Metal Allies–The new face of a faceless global war: drones and the CIA.

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By William Saletan

uav4tf31In the decade since Sept. 11, 2001, the United States has developed an air force of drones to fight its new enemies. Faced with terrorists willing to take any life, we built machines that hunt and kill but don’t bleed.

In the next decade, our reliance on drones and the spies who support them may increase for a different reason: We’re losing friends.

Since Sept. 11, the U.S. drone fleet has grown from a few dozen to 7,000. The Air Force now trains more pilots to operate drones than to fly bombers or fighter jets. Spy drones have flown extensively in Afghanistan and Iraq, where we’ve fought ground wars. But killer drones have been particularly useful in Pakistan, where we can’t send troops.

Every time U.S. ground forces have entered its territory—most recently in the raid that killed Osama Bin Laden—Pakistan has freaked out. But Pakistani leaders have tolerated U.S. drone strikes that killed nearly 2,000 insurgents in the country’s frontier provinces over the past five years. In fact, since the Bin Laden raid, the drone strikes have escalated and spread.

Hand in hand with the drone war, the CIA’s role has expanded. Like the drones, the CIA is invisible. It can hunt and kill in a country without officially being there. So while the military operates our drones in Afghanistan, the CIA operates them in Pakistan. Apparently, we’ve been allowed to launch some of our drone missions over Pakistan from bases within the country.

That may change. The Bin Laden raid, coupled with a lethal incident involving a U.S. agent inside Pakistan, has frayed the U.S.-Pakistan relationship. Instead of investigating Pakistani officials who may have helped shelter Bin Laden, Pakistan has rounded up people it suspects of helping the CIA set up the raid. Pakistan has also snuffed out a U.S. program to train Pakistani troops to fight al-Qaida. And the CIA has caught insurgents being tipped off when the U.S. shares intelligence with Pakistan.

So the U.S. is preparing to fight on without Pakistan’s help. The backup plan is to move our drones to Afghan bases and fly them into Pakistan from there. And as we pull out of Afghanistan, we’d leave drones in place. That way, we can continue to hunt al-Qaida in both countries even when, as a human presence, we’re no longer there.

A similar scenario is unfolding in Yemen. With Bin Laden’s decline and death, al-Qaida in the Arabian Peninsula, led by radical cleric Anwar al-Awlaki, has become the chief orchestrator of terror plots against the U.S. The regime in Yemen, like the one in Pakistan, prefers that we fight this enemy with drones rather than ground forces.

Until now, the drone war in Yemen has been run by the U.S. military. But the military has screwed up. First it misidentified a target and killed a Yemeni envoy. Then it failed three times to take out Awlaki. But the bigger problem is that the Yemeni regime is unraveling. Its collaboration with U.S. forces has collapsed. Its political opponents want to take over and end U.S. military operations.

So the U.S. is preparing the same nonexit strategy. We’re putting extra CIA officers in Yemen and instructing the agency to run an expanded drone campaign based outside the country.

Legally, the U.S. military needs the consent of the host government to wage a drone war.* The CIA doesn’t. The war can be euphemized as intelligence gathering and “covert action.” Nor does Yemen have to host the drones. We can fly them over the border, as in Pakistan. We already launch drone missions over Yemen from Djibouti. Now, according to reports, we’re building a CIA base outside Yemen from which we can run a drone war in that country without its approval. U.S. officials are keeping the base’s location secret, but the logical guess is Saudi Arabia, where the drones’ intelligence-gathering network will be headquartered. Presumably, the base will support a bigger drone fleet than the Djibouti airfield, where limited runway capacity has constrained the number of drone missions.

We’re also flying killer drones over Libya. But there, we’re waging an open military conflict in concert with NATO. What’s significant about Pakistan and Yemen is that they’re off the books. We use drones instead of ground troops. We don’t even send pilots who can be shot down. We put the CIA in charge of the war so we don’t have to respect the laws of war.* And we build bases outside the country so we can conduct the entire operation by remote control, except for the collection of targeting intelligence, which we leave to the CIA.

To top it off, we put the former director of the CIA, Leon Panetta, in charge of the military. And we put our top general, David Petraeus, in charge of the CIA. The CIA and the drones are the team of the future. They’re the new face of a faceless war.

None of this is diabolical. It’s evolution. Al-Qaida, with its network of terrorist cells diffused among failed states, is an organism well-designed to evade conventional warfare. We, in turn, are evolving to fight the new threat. In a world of political chaos, waning American power, unstable allies, untrustworthy friends, and enemies who obey no rules, we’re developing a new kind of war that we can wage from regional air bases with killer machines in the air fed by covert human networks on the ground. And the scary thing isn’t that it might work. The scary thing is that it might not.

Clarification, June, 23, 2011: The Obama administration says that all its drone strikes respect the laws of war and that the U.S. military can legally wage a lethal drone campaign in a country without the consent of that country’s government. Specifically, State Department legal adviser Harold Koh said last year that it is the considered view of this Administration … that U.S. targeting practices, including lethal operations conducted with the use of unmanned aerial vehicles, comply with all applicable law, including the laws of war. …

As a matter of international law, the United States is in an armed conflict with al-Qaida, as well as the Taliban and associated forces, in response to the horrific 9/11 attacks, and may use force consistent with its inherent right to self-defense under international law. …

In this ongoing armed conflict, the United States has the authority under international law … to use force, including lethal force, to defend itself, including by targeting persons such as high-level al-Qaida leaders who are planning attacks. … [W]hether a particular individual will be targeted in a particular location will depend upon considerations specific to each case, including those related to the imminence of the threat, the sovereignty of the other states involved, and the willingness and ability of those states to suppress the threat the target poses.

On this view, when a state is unwilling or unable to deal with people within its borders who threaten the U.S., both the Department of Defense and the CIA can legally use drones or other lethal force against those people, in the name of self-defense, even without that state’s consent.

13-28

Islamic Trade Finance Seen Lifting Growth of Sector

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By Shaheen Pasha

DUBAI, June 9 (Reuters) – Islamic trade finance has benefitted from shifting preferences towards Sharia-compliant banking and could serve as one of the key growth drivers to help the nearly $1 trillion Islamic finance industry double in size.

The global Islamic finance industry, which has been growing between 15 to 20 percent a year, is widely expected to reach $2 trillion in the next three to five years.

While Islamic banking and Islamic bonds, or sukuk, are expected to lead growth, bankers say Islamic trade finance could serve as the dark horse emerging to propel the industry further.

Trade finance, the lifeblood of global commerce, underpins 60-80 percent of the $12-13 trillion trade in global merchandise and practitioners say it is safer than other forms of lending.

Total trade finance among the 57 members of the Organization of the Islamic Conference, which includes Saudi Arabia, Malaysia and Turkey, is expected to reach $4 trillion by 2012, said Mohamad Nedal Alchaar, secretary-general of the Accounting & Auditing Organization for Islamic Financial Institutions (AAOIFI).

“(Islamic finance) could tap 20 percent of the total trading financing, that’s very reasonable,” Alchaar said, adding that while the current Islamic trade finance market remains fragmented and non-competitive, there has been a shift towards pushing trade finance among Islamic practitioners.

Part of the increased interest in Islamic trade finance is that the Islamic finance industry, which prohibits interest, has matured and can provide complicated instruments, such as Sharia-compliant hedging products to protect trade transactions, said Yakub Bobat, global head of HSBC Amanah commercial banking.

“If you don’t have access to Islamic hedging, there will be a currency conversion impact. In the absence of those solutions, people go for conventional,” Bobat said. “But the proposition is now complete and you can now use Islamic hedges for trade transactions.”

Bobat said such innovations in the industry will help persuade people inclined toward Sharia-compliant business to opt for Islamic trade finance over conventional forms.

In Islamic trade finance, a bank will provide a letter of credit, guaranteeing import payments using its own funds, for a client based on sharing the profit from the sale of the item.

But some banks are still wary of providing Islamic trade finance services, citing it as more costly and time consuming.

In addition, some see little difference between conventional and Islamic trade finance as both are fee-based products, resulting in lower demand for the Islamic product.

Changing that view will be key for the industry, said Shabir Randeree, chairman of the European Islamic Investment Bank.

East-East Trade Flows Grow

“There is a very compelling reason to promote this product given that the returns of trade financing can be very attractive, much more than real estate financing, for example,” he said. “Providers of this product have not been as aggressive in promoting it.”

But with increasing cross-border trade among Asian and Middle Eastern countries, demand for more Sharia-compliant financing from Muslims is still expected to increase.

Asia to Middle East trade flows more than doubled between 2005 and 2008, according to the World Trade Organization.

“If I compare three years back, volumes have gone up overall in the Islamic trade finance market,” said Ghazanfar Naqvi, managing director, Islamic origination and client coverage at Standard Chartered Saadiq.

“It’s a function of more awareness and more offerings. Today we are seeing customer preference changing and trade finance is a key component of growth in Islamic finance.”

Naqvi said it was difficult to pin down tangible global figures for Islamic trade finance as the majority of deals are not public transactions.

The International Islamic Trade Finance Corp. (ITFC), an independent entity within the Islamic Development Bank, said in its annual report that it approved $2.17 billion in Islamic trade finance transactions at the end of 2009.

That grew to around $2.55 billion in 2010, with a majority of transactions taking place in OIC member nations.

HSBC Amanah’s Bobat said Islamic trade finance will be a significant contributor to growth in Islamic finance but the industry will have to look beyond asset finance.

“The industry today is pretty much focused on asset finance and it needs to have the ability to capitalise on trade,” he said. “(Islamic trade finance) should be as much bread and butter business as it is for conventional trade flows.” (Reporting by Shaheen Pasha; Editing by Jon Hemming)

13-28

Russia: Arming Libya Rebels Is “Crude Violation”

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By Lutfi Abu-Aun

2011-07-06T202351Z_158716080_GM1E7770CEB01_RTRMADP_3_LIBYA

Head of the rebel forces Abdel Fattah Younes gestures as he arrives at Green Square in the Kish, Benghazi July 6, 2011, to demonstrate against Muammar Gaddafi and his regime. 

REUTERS/Esam Al-Fetori

TRIPOLI (Reuters) – Russia accused France on Thursday of committing a “crude violation” of a U.N. weapons embargo by arming Libyan rebels, while Washington said it was acting legally, creating a new diplomatic dispute over the Western air war.

France confirmed on Wednesday that it had air-dropped arms to rebels in Libya’s Western Mountains, becoming the first NATO country to acknowledge openly arming the insurgency against Gaddafi’s 41-year rule.

France, Britain and the United States are leading a three-month-old air campaign which they say they will not end until Gaddafi falls. The war has become the bloodiest of the “Arab Spring” uprisings sweeping North Africa and the Middle East.

Rebels acknowledged French support, saying it had helped sustain them in the region.

“There should be no doubt that Libyans in the Nafusa Mountain (Western Mountains) area are alive and safe today thanks to a combination of heroic Libyan bravery and French wisdom and support,” Vice Chairman Abdul Hafeedh Ghoga of the Transitional National Council said in a statement of thanks to French President Nicolas Sarkozy.

Though rebel advances have been slow, the insurgents scored a success in the region on Sunday in pushing to the outskirts of Bir al-Ghanam, within 80 km (50 miles) of Tripoli.

On Thursday the rebels surveyed the strategic town from a ridge overlooking the desert plateau that leads to the capital, in preparation for a possible attack. A Reuters journalist with them said they were waiting for NATO airstrikes to help them.

Libyan television broadcast a statement from tribal leaders condemning Sarkozy over the arms, calling the rebels in the Berber area “a product of France.”

Russian Foreign Minister Sergei Lavrov said Moscow “asked our French colleagues today whether reports that weapons from France were delivered to Libyan rebels correspond with reality.”

“If this is confirmed, it is a very crude violation of U.N. Security Council Resolution 1970,” he said. That resolution, adopted in February, imposed a comprehensive arms embargo.

Paris said on Wednesday it believed it had not violated the U.N. embargo because the weapons it gave the rebels were needed to protect civilians from an imminent attack, which it says is allowed under a later Security Council resolution.

Washington agreed. “We believe that U.N. Security Council resolutions 1970 and 1973, read together, neither specified nor precluded providing defense materiel to the Libyan opposition,” State Department spokesman Mark Toner said.

“We would respectfully disagree with the Russian assessment,” he added. Nevertheless, although legal, arming the rebels was “not an option that we have acted on,” he said.
Although Russia is not involved in the bombing campaign, its stance could add to reservations among some NATO countries wary over an air war that has lasted longer and cost more than expected. Moscow could also challenge Paris at the U.N. Security Council, where both are veto-wielding permanent members.

U.N. spokesman Farhan Haq said it was up to the Security Council to determine what is permitted by its resolutions.

France’s weapons airlift, while possibly increasing the insurgent threat to Gaddafi, highlights a dilemma for NATO.

More than 90 days into its bombing campaign, Gaddafi is still in power and no breakthrough is in sight, making some NATO members feel they should help the rebels more actively, something the poorly-armed insurgents have encouraged.

But if they do that, they risk fracturing the international coalition over how far to go.

The World Bank’s Libya representative said on Thursday Islamist militants could gain ground if the conflict wears on.

“If this civil war goes on, it would be a new Somalia, which I don’t say lightly,” said Marouane Abassi, World Bank country manager for Libya who has been in Tunisia since February.

“In three months we could be dealing with extremists. That’s why time is very important in this conflict, before we face problems in managing it.”

Even before news of the French arms supply emerged, fissures were emerging in the coalition with some members voicing frustration about the high cost, civilian casualties, and the elusiveness of a military victory.

Gaddafi says the NATO campaign is an act of colonial aggression aimed at stealing the North African state’s oil. He says NATO’s U.N.-mandated justification for its campaign — to protect Libyan civilians from attack — is spurious.

NATO Secretary General Anders Fogh Rasmussen made clear on Thursday the weapons airlift was a unilateral French initiative. Asked by reporters on a visit to Vienna if NATO had been involved, he answered: “No.”

“As regards compliance with the U.N. Security Council resolution, it is for the U.N. sanctions committee to determine that,” Rasmussen said.

The rebel advance toward Tripoli’s southwest outskirts from the Western Mountains has not been matched by progress toward the capital from the east, where they hold Misrata on the coast about 200 km (130 miles) from the capital.

The city has been bombarded for months by Gaddafi’s forces. Six rockets landed early on Thursday near the oil refinery and port. A Reuters journalist there reported no casualties.

Britain’s military said its Apache helicopters had attacked a government checkpoint and two military vehicles near Khoms, on the Mediterranean coast between Misrata and Tripoli.

Insurgents say Gaddafi’s forces are massing and bringing weapons to quell an uprising in Zlitan, the next big town along the road from Misrata to the capital. Rebels inside Zlitan said they mounted a raid on pro-Gaddafi positions on Wednesday night.

“(We) carried out a violent attack last night on checkpoints … and exchanged gunfire, killing a number of soldiers,” a rebel spokesman, who identified himself as Mabrouk, told Reuters from the town.
Le Figaro newspaper said France had parachuted rocket launchers, assault rifles and anti-tank missiles into the Western Mountains in early June.

A French military spokesman later confirmed arms had been delivered, although he said anti-tank missiles were not among them. Despite the diplomatic storm, the rebels encouraged more arms deliveries.

“Giving (us) weapons we will be able to decide the battle more quickly, so that we can shed as little blood as possible,” senior rebel figure Mahmoud Jibril said in Vienna.

The conflict has halted oil exports from Libya, helping push up world oil prices. Jibril said it may take years for oil exports to fully resume: “No, no oil is being sold. A lot of the oil well system was destroyed, especially in the east.”

13-28

Libyan Rebels Push Towards Tripoli on Two Fronts

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By Peter Graff

2011-07-06T212010Z_307909548_GM1E7770F1801_RTRMADP_3_LIBYA

A Libyan boy flashing a victory sign attends a rally against Muammar Gaddafi in Misrata July 6, 2011.  

REUTERS/Thaier al-Sudani

AL-QAWALISH, Libya (Reuters) – Rebel fighters seized a village south of the Libyan capital and another group advanced toward Tripoli from the east on Wednesday in the biggest push in weeks toward Muammar Gaddafi’s main stronghold.

Rebels firing their rifles into the air in celebration poured into the village of Al-Qawalish, 100 km (60 miles) southwest of Tripoli, after a six-hour battle with pro-Gaddafi forces who had been holding the town.

Rushing through an abandoned checkpoint where government troops had left tents and half-eaten bread in their rush to get away, the rebels ripped down pro-Gaddafi flags.

Farther north, rebels pushed westward from the city of Misrata to within 13 km of the center of the town of Zlitan, where large numbers of pro-Gaddafi forces are based.

But they came under artillery fire. Doctors at the al-Hekma hospital in Misrata said 14 fighters had been killed on Wednesday and about 50 were injured.

The advances came amid reports that Gaddafi — under pressure from a five-month uprising against his rule, sanctions and a NATO bombing campaign — was seeking a deal under which he would step down.

His government has denied any such negotiations are underway, and NATO’s chief said he had no confirmation that Gaddafi was looking for a deal to relinquish power.

A Libyan official told Reuters on Wednesday there were signs a solution to the conflict could be found by the start of August, though he did not say what that solution might involve.

In the rebel-held cities of Benghazi and Misrata, thousands demonstrated against Gadaffi, waving European and rebel flags and calling for the end of his four-decade rule.

The rebel advances followed weeks of largely static fighting. Heavily armed Gaddafi forces still lie between the rebels and Tripoli, and previous rebel advances have either bogged down or quickly turned into retreats.

But with Al-Qawalish now in rebel hands, they can advance northeast to the larger town of Garyan, which controls the main highway leading into Tripoli. Libyan state television reported on Wednesday that NATO hit targets in Garyan as well fuel tanks in the town of Brega, 200 km (130 miles) west of Benghazi.

The previous big advance in the region was last month, when rebels pushed 20 km (12 miles) north from their base in the Western Mountains to the town of Bir al-Ghanam.

Misrata Push

At the frontline on the outskirts of Zlitan, a unit of fighters had built a sand-bank behind which they could shelter while firing at government troops. There were still sounds of intermittent shelling as night fell.

Unit commander Tarek Mardi, a 36-year-old former banker, said pro-Gaddafi forces had tried to push his fighters back but they had held their ground.

“Why isn’t NATO doing its job, where are the Apaches?” he asked, referring to the attack helicopters the alliance had deployed to Libya. “We are protecting our people, our country. We want to save our land from Gaddafi. He is a criminal.”

More than 100,000 rebel supporters spilled into the streets of Benghazi waving European and rebel flags and chanting slogans against the Libyan leader.

Gaddafi, who has ruled oil producer Libya for 41 years, says the rebels are armed criminals and al Qaeda militants. He has described the NATO campaign as an act of colonial aggression aimed at stealing Libya’s oil.

Deal Talk

A Russian newspaper this week quoted what it described as a high-level source as saying Gaddafi is sounding out the possibility of stepping down on condition there was a political role for one of his sons.

A Libyan government spokesman denied that report, saying Gaddafi’s future was not up for negotiation.

Deputy Foreign Minister Khaled Kaim told Reuters in Tripoli that a solution to the conflict could be found before the Muslim holy month of Ramadan begins early in August.

“There are signals that the crisis will find a solution in the coming weeks. We will do whatever possible so that our people will spend Ramadan in peace,” he said.

“Currently the key hurdle to a solution is the NATO military campaign, and we hope that our friends in the African Union organization will do whatever possible to convince it to stop its aggression against our people.”

NATO Secretary General Anders Fogh Rasmussen said he had no confirmed information that Gaddafi had sounded out the possibility of stepping down.

“But it is quite clear that the end state must be that he leaves power,” Rasmussen told a news conference in Brussels.

(Additional reporting by Nick Carey in Misrata, Hamid Ould Ahmed in Algiers, Lamine Chikhi in Tripoli, David Brunnstrom in Brussels, Maria Golovnina in Benghazi, Joseph Nasr in Berlin and Moscow bureau; Writing by Christian Lowe and David Dolan; Editing by Diana Abdallah)

13-28

Syrian Forces Round Up Dozens in Hama

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By Dominic Evans

BEIRUT (Reuters) – Syrian forces rounded up dozens of people around Hama on Wednesday, a day after shooting dead 22 people, activists said, and Amnesty International said Syria may have committed crimes against humanity in an earlier crackdown.

Tanks were still stationed outside Hama, which has seen some of the biggest protests against President Bashar al-Assad and was the site of a bloody crackdown against Islamist insurgents nearly 30 years ago.

But some of the tanks were redeployed away from the city and a resident said security forces were concentrated around the headquarters of the ruling Baath Party, the police headquarters and a state security compound. Most arrests took place in the outskirts of the city.

Ammar Qurabi, Cairo-based head of the Syrian National Human Rights Organization, said the death toll from Tuesday, when gunmen loyal to Assad swept through the city, had risen to 22.
He said hundreds of people had been arrested.

Rami Adbelrahman of the Syrian Observatory for Human Rights said 23 people had died in Hama in the last 24 hours, and that an opposition figure in the city had reported water and electricity supplies were cut to the city on Wednesday morning.

State news agency SANA said one policeman had been killed in a clash with armed groups who opened fire on security forces and threw petrol and nail bombs at them. It made no mention of civilian deaths but said some “armed men” were injured.

Syria has prevented most independent media from operating inside the country, making it difficult to verify accounts from activists and authorities.

Hama was emptied of security forces for nearly a month after at least 60 protesters were shot dead on June 3, but the security vacuum emboldened demonstrators and on Friday activists said at least 150,000 people rallied to demand Assad’s downfall.

The next day Assad sacked the provincial governor and sent tanks and troops to surround the city, signaling a military assault similar to those carried out in other protest centers.
In a report released on Wednesday, Amnesty International said the crackdown two months ago against one of those protest centers — the town of Tel Kelakh near the border with Lebanon — may have constituted a crime against humanity.

Urging the United Nations to refer Syria to the International Criminal Court, it said nine people died in custody after being captured during the operation in the town, close to the Lebanese border.

“Crimes Against Humanity”

Describing a “devastating security operation”, it said scores of men were rounded up, and most of them were tortured.

Some detainees told Amnesty they were beaten and tied by the wrists to a bar high enough off the ground to force them to stand on the tip of their toes for long periods — known as the shabah, meaning ghost, position.

A 22-year-old man told Amnesty he was tied up in the shabah position had electric shocks applied to his body and testicles during five days of detention in the provincial capital Homs.

“Amnesty International considers that crimes committed in Tel Kelakh amount to crimes against humanity as they appear to be part of a widespread, as well as systematic, attack against the civilian population,” it said.

Syrian activists say security forces have killed more than 1,300 civilians since the unrest erupted 14 weeks ago. Authorities say 500 soldiers and police have been killed by armed gangs who they also blame for most of the civilian deaths.

Assad has responded to the protests with a mixture of repression and concessions, promising a political dialogue with the opposition. Preliminary talks on the dialogue are due to be held on Sunday.

But opposition figures refuse to sit down and talk while the killings and arrests continue, and diplomats say events in Hama will be a litmus test for whether Assad chooses to focus on a political or a military solution to the unrest.

Some residents sought to halt any military advance earlier this week by blocking roads between neighborhoods with rubbish containers, burning tyres, wood and metal.

The New York-based group Human Rights Watch (HRW) said it had been told by an official at Hama’s Hourani hospital that security forces surrounded the hospital on Tuesday, although they did not enter it, as it received the bodies of four people and treated 60 others with gunshot wounds.

“Security forces have responded to protest with the brutality that’s become familiar over the past several months.” said Sarah Leah Whitson, HRW’s Middle East director.

Assad’s father, Hafez al-Assad, who ruled Syria for 30 years until his death in 2000, sent troops into Hama in 1982 to crush an Islamist-led uprising in the city where the armed wing of the Muslim Brotherhood made its last stand.

That attack killed many thousands, possibly up to 30,000, and one slogan shouted by Hama protesters in recent weeks was “Damn your soul, Hafez”.

13-28

Emerging Fast-Food Nation Indonesia Props Up Wheat Market

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By Michael Taylor

2011-06-28T113849Z_235646864_GM1E76S1IQV01_RTRMADP_3_INDONESIA-WHEAT

A woman holding a baby walks past menus displayed in front of a fast food outlet in Jakarta June 28, 2011. Indonesia will be crowned top Asian wheat importer this year, as higher incomes turn Southeast Asia’s largest economy into a fast-food nation and help to keep global prices on the boil.

JAKARTA, June 28 (Reuters) – Indonesia will be crowned top Asian wheat importer this year, as higher incomes turn Southeast Asia’s largest economy into a fast-food nation and help to keep global prices on the boil.

As affluent Indonesians turn away from rice, their country is vying with Japan to be Asia’s leading wheat buyer, while the latter battles economic crisis in the wake of a devastating earthquake and an ageing population boosts protein in its diet.

“We are coming up on a par with, or even more than, Japan,” said Franciscus Welirang, chairman of the Indonesian Wheat Flour Mills Association, known as Aptindo. “It could be this year that we overtake.”

With Indonesia’s imports of the staple set to rise more than 10 percent this year and 3 percent a year in the period to 2015, the trend could even carry Indonesia to second place among the ranks of the world’s largest importers this year.

Listed firms that could gain from any rise in Indonesian wheat consumption include Indofood Sukses Makmur , Singapore’s Wilmar International and Malaysia’s PPB Group.

Indonesia, which relies entirely on imports for its wheat, gets around 60 percent of supplies from Australia, with Canada and the United States accounting for about 30 percent.

Western Australian wheat suppliers will benefit from the trend and continue to dominate Indonesian demand, analysts say, as geographic proximity and consumers’ preference for premium and standard white wheat head off competition from mainly soft white and hard red wheat producers in the U.S. and Canada.

Premium wheat from Western Australia, used to make bread and noodles, is also a favourite of East Asian countries, such as Vietnam and Taiwan.

Small Global Deficit

Global wheat output is set to show a small deficit this year, with stocks meeting any shortfall as output hits around 663 million to 673 million tonnes, analysts say.

The surge in Indonesian imports for the rest of this year coincides with a recent plunge in global wheat prices on improving crop weather in the West while Australian exports could jump nearly 9 percent to a record in 2011-12.

“In such a finely balanced market, any change in supply or demand will have an outsized impact on prices,” said Deepak Gopinath, director at Trusted Sources Research. “The continued rapid growth of Southeast Asian wheat imports will be bullish for wheat prices over the medium term.”

That growth will help moderate the price drop seen for the coming months, after wheat prices hit 2-1/2 year peaks near $9.00 a bushel in February on tight supplies and robust demand from Middle East and North African importers.

By 0628 GMT, the front-month July contract wheat futures on the Chicago Board of Trade was flat at $6.24 a bushel, after posting its fourth-straight week of losses last week to around the lowest in a year. A Reuters technical analysis showed CBOT wheat would fall to $4.02-1/4 per bushel over the next three months.

Southeast Asia now accounts for about 12 percent of global wheat imports, up from 9 percent in 2009. While wheat imports by neighbouring Vietnam, Thailand and Malaysia have held under 3 million tonnes over the past decade, Indonesian intake has almost doubled.

This is due in part to a wheat consumption push by the Indonesian government, an effort to avoid an over-reliance on the staple diet rice of which it is not a major exporter like many of its neighbours.
“Asia is a new market and one of the big issues in terms of food security,” said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.

“We’re looking for increased production but it is not meeting the new demand from emerging economies — that’s the problem because it’s moving outside traditional food sources.”

Fast Food Chains

2011-06-28T113545Z_1643857741_GM1E76S1IM901_RTRMADP_3_INDONESIA-WHEAT

Customers queue to buy food at a KFC outlet in Jakarta June 28, 2011. Indonesia will be crowned top Asian wheat importer this year, as higher incomes turn Southeast Asia’s largest economy into a fast-food nation and help to keep global prices on the boil.

Behind Indonesia’s rapidly rising wheat imports stands a booming economy, set to rise about 6.5 percent this year, boosted by domestic consumption and mineral exports.

Appetites are changing, with bread-based breakfast favoured by the upper middle classes and noodles preferred by the middle classes, a shift away from the previous breakfast staple, rice.

Such changes are easy to spot on a walk through the smog-filled streets of Indonesia’s capital, Jakarta, where new fast food outlets and billboards for the likes of McDonalds , Dunkin’ Donuts, Pizza Hut and KFC , have mushroomed.

McDonalds’ Indonesian licensee says the hamburger chain now has 117 restaurants in the country versus 98 at the end of 2009.

“The increasing westernisation of diets throughout Southeast Asia over the past couple of years, has certainly driven feed wheat demand,” said Michael Creed, an agribusiness economist for National Australia Bank.

About 60 percent of Indonesian wheat imports are now used to make noodles, with 20 percent consumed by bakeries.

Aptindo Indonesia recently forecast wheat imports would grow 10 percent this year to 5.1 million tonnes.

According to forecasts by the United States Department of Agriculture (USDA), Indonesia is already ahead in Asia in the trade year July 2010 to June 2011, with wheat and flour imports at 6.1 million tonnes compared to 5.5 million tonnes in Japan.

USDA data showed 2009/2010 imports for Indonesia and Japan at 5.36 million tonnes and 5.5 million tonnes respectively. It adds that Indonesian wheat consumption is estimated to rise to 5.8 million tonnes in 2010/2011, versus 5.25 million in 2009/10.      A combination of ageing population, rising incomes leading to consumers favouring less starch and more high protein foods, are all helping to push Japan’s wheat consumption lower, analysts say.

Analysts say Indonesian wheat imports are seen rising about 3 percent annually in three to five years , with huge scope for further growth, given that its annual consumption of wheat per capita of 18 kg puts the country among the world’s lowest.

“There is a potential market to grow,” said a consultant at U.S. Wheat Associates.

Indonesia will import 700,000 tonnes of wheat flour this year, said Aptindo, 60 percent from Turkey.

The USDA forecast that Indonesia will rank third among global importers in 2010/2011, behind Egypt and Brazil.

“Indonesia are a fairly large importer,” said Creed, who sees Indonesia overtaking Brazil. “There is not exactly a huge amount of arable land in Indonesia… Brazil does have a capacity to increase productivity.”

But as tastes widen beyond rice, any negative impact on the traditional staple grain is limited due to Indonesia’s ambitious aims to be self-sufficient in rice production.

“The Indonesian government’s goal is to maintain rice self-sufficiency at all costs,” said Gopinath. “That means encouraging Indonesians to substitute wheat for rice as much as possible to slow the growth in rice consumption.” (Editing by Ramthan Hussain and Clarence Fernandez)

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Cheese

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Cheese is a generic term for a diverse group of milk-based food products. Cheese is produced throughout the world in wide-ranging flavors, textures, and forms.

Cheese consists of proteins and fat from milk, usually the milk of cows, buffalo, goats, or sheep. It is produced by coagulation of the milk protein casein. Typically, the milk is acidified and addition of the enzyme rennet causes coagulation. The solids are separated and pressed into final form. Some cheeses have molds on the rind or throughout. Most cheeses melt at cooking temperature.

Hundreds of types of cheese are produced. Their styles, textures and flavors depend on the origin of the milk (including the animal’s diet), whether they have been pasteurized, the butterfat content, the bacteria and mold, the processing, and aging. Herbs, spices, or wood smoke may be used as flavoring agents. The yellow to red color of many cheeses is from adding annatto.

For a few cheeses, the milk is curdled by adding acids such as vinegar or lemon juice. Most cheeses are acidified to a lesser degree by bacteria, which turn milk sugars into lactic acid, then the addition of rennet completes the curdling. Vegetarian alternatives to rennet are available; most are produced by fermentation of the fungus Mucor miehei, but others have been extracted from various species of the Cynara thistle family.

Cheese is valued for its portability, long life, and high content of fat, protein, calcium, and phosphorus. Cheese is more compact and has a longer shelf life than milk. The long storage life of some cheese, especially if it is encased in a protective rind, allows selling when markets are favorable.

Strict followers of the dietary laws of Islam and Judaism must avoid cheeses made with rennet from animals not slaughtered in a manner adhering to halal or kosher laws. Both faiths allow cheese made with vegetable-based rennet or with rennet made from animals that were processed in a halal or kosher manner. Many less-orthodox Jews also believe that rennet undergoes enough processing to change its nature entirely, and do not consider it to ever violate kosher law. As cheese is a dairy food under kosher rules it cannot be eaten in the same meal with any meat.

A study by the British Cheese Board in 2005 to determine the effect of cheese upon sleep and dreaming discovered that the effect of cheese on sleep was positive. The majority of the 200 people tested claimed beneficial results–the cheese promoting good sleep. Six cheeses were tested and the findings were that the dreams produced were specific to the type of cheese. None of the cheeses tested were found to induce nightmares. Cheese contains tryptophan, an amino acid that has been found to relieve stress and induce sleep.

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