Canadian minister takes fight for oil sands crude to Europe

By David Ljunggren

OTTAWA (Reuters) - A European Union plan to label crude from the Alberta oil sands as dirty is unfair and could damage Canada's bid to find new export markets, the Canadian resources minister said at the start of a mission to lobby against the idea.

As part of a plan to cut greenhouse gases from transport fuel, the EU's executive commission has developed a Fuel Quality Directive that would single out oil from Alberta's tar sands as more polluting than conventional crude.

Canada, whose oil sands are the world's third-largest proven reserves of crude, strongly opposes the move.

Natural Resources Minister Joe Oliver, speaking at the start of a week-long trip to Paris, Brussels and London, said the directive should be changed to ensure it does not discriminate against crude from the oil sands.

"We think that's critical as an alternative to what we view as a flawed and ineffective approach that's proposed by the commission," he told Reuters in an interview from Paris.

Extracting crude from the clay-like Alberta oil sands requires more energy than conventional oil production. Environmentalists say that increases greenhouse gas emissions, making the oil sands a top target for the green movement.

Ottawa is unhappy the directive would not penalize Russia, which both burns and releases natural gas while extracting oil. Oliver said this means Russian crude extraction produces at least as many emissions as tar sands oil, if not more.

"If you're giving a free pass to a high emitter who happens to be one of the biggest exporters into the Union, then how are you achieving your objectives? This is all very logical, it's hard to argue against," he said.

Last year, amid heavy Canadian lobbying, the EU held an inconclusive vote on the directive and then decided to assess the full impact of the plan. That assessment is due in the next few months, paving the way for another vote.

Although Canada sends almost no crude to the EU now, that could change if proposals to create pipeline capacity from Alberta to Canada's East Coast are successful.

"We're not exporting to the EU at the moment but we don't want to see our crude oil stigmatized, which could possibly have implications elsewhere," said Oliver, adding that Canada did not oppose the goals of the fuel quality directive.

"What we want is a scientific fact-based approach that makes its judgment based on the scientific realities and not sort of a preconceived idea ... that our oil should be treated differently," he told Reuters.

Canada sends 99 percent of its oil exports to the United States. But a glut of supply and full pipelines are cutting prices, a problem that underlines the Canadian industry's need to find new markets.

The EU vote on the directive last year ended in stalemate amid misgivings from Britain and the Netherlands. Both nations have stakes in Royal Dutch Shell Plc, which operates in the oil sands, as does France's Total SA.

Oliver is meeting senior executives from both companies during his mission, as well as officials from the European Commission and industry groups. He declined to predict how successful his trip would be.

"I've got this great hand but the final results aren't yet in. We're arguing from logic and we're arguing from equity, in all fairness. You hope that prevails," he said.

(Reporting by David Ljunggren; Editing by Peter Galloway)

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Pakistan-US alliance takes hits on campaign trail

ISLAMABAD (AP) — On the campaign trail in Pakistan, candidates boast about their readiness to stand up to Washington and often tout their anti-American credentials. One party leader even claims he would shoot down U.S. drones if he comes to power.

So it's perhaps no surprise that the government that emerges from next month's parliamentary election is likely to be more nationalistic and protective of Pakistani sovereignty than its predecessor.

As a result, the U.S. may need to work harder to enlist Islamabad's cooperation, and the new Pakistani government might push for greater limits on unpopular American drone strikes targeting Taliban and al-Qaida militants in the country.

But ultimately, the final say on Pakistan's stance toward drones and many aspects of the relationship with Washington is in the hands of the country's powerful army. And even nationalist politicians like former Prime Minister Nawaz Sharif, the leading contender in the election, recognize the need for a U.S. alliance and are unlikely to go too far in disturbing it.

"I think the tagline here is different posturing, same substance" when it comes to the next government's relationship with the U.S, said Moeed Yusuf, an expert on South Asia at the United States Institute of Peace.

Nevertheless, it's unclear how long Pakistan's alliance with the U.S. can remain relatively insulated from anti-American sentiment. The May 11 vote is historic because it will mark the first transfer of power between democratically elected governments in a country that has experienced three military coups.

U.S. officials have remained fairly quiet about the election because they don't want to be seen as influencing who wins. But Secretary of State John Kerry has met Pakistani army chief Gen. Ashfaq Parvez Kayani twice in the last month, underlining the importance of the relationship to Washington.

The U.S. needs Pakistan's help in battling Islamic militants and negotiating an end to the war in neighboring Afghanistan. Pakistan relies on the U.S. for billions of dollars in aid and also needs American support as it seeks a bailout from the International Monetary Fund to shore up the government's shaky fiscal situation.

The relationship has been severely strained in recent years, especially following the 2011 raid that killed Osama bin Laden near Pakistan's equivalent of West Point. But it has never broken down completely and has settled into a wary calm over the last year or so. Trust is still in short supply, but both sides recognize they can't do without each other.

"We have moved into a phase of reduced expectations of each other, which is good," said Maleeha Lodhi, a former Pakistani ambassador to the U.S. "It's what they call the new normal."

This pragmatism seems largely set to continue, despite often pointed comments by Sharif and other candidates on the campaign trail.

Sharif has criticized the outgoing Pakistan People's Party for selling out the country's sovereignty in exchange for U.S. aid and likes to recount how he tested Pakistan's first nuclear weapon in 1998 despite American pressure.

"We will never accept any foreign pressure," said Sharif, head of the Pakistan Muslim League-N party, during a recent campaign speech. "We will have relations with foreign countries on the basis of mutual respect, dignity and equality."

Sharif's party controlled the government of Pakistan's largest province, Punjab, in 2011 when it turned down more than $100 million in U.S. aid following the raid that killed bin Laden. But Lodhi, the former ambassador, said she thought it was unlikely Sharif would give up the more than $1 billion in American aid Pakistan receives annually if he came to power.

Former cricket star-turned politician Imran Khan, who many analysts believe will end up playing a key role in the opposition after the election, has been even more critical of Pakistan's relationship with the U.S., saying he would "end the system of American slavery."

But the manifesto of Khan's party, Pakistan Tehreek-e-Insaf, is more tempered, saying "Pakistan will endeavor to have a constructive relationship with the U.S. based on Pakistan's sovereign national interests and international law, not on aid dependency."

Pakistan's relationship with the U.S. — and foreign policy in general — has been less of a focus in the election than domestic issues, such as corruption, pervasive energy shortages and stuttering economic growth.

Lodhi believes this is because the U.S. has said it is largely pulling out of Afghanistan by the end of 2014 and is seeking a peace settlement with the Taliban — a move long advocated by the Pakistani government and supported by the main contenders in the election.

"That has helped to take the edge off negative sentiment in Pakistan which we saw in the last couple of years against the United States," Lodhi said.

One issue that continues to create tension between the two countries is the U.S. drone program targeting Islamic militants in Pakistan's rugged tribal region near the Afghan border.

The attacks are extremely unpopular in Pakistan. They are seen as violating the country's sovereignty, and many people believe they kill mostly civilians — an allegation denied by the U.S.

Pakistan's civilian and military leaders have contributed to these perceptions by criticizing the strikes in public in the past, while supporting them in secret. This support has declined over time as the relationship between the two countries has worsened.

The number of strikes has dropped from a peak of more than 120 in 2010 to close to a dozen so far this year, but it's unclear how much this trend has been driven by U.S. decisions about targeting versus the political sensitivity of carrying out strikes.

Khan, the former cricketer, has sharply criticized U.S. drone attacks and has even pledged to shoot down the unmanned aircraft if he came to power.

Sharif has also been a vocal opponent of the strikes in the past, although he hasn't made them as much of a focal point of his campaign as Khan has.

Nevertheless, Daniel Markey, a South Asia expert at the Council on Foreign Relations, believes Sharif would work with the army to renegotiate the use of drones in Pakistan if he took power.

"In the end, I think probably some accord will be reached in which the use of drones will probably be curtailed from where they have been over the past couple of years," Markey said during a recent call with media. "But they will continue, particularly against high-value targets when they are found."

However, Lodhi, the former ambassador, has doubts Sharif would pick a high-profile fight with the U.S. over drones since the number of strikes has decreased so much.

"The centrality of drones may not be what it was in the past," Lodhi said. "Why would you want to whip up something that is going down anyway?"

____

Associated Press writers Munir Ahmed and Zarar Khan contributed to this report.

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Follow Sebastian Abbot on Twitter at https://twitter.com/sebabbot

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As US talks up diplomacy, NKorea takes hard line

TOKYO (AP) — The United States and Japan opened the door Sunday to new nuclear talks if North Korea lowered tensions and honored past agreements, even as the saber-rattling government rejected South Korea's latest offer of dialogue as a "crafty trick."

U.S. Secretary of State John Kerry told reporters in Tokyo that North Korea would find "ready partners" in the United States if it began abandoning its nuclear program.

Japan's foreign minister, Fumio Kishida, also demanded a resolution to a dispute concerning Japanese citizens abducted decades ago by North Korean officials.

The diplomats seemed to point the way for a possible revival of the six-nation talks that have been suspended for four years.

China long pushed has for the process to resume without conditions. But the U.S. and allies South Korea and Japan fear rewarding North Korea for its belligerence and endless repetition of a cycle of tensions and failed talks that have prolonged the crisis.

Kerry's message of openness to diplomacy was clear, however unlikely the chances appeared that North Korean leader Kim Jong Un's government would meet the American's conditions.

"I'm not going to be so stuck in the mud that an opportunity to actually get something done is flagrantly wasted because of a kind of predetermined stubbornness," he told U.S.-based journalists.

"You have to keep your mind open. But fundamentally, the concept is they're going to have to show some kind of good faith here so we're not going to around and around in the same-old, same-old," he said.

Tensions have run high on the Korean Peninsula for months, with North Korea testing a nuclear device and its intercontinental ballistic missile technology.

The reclusive communist state hasn't stopped there. It has issued almost daily threats that have included possible nuclear strikes against the United States. Analysts and foreign officials say that is still beyond the North Koreans' capability.

While many threats have been dismissed as bluster, U.S. and South Korean say they believe the North in the coming days may test a mid-range missile designed to reach as far as Guam, the U.S. territory in the Pacific where the Pentagon is deploying a land-based missile-defense system.

Japan is the last stop on a 10-day trip overseas for Kerry, who visited Seoul and Beijing as well in recent days.

In South Korea, he strongly warned North Korea not to launch a missile and he reaffirmed U.S. defense of its allies in the region. In China, he secured a public pledge from Beijing, the lone government with significant influence over North Korea, to rid the North of nuclear weapons.

Before returning to the United States, Kerry planned a speech Monday in Japan on the Obama administration's Asia policy.

So far, Republican lawmakers in the U.S. have largely backed the administration's efforts on North Korea.

U.S. Sen. Marco Rubio, R-Fla., told CBS' "Face the Nation" that he was encouraged by Kerry's China visit and that he hoped "we can get the Chinese to care more about this issue.

U.S. Sen. John McCain of Arizona suggested on CNN's "State of the Union" that the U.S. make a counter-threat by using missile interceptors to hit any North Korean missile that is test-fired.

At each stop on his trip, Kerry stressed that the United States wanted a peaceful resolution of the North Korea situation six decades after a cease-fire ended the Korean War.

But North Korea on Sunday served a reminder of the difficult task ahead. Its Committee for the Peaceful Reunification of Korea said the government had no intention of talking with Seoul unless the South abandons its confrontational posture, as the North called it.

Seoul had pressed North Korea to discuss restarting operations at a joint factory park on the border and President Park Geun-hye has stressed peace opportunities after taking power from her more hard-line predecessor, Lee Myung-bak. The presidency expressed regret with North Korea's rebuttal Sunday.

At a news conference in Tokyo, Kerry stressed that gaining China's commitment to a denuclearized North Korea was no small matter given its historically strong military and economic ties to North Korea.

But he refused to say what the Chinese were offering to do concretely to pressure the North into abiding by some of the conditions it agreed to in a 2005 deal that required it to abandon its nuclear program.

"They have to take some actions," Kerry said of North Korea. "How many or how much? I'd have to talk to folks back in Washington about that. But if the Chinese came to us and said, 'Look, here's what we have cooking,' I'm not going to tell you I'm shutting the door today to something that's logical and might have a chance of success."

In remarks to U.S. journalists, Kerry said that under the right circumstances, he even would consider making a grand overture to North Korea's leader, such as an offer of direct talks with the U.S.

"We're prepared to reach out," he said. Diplomacy, he added, required risk-taking and secrecy such as when President Richard Nixon engaged China in the 1970s or U.S. back-channel talks were able to end the Cuban missile crisis a decade earlier.

Given their proximity and decades of hostility and distrust, Japan and South Korea have the most to fear from the North's unpredictable actions.

Kerry clarified a statement he made Saturday in Beijing, when he told reporters the U.S. could scale back its missile-defense posture in the region if North Korea goes nuclear-free.

It appeared to be a sweetener to coax tougher action from a Chinese government which has eyed the increased U.S. military presence in its backyard warily, but which has done little over the years to snuff out funding and support for North Korea's weapons of mass destruction program.

Kerry said America's basic force posture wasn't up to debate. "There is no discussion that I know of to change that," he said.

But he said it was logical that additional missile-defense elements, deployed specifically in response to the Korean threat, could be reversed if that threat no longer existed.

"I was simply making an observation about the rationale for that particular deployment, which is to protect the United States' interests that are directly threatened by North Korea," he said.

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Maduro takes narrowing lead into Sunday vote

CARACAS, Venezuela (AP) — It's the final day of campaigning for Sunday's election to replace Hugo Chavez and the streets of Caracas are flooded with red-shirted backers of the man the recently deceased Venezuelan president tapped to succeed him.

Nicolas Maduro is favored to win the vote. The burly former bus driver had been Chavez's foreign minister and vows to carry on his mentor's socialist revolution.

But polls show Maduro's advantage narrowing as challenger Henrique Capriles hammers away at government deficiencies in managing the economy and fighting crime.

Venezuela is also plagued by food shortages, double-digit inflation and worsening power outages.

Many analysts believe that if the campaign were to held a few months from now Maduro would not have the 10-point lead the latest poll from the Datanalisis firm gives him over Capriles.

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NZ's Warehouse takes 51 percent stake in online retailer

WELLINGTON (Reuters) - New Zealand's biggest listed retailer The Warehouse Ltd said on Monday it had taken a 51 percent stake in local online retailer Torpedo7 Ltd.

It said it would pay up to NZ$33 million ($27.3 million), with NZ$20 million payable immediately and the rest over three years based on performance.

Torpedo7 operates websites in New Zealand and Australia.

Shares in the Warehouse closed on Friday at NZ$3.56.

(Gyles Beckford)

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First female South Korean president takes office

SEOUL, South Korea (AP) — Park Geun-hye has become South Korea's first female president and returned to the presidential mansion where she grew up with her dictator father.

As president, Park will face stark divisions both in South Korean society and with rival North Korea, which detonated an underground nuclear device about two weeks ago. South Koreans worry about a growing gap between rich and poor, and there's pressure for her to live up to her campaign suggestion that she can return the country to the strong economic growth her strong-man father oversaw.

Park technically took over as the clock struck midnight. Her swearing-in ceremony Monday was to be attended by tens of thousands, including international dignitaries.

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