The Iran Strike is very near now. World War 3, here we come.


http://online.wsj.com/article/SB10001424052748704608104575220112898...

Pentagon in Race for Raw Materials

The U.S. military is gearing up to become a more active player in the global scramble for raw materials, as competition from China and other countries raises concerns about the cost and availability of
resources deemed vital to national security.

The Defense Department holds in government warehouses a limited number of critical
materials—such as cobalt, tin and zinc—worth about $1.6 billion as of
late 2008. In the coming weeks, the Pentagon is likely to present a
plan for Congress to overhaul its stockpiling program,

The new plan, dubbed the Strategic Materials Security Program by the Pentagon, would give the military greater power to decide what it stockpiles and how it goes about buying the materials. It would also
speed up decision making at a time when military technology evolves
rapidly, commodity markets swing widely and countries around the world
fight to secure access to natural resources.

"It's a risk-management program," said Paula Stead, who oversees the effort for the Defense National Stockpile Center at Fort Belvoir, in Virginia. The
goal is to be able to obtain "a much broader" array of materials in "a
much shorter time," she said.

Right now, the military can't add to the stockpile list without congressional approval, a process that can take as long as two years. The military wants to remove that
restriction. It also wants the authority to strike long-term deals with
companies or allied nations to provide emergency supplies of materials
that the military says are irreplaceable for making weapons, jet
engines, high-powered magnets and other gear.

U.S. allies are also increasingly alert to possible supply threats. Last year, Australia blocked a Chinese firm's bid for control of a company that
was developing a mine for rare-earth elements, which are used in
products such as alloys, electronics and computer monitors.

China controls more than 90% of global production of rare-earth elements, which the U.S. military uses in lasers and high-powered magnets. The
U.S. in October added several of these elements to its list of
materials that it might warehouse.

The proposed changes to the stockpile system are part of a broader overhaul of the way the Pentagon buys raw materials. The military currently uses hundreds of millions of dollars worth of raw materials
annually, for building weapons and equipment, among other things.

The military has recently tested a system of bulk-buying commodities—by putting in joint orders across the armed services—which could cut
purchasing costs. The military also wants the latitude to have private
companies stockpile materials in "buffer stocks" that the military can
tap if other supplies dry up.

Critics argue the current stockpiling system—set up in 1939 for World War II and shaped by the Cold War—is outdated and leaves the U.S. vulnerable to a shortage of
critical supplies. That could weaken the military's negotiating
position or leave it at the mercy of wild price swings in the market,
or unable to get the material it needs for key weapons.

The huge purchasing power of other nations such as China and India makes this even more critical, according to a Department of Defense report given
to Congress last year. Worries about potential shortages of strategic
materials escalated in 2007 and 2008, as commodity prices jumped and
demand from emerging economies soared.

At a hearing on the stockpile last July, a Defense Department official told Congress that the price of rhenium, whose heat-resistant qualities help jet engines
operate at higher speeds, at one point shot up 1,000%. Rhenium is one
of many materials the department already screens for stockpiling.

China looms large in the debate. In addition to dominating production of rare-earth elements, China is an aggressive deal maker with countries
and companies that produce raw materials. The Chinese government also
stockpiles a range of natural resources.

The rising competition for raw materials has sparked fears in the U.S. military that some materials that once seemed abundant could suddenly become hard to get
at any price. In 2008 the military suspended or limited sales of 13
commodities it had previously considered excess. Last year it added 14
materials to its list of resources it considers for stockpiling,
including specialty steels, lithium and some rare-earth elements,
taking the total to 68. More additions are expected, said Ms. Stead of
the Defense National Stockpile Center.

The changes being proposed by the military have the potential to move prices, especially on materials for which the market is small. If the military decides to add
a commodity to the stockpile, it could cause "some upward pressure on
price," said Roderick Eggert, a mineral economist at the Colorado
School of Mines, who has tracked the proposal.

The Defense Department is also a major buyer of raw materials for immediate consumption, as opposed to stockpiling. It purchases about
three-quarters of a million tons of raw materials a year for immediate
consumption, and it uses almost 1% of U.S. steel production and nearly
5% of its aluminum.

The stockpiling system evolved over the past few decades into a network of warehouses containing material that, after the Cold War, the military largely concluded it no longer needed.
Much of what was stored has since been sold off, shrinking the hoard
and netting about $7 billion.

In 1995, the stockpile held 90 different commodities at 85 different locations. Today, it holds 20 commodities in 10 locations, Ms. Stead said.

The system amounted to "putting stuff into big piles," said Robert Latiff, a retired Air Force major general and lead author of a recent study on managing raw
materials for the National Academies. The process for adding new
material was "not only lengthy but torturous," said Mr. Latiff, who is
now a professor at George Mason University.

The military has been caught flat-footed in the past. A special type of steel was needed early in the Iraq war to reinforce Humvees to protect soldiers from
powerful explosives used by insurgents. The Defense Department didn't
have the steel in its stockpile, and couldn't find a domestic firm to
produce all it needed.

The rules were changed to allow the military to use material from Mexico, according to testimony to Congress last year.

At the same time, the military has also adapted to emergencies. When it was racing to build bomb-resistant trucks to use in Iraq, the Pentagon
invoked authority it hadn't used in decades to force contractors to
give key projects top priority access to essential material, because it
feared shortages of ballistic glass and other components.

French Nuclear Industry Faces Meltdown

http://blogs.wsj.com/source/2010/05/11/french-nuclear-industry-face...

A much-awaited report on France’s nuclear industry — due out later this week — is understood to offer ways for France’s diverse nuclear industry to work together to garner big contracts around the globe.

It may succeed. That is, if the government can use it to end, or at least calm, a complex of feuds among the heads of France’s biggest energy companies.

The stakes are high. Clean nuclear power is enjoying a renaissance and France is home to some of the world’s largest players in the nuclear industry. Indeed, it is president Nicolas Sarkozy’s dream to
streamline the nuclear power sector, from design to operation, working
as a team to win high profile contracts around the world.

“All bosses of France’s biggest energy companies more or less hate or at least despise each other, for one reason or another,” an executive at one French energy company told Dow Jones Newswires under
conditions of anonymity.

“This little war of chieftains is certainly detrimental to French companies’ reputation and credibility on an international level,” a Paris-based analyst said.

The frictions range from the obvious competition between companies to deeply personal incompatibilities. For example, CEO Henri Proglio of State controlled utility giant Electricite de France and arch-rival GDF Suez’s
CEO Gerard Mestrallet have been clawing over each other to advance
their careers for decades. Then there’s the deep-rooted personal
antipathy between nuclear engineering titan Alstom’s CEO Patrick Kron and state-controlled nuclear engineering group Areva’s CEO Anne Lauvergeon.

Indeed, none of those four is enthralled with any of the others, executives say.

EDF said today that it aims above all to increase its nuclear output this year, as it reiterated its full-year guidance following an 4.3% increase in first-quarter revenue. Proglio stressed that “the assigned
objective to improve the French nuclear fleet’s performance (was) a
priority for EDF.” [Read EDF's results here.]

Despite this positive talk, it is clear that as on any team, where the French nuclear industry is concerned personal animosity can breed failure. The companies mentioned above took a body blow when their
all-French consortium, that also included oil major Total, lost a $20
billion bid for nuclear reactors in Abu Dhabi last December to a South
Korean grouping with less sophisticated technology.

The Abu Dhabi example illustrates the schoolyard rivalry well: initially, Areva approached EDF to form a team to bid, EDF declined as the then-CEO Pierre Gadonneix didn’t quite fancy Areva’s Lauvergeon.
Areva then turned to EDF’s arch-rival GDF Suez. Total, eager to get
into nuclear, asked to tag along. As the three-some efforts got bogged
down, the French presidency ordered EDF to join and help rescue the
struggling bid. But it was then too late.

Ironically, previous governments’ attempts to inject competition into the French nuclear industry through the break-up of big State-run nuclear and energy combines appears to have succeeded all to well. And
current President Nicolas Sarkozy’s attempt to glue these diverse
companies, and their ambitious top mangers, back together again isn’t
helping.

“They will shoot at each other now. EDF no longer has to buy Areva’s reactors only, while Areva can look outside Alstom for parts. This might not be good for the French energy industry as a team nor
synergies, but that’s perhaps healthier as far as competition is
concerned,” an analyst said.

Step in Francois Roussely, former head of EDF, whom Sarkozy, who has been asked to sort out the mess. He’s soon to file much a much anticipated and speculated upon set of recommendations to guide the
French nuclear industry into the future. His report should be made
public by mid-May, though it will disappoint those expecting detailed
wisdom on restructuring the industry.

Although nominally losing its monopoly in these sectors, the government still plays a heavy hand in the sector, sometimes playing one company off against the other.

“That might explain part of the feuds, as some CEOs are closer to some politicians while others are not anymore, depending on their network or government reshuffles,” a senior government official, who
declined to be named, told Dow Jones Newswires.

It’s been reported that EDF former CEO Gadonneix’s fall from grace last summer was down to Sarkozy’s dislike of him. When Gadoneix’s contract ran out, Sarkozy appointed Henri Proglio, one of the few tough
French industrialists liked by unions. Sarkozy, a right-wing Gaullist,
has also for some time been mulling the untimely departure of CEO Anne
Lauvergeon, who has been a close aide to socialist president Francois
Mitterrand.

The French presidency has persistently declined to comment about the imminent demise of Lauvergeon, who’s mandate runs out next year. After months of contradictory government leaks, Sarkozy appears to have
decided to keep her until the end of her contract.

The schizophrenic nature of a French economic policy that preaches private ownership, but ultimately controls strategic sectors, especially energy, may explain part of the situation.

The state owns 84% in EDF and 93% in Areva, while former public natural gas operator Gaz de France has been privatized and merged — mainly Sarkozy’s doing — with utility Suez. The state retains a 35.6%
direct stake in GDF Suez.

“Beforehand, companies were simply (full-blown) public entities, for instance with EDF working hand in hand with what was Areva’s predecessor Framatome,” the official said. Back then, there was no
question of ego, competition, contract prices — employees were all
civil servants and did what they were told.

The arrival of the feisty Proglio at the helm of EDF, a company which is notoriously mired in a civil servant mentality, has ratcheted up intra-sector tension. Upon taking office, he compared the French
nuclear industry to a soccer team, with EDF as the clear forward goal
scorer and the rest supporting players. He also mused about a possible
dismantlement and parceling out of Areva, with EDF grabbing Areva’
nuclear engineering activities.

Also known as “Atomic Anne,” Areva’s formidable CEO has been fighting back, seeking an industrial partnership with EDF’s arch-rival GDF Suez and publicly defying Proglio over nuclear waste contracts
linking their companies in January.

The dispute over nuclear waste transport and treatment went public and ended up on the Prime Minister’s lap. “We had to act as the headmaster during playtime and stop the schoolyard fight,” the senior
official recalled, referring to the prime minister Francois Fillon’s
intervention to force both CEOs to end the spat.

At least in public, the chastened CEOs are making signs toward co-existence. In an press interview in February, Lauvergeon appeared to call a truce with Proglio. “For years I’ve been wishing for the renewal
and the modernization of our relationship with EDF. We have lots to do
together, in France and abroad,” she said. “I have no relationship
problems with Henri Proglio,” she insisted.

Also trying to patch up his relationship with EDF’s Proglio, GDF Suez’s Mestrallet made very public the fact that he invited his counterpart to lunch in January. “I initiated this meeting which seemed
to us normal and necessary. I manage GDF Suez in the interests of its
shareholders, its customers and its employees, not for my ego,” he
explained in an interview last Thursday with French newspaper Les
Echos. A GDF Suez spokesman declined to comment further.

But tensions remain and some look difficult to calm, such as the recurring fighting between Alstom’s CEO Kron and Lauvergeon. This one dates back from 2005, when Areva’s CEO balked at being forced by the
government to come to Alstom’s rescue.

“Kron never forgot,” and intensively lobbied the government for Areva to be merged with his company. Lauvergeon has been resisting but couldn’t oppose the government’s decision to sell Areva’s transmission
and distribution unit to Alstom last year.

“Some hatred between them is totally irrational and I doubt any report and any law could do anything about that,” the senior official government added.

Though wary of him, the others seem to like the congenial and moustachioed Total CEO Christophe de Margerie, who wears his company’s nuclear ambitions on his sleeves but, has been careful not to tread on
anyone’s toes. So far.

The Roussely report alone, laying out a basis for smoothed relationships between them all, won’t suffice. And it seems Sarkozy will have to take the reins and knock some heads together, something
he’s been unwilling to do so far–but may be forced to.