinton chomping on a cigar, with the
voices of women describing his unwanted sexual advances in the background, along with an ominous Hillary
cackle, was a study in full-throttle bluntness.
Mrs. Clinton now knows that attacking Mr. Trump about women will invite a
counterattack from him citing Paula
Jones, another of Bill’s accusers. So perhaps Mrs. Clinton will lay off that front.
Which is Mr. Trump’s goal. He’s playing
for a draw on this issue.
Does Mr. Trump’s Bad Bill approach
risk making Mrs. Clinton look like a victim? It might, if this were the 1990s, and
she were still viewed as the victim of a
philandering husband. But Hillary has
spent the past 16 years embracing her
womanizer, using his fame and fortune
to bolster her presidential run. And this
is the woman who, according to her longtime friend Diane Blair, railed that Monica Lewinsky was a “narcissistic loonytune.” It’s hard to feel sorry for a woman
willing to blame her husband’s dishonor
on a 22-year-old intern.
What matters most about this Trump
strategy is that it’s a marker of what’s
to come. The Clintons play hardball. Mr.
Trump intends to play smashball. For
them, that’s new.
Write to

That Slow Hissing Sound?

The Deflating Jet Bubble
What happened to the
jet bubble we wrote
about between 2010
and 2013? It popped.
Last year, sales by
Boeing and Airbus
were down 40% from
BUSINESS
the previous two
WORLD
years. In 2016, the
By Holman W.
sledding, so far, has
Jenkins, Jr.
been even rougher.
Boeing’s stock price is
down only a bit, but trails the market.
Break-even for its spiffy 787 Dreamliner,
which ran up $30 billion in deferred
production costs, has been delayed.
Profits are even more remote for
Airbus’s gigantic A380, a plane popular
with travelers and unlikely to earn a
nickel for Airbus shareholders.
But jet bubbles don’t pop the way dotcom or telecom bubbles do. If the plane
makers never booked another order, they
would still work eight years or more to
meet those already penciled in. Airbus’s
backlog, at list prices, officially tops $1

trillion, and Boeing’s isn’t far off.
Naturally, both worry about cancellations and deferrals by airlines whose
eyes were bigger than their tummies. In
many ways, though, the duo have lucked
out. New invaders from Russia, China,
Japan and elsewhere, aiming to challenge their dominant, workaday narrowbodies, the 737 and A320, have been
slow to get off the ground. Canada’s
Bombardier a few weeks ago racked up
its first big order from a U.S. carrier
(Delta) for its CS100, but the company
still is seeking a billion-dollar bailout
from the Canadian government.
Was bubble ever the right word?
What is a bubble anyway?
As this column has detailed, political
and market factors lay behind the boom
in orders that barely took a hiatus even
during the financial crash of 2008.
The courts in the U.S. keep bankrupt
carriers flying, wiping out their debts
and freeing up balance sheets for new
plane purchases and leases. An authentic air-travel boom in Asia generated
lots of sales, but so did cheap, government-subsidized lending.
Europe pitched in with noise- and
carbon-abatement rules that artificially
encouraged carriers to park older but
perfectly serviceable aircraft. High oil
prices further rewarded carriers for retiring 10-year-old jets to the desert in
favor of newer jets promising a 10%
improvement in fuel efficiency.

Even so, the latter dynamic was already fraying before 2014’s fracking-induced bust in oil prices. Delta, Southwest
and others noticed that high-quality,
older planes had become so cheap on the
secondary market that flying them
would be profitable even with their
higher fuel-burn.
One of our cohorts in bubble-saying,
Adam Pilarski of the Avitas consultancy,
was already predicting six years ago
that, by 2018, oil prices would fall to
$40 based on sluggish global growth
and shale.
The Boeing-Airbus duopoly, you
might think, would be capable of disciplining itself, but being a duopolist is
not all it’s cracked up to be. Boeing, despite evidence of doubts, followed Airbus in rolling out expensive commitments to develop new aircraft even
when these planes would undercut the
value of hundreds of planes that customers had not yet taken delivery of.
Still, the bubble thesis may have been
overstated if you were expecting a sudden meltdown. Both manufacturers deliberately sought to increase production in
locales where law and culture are less
friendly to organized labor, giving themselves the flexibility to slash costs and
output if needed. Boeing built its second
787 line in South Carolina; Airbus last
year started production of A320s in Mobile, Alabama.
But the risk remains. Both have the
potential to blow themselves up by
guessing wrong on future deliveries and
trying to build too many planes too fast,
creating the kind of production snafu

that almost undid Boeing in the 1990s.
Not only are both companies, as their
struggles with the A380 and 787 show,
tempted to overestimate their own competence in the most complex manufacturing task known to man. The future of
commercial aviation is also a question.
Does air travel seize up under security
fears, environmental costs, the closing
of markets and the appeal of telepresence? Or does globalization, despite
Trumpian and Brexit hiccups, continue?
Do the happy trends prevail that recently saw Chinese police officers deployed to Italy to cooperate in keeping
Chinese tourists safe and comfy? Will
growing hordes continue to wander the
globe in search of business, adventure
and new scenery? Of course, both
manufacturers also have large military
businesses to fall back on should the future choose a darker path.


THE WALL STREET JOURNAL.

Monday, May 30, 2016 | A11

OPINION

DECLARATIONS
By Peggy Noonan

T

he most interesting thing

Donald Trump has said
recently isn’t his taunting
of Hillary Clinton, it’s his
comment to Bloomberg’s
Joshua Green. Mr. Green writes:
“Many politicians, Trump told me,
had privately confessed to being
amazed that his policies, and his
lacerating criticism of party leaders,
had proved such potent electoral
medicine.” Mr. Trump seemed to “intuit,” Mr. Green writes, that standard
Republican dogma on entitlements
and immigration no longer holds
sway with large swaths of the party
electorate. Mr. Trump says he sees
his supporters as part of “a movement.”

She breaks the rules
and gets away with it
every time. No wonder
voters are fed up.
What, Mr. Green asked, would the
party look like in five years? “Love
the question,” Mr. Trump replied.
“Five, 10 years from now—different
party. You’re going to have a
worker’s party. A party of people
that haven’t had a real wage increase in 18 years.”
My impression on reading this
was that Mr. Trump is seeing it as a

party of regular people, as the Democratic Party was when I was a child
and the Republican Party when I was
a young woman.
This is the first thing I’ve seen
that suggests Mr. Trump is ideologically conscious of what he’s doing.
It’s not just ego and orange hair, he

suggests, it’s politically intentional.
It invites many questions. Movements require troops—not only supporters on the ground, but an army
of enthusiastic elected officials and
activists. Mr. Trump doesn’t have
that army. Washington hates what
he stands for and detests the idea he
represents policy change. GOP elites
will have to start thinking about two
things: the rock-bottom purpose of
the party and the content, in 2016,
of a conservatism reflective of and
responsive to this moment and the
next. This will be necessary whatever happens to Mr. Trump, because
big parts of the base are speaking
through him. It is no surprise so
many D.C. conservatives are hissing,
screeching and taking names.
They’re in the middle of something
epochal that they did not expect.
They’re lost.
To another part of the Trump
phenomenon that does not involve
policy, exactly:

When Mr. Trump went after Mrs.
Clinton over her husband’s terrible
treatment of women—she was his
“unbelievably nasty, mean enabler”—my first thought was: Man,
I thought it was supposed to get
bloody in October. This is May—
where will we wind up? But I was
struck that no friend on the left
seemed shocked or appalled. A few
on the right were delighted, and
some unsure. Isn’t this the sort of
thing that’s supposed to turn women
off and make Hillary look like a
victim?
But so far Mr. Trump’s numbers
seem to be edging up.
I was surprised that if Mr. Trump
was going to go there early, he
didn’t focus on a central political
depredation of the Clinton wars.
That was after Mrs. Clinton learned
of the Monica scandal and did not
step back, claiming a legitimate veil
of personal privacy—after all, it was
not she who had been accused of
terrible Oval Office behavior—but
came forward on “Today” as an
aggressor. Knowing her husband’s

ZUMA PRESS

Clinton Embodies Washington’s Decadence

Campaigning in Buena Park, Calif., May 25
history, knowing his sickness, having
every reason to believe the charges
were true, she attacked her husband’s critics, in a particular way:
“The great story here . . . is this vast
right-wing conspiracy that has been
conspiring against my husband since
the day he announced for president.
. . . Some folks are gonna have a lot
to answer for.”
She was speaking this way about
conservatives, half or more of the
country. At a charged moment she
took a personal humiliation and
turned it into a political weapon,
which further divided the nation,
pitching left against right. She did
this because her first instinct is
always war. If you have to divide the
country to protect your position by
all means divide the country. It was
unprotective of the country, and so
unpatriotic.
The lack of backlash against Mr.
Trump’s attacks on Mrs. Clinton,
though, I suspect is due to something else. It’s that the subject
matter really comes down to one

word: decadence. People right now
will respect a political leader who
will name and define what they
themselves see as the utter decadence of Washington.
I don’t mean that they watch
“Scandal” and “House of Cards” and

think those shows are a slightly
over-the-top version of reality,
though they do. Now and then I
meet a young person who, finding I’d
worked in a White House, asks, halfhumorously and I swear half-curiously, if I ever saw anyone kill a
reporter by throwing her under a
train. I say I knew people who would
have liked to but no, train-station
murders weren’t really a thing then.
(Someday cultural historians will
wonder if the lowered political standards that mark this year were at all
connected to our national habit of
watching mass entertainment in
which our elites are presented as
high-functioning psychopaths. Yes,
that may have contributed to a
certain lowering of real-world standards.)
But the real decadence Americans
see when they look at Washington is
an utterly decadent system. Just one
famous example from the past few
years:
A high official in the IRS named

Lois Lerner targets those she finds
politically hateful. IRS officials are in
the White House a lot, which oddly
enough finds the same people hateful. News of the IRS targeting is
about to break because an inspector
general is on the case, so Ms. Lerner
plants a question at a conference,

answers with a rehearsed lie, tries to
pin the scandal on workers in a
cubicle farm in Cincinnati, lies some
more, gets called into Congress,
takes the Fifth—and then retires
with full pension and benefits,
bonuses intact. Taxpayers will be
footing the bill for years for the
woman who in some cases targeted
them, and blew up the reputation of
the IRS.
Why wouldn’t Americans think
the system is rigged?
This is Washington in our era: a
place not so much of personal as of
civic decadence, where the Lois
Lerner always gets away with it.
Which brings us to the State
Department Office of Inspector General’s report involving Hillary Clinton’s emails. It reveals one big thing:
Almost everything she has said publicly about her private server was a
lie. She lied brazenly, coolly, as one
who is practiced in lying would, as

one who always gets away with it
could.
No, she was not given legal
approval to conduct her business on
the server. She was not given the
impression it was fine. She did not
comply with rules on storage and
archiving. Her own office told U.S.
diplomats personal email accounts
could be compromised and they
must avoid using them for official
business. She was informed of a
dramatic increase in hacking attempts
on personal accounts. Professionals
who raised concerns about her
private server were told not to speak
of it again.
It is widely assumed that Mrs.
Clinton will pay no price for misbehavior because the Democratic president’s Justice Department is not
going to proceed with charges
against the likely Democratic presidential nominee.
This is what everyone thinks, and
not only because they watch “Scandal.” Because they watch the news.
That is the civic decadence they
want to see blown up. And there’s
this orange-colored bomb . . .

America’s Inattention-to-the-Deficit Disorder
By George Melloan

‘U

topia for Realists” is the title of a Dutch e-book now
available online in English.
The young author, Rutger Bregman,
argues that technology has made
those of us living in advanced nations
rich enough that we should start taking it easier. The utopia he imagines,
as the subtitle says, would have a
“Universal Basic Income, Open Borders, and a 15-hour Workweek.”
But how rich are we, really? A
good argument can be made that we
seem richer than we actually are because we have borrowed so heavily
from future generations. That’s not
exactly an original idea. Young adults
have been fretting for years that the
government safety nets available to
today’s elderly and infirm won’t be
there when they reach old age.
What is less obvious is that the
nation’s slow growth and rising debt
are already reducing the opportunities for upward mobility. That could
account for the political unrest so
evident in the protest votes in
today’s party primaries.
Recent projections of the future
cost of current government obliga-

tions certainly won’t relieve young
people’s worries. Those promises

have expanded far beyond any
reasonable projection of the government’s ability to extract enough
revenue to cover them.
Ironically, the default position—
literally one might say—of the leftist
politicians like Bernie Sanders is to
promise more and more freebies.
Judging from the improbable popularity of his presidential campaign,
it wins votes. Maybe voters need a
better understanding of the problem.
Harvard economist Jeffrey Miron
has provided the latest estimate of,
as its title says, the “U.S. Fiscal Imbalance,” in a monograph for the
Cato Institute. The gap is appalling.
Looking 75 years out, he estimates
that the present value of future U.S.
government expenses exceeds the
present value of future government
revenues by $117.9 trillion. That’s
trillions, in case you misread.
Retired Cato president John Allison notes in an introduction to the
booklet that this enormous gap between government promises and any
means of filling it exceeds the total
annual production of the U.S. (GDP)

by 6.8 times and by far exceeds the
nation’s total private wealth currently of $63.5 trillion.
The gap estimate is not a fantasy
number. It is based on entitlement
laws already on the books, projections of the future number of pen-

By one estimate, the U.S.
government will spend
$117.9 trillion more than
it takes in this century.
sioners relative to workers and estimates of economic growth. The
costs of Social Security, Medicare,
Medicaid and ObamaCare are at or
near record highs despite some
success by House Speaker Paul Ryan
and other budget hawks in bringing
them under better control. The
Congressional Budget Office projects
a steady rise in “mandatory” (i.e.,
entitlement) costs as a share of GDP
out into the distant future.
Entitlement costs soared as a
share of GDP during the 2009 recession, mainly because GDP fell

sharply. The federal deficit ballooned to more than $1 trillion for
four straight fiscal years, 2009
through 2012. An improved economy
and congressional efforts lowered it
to $439 billion in fiscal year 2015
but the CBO projects it will rise
again this year by about $100 billion.
These huge deficits doubled the
national debt in only seven years and
rock-bottom interest rates ordained
by the Federal Reserve expanded private debt as well. The upshot: Americans are deep in debt, mainly thanks

to government excesses. Debt is deflationary because it devotes more
income to paying for past consumption. The Fed, working against itself,
is fighting deflation and trying to engineer inflation to devalue the debt.
But inflation is no cure because it
will expand the cost of entitlements.
The only real answer is that the
entitlement programs will have to be
reformed, and sooner better than
later, because the longer reform is
postponed the greater the fiscal imbalance will become and the greater
its drain will be on other important
government functions, such as national defense. That reform can be

done. For example, reprivatizing
health insurance to restore market
competition would be a big help.
Republican front-runner Donald
Trump is out to lunch on this issue,
as he is on most questions that require more than a fatuous sound-bite
answer. As for Hillary and Bernie,
forget about it. They want to add
new entitlements, such as free college education.
As for Mr. Bregman, “Utopia for
Realists” is better than it might
seem at first glance. Respectable
cases have been made for a universal income, even by the likes of that
great free marketer Milton Friedman. But this was on the condition
that it supplant other welfare programs and thus bring greater simplicity and market forces to bear.
Powerful welfare bureaucracies
would fight it like tigers.

But as for utopia, we’re certainly
not there yet. And we may be going
in the opposite direction.
Mr. Melloan is a former deputy
editor of the Journal editorial page.
His book “When the New Deal Came
to Town” will be published by Simon
& Schuster in the fall.

Gurney. Tiny. Pig Pen. I Remember Them All
By Jack Estes

I

n 1968 I was 18 years old, broke,
flunking out of school and my girlfriend was pregnant. Then I joined
the Marine Corps and went to Vietnam.
When a rocket hit the mess hall,
half full of young Marines, I was about
200 yards away. I saw it pass overhead, long and white, and heard the
explosion. I had only been in country
a few days and knew no one. Some of
the boys were placed in body bags
and trucked out, as I recall.
Now I’m old and beat up, moving

toward another Memorial Day. I’m
thinking about the Marines I did know
and wondering what their lives would
have been like if they had survived.

Gurney was my first squad leader
in Vietnam and I’ve spent a lot of time
over the decades thinking about him.
He had blond hair and blue eyes. He
quoted memorized lines from movies.
One night he told me he had once
taken an R&R trip to Hawaii and flown
home to get married.
The next day our company was
flown out in choppers to the jungle
for a big operation. Our squad was
leading as we hacked through

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elephant grass up to our waist and
began the ascent up the mountain.
The jungle was thick and hot as we
climbed. I was scared and worried
about getting shot in the face. Gurney was on point, Forrest followed
and I was behind him.
Soon we were on a well-used trail
where enemy had carved out steps
and built bamboo guard rails, which
was frightening. Gurney and Forrest
disappeared around the bend and
soon the firing came. Forrest yelled,
“He’s hit, Gurney’s hit.”
When we found him Gurney was
lying on his back, eyes open, with a
startled look on his face. He had a
hole in his neck, with a white cord
hanging from it. He’s dead, I said, as
Forrest was shaking.
What would Gurney have done
with his life? If he had moved an inch
or two and the bullets whizzed by, he
might have lived. He’d have come
home to his young wife’s kisses. He

could have read books and walked on
beaches and had children and some
kind of fulfilling career. I knew he
used to surf. I’ll imagine him as a
surfer or actor or director, making
movies about war and how families
feel when their soldier’s don’t come
home.
Over 58,000 died in that damn
war. Some were boys from the city
or young men from Midwest farms,
like Tiny. He was big and strong and
carried a machine gun. His best bud
hauled Tiny’s extra ammo and I nicknamed him Pig Pen. We all laughed
about that. They reminded me of
blue-collar guys who drink beer after

working a day shift at the warehouse. They both died when a
rocket-propelled grenade hit Tiny
directly. Forrest saw it.
But I’ll pretend they’re alive and
remained close pals. That they went
into business and owned a string of
gas stations and their boys played

What if Jimmy from
Georgia hadn’t been
killed in Vietnam?
And we’d all danced
at his wedding instead?

baseball and they sat in the stands,
ate hot dogs and cheered. Simple
stuff we take for granted.
What if Jimmy from Georgia
hadn’t been killed? When he was
first wounded I helped him on the
chopper and the enemy kept firing
and I dived off. What if Jimmy didn’t
get shot again and die as the chopper landed? And suppose 20 years
later, I never called his parents to tell
them how he died? What if his sister
didn’t fly into town to meet the man
who once knew her dead brother?
No. No. I’ll pretend none of that
ever happened. I can wish Jimmy
alive and that we stayed friends and
that the way I met his pretty sister
was when he introduced us at his
wedding. It was high on a hill, with a
little church, where the pastures below were green and everyone danced
and drank, and his name didn’t end

up on the black granite wall in D.C.
The wall full of nightmares, where
everyone comes to grieve.
Hodges was wounded and Recon
and Happy and Doc, too. I don’t know
what happened to any of them. But I
saw them bleeding as we helped them
to the chopper. Charlie Young took a

round through the throat like Gurney
and shrapnel ripped through Bo’s
head. Bob was shot four times. Today
he walks with a limp and has a useless arm, and a slew of grandchildren.
We were best friends during the war,
and I tied his shattered forearm
together with my sock.
One night our squad was set in a
village overlooking a graveyard,
when we were attacked. Corporal
Swan ran shirtless outside of a grass
hut and took one round through the
heart. I heard him say, “Oh my God,”
as he fell. If he had lived, would he
have come home damaged inside, the
way some did and still do? I won’t
imagine that.
These are all real young men I
lived with and fought with and think
of on Memorial Day. When the picnics are over and the beer has
stopped flowing and the flags have
been picked up at all the graveyards,
memory brings them back to life.
They sweep into my dreams or visit
when I’m walking in the woods with
Gurney.
Mr. Estes is the author of the 1987
Vietnam memoir, “A Field of Innocence,” (Kindle, 2014); his novel, “A
Soldier’s Son,” will be released Aug. 1
through Ingram Spark and Amazon.

THE WALL STREET JOURNAL.

A12 | Monday, May 30, 2016

WEATHER & CROSSWORD

Ukraine Army Can’t Find Charismatic DJs
ARTHUR BONDAR FOR THE WALL STREET JOURNAL; UKRAINIAN MINISTRY OF DEFENSE (BOTTOM)

Army FM station hopes a
‘cooler vibe’ will drown out
pro-Russian broadcasts;
like Robin Williams character
BY JULIAN E. BARNES
KIEV—Ukraine’s army is searching for its own Robin Williams.
Specifically, it is looking for a
charismatic army disc jockey like
the one Mr. Williams played in the
film “Good Morning, Vietnam”
three decades ago.
Alexey Makukhin, an adviser to
Ukraine’s military who is helping
set up the station, wants a Robin
Williams to help with his “big
problem.” Troops facing Russianbacked separatists in the east hear
a steady barrage of radio and TV
broadcasts that seem crafted to
sow doubts about their mission.

His solution is Army FM, a radio
station for Ukraine’s soldiers. To
make it a success he needs a DJ—a
great DJ.
Dozens of résumés poured in
when word about the plan got out.
Mr. Makukhin interviewed about 50
DJ applicants. They were an almost
complete bust.
“A lot of candidates just do not
fit to the role of presenter—poor
voice, cannot keep up a discussion
or stop themselves,” he says.
“Some candidates have a fixed
mind-set and are not ready to work
in our format of entertaining and
friendly radio.”
Mr. Makukhin, a 35-year-old former TV sitcom producer, dispatched old colleagues from the
military and television worlds to
hunt for undiscovered talent.
One military colleague, scouring
the front lines where the army
faces breakaway provinces, found
Lidiya Huzhva.
With dyed blue hair and a mischievous look, Ms. Huzhva has both
personality and a knowledge of the
fighting. She spent 18 months as a
freelance reporter interviewing
Ukrainian soldiers.
She also has a good voice and

understands what the station’s vibe
should be, a blend of “Daily Show”
style humor and serious purpose
like that of an armed-forces newspaper. She says Army FM should
respond to pro-Russian broadcasts
not with indignant rebuttals but
with jokey dispatches.
“The people here need to laugh,”
she says. “They love comedy.”
There was just one problem. Ms.
Huzhva, 38 years old, doesn’t really
want to be a host sitting in the studio. She would rather report from
the front.
She also has the wrong taste in
music. She likes jazz. Ukraine’s soldiers like rap, hard rock and metal.
For Mr. Makukhin, it was back to
the search.
The music that Ms. Huzhva
doesn’t like, but that many soldiers
do, is what they get from the Russian and separatist-province radio
stations, sometimes with lyrics
slamming Ukraine’s government.
A separatist heartthrob named

Lidiya Huzhva, above, has the voice
and personality to be a DJ at Army FM
but prefers reporting from the front
lines. Right: Alexey Makukhin, center,
hopes for a soldier-DJ like Robin
Williams in ‘Good Morning, Vietnam.’

Gleb Kornilov dominates the charts
at Radio Novorossia in Donetsk, in
the heart of the breakaway Ukrainian region the separatists dub Novorossia, or New Russia. When the
rebellion got going two years ago,
he sang about the Ukrainian armed
forces’ alleged burning of Donetsk.
More recently, he has sung of Novorossia planning to go on the offensive against the West.
“We believe in the empire with
the new vigor/Our song is a military crusade/ Our music is the finger on the trigger,” Mr. Kornilov
sings in Russian.
Reached by phone in eastern
Ukraine, Mr. Kornilov said his
songs weren’t about criticizing
Ukraine, just the oligarchs he says
took it over. He said he was both
pro-Ukraine and pro-Novorossia.
“We are fighting not against the
people, but against the powers that
be,” Mr. Kornilov said. “One person
fights with a weapon, another with
their art.”
News on the separatist-controlled radio and television stations
presents a grim picture of Ukraine,
frequently accusing the Kiev government and its supporters of a
range of atrocities. One broadcast
said pro-Ukrainian militias had kidnapped journalists.
The stations, say Ukrainian officials, have grown adept at mirroring the actual news, quickly issuing
reports about mortar strikes, artillery barrages or buses hitting land
mines. While Ukrainians say rebels
are responsible for the attacks, the

pro-separatist radio stations assign
blame to Kiev.
Other reports on channels such
as Novorossia TV and Radio Free
Novorossia highlight true, but un-

flattering, news about the Ukrainian government, particularly corruption accusations from the
International Monetary Fund or the
European Union. Novorossia TV
and Radio Free Novorossia didn’t
respond to a request for comment.
Ukrainian officials say they are
working on addressing concerns
but add that pro-separatist stations
exaggerate the problem.
One common theme from the
separatist broadcasting is that the
Ukraine government does nothing
while its soldiers sit in the mud on
the front lines.
“If I watch or listen to it for an
hour or two, it hits you in the
head,” said Lt. Col. Oleksandr Vasylenko. “Whether you want it to
or not, it just influences you. Even
though you know it is propaganda.”
The U.S. ambassador to Ukraine,
Geoffrey Pyatt, called the information war in eastern Ukraine part of
a larger struggle. “The point of this
Russian propaganda is not to win
the argument and it is certainly not

to illuminate the truth,” he said. “It
is to confuse. It is part of their arsenal.”
Russian officials such as Moscow’s ambassador to the North Atlantic Treaty Organization, Alexan-

The WSJ Daily Crossword | Edited by Mike Shenk

Weather
Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.

Beijing
Seoul
h
New D
Delhi
h
Riyadh
h
Karachi

Toky
Tokyo

h gh
Shanghai

lk t
Kolkata
Hanoi
Bangkok
k k

Taip
Taipei
Hong Kong
Manila

1

-15
-10
-5
0
5
10
15
20
25
30
35
Warm
Cold

L p
Kualaa Lumpur

2

Snow
Sydney
ydd ey

lb
Melbourne

s...sunny; pc... partly cloudy; c...cloudy; sh...showers;
t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice
Hi
18
17
30
32
36
24
34
36
27
19
24
21
17
15
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14
31
28
29
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23
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40
18

17
19

Today
Lo W
15 t
10 pc
22 s
20 s
22 s
18 r
27 t
22 pc
15 t
11 c
9 pc
17 r
14 r
8 r
21 s
5 c
25 t
18 c
17 pc
21 t
8 pc
16 s
30 s
9 s
8 pc

14 t

Tomorrow
Hi Lo W
21 14 sh
20 12 pc
31 19 s
31 20 pc
36 24 s
28 18 pc
35 27 t
30 14 c
25 17 t
19 11 r
27 11 s
27 15 pc
20 12 r
14 5 c
36 24 s
17 7 pc
31 26 c
29 18 t
28 18 t
29 21 t
18 8 t
29 17 s
40 28 s
19 10 pc
17 9 pc
21 12 sh

8

Tomorrow
Hi Lo W
16 11 sh
36 28 pc
32 22 pc
32 28 pc
28 23 pc
29 22 t
25 19 s
32 25 c
19 2 s
24 16 t
36 23 s
23 16 s
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23 15 pc
24 10 s
34 28 t
15 5 c
27 13 t
32 24 t
22 13 t
24 15 t
33 20 c
26 12 pc
21 6 pc
33 30 pc

32 17 pc
40 29 t
33 23 pc
28 19 pc
25 13 t
33 22 t

City
Ottawa
Paris
Philadelphia
Phoenix
Pittsburgh
Port-au-Prince
Portland, Ore.
Rio de Janeiro
Riyadh
Rome
Salt Lake City
San Diego
San Francisco
San Juan
Santiago
Santo Domingo
Sao Paulo
Seattle
Seoul
Shanghai
Singapore
Stockholm

Sydney
Taipei
Tehran
Tel Aviv
Tokyo
Toronto
Vancouver
Washington, D.C.
Zurich

Hi
28
17
24
34
28
33
25
28
42
23
26
21
23
31
16
30
23
21
28

25
33
21
19
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32
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Today
Lo W
16 pc
13 r
19 r
21 s
16 pc
22 t
12 pc
21 pc
28 s
14 s
11 pc
17 pc
12 s
25 t
5 pc

22 t
16 t
11 c
15 s
20 c
25 t
11 pc
12 s
25 t
18 c
17 s
18 sh
16 pc
11 s
19 r
10 t

10

11

12

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14
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28

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46

56

60
64

68

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49

82

83

99
106

114

86

87

88

109

81 Croque-monsieur
ingredient

71 Old Calif. base
72 Ovary, e.g.

16 Song about a Trondheim
thug?

74 Slot machine symbol

17 “The Wah-Watusi”
singers

76 Like 40% of eclipses

75 Brainstorming product
78 Ecuadorean estate
83 Completely incompetent

84 P look-alike

24 Prized violin

85 Minutemen’s sch.

29 Box office sales, in Variety

86 Genotyping microarray
87 Between origin and
destination
88 Sire’s counterpart

33 Word from un dictionnaire
110

113

55 Song about a hair stylist
who won’t work
evenings?
58 U.S. Grant was
its eighth pres.
59 Wherewithal
60 Tax
61 View from
Sharm el-Sheikh
62 Blacken
63 Memo starter
64 Valuable extraction

65 Neurologist’s diagnostic
test,
for short
66 Got hitched
67 “Mysterious Ways”
vocalist
68 “Die Deutsche Ideologie”
writer
69 Valley of Fire State Park
location
71 Took nourishment
72 Mosaic artist’s supply
73 Mt. ___ (Charley Weaver’s
home)
74 Song about a beautiful
copier?
76 A bunch
77 First, fifth or sixth of
Henry VIII’s six
79 URL bit
80 Cologne conjunction

14 Defense advisory gp.

32 Lag behind

116

BEATLES WANNABES | by Mike Peluso & Jeff Chen
Across

1 Entrance requirement,
perhaps
7 Ocean Spray trademark
14 Some iPods
19 Slip
20 Surpassed in performance
22 Quick drink
23 Song about a laid-back
U-boat?
25 Gugino of “San Andreas”
26 Malamute’s tow
27 Very, to Voltaire
28 Did some deck work
30 Victorious cry
31 Took nourishment
32 Start for color or cycle
33 It was
“de-orbited” in 2001
34 Commit a message, in a
way
36 Song about an
overconfident mammal?
41 Salad bar array
42 Gunfire, in slang
43 Bone-related
45 CCCXXXIV trebled
46 Peyton’s brother
47 Shrink’s org.
48 Yuri Gagarin,
for one

53 Battery for a large
flashlight

70 10-Down and others

31 Hamburger complaint

97
103 104

Flurries
Ice
Tomorrow
Hi Lo W
25 11 s
16 13 r
30 18 pc
36 23 s
29 16 s
33 22 t
32 14 s
28 20 r
39 26 s
23 15 pc
25 11 s
20 17 pc
24 12 s
31 25 t
15 3 pc
30 23 t

23 16 r
26 12 s
26 15 pc
27 20 sh
32 26 c
23 11 s
18 12 c
35 26 pc
31 17 s
28 19 s
25 18 pc
26 14 s
21 13 s
29 18 pc
20 10 sh

65 Joseph of frozen dessert
fame

13 “99 Luftballons” group

80

96

115

12 Less cordial

21 Site of Shah Jahan’s Jama

Masjid

101 102

112

62 What “over” is said over
64 ___ about (roughly)

18 Put up with

85

108

60 Piazza with a famed
fountain

76

93

100

8 Naif in the big city

15 “Under a Glass Bell”
author

72

84

92

107

52

67

71

95

98

51

62

79

91

59 Copy

10 Hoppy beer, briefly

58

75

90

57 Race part

7 Yahoo News star
9 Twenty suppliers

50

66

78

56 Defeat soundly

5 Cross

6 Market indicator

11 One in a tight squeeze

61

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81

30

57

65

74

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18

45

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63

17

35

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16

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33

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15

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25

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105

9

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111

Today
Lo W
11 t
27 t
20 pc
28 pc
22 sh
21 pc
19 s
25 c
3 s
17 pc
23 s
16 pc
12 pc
15 pc
10 pc
27 t
3 s
13 pc
24 t
13 t
18 pc

21 t
17 t
12 pc
30 pc
17 pc
28 t
23 pc
19 r
18 t
22 pc

7

94

T-storms

Hi
18
33
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29
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31
19
27
34
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20
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22
35
14
26
31
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27
25
33
31
39
33
23
28
33

6

26

Showers
Rain

City
Geneva
Hanoi

Havana
Hong Kong
Honolulu
Houston
Istanbul
Jakarta
Johannesburg
Kansas City
Las Vegas
Lima
London
Los Angeles
Madrid
Manila
Melbourne
Mexico City
Miami
Milan
Minneapolis
Monterrey
Montreal
Moscow
Mumbai
Nashville
New Delhi
New Orleans
New York City
Omaha
Orlando

5

23

77

k
Jakarta

4

20

Stationary

Global Forecasts

3

19

g p
Singapore

City
Amsterdam
Anchorage
Athens
Atlanta
Baghdad

Baltimore
Bangkok
Beijing
Berlin
Bogota
Boise
Boston
Brussels
Buenos Aires
Cairo
Calgary
Caracas
Charlotte
Chicago
Dallas
Denver
Detroit
Dubai
Dublin
Edinburgh
Frankfurt

der Grushko, say Russia has no
direct role in the fighting in
Ukraine. Separatist and Russian officials say the reports Westerners
call propaganda are factual broadcasts, not controlled by Russia,
about Ukrainian government incompetence or corruption. It is the
U.S. and Ukraine that are misleading the public, Russian officials say.
In setting up the Ukraine army
radio station, Mr. Makukhin has

had help from a U.S. nonprofit
called Spirit of America. Unlike
many nongovernment organizations in war zones that pledge neutrality, this one tries to align its efforts with U.S. objectives.
In Afghanistan, Spirit of America’s workers were stationed in the
field, helping provide nonlethal
equipment to local police forces
working with U.S. special operation
forces. In Ukraine, it is providing
$200,000 to outfit Army FM’s studio and put up transmitters, including one just 36 miles from Donetsk.
“The entrepreneurial, venturecapital approach is something
that’s rarely applied in these situations overseas,” said Jim Hake, the
NGO’s founder. “The core of that is
to support the initiative of people
closest to the problem…see what

works, do more of what works, and
if it doesn’t work stop it.”
Spirit of America has no direct
hand in the programming, but Mr.
Hake has offered advice and said
Mr. Makukhin understands that
Army FM can’t fight propaganda
with propaganda. “Trust and credibility are more important than
transmitters or radio equipment,”
he said.
The station’s plans include airing frank interviews with Ukrainian
officials to show soldiers the government is willing to address hard
problems. It is important for Army
FM, which is owned by the Defense
Ministry, to avoid a stuffy official

military style, said Yana Kholodna,
a TV producer hired as an adviser.
“The challenge is to make a cool
radio station,” she said. After the
blue-haired Ms. Huzhva didn’t work
out as host, Mr. Makukhin’s colleagues brought him another potential find, Pvt. Oleksandr Bezsonov, a young front-line soldier
who had started a pirate radio station to entertain troops at his base.
Unfortunately, his tryout didn’t
go well. He had technical wizardry
but not the right on-air personality,
Mr. Makukhin said. Army FM hired
him as a sound engineer instead,
and then made him sound director
for several of the shows.
On March 1 the station went on
the air in beta form, without a
morning host. Even so, its opening
words were a nod to Mr.
Makukhin’s quest for a soldier-DJ:
“Good Morning, Ukraine.”
He hasn’t given that quest up,
but in late March he turned to a
veteran civilian radio presenter,
Philip Boiko. In its early form,
Army FM’s morning show is a mix
of front-line news (Ukraine’s use of
MiG 29 jet fighters), pop culture
(Axl Rose’s turn as frontman for
AC/DC) and long tales of historical
Ukrainian war heroes. In one, Mr.

Boiko celebrated the ingenuity of a
volunteer who made a mobile
sauna for soldiers out of an old
military truck.
Refuting “fake news and announcements” from the occupied
east will be part of his show, he
said. Bands whose music he has
played include a Russian one called
DDT that was founded by a Kremlin
critic.
Mr. Boiko, 38, doesn’t pretend to
have the manic energy of the DJ
star of “Good Morning, Vietnam.”
But he figures that good rock music
and his mix of sarcasm and humor
can keep the soldiers listening.
Mr. Makukhin, while still keeping his eye out for the military service member he can put on the air,
says he can’t complain about his civilian DJ.
“Eight a.m. in Kiev. ‘Soldiers,
wake up!’ ” Mr. Boiko boomed on a
recent broadcast as he as greeted
the troops. “Morning infotainment
show starts its second part, and I,
Philip Boiko, greet all the listeners
of Army FM. Especially our heroes
in the military zone who diligently
fight with separatist and occupying
bastards, protecting their motherland.”

82 There’s a lot of interest in

this job
85 Solo

89 Noted fossil site

35 Island north of Western
Australia

90 ___ Paulo

37 Therapist’s staple

91 Crash specialists

38 Long-distance calls?

93 Devil’s-food cake treats

39 Cost of a visit

94 Maze choices

40 Anthem opener

95 Metz menu

41 Nervous performer’s
affliction

100 Ready to be driven

101 Fluffy accessories

44 Etcher’s stuff

102 Radiate

47 Money for Money

103 Consequently

49 Going rate

89 Brand with a crocodile
logo

50 Lake in the Mojave Desert

92 Song about an
untrustworthy pop star?

51 Titania and Oberon circle
it

94 Copper coatings

52 Ouija alternative

104 Himalayan legend
106 Sloth, e.g.
108 Many-venued crime

franchise

95 Big suit

53 “Gracias” response

109 Decorates in a prankish
way

96 Crew tool

54 Song about an angler’s
order to his assistant?

110 Composer Rorem

97 Pitching power

Previous Puzzle’s Solution

98 French cleric
99 Number system in which
this would be 143-Across
101 They may be made by a
maid
103 Lionel rival
105 Gender opening
107 Song about an invasion by
Attila?
111 1937 role for Shirley

Temple
112 Casts off
113 Slight
114 Soul buyer
115 Stops
116 Attacked verbally
Down
1 Watson’s home
2 Playground retort
3 Accumulate over time
4 Proficient

P
E
R
C
H

O
P
E
R
A

L
I
N
E
N

O
C
E
A
N
T
A T E I
W I N D
A N T E
I T E
T O R Q
E T
A U D I
S N I P
S O N S

P
S
Y
M C
A H
R O
T
Y S
U
S P
U E
E R
M
A

N

R
E
A
R

I
D
L
E

M
E
T
S

P
R
A
C
T
T
R I
O P E C
P A C E
S D A
Y
P S
U

N A L C
I C A H
T R I A
E E D S

S
C
O
E N
I E
D
F
MO
E S
S T
S E
I R
D
A
D

F
L
A
T
B
O
A
T
S

P D
U E
T Y
A
L
C
O
A

R
E
T
R
Y

S
C
I
F
I

U
L
N
A
E

P
E

E
R
S

The contest answer is RICHMOND. Each of the seven
words in the theme entries is used in a prominent city’s
nickname: Milwaukee is “Cream City,” New Orleans is
“Crescent City,” Chicago is “Windy City,” Houston is
“Space City,” Detroit is “Motor City,” Rome is “Eternal
City,” and Indianapolis is “Circle City.” The eight letters
those cities begin with, in order of the parenthetical
numbers, yield the answer.


BUSINESS & TECH.

Qualcomm’s China Market

INSIDE:

MONEY &
INVESTING

Chips to be made through government venture TECHNOLOGY | B3
© 2016 Dow Jones & Company. All Rights Reserved.

Mizuho Warns on
Sales-Tax Risks
FINANCE | B13
Monday, May 30, 2016 | B1

THE WALL STREET JOURNAL.

Car makers on Friday recalled millions more vehicles
world-wide with faulty Takata
Corp. air bags, further escalating an automotive-safety crisis
linked to at least 11 deaths and
more than 100 injuries.
By Mike Spector
in New York
and Megumi Fujikawa
in Tokyo
In the U.S., more than 12
million additional vehicles will
need air bags replaced initially, according to filings with
U.S. regulators. The U.S. safety
campaigns are part of a massive expansion disclosed earlier in May requiring the recall
of as many as an additional 40
million air bags that risk rupturing and spraying shrapnel
in vehicle cabins. All told,
nearly 70 million air bags are
being recalled in the U.S.
Honda Motor Co., Fiat
Chrysler Automobiles NV,

Toyota Motor Corp., Nissan
Motor Co., Fuji Heavy Industries Ltd.’s Subaru, Ferrari NV
and Mitsubishi Motors Corp.
kicked off the U.S. recalls on
Friday.

Honda, Takata’s largest customer, recalled roughly 4.5
million vehicles, including
some that had already been
recalled earlier. Fiat Chrysler
recalled 4.3 million vehicles.
Japanese officials ordered
car makers to recall as many
as seven million more vehicles
with Takata air bags, bringing
the total there to 19.6 million.
Japan’s recall, to be carried
out in phases, must be completed by the end of March
2019, an official at the transport ministry said Friday.
The latest recalls in Japan
cover car makers including
Honda, Toyota, Nissan, Mitsubishi and Mazda Motors
Corp., the transport ministry
said. Takata shares fell 8.1% to
¥421 ($3.82) in Tokyo on Fri-

JOE SKIPPER/REUTERS

Car Makers Widen Air-Bag Recalls

A recalled Takata air-bag inflator. New recalls hit Takata’s shares.
day, after surging 21% a day
earlier on hopes the company
would find an investor to help
it restructure.
The air bags use ammonium

nitrate as a propellant in their
inflaters, a setup found to destabilize and lead to explosions amid prolonged exposure
to moisture.
Older air bags add to the
risk, officials have said. The

latest recall expansion in the
U.S. affects air bags that lack a
drying agent to prevent moisture from building.
Takata Chief Executive
Shigehisa Takada in May said
his company would cooperate
on the expanded recalls and
work with U.S. regulators and
auto makers to develop longterm, orderly solutions to the
safety crisis. He added that

Chinese
Suitor
Gives Up
U.S. Bid

the company remains committed to safety and restoring
confidence with drivers.
The recalls are proving vexing for consumers, who in
some cases need to get vehicles fixed more than once and
face parts shortages when going to dealerships for repairs.
The death toll from the air
bags, meanwhile, could rise.
Honda in May pointed to two

fatal crashes in Malaysia in
which air bags ruptured,
though officials hadn’t yet determined causes of death.
For Takata, the crisis is
leading to financial losses,
strained relations with car
makers and litigation and government investigations, which
could lead to penalties that
further drain its coffers.
Takata posted a $121 million loss for the year ended in
March, and logged more than
$180 million in special losses
for recalls and settling of legal
claims from air-bag victims.

BY BOB TITA
AND KANE WU
One of China’s biggest construction-equipment makers on
Friday abandoned its pursuit of
crane manufacturer Terex
Corp., joining a line of failed efforts by Chinese companies to
buy U.S. rivals.
Zoomlion Heavy Industry
Science & Technology Co. said
the two sides failed to agree on
a price after Terex last week
delivered an ultimatum: finalize terms for the whole company by May 31, or lose one of
Terex’s key units to a $1.3 billion offer from Finland’s
Konecranes Oyj.
A push by China for overseas assets is running into hurdles, ranging from securing financing

to
overcoming
national-security
concerns
among local regulators and
lawmakers. Terex makes cranes
for loading ship cargo, and
deals involving U.S. port infrastructure have long been politically sensitive.

Airline Executives Look to Soothe Investors
The industry will need
to confront looming
signs of trouble amid
a gathering in Dublin

14%

BY ROBERT WALL
AND DOUG CAMERON

Airlines face challenges such as lower fares. The International Air Transport Association convenes its annual gathering this week.

For almost as long as people have had cellphones, scientists have been debating
whether the now-ubiquitous
devices cause health effects.
More than a decade ago,
the U.S. government set in
motion a study to help answer
the question. Its initial findings were released last week.
The researchers said the findings were significant enough

that they felt the urgency to
release the results before the
entire study was complete.
The study found “low incidences” of two types of tumors—one in the brain and
one in the heart—in male rats
that were exposed to the kinds
of low-level radio waves that

are emitted by cellphones.
The researchers, as well as
scientists not involved in the
study, said it was still too soon
to draw sweeping conclusions
about whether cellphones
cause cancer.
“Much work remains to be
done to understand the implications, if any, of these findings on the rapidly changing
cellular technologies that are
in use today,” said John R. Bucher, the associate director of
the Department of Health and
Human Services run National
Toxicology Program, which
conducted the study. Yet “we
felt it was important to get
the word out.”
Scientists pointed out some
of the unusual findings: TuPlease see PHONE page B3

bers rose 7% in the first
quarter from a year earlier,

driven largely by growth
among carriers in Asia and
the Middle East.
Fliers are paying less,
with global fares down an
average 4% through April
and particularly weak on
trans-Atlantic flights and in
the U.S.
Average U.S. domestic
fares haven’t risen in more
than a year and airlines
don’t expect them to stabilize before the end of 2016.
Hunter Keay, airline ana-

lyst at Wolfe Research LLC,
last week boosted his airline
investor-sentiment gauge to
4, on a scale of 1 to 10, having pegged it at 1 or 2 for
much of the year. “This is
the 2016 version of good
news, sadly,” he said of the
recent raise.
The executives gathered
in Dublin have few levers to
pull to soothe disgruntled investors or those passengers
facing long security lines at
airports in coming months.
Airlines can cut flights to
gain more control over fares.

Some U.S. carriers such as
Delta Air Lines Inc. have recently announced plans to
trim capacity after the Labor
Day holiday in September. In
Europe, British Airways parent International Consolidated Airlines Group SA
and Deutsche Lufthansa AG
have also scaled back.
Executives have to be
careful in Dublin. Antitrust
laws bar them from discussing or coordinating fares in
most markets. Comments
made at last year’s IATA
Please see AIRLINES page B2

Heard on the Street: Chinese
firms end bids abruptly..... B16

Oil Firms Remain Shy Despite Upswing
BY SARAH KENT
AND LYNN COOK
The world’s biggest energy
companies are treating with
caution the rally that briefly
lifted crude-oil prices over $50
a barrel last week, wary of
boosting spending and production too soon.
Companies including Exxon
Mobil Corp., Royal Dutch
Shell PLC and BP PLC spent

huge sums on giant new oil
and natural-gas projects as
prices surged over the past decade, only to make large corresponding cuts to their development budgets when prices
plunged in 2014 and 2015.
Oil prices are recovering,
topping $50 a barrel for the
main
global
benchmark
on Thursday—nearly double
the price in January—before

EDDIE SEAL/BLOOMBERG NEWS

structurally transformed and
the valuations do not reflect
such a transformation,” he
said. “They’re not even
close.”
Investors have shrugged
and headed for the exits,
dragging an index of global
airline stocks down 6.4%
since the start of the year.
U.S. carriers have been hit
hardest, with Mr. Parker’s
American shedding a quarter
of its value even as it poured
profits into stock buybacks.
Demand isn’t the problem. Global passenger num-

Study Fans Worries
Of Cellphone Cancer
BY RYAN KNUTSON

Shares of the Connecticutbased company fell 14% to
$20.89 on Friday in the wake of
the deal’s collapse—for which
the two parties offered differing accounts.
Zoomlion said plans announced in the preceding week
by Terex to sell its maritime
port and factory cranes businesses to Konecranes left the
two sides unable to agree on a
price for the remainder. Terex
said the Chinese company
couldn’t formalize its $31-ashare, or $3.4 billion, offer for
the entire company, including
commitments for financing the
purchase.
“After many months of discussions, Zoomlion was unable
to provide a fully financed,
binding proposal for the purchase of Terex with or without
the material handling and port
solutions” business, Terex
Chairman David Sachs said in a
written statement.
Terex had been pressuring
Zoomlion
executives
for

months to confirm detailed financing for the purchase.
Zoomlion is part-owned by
China’s Hunan provincial government and had tapped stateowned banks including China
Development Bank, China Construction Bank and Bank of
China to fund the Terex deal,
according to people familiar
with the situation.
Please see SUITOR page B2

MARTIN DALTON/REX SHUTTERSTOCK/ZUMA PRESS

The airline industry has
finally shaken off its boomand-bust past, says the head
of the world’s largest carrier,
but investors aren’t buying it
because familiar signs of
trouble loom on the horizon.
Global airfares are falling
as carriers add ever more
aircraft, and
THE WEEK low oil prices,
AHEAD
which helped
airlines land
record profits
of $33 billion last year, are
edging higher.
In addition, terrorism
fears are weighing on bookings and, even as more passengers take to the skies,
growth is stalling in some

regions.
It is a challenging mix for
the 200-plus airline executives gathering in Dublin this
week for the industry’s annual jamboree hosted by the
International Air Transport
Association, a trade group.
The message they would
like to deliver echoes that of
American Airlines Group
Inc. Chief Executive Doug
Parker in a well-publicized
speech in March.
“We have an industry
that also can be a real business like other businesses,”
said Mr. Parker, who has
spearheaded much of the
consolidation that has allowed airlines to become
more efficient, and last year
earn more than their cost of
capital for the first time.
“The airline business has
been fundamentally and

Drop in Terex’s share price
Friday after Zoomlion Heavy
Industry threw in the towel.

Expensive projects require higher oil prices. Above, Polar Pioneer rig.
retreating to $49.33 a barrel
on Friday. But companies are

moving more slowly to start
new drilling and production
this time around.
“We’re not going to try and

get into a boom and bust,” BP’s
chief financial officer, Brian
Gilvary, said in a conference
call last month. Even at $60 a
barrel, he said, “We wouldn’t
be looking to significantly

ramp [activity] up.”
Shell this week announced a
fresh round of job cuts across
its business, bringing its total
planned for the year to at least
5,000.
Oil hitting $50 a barrel
might boost smaller producers
in places such as the U.S.’s
shale fields, sending their relatively low-cost projects into
the black. But many of the expensive, long-term projects
that big oil companies specialize in, such as deep-water
wells, require higher prices to
be profitable.
Still, some larger oil companies say they can boost production as prices reach the $50
threshold, though the increase
Please see OIL page B2
For some retail investors,

crude is new hot trade...... B13


THE WALL STREET JOURNAL.

B2 | Monday, May 30, 2016

INDEX TO BUSINESSES

BUSINESS NEWS

These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.

A

G

Rystad Energy ............ B2

Alphabet......................B3
American Airlines
Group.........................B1
Anglo American..........B2

Google ......................... B3

S

H

Samsung
Electronics..............B16
Seven West Media.....B2
SGL Carbon ................. B2
State Bank of India..B16
STX Offshore &
Shipbuilding..............B2
Sumitomo Mitsui
Financial Group.......B15

C
Chevron..................A2,B2
China National
Chemical....................B2
China National Nuclear
Power........................B2
CHS............................B13
Citigroup....................B15
CME Group................B16
Condor.........................A3

D
De Beers......................B2

E
Energy Transfer
Equity......................B16
Exxon Mobil................B1

F
Ferrari..........................B1
Fiat Chrysler
Automobiles ............. B1
Fieldwood Energy.....B15
Fuji Heavy
Industries..................B1

K
Konecranes..................B1

L
LinkedIn.....................B16

M
Mazda Motors.............B1
Mitsubishi Motors......B1
Mitsubishi UFJ
Financial Group.......B15
Mizuho Financial
Group.......................B13

N
News Corp...................B2
Nissan Motor..............B1
Novorossia TV .......... A12

O

V

Oracle .......................... B3

Valeant
Pharmaceuticals
International...........B16

P
Parsley Energy..........B15
Philippine Amusement
and Gaming .............. A1

Q

W
Wells Fargo...............B15
Williams....................B16

Qualcomm...................B3

Z

R

Zoomlion Heavy
Industry...................B16
Zoomlion Heavy
Industry Science &
Technology................B1

Riverstone Holdings.B15
Royal Dutch Shell.......B1
Royal London Asset
Management...........B15

INDEX TO PEOPLE
A

K

O

Aberle, Derek..............B3
Ackman, William ...... B16

Kalfas, Mina................B3

Olsen, Yngvild.............B3
Omens, Mark ............ B16

B

Kauffman, Nathan....B15

L

Bignone, Reynaldo......A3
Bucher, John R............B1

Lindell, Grant............B15

C

Lindzon, Howard.......B16

Christensen, Bo..........A2
Cleaver, Bruce.............B2
Croft, Helima..............A2

M

H
Hittle, Ann-Louise......A1

Makukhin, Alexey.....A12
McRae, Eric...............B15
Mellier, Philippe..........B2

J

N

Jensen, Mark ............ B15

Nelson, Randy...........B15

R
Rousseau, Jacques.....A1

S

Sem, Claude..............B13
Seppala, Marvin..........B3
Sheldon, Behshad.......B3
Swanson, Michael.....B13

T
Takada, Shigehisa.......B1

V
Volkow, Nora...............B3

SGL Carbon Surges
As ChemChina Circles
BY FRIEDRICH GEIGER
BERLIN—Shares in Germany’s SGL Carbon SE
jumped 12% on Friday following a magazine report
that China National Chemical
Corp. was interested in acquiring the graphite-electrode and
carbon-fiber maker.
ChemChina Chairman Ren
Jianxin has held talks several
times with SGL Carbon Chief
Executive Juergen Koehler and
its main shareholder Susanne
Klatten, Germany’s Manager
Magazin reported.
SGL Carbon wants to spin
off its carbon electrodes business, which supplies the steel
sector where weak prices have
been weighing on demand.

BY IN-SOO NAM

T
Takata..........................B1
Takeda
Pharmaceutical.......B16
Terex............................B1
Titan
Pharmaceuticals.......B3
Toyota Motor..............B1
Twitter ...................... B16

Government-owned ChemChina is interested in acquiring all of SGL Carbon but is
open to other options, according to Manager Magazin.
A spokesman for SGL Carbon said the company has provided potential investors with
information about its graphite
electrodes business. He said
the possible sale of the entire
company was “pure speculation” and declined to comment
further on it.
Ms. Klatten’s investment
vehicle, Skion, holds a 27%
stake in SGL Carbon.
A ChemChina spokesman
didn’t immediately respond
with a comment and Ms. Klatten couldn’t immediately be
reached.

OLIVIA HARRIS/REUTERS

B
Betfair Group............B13
Bonanza Creek
Energy.....................B15
BP................................B1
Braeburn
Pharmaceuticals.......B3

Hercules Offshore ...... B2
Honda Motor...............B1

Korean
Shipbuilder
Could Be
Liquidated

De Beers is among the biggest diamond producers in the world and is the gem’s most important seller.

De Beers Gets New CEO
Change at top comes
as diamond company
is coping with weak
demand, low prices
BY ALEX MACDONALD
LONDON—De Beers named
a new chief executive on Friday
as the storied diamond company steers through a rough
patch of weak demand and low
prices for the precious gems.

Bruce Cleaver, 51 years old,
will succeed Philippe Mellier as
chief executive on July 1. Mr.
Cleaver currently heads strategy
and business development at
U.K.-based mining company Anglo American PLC, which owns
85% of De Beers.
Mr. Mellier, 60, is stepping
down after serving what he had
said would be a five-year stint
to revive De Beers’s fortunes.
De Beers is among the biggest diamond producers in the
world and is the gem’s most
important seller, having effectively marketed diamonds as

AIRLINES

Continued from the prior page
meeting in Miami form part of
a class-action lawsuit lodged
against four U.S. carriers,
which all deny the charges.
Cheaper jet fuel has been
the biggest driver of higher
profits, but prices have been
rising since January. Still, the
airline industry should deliver
strong earnings this year, said
Peter Morris, chief economist
at aviation consultant Ascend

Worldwide Ltd.
Many carriers in Europe
and Asia are only starting to
see the benefit from cheaper
fuel as costly fuel hedges,
made before crude tumbled,
are replaced by ones made at

weight divisions of years past—
such as iron ore, copper and
platinum—have struggled due
to a drop in metal prices to
multiyear lows.
In a news release, Mr. Mellier said he steered the company “through some of the diamond industry’s toughest
times and with the market
showing signs of recovery,
now is the right time for me
to pass the baton to the next
generation.”
Mr. Cleaver joined De Beers
as general counsel in 2005, becoming commercial director in
2007. In 2010 he was appointed an interim co-CEO of
the company before Mr. Mellier became CEO in 2011. Mr.
Cleaver headed strategy and
business development for De
Beers before assuming his current role in 2015.
Anglo American CEO Mark
Cutifani said Mr. Cleaver’s appointment will provide continuity to Mr. Mellier’s work
given that the two spent much
of the past decade working together on executing strategy.

more favorable rates.
Also on the Dublin agenda
is the prospect of a new cost
headwind as regulators consider making carriers pay for
carbon-dioxide emissions.
Airlines are exempt from
the global climate change deal
struck in Paris last December,
but pressure has been mounting on politicians and regulators to curtail the CO2 output
from commercial flights.
Environmental groups fret
that the airline industry’s
rapid growth could undermine
other climate-change initiatives unless limits are imposed. The International Civil
Aviation Organization, an arm
of the United Nations, is trying
to secure agreement on a
mechanism to limit the indus-

try’s C02 output without curtailing growth.
ICAO members pledged to
improve the fuel efficiency of
commercial aircraft by 2% a
year and to see that any industry growth beyond 2020
won’t increase pollution.
ICAO representatives convened in May to help bridge
differences between member
states about what the system
might look like.

Exactly how much of an airline’s carbon emissions will
need to be offset is still being
negotiated. IATA estimates
that the airline industry’s annual bill would be about $2.8
billion compared with projected profits this year of $36
billion, a forecast expected to
be updated this week.

OIL

Business
Watch
HERCULES OFFSHORE

HERCULES OFFSHORE INC.

Company to File
Again for Bankruptcy

Hercules Offshore Inc. said it
would again file for bankruptcy, this
time planning to liquidate as the
ocean driller goes out of business
amid the long swoon in oil prices.
Less than seven months after
exiting bankruptcy court with
$450 million in fresh financing
and a lighter debt load, Hercules
said Friday that it reached a deal
with 99% of its senior lenders

that will be executed with a
“prepackaged” chapter 11 filing.
In a prepackaged bankruptcy,
companies line up creditor support for their debt-payment
plans before seeking chapter 11
protection, allowing them a
speedier—and cheaper—trip
through bankruptcy.
Hercules’s plan would see the
company liquidate its assets and
use the proceeds to repay creditors. The company expects to be
able to pay unsecured creditors in
full and provide as much as $12.5
million to shareholders.
Senior lender recoveries will
be based on the success of the
asset sales. The company said
Friday that it already has lined up
a $196 million offer for its harsh
environment jackup rig, formerly
named Hercules Highlander, to
Maersk Highlander UK Ltd.
As reasons for its distress,
Hercules cited “the ongoing decline in oil prices, the consolidation of its U.S. customer base
and the addition of new capacity
[that] negatively impacted day
rates and demand for Hercules’s
services.”
—Stephanie Gleason
and Anne Steele

an essential engagement gift
since the mid-20th century.
But the South African company has struggled in the past
year amid an economic slowdown in China, where burgeoning wealth had previously
fueled sales of diamonds. De
Beers’s underlying earnings
shrank 72% last year to $258
million.
De Beers cut production to
help rebalance supply and demand. That led diamond traders
to sell down bloated inventories
of polished diamonds as consumer demand reached its seasonal year-end holiday peak.
The production cutbacks
have helped buoy rough-diamond prices, although demand
ebbed recently due to a seasonal lull in buying activity.
Still, De Beers has become
an important profit center for
parent company Anglo American.
Diamonds accounted for 31%
of Anglo’s underlying earnings
last year, making it the group’s
second-most important earnings
driver after coal. Anglo’s heavy-

Hercules Offshore plans to liquidate amid the long swoon in oil prices.
SEVEN WEST MEDIA

Company in Talks
To Buy Newspaper

Seven West Media Ltd. is in
discussions with News Corp to
buy Western Australian newspaper The Sunday Times and news
website Perth Now.
The Perth-based company,
which owns the West Australian
newspaper as well as free-to-air
broadcaster Seven Network, on
Friday said any deal would boost
earnings in the first year after
the acquisition but would be
subject to approval from Australia’s antitrust regulator.
As part of the agreement,
Seven West Media and News
Corp plan to implement a news
content sharing agreement for
the West Australian with News’
daily brands in Adelaide, Bris-

bane, Melbourne and Sydney.
The company said the acquisition would allow it to explore
expansion of its printing operations which could deliver scale
benefits and synergies.
—Rebecca Thurlow
CHINA

Nuclear Company
To Build Sudan Plant

China is to build Sudan’s first
nuclear reactor, as the East African nation moves to boost electricity generation and avert a
looming power crisis.
The reactor will be built by
China National Nuclear Power
Co. The 600-megawatt power
plant would supply electricity to
the Sudanese capital, Khartoum,
as well as several other towns.
—Nicholas Bariyo

Continued from the prior page
might be modest.
Although many of Chevron
Corp.’s mega projects around
the globe need higher prices to
be profitable, the company recently said that its Permian Basin operations in West Texas
can hum along with crude at
$50. Chevron has slashed 40%
from its costs in the area and
now has 4,000 wells there that
give a 10% rate of return when
West Texas Intermediate, the
U.S. benchmark price, is at $50.
“We are now in full horizontal factory mode in the Permian,” said Joe Geagea, an executive vice president for
technology and services at
Chevron, comparing drilling
operations there to a streamlined manufacturing process.
Exxon hit the brakes this
year, slashing its budget by

25% and dropping the number
of drilling rigs it runs in the
U.S. from close to 60 at the
height of the oil boom to about
16 as it delayed shale production. “It’s not really a price

SUITOR

Continued from the prior page
China Development Bank
was expected to lead the financing, they said. However,
the policy bank hadn’t yet provided a commitment letter to
Zoomlion, one of the people
said.
Chinese officials have been
trying to slow an exodus of
money from the country, making life tougher for companies
that need to trade the yuan for
U.S. dollars to do business. The
Wall Street Journal earlier reported that China’s foreign-exchange regulator had asked
banks to more closely review
foreign-currency transactions;

trigger for us,” said Jeff Woodbury, vice president of investor
relations, when Exxon discussed first-quarter earnings
in late April.
The company cares more
about the broad supply-anddemand balance across the
whole world, he said.
Global oil demand is growing, but not fast enough to outpace the crude supply glut that

has built up over the past two
years. A forecast from the In-

SEOUL—South Korea’s STX
Offshore & Shipbuilding Co.
has filed for receivership, in
further evidence of the challenges facing global shipbuilders mired in one of the industry’s worst slumps.
The filing with the Seoul
Central District Court on Friday came just two days after
creditors for STX Offshore discontinued providing a lifeline
after years of financial assistance failed to keep the company afloat.
The court will soon determine whether STX Offshore
should be liquidated or given a
chance for survival after rigorous debt restructuring, the
company said.
State-run Korea Development Bank, the company’s
main creditor, said Wednesday
that any additional bailout
funds would do little to help
the company while it struggles
to get shipbuilding orders in
its current situation.
STX Offshore, once the
country’s fourth-largest shipbuilder by revenue, has been
under the control of its creditors since April 2013 after
losing money from operations and amassing huge
debt.
The creditors injected billions of dollars to bail it out,
but it still ran a 314 billion
won ($265 million) operating

loss last year, following a 1.5
trillion won loss in 2014. The
company owes financial institutions nearly 6 trillion
won.
As a glut of vessels and low
freight rates have created a financial nightmare for many
shipbuilders, the Korean government said last month that
it would push for sector consolidation, particularly in the
troubled shipbuilding and
shipping industries.
Profits at Korean shipbuilders began sliding after the
2008 global economic crisis
damped orders from shipping
companies, and lower-cost
Chinese rivals made market
inroads.
The world’s three largest
shipbuilders, all Korean—
Hyundai Heavy Industries
Co., Daewoo Shipbuilding &
Marine Engineering Co. and
Samsung Heavy Industries
Co.—are also staggering under
heavy debt loads.

ternational Energy Agency now
projects a strong rebound in
the second half of 2016, with
oil demand rising by 1.8 million
barrels a day to 96.8 million

barrels a day by the fourth
quarter.
Although many U.S. producers have said $50 oil won’t
spur them to rush out and tap
new wells, one of the bigger

uncertainties is whether the
$50 threshold will lead them to
finish the many wells that are
drilled but not yet pumping in
fields from Texas to North Dakota—estimated at nearly
4,000 according to data from
consulting firm Rystad Energy. “Consensus appears to
be building around the notion
that $50 to $55 is tantamount
to an industry ‘all clear,’ ” analysts at Tudor, Pickering, Holt
& Co. said.
Further out in the futures
market, oil is trading over $50
a barrel into 2017. That allows
companies to hedge their future output by locking in
higher prices today for oil they
won’t pump until next year,
said John England, a vice
chairman of oil for Deloitte
LLP in Houston.
The prevailing view on Wall
Street is that $60-a-barrel oil
is the new $90, the price
needed to trigger the sort of

production growth seen during
the last upswing, said Evan
Calio, head of U.S. oil research
at Morgan Stanley.
—Erin Ailworth
contributed to this article.

and that scrutiny could delay
many of China’s outbound
deals, according to bankers and
lawyers.
Zoomlion joins a growing
list of Chinese companies unable to complete acquisitions
outside of the country. In a
prominent case, Anbang Insurance Group Co. entered into a
bidding war with Marriott International Inc. for control of
Starwood Hotels & Resorts
Worldwide Inc., but abandoned
its $14 billion bid in March,
citing only “various market
considerations.”
Such failed attempts could
make bankers and potential acquisition targets wary of entertaining overtures from China.
That said, there have been

some high-profile deals struck
by Chinese businesses this
year, including China National
Chemical Corp.’s $43 billion offer for Swiss seed giant Syngenta AG. So far this year, overseas buying by Chinese
companies totals $119 billion,

according to Dealogic, which
compares with $107 billion for
all of 2015.
China’s construction-equipment market has been mired in
a slump. Zoomlion went public
in January with an unsolicited
$30-a-share offer for Westport,
Conn.-based Terex. The offer
disrupted Terex’s plan from
last August for an all-stock
merger with Konecranes.
—Joanne Chiu
contributed to this article.

$60-a-barrel oil is
the price needed to
kindle a production
rise, analysts say.


THE WALL STREET JOURNAL.

Monday, May 30, 2016 | B3

TECHNOLOGY

@wsjd | wsjd.com

Qualcomm Starts China Venture
BY EVA DOU

Silicon Valley
Driverless-Car
StartupRaises
Fresh Capital
BY MIKE RAMSEY
The backer of a Silicon Valley autonomous-car developer
called Zoox said the secretive
startup raised a fresh round of
capital valuing it at more than
$1 billion, roughly equal to a
similar company General Motors Co. acquired earlier this
month.
Zoox executives have been
tight-lipped, saying little in
public about the Palo Alto, Calif., company’s plans.
The firm is developing technology similar to Alphabet
Inc.’s Google car project and
Cruise Automation, which GM
purchased in a deal valuing it
at more than $1 billion, according to people familiar
with the terms.
Zoox’s profile, however, has
increased
recently
amid
heightened interest in autonomous cars and the potential
for using them as self-driving
taxis that can be deployed by
ride-sharing services such as

Uber Technologies Inc.
While auto makers including GM have been working on
self-driving cars for several
years, companies such as Zoox
could play an important role
refining the technology.
Zoox is one of 13 companies
that have received licenses
from California to test autonomous vehicles on public roads.
Hong Kong-based AID Partners Capital Holdings Ltd.
this week disclosed a $20 million investment for a Zoox
stake that implies a $1 billionplus valuation for the
startup. AID Chairman and
Chief Investment Officer Kevin
Wu believes Zoox can deploy a
fleet of fully autonomous vehicles by 2020 for ride-sharing
services like those Uber offers.
The company’s co-founder,
Tim Kentley-Klay, declined to
comment on the investment.
Zoox’s other co-founder is
Jesse Levinson, who formerly
led Stanford University’s selfdriving car program.
Zoox is designing its
own self-driving taxi and control system. It employs 140
people, according to AID, including dozens of scientists
from universities. It also has
attracted more than 50 engineers and professionals from
Alphabet, electric-car maker
Tesla Motors Inc., Apple Inc.,

Nvidia Corp. and NASA, the investment firm said.

Revenue
$8 billion

BY JACK NICAS

China Woes
Qualcomm's overall revenue has
fallen, hit by difficulties in
collecting royalties in China.

6

4

2

0
FY2014

’15

’16

Note: Fiscal years end in late September.
Source: the company

REUTERS

THE WALL STREET JOURNAL.

Qualcomm President Derek Aberle expects China’s server demand to eclipse that of the U.S.
Over the past two years,
China has tightened requirements for foreign technology
vendors, requiring them to
share more information with
Beijing to prove their products
are secure. This is especially
true for sales to the Chinese
government and state-owned
enterprises, according to people familiar with the process.
The Qualcomm joint venture will likely address the
matter of security by developing “something very specific
to China,” Mr. Aberle said.
“That’s a difference from
where you’ve got a complete

solution and you’re trying to
bring that in.”
Qualcomm, which is based
in San Diego, has two major
units, one that sells chips and
another that licenses patents
on cellular technology to
smartphone makers.
Its licensing business has
had trouble collecting royalties in China following an investigation by China’s National
Development and Reform
Commission. The regulator

said Qualcomm had used its
market dominance to charge
Chinese smartphone makers
overly high prices to license

technology needed for their
handsets. Qualcomm said it
was disappointed in that finding, but agreed not to contest
it in further legal proceedings.
The company settled early last
year, agreeing to pay a fine of
$975 million and renegotiate
licensing agreements with Chinese customers.
While Qualcomm has signed
new contracts with more than
100 Chinese clients, there are
still some holdouts, and some
companies are underreporting
their sales, Mr. Aberle said.
Qualcomm’s global licensing
revenue fell 12% in the most

recent quarter; the company
doesn’t break out its licensing
revenue by country.
Mr. Aberle said Qualcomm
is working with customs officials in China and other Asian
countries to track down
smartphone sales that clients
aren’t reporting. “I would say

we had very high compliance
prior to the investigation by
the NDRC,” he said. “And I
think through that process,
companies looked to try to leverage the fact that we had
the investigation.”
Mr. Aberle said that Qualcomm’s business will be able
to grow faster than the market
if it can solve the underreporting problem. Qualcomm is
considering other investments
in China in new technology areas, Mr. Aberle said. In March,
it set up a $2.8 million joint
venture with China’s Thunder
Software Technology Co. to
develop software for drones.

Device Cleared toTreat Opioid Addicts
BY JEANNE WHALEN
The U.S. Food and Drug Administration approved a drugemitting arm implant to treat
addiction to heroin and other
opioids, providing a new tool
against a condition that has
proved extraordinarily difficult to manage.
Some addiction experts said
the implant could offer a more
reliable way to keep addicts
on their medication. But like
all drugs meant to treat drug
addiction, the device could
face opposition from those

who embrace the total-sobriety approach to treatment
long advocated by 12-step programs.
Despite a new push by the
Obama administration and
many public-health officials to
promote medication for opioid
addiction, some treatment
centers still shun or discourage it.
The match-stick-size implant, called Probuphine, emits
buprenorphine, a drug that
eases cravings for opioids and
prevents withdrawal symptoms. Four implants are inserted into the upper arm at a

PHONE

Continued from page B1
mors weren’t observed in female rats exposed during the
tests. And rats that were exposed to radio-frequency energy lived longer than the control group, which had no
exposure.
“There is a long way to go
from the findings reported
here…and a finding that radiofrequency [electromagnetic radiation] is a human carcinogen,” said Jonathan Samet, a
professor at the University of
Southern California who was
chairman of the World Health
Organization committee that
in 2011 determined cellphones
were possibly carcinogenic.
The report was released
late Thursday night after

some of the study’s conclusions began to leak to the media. More than half of the 74page document was scientific
reviewers’ responses to the
findings.
Michael Lauer, deputy director for extramural research
at the National Institutes of
Health, whose review of the
results were included with the
findings, said he couldn’t support the study’s conclusions.
“The higher survival with [radio-frequency
radiation],
along with the prior epidemio-

time, providing six months’
worth of drug.
Behshad Sheldon, chief executive of the implant’s marketer, Braeburn Pharmaceuticals, said Probuphine would
cost less than $6,000 for a sixmonth supply. She declined to
be more specific. Titan Pharmaceuticals Inc. co-developed
the device with Braeburn, and
will receive royalties on sales.
Buprenorphine is already
available in tablet form, or as
films that dissolve in the
mouth, but addicts sometimes
run out of doses, or skip them
and use illegal narcotics in-

stead. Some also sell their buprenorphine to other addicts.
The implant makes this behavior impossible, and so has
won support from some addiction experts.
“For someone with an opioid-use disorder, they have to

decide on a daily basis if
they’re going to take their buprenorphine,” said Marvin
Seppala, chief medical officer
of Hazelden Betty Ford Foundation, a nonprofit treatment
provider. “That decision every
day to remain abstinent from
opioids is difficult. The implant takes away that decision.”
Public-health officials say
better treatment is desperately needed to fight the
growing epidemic of opioid
abuse. More than 47,000
Americans died of drug overdoses in 2014—a record that
exceeded the number killed in
car accidents, according to the
Centers for Disease Control
and Prevention. The biggest
drivers of those deaths were
opioid painkillers and heroin.
The FDA approved Probuphine’s use in people who are
already stable on a low or

moderate dose of oral buprenorphine. The agency said
Probuphine should be used
alongside counseling and
other “psychosocial support.”
Health-care providers must
complete a training program
on inserting the implants before they will become certified
to administer them, the FDA
said.

A recent clinical study tested
the implant in 175 people who
had already been taking an oral
form of buprenorphine for six
months. Half continued to take
oral doses and the other half
received Probuphine; both
groups received 10 urine tests
over six months, to screen for
illicit opioids.
The study, financed by
Braeburn
Pharmaceuticals,
found that rates of illicit opioid use were no worse in the
Probuphine group than in the
oral buprenorphine group, according to results summarized
in FDA documents.
The most common side effects of Probuphine include
pain, itching and redness at
the implant site, as well as
headache, depression and
other issues, the FDA said.

logical literature, leaves me
even more skeptical of the authors’ claims,” he wrote.
The researchers said it
wasn’t uncommon for toxicology studies to find results in
one sex but not the other. “It’s
often not explainable, but it’s
not unusual,” Dr. Bucher said.

“It is very difficult to explain
why something doesn’t happen.” Dr. Bucher said between
70% and 80% of the people
who reviewed the results before its release felt there was
a significant association. “This
is not a universal conclusion
as you can tell by the reviewers’ comments,” Dr. Bucher

said. “Overall, we feel that the
tumors are in fact likely to be
related to the exposures.”
Wireless carriers and phone
manufacturers deferred questions to a trade group called
CTIA, which said it was reviewing the findings.
In a statement, the CTIA
said numerous international
and U.S. organizations “have
determined that the already
existing body of peer-reviewed and published studies
shows that there are no established health effects from radio frequency signals used in
cellphones.” In May, a survey
of brain-cancer rates in Aus-

tralia reported no increase
since the introduction of mobile phones there almost three
decades ago, a result found in
other countries, too.
The Federal Communications Commission, which administers cellphone safety
standards in the U.S., said it
had been briefed on the results. The NTP study was designed to expose rats to levels

of cellphone radiation that
could be considered similar to
what humans may experience
by using a cellphone at maximum power.
Tumors were found in rats
that were exposed to levels

FDA

BEIJING—Qualcomm Inc.
expects to start making some
computer chips for the China
market next year through a
Chinese government-owned
venture, in an example of how
U.S. tech companies are localizing products as Beijing tightens control of technology
within its borders.
The customized chips will
go into servers, the hardware
for running websites, storing
companies’ data and powering
data centers. For Qualcomm,
the world’s leading supplier of
smartphone chips, servers are
a new growth initiative as demand in the smartphone market softens.
Qualcomm President Derek
Aberle said his company set
up a joint-venture with China’s
Guizhou province last year
partly because he expects

China’s server demand to
eventually eclipse that of the
U.S. While Western companies
have long licensed older technology to Chinese counterparts, Mr. Aberle said the
China venture is more central
to Qualcomm’s plans.
“This is really going to be
the primary vehicle from
which we build our data-center business in China,” he said
in an interview on Friday. “We
are actually trying to create
the company that is going to
be able to win the market here
as opposed to just licensing
old technology.”
The joint venture, in which
the Guizhou government has a
55% stake and Qualcomm the
remainder, was set up last
year with initial funding of
about $280 million. Chip production is expected to begin in
the latter half of next year.

Google
Gains Win
In Dispute
Over Java

The arm implant won approval.

Surrounding Waves
A new federal study links cancer in some laboratory rats to chronic exposure to electromagnetic
radiation from cellphones, which previous studies have found harmless.
Ionizing radiation can change molecular structure,
potentially damaging DNA. Common sources are
radioactive elements, cosmic particles, and X-rays.

Non-ionizing radiation typically does not
have enough energy to change atomic
structure or DNA.

Electromagnetic spectrum
Hz
0

KHz
10

2

10

4

MHz
10

6

Non-ionizing radiation

Computer
FM Radio
60-100 Hz
8.75-108 MHz
Source: NIH

EHz

GHz
10

8

10

10

Cellphone*
1.9-2.2 GHz

10

12

Microwave
3-30 GHz

*Third generation mobile cell system

10

14

10

16

10

18

10

20

10

22

Ionizing radiation
Visible light Ultraviolet X-rays Gamma
radiation
rays
THE WALL STREET JOURNAL.

SAN FRANCISCO—A federal
jury in the U.S. found Google’s
use of Oracle Corp.’s Java software in its mobile products
didn’t violate copyright law, a
verdict cheered by many in Silicon Valley who believe it will

protect how they write and use
software.
Thursday’s decision, which
Oracle said it would appeal,
marked the latest chapter in a
six-year legal battle in which
Oracle sought as much as $9
billion from Google for using
11,000 lines of Java software
code in its Android software.
Oracle sued Google, a unit
of Alphabet Inc., in 2010 for
using parts of Java without
permission. A federal appeals
court later ruled that Oracle
could copyright the Java parts,
but Google argued in a new
trial this month that its use of
Java was limited and covered
by rules permitting “fair use”
of copyright material.
The verdict “represents a
win for the Android ecosystem, for the Java programming
community, and for software
developers who rely on open
and free programming languages,” Google said.
Oracle General Counsel
Dorian Daley said, “Google developed Android by illegally
copying core Java technology
to rush into the mobile device

market.” She added: “there are
numerous grounds for appeal.”
The technology industry has
watched the case closely because it could determine how
software programs use application program interfaces, or
APIs, computer code that helps
programs, websites or apps
talk to one another.
Oracle sued Google over its
use of 37 Java APIs in Android,
which runs most of the world’s
smartphones. Google said it
used the APIs to help software
engineers, many of whom are
familiar with Java, build Android apps.
Google and others in Silicon
Valley said an Oracle victory in
the case would have stifled
software innovation by discouraging programmers from
using APIs. That would make
software development harder
and could render some apps
inoperable, they said.
“We are popping the bubbly
here,” said Uri Sarid, chief
technology officer of MuleSoft
Inc., which helps firms build
APIs. He said APIs help programs reach broader audiences
and “there’s a chilling effect if
your building block can’t talk

to mine.”
Pamela Samuelson, an intellectual-property law professor
at the University of California
at Berkeley, said an Oracle victory would have given big tech
companies too much power, by
allowing them to require others to obtain licenses to work
with their software.
below the current U.S. exposure limits of 1.6 watts per kilogram. Tumors were also
found in rats that had been
exposed to levels above legal
limits, but not high enough to
cause the animals to heat up,
researchers said.
A key element of the debate
is what the biological mechanism might be that is causing
the health effect. Unlike Xrays, or other types of radiation, cellphones operate at
frequencies that aren’t known
to affect cells or destroy DNA.
If the rats weren’t exposed
to enough radio-frequency radiation to heat cells, yet still
had health effects, the question is what mechanism might
be causing that.
There also didn’t appear to
be an increased risk based on
increased exposure in the rats.
That could mean radio-frequency energy isn’t the direct
cause—or it could mean that
the amount of exposure isn’t
the determining factor.
The NTP said it was unlikely that other similar studies could be conducted, given

the size and scale of this one.
Another factor is that new
cellular technologies, such as
high-speed LTE networks,
weren’t around when this
study first began in 2005.
It plans to release the complete results by autumn 2017.


B4 | Monday, May 30, 2016

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MARKETS DIGEST B14 | FINANCE WATCH B16

An Oil Driller Looks
Beyond Banks for Cash

Another Chinese Bidder
Scraps an Acquisition

CREDIT MARKETS | B15

HEARD ON THE STREET | B16

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© 2016 Dow Jones & Company. All Rights Reserved.

As of 4 p.m. ET Friday EUR/GBP 0.7606 g 0.34%

YEN/DLR ¥109.90 À 0.12% GOLD 1213.80 g 0.54%

OIL 49.33 g 0.30%

Monday, May 30, 2016 | B13
3-MONTH LIBOR 0.67305%

10-YR TREAS g 8/32 yield 1.851%

Mizuho Chief Warns on Sales-Tax Risks

Banks in

U.S. Grow
Pickier on
Farm Debt

Fallow Period
Net farm income has fallen
sharply from its recent peak.
$125 million
100
75
50
25
0
2008

’10

’12

’14

Note: 2015 and 2016 are forecasts
Source: U.S. Department of Agriculture

THE WALL STREET JOURNAL.

’16

ment debt is among the
largest in the world relative

to the size of its economy.
Moody’s Investors Service
said in a March report, “Postponing the next [sales-tax] increase regardless of the reason would pose a big fiscal
burden for Japan.”
Moody’s
downgraded
Japan’s credit rating by one
notch from Aa3 to A1, the
same rating it has assigned to
Israel and the Czech Republic,
after Mr. Abe decided in November 2014 to delay the tax
increase the first time.
The following day, Moody’s
also downgraded five Japanese banks, including the
Please see TAX page B15

Mizuho Financial Group
President Yasuhiro Sato

Shanghai:
New Rules
On Halts
For Stocks

Erupting
Trading has increased in some
commodity-tracking investments.
Daily volume,
exchange-traded products*
50 million shares

SPDR Gold Trust
VelocityShares
3x Long Crude
Oil ETN

40

BY JESSE NEWMAN
Banks are tightening credit
for U.S. farmers amid a rise in
delinquencies, forcing some
growers to turn to alternative
sources of loans.
When U.S. agriculture was
booming this decade, banks
doled out ample credit to
strong performers and weaker
growers alike, said Michael
Swanson, an agricultural
economist at Wells Fargo &
Co. But with the farm slump
moving into its third year,
banks have become pickier,
requiring some growers to
cough up more collateral and
denying financing outright to
some customers who need it
to pay for seeds, crop chemicals and rent. Farmers this
year have been grappling with
low commodity prices, mounting debt and weaker incomes.

Claude Sem, chief executive
of Farm Credit Services of
North Dakota, said he asked
some farmers to put up more
land or machinery to back
loans this spring.
Collateral
requirements
could increase for more farmers if crop prices remain low,
he said, noting that the cash
price for wheat in northern
North Dakota recently was
about $4.50 a bushel, roughly
a dollar below what it costs
many farmers to raise the
crop.
“Below break-even, everything tightens up,” Mr. Sem
said, adding that falling land
values also have spurred lenders to boost collateral requirements, with cropland
prices down as much as 20%
in some parts of North Dakota.
With traditional bank loans
harder to come by, farmers
are turning to sources like
CHS Inc., a large farmerowned cooperative in the U.S.,
which operates grain elevators and retail stores across
the Midwest. CHS said its
loans to farmers increased
48% in both number and volume in the 12 months to
Please see FARM page B15

would pose a risk to Japan’s
economy.
“There will be a risk in either case of raising the tax or
not, so as long as the government demonstrates a clear
road map for fiscal reconstruction, Japanese credibility
likely won’t be hurt so much,”
he said.
Some bankers say Japan
could damage its international credibility if it fails to
raise taxes on schedule. The
tax increases are part of longstanding efforts to reach a
primary government surplus
by 2020. A primary surplus is
a fiscal surplus excluding interest payments on government debt. Japan’s govern-

KIYOSHI OTA/BLOOMBERG NEWS

TOKYO—The chief of Mizuho Financial Group Inc. said
Japan risks a credit-rating
downgrade if Prime Minister
Shinzo Abe delays a scheduled sales-tax increase without explaining how the government plans to cut its
deficit.
Yasuhiro Sato, president of
Japan’s second-largest bank
by assets, said Mr. Abe’s

increase in the sales tax to
10% from 8% scheduled to
take effect in April next year.

He said he would decide before an upper house election
to be held in July, but Japanese media have reported
that a decision could come
this week.
Mr. Abe has delayed the
tax increase once, after the
rise to 8% in April 2014 derailed an economic recovery.
Consumer spending has yet to
fully rebound, and some economists say the prospect of another tax increase next year is
already weighing on spending.
Mr. Sato acknowledged
that raising the tax again

30
20
IAN PATTERSON FOR THE WALL STREET JOURNAL

BY ATSUKO FUKASE

framing of such a decision
would determine whether it
sparked concerns about the
government’s credibility regarding its plans for fiscal
consolidation.
“The worst scenario is [the
government] will just announce a delay in the tax increase. That could send a
message that Abenomics has
failed or Japan is heading for
a fiscal danger zone and then
it will harm Japanese government bonds’ credit ratings,”

Mr. Sato said in an interview,
referring to the prime minister’s growth program.
Mr. Abe acknowledged for
the first time Friday that he
was considering delaying an

10
0
2015

’16

2015

’16

*Split-adjusted Source: FactSet

THE WALL STREET JOURNAL.

Erika Cajic, a mother of two, made money from trades betting oil prices would rise using an investment linked to crude.

Everyone’s Trading Crude,
From Moms to Millennials
When Erika Cajic woke before dawn one morning in
early May and read that wildfires were breaking out in an
oil-producing region of Alberta, she sat down on the
By Ben Eisen,
Nicole Friedman
and Saumya

Vaishampayan
family-room couch with a cup
of hot chocolate and her laptop and bought shares of an
investment linked to crude.
The 45-year-old full-time

parent of two in Mississauga,
Ontario, like many investors,
reasoned that the production
outages would drive up the
price of oil.
By buying the VelocityShares 3x Long Crude Oil exchange-traded note, she tripled down on her hunch, as
the product uses derivatives that aim to rise and fall
at triple the daily change in
oil.
Within about four days, she
estimated she made about 500
Canadian dollars (US$384) on
those trades after converting

from U.S. dollars.
“The swings are gigantic
lately,” she said of the product, known by its ticker UWTI,
and the other energy products
she has traded in recent
months.
For some individual, or retail,
investors, crude is the new hot
trade. Oil in the U.S. fell to its
lowest level since 2003 in February but has surged roughly

90% since then. On Thursday, it
traded above $50 a barrel for
the first time since October, and
it settled Friday at $49.33. That
Please see CRUDE page B16

T-shirt with tickers on front of
two hot crude-oil investments

SHANGHAI—China’s stock
exchanges tightened their
rules on companies halting
trading in their shares, in a
move that could boost the
chances of Chinese stocks being included in MSCI Inc.’s indexes this summer.
Under regulations released
by the Shanghai and Shenzhen
stock exchanges Friday, listed
Chinese companies involved in
major restructuring won’t be
allowed to halt trading in their
stocks for more than three
months. Firms planning private placements of stock will
no longer be allowed to suspend trading for more than a
month.
In addition, the Shanghai
Stock Exchange will be able to
stop accepting applications for
trading halts, based on the
recommendation of the China

Securities Regulatory Commission or on market conditions,
according to a statement on
the exchange’s microblog.
The rules come ahead of a
decision due next month by
MSCI that could see mainlandtraded shares included in its
indexes. Inclusion could cause
funds that track the benchmarks to channel billions of
dollars into Chinese stocks.
MSCI said in March that
China must prevent widespread trading halts before
stocks here can be included.
When the Shanghai stock
market started to tumble last
June, listed companies scrambled to halt trading in their
Please see RULES page B16

Investors Shrug Off Possibility U.K. Will Exit EU
BY MIKE BIRD
AND JON SINDREU
Investors appear to have
concluded that the U.K. will
vote to stay in the European
Union this June, leaving them
exposed to steep losses should
Britain elect to leave.
Opinion polls show Britain
leaning toward a vote to stay
in the EU in the June 23 referendum. Bookmakers have cut
the odds on a vote to leave

to 19%, from 37% in April, according to Betfair Group PLC.
That shift appears to have
reassured investors that Britain will remain in the EU. The
country’s bond and stock markets have barely reacted to the
possibility of a so-called Brexit. While the pound had declined on such a prospect, the
currency began reversing
course in late February.
Some analysts point out
that political polls and betting
have called British political
events incorrectly before, and
that sentiment in referendums
can swing in the closing days
of campaigning.
“In the early months of this

year, there was a big selloff in
Brexit-related stocks,” said
James Ross, who manages
Henderson Global Investors’
U.K. Alpha Fund. “But since
around the turn of this month,
we’ve seen a rapid reversal,
and complacency has reached
a bit of a dangerous level.”
In recent months, a host of
major financial institutions,
from the Bank of England to
the International Monetary

Fund, have warned British voters of dire consequences
should they vote to leave the
world’s largest trading bloc.
Supporters of Brexit say the
British economy will thrive
freed of EU red tape and able
to carve out its own trade
deals.
The U.K.’s main equity markets haven’t budged much on
the prospect of an exit, performing broadly in line with

U.S. markets. Nor have foreign
investors withdrawn capital
from British banks or sold the
country’s sovereign bonds,
known as gilts, data from the
Bank of England shows.
The 10-year gilt was yielding 1.438% Friday, down from
1.94% about a year ago. Yields
fall as prices rise. The Treasury is having no problems
selling bonds, with one measure of demand for new issues,

SIMON DAWSON/BLOOMBERG NEWS

Japan debt rating may
be hit if rise in levy is
postponed without a
‘road map,’ Sato says

British opposition Labour Party leader Jeremy Corbyn spoke at a rally in London this month.

the bid-to-cover ratio, recently
touching its highest level since
the middle of 2014, according
to analysts at Capital Economics.
On corporate debt, the yield
on
sterling-denominated
bonds has fallen relative to
their euro-denominated peers
since early March.
The exception has been the
pound. Sterling fell by as much
as 11% from November to early
April, as measured against a
basket of other currencies.
The BOE estimated that half of
that decline was due to Brexitrelated uncertainty.
But the pound has since retraced some of that decline,
rising by more than 4% to
Thursday, underscoring how
investors are more relaxed
about the referendum as the
date gets closer. It also is unclear how much of the pound’s
decline is due to the referendum and how much is attributable to concern over the U.K.
economy.
Leveraged funds—which include hedge funds—now have
the smallest net short position
Please see EXIT page B15