India's PM Worried by Budget Deficit

NEW DELHI - India's Prime Minister Manmohan Singh said in his New Year's message to the nation Dec. 31 that controlling the government's budget deficit was a priority for 2012 to avert another crisis.

In a lengthy address from the beleaguered premier, whose cabinet has suffered from corruption scandals and policy setbacks this year, Singh laid out his vision for the next 12 months.

"I am concerned about fiscal stability in the future because our fiscal deficit has worsened in the past three years," Singh said in a statement sent to AFP.

After heavy borrowings over the last three years to fund a stimulus package to counter the effects of the 2008 global financial crisis, he accepted the budget now needed to be rebalanced with new taxes and cuts to subsidies.

"We have run out of fiscal space and must once again begin the process of fiscal consolidation," he said.

Recalling the country's financial crisis in the 1990s, he added: "This is important to ensure that our growth process is not jeopardized and, equally important, our national sovereignty and self respect are not endangered."

He said the government "must ensure that the country does not go down that road once again", referring to the 1991 bailout of the country by the International Monetary Fund.

The Indian economy has hit headwinds in the last six months, with high inflation coupled with sharply lower growth forecast to be 7.0 percent by economists for this financial year - low by recent standards.

The rupee has also fallen sharply this year and is at record lows against the dollar.

Singh also stressed the importance of the expensive task of modernizing India's defense forces, something he described as "my most important task as prime minister.

"India's economic and energy security require this," he said.

Maliki Declares 'Iraq Day' to Mark U.S. Pullout

BAGHDAD - Prime Minister Nuri al-Maliki declared "Iraq Day" on Dec. 31 to mark the end of a pact allowing U.S. forces to stay in the country, two weeks after they left and with Iraq mired in a political row.

IRAQI PRIME MINISTER Nuri al-Maliki delivers a speech Dec. 31 during a ceremony at Al-Shaab stadium complex in central Baghdad. Maliki declared 'Iraq Day' to mark the withdrawal of U.S. forces. (Ali Al-Saadi / AFP via Getty Images)

Maliki called for Iraqis to unite, and said the country's days of dictatorship and one-party rule were behind it, even as rival politicians have accused him of centralizing decision-making power.

Speaking at a ceremony attended by several ministers and top security officials at the Al-Shaab stadium complex in central Baghdad, Maliki said Dec. 31 was "a feast for all Iraqis" and marked "the day Iraq became sovereign".

"I announce today, the 31st of December, which witnessed the completion of the withdrawal of U.S. forces, to be a national day," Maliki said. "We call it Iraq Day."

"Today, you are raising the Iraqi flag across the nation, and unifying under that flag. Today, Iraq becomes free and you are the masters."

He continued: "The withdrawal of U.S. forces from Iraq returns the country to normality. That makes targeting civilians, police, the army and other security forces, or carrying out any sabotage against infrastructure a huge betrayal, and that puts those who commit these acts in the corner of the enemy."

U.S. troops completed their withdrawal from Iraq on Dec. 18, nearly nine years after Washington launched a controversial war to oust dictator Saddam Hussein.

At their peak, American forces in Iraq numbered nearly 170,000 and had as many as 505 bases. Now, just 157 remain, under the authority of the embassy, to train Iraqi forces to use equipment purchased from the United States.

In 2008, Baghdad and Washington signed a deal which called for all U.S. soldiers to leave Iraq by the end of 2011.

Efforts to keep a significant American military training mission beyond year-end fell through when the two sides failed to agree on a deal to guarantee U.S. troops immunity from prosecution.

The Iraqi premier also told his countrymen that they should "be totally confident that Iraq has rid itself forever of dictatorship and the rule of one party, one sect, and one ruler."

Maliki's remarks came amid a festering political standoff in Iraq, with authorities having charged Sunni Vice President Tareq al-Hashemi with running a death squad and Maliki calling for Sunni Deputy Prime Minister Saleh al-Mutlak to be fired.

Mutlak and Hashemi's Sunni-backed Iraqiya party has boycotted parliament and cabinet meetings. Hashemi, who is holed up in the autonomous Kurdish region, rejects the accusations, while Mutlak has decried the Shiite-led government as a dictatorship.

The support of Iraqiya - which narrowly won a 2010 poll and garnered most of its seats in Sunni areas, is seen as vital to preventing a resurgence of violence.

The Sunni Arab minority dominated Saddam's regime and was the bedrock of the anti-U.S. insurgency after the 2003 invasion.

Iran Keeps Tensions High Over Oil Strait

TEHRAN - Iran kept tensions simmering Dec. 31 over its threat to close the Strait of Hormuz to oil tankers by readying war game missile tests near the entrance to the Persian Gulf.

AN IRANIAN WAR-BOAT fires a missile Dec. 30 during the 'Velayat-90' navy exercises in the Strait of Hormuz. (Ali Mohammadi / AFP via Getty Images)

Washington has warned a closure of the strait "will not be tolerated" after Iranian Vice President Reza Rahimi's threat this week that "not a drop of oil" will pass through the channel if more Western sanctions are imposed over Tehran's nuclear program.

Iran has brushed off the warning from the United States, which bases its Fifth Fleet in the Gulf, with Iranian navy chief Adm. Habibollah Sayari saying it would be "really easy" to close the strait.

A spokesman for the Iranian navy, Commodore Mahmoud Mousavi, told state television on Dec. 31 that, "in the next days, we will test-fire all kinds of surface-to-sea, sea-to-sea and surface-to-air as well as shoulder-launched missiles" in the final stages of the war games.

He did not say exactly when the launches would start, but explained they would involve tests of "medium- and long-range missiles" to evaluate their operational effectiveness.

The navy exercises started Dec. 24 and are due to end on Jan. 2.

Twenty percent of the world's oil moves through the Strait of Hormuz, at the entrance of the Gulf, making it the "most important chokepoint" globally, according to information released Dec. 30 by the U.S. Energy Information Administration.

Around 14 crude oil tankers per day pass through the narrow strait, carrying a total 17 million barrels. In all, 35 percent of all seaborne oil transited through there this year.

On Dec. 29, a U.S. aircraft carrier and an accompanying missile cruiser passed through the zone where the Iranian navy was conducting its drill. U.S. officials insisted it was a routine passage.

No confrontation occurred, though an Iranian military aircraft flew in close to record video of the aircraft carrier, which was then shown on state television.

Analysts and oil market traders have been watching developments in and around the Strait of Hormuz carefully, fearing that the intensifying war of words between arch foes Tehran and Washington could spark open confrontation.

With tensions rising, the United States said it has signed a $29.4-billion dealto supply Iran's chief rival in the Middle East, Saudi Arabia, with 84 new fighter jets.

The sale was a "strong message" to the Gulf region, Washington said.

Iran is subject to four rounds of U.N. sanctions over its nuclear program, which many Western countries allege is being used to develop atomic weapons.

Tehran denies the allegation.

The United States and its allies have also imposed unilateral sanctions on Iran's economy.

The last lot of unilateral sanctions triggered a demonstration in Tehran that led to members of the Basij militia controlled by the Revolutionary Guards ransacking the British embassy. London reacted by closing the mission and ordering Iran's embassy in Britain closed.

More sanctions are on the way.

U.S. President Barack Obama is expected to soon sign into law additional restrictions on Iran's central bank, which acts as the main conduit for Iranian oil sales.

The European Union is considering other measures that could include an EU embargo on Iranian oil imports, with foreign ministers to meet on the issue in a month's time.

Iran's oil minister, Rostam Qasemi, told the Aseman weekly that sanctions "will drive up the price of oil to at least 200 dollar" per barrel.

Iran's top nuclear negotiator, Saeed Jalili, was quoted by the Iranian media telling Islamic republic's envoys who have been gathered in Tehran that "we will give a resounding and many-pronged response to any threat against the Islamic Republic of Iran."

But he and other officials also left the door open to resuming long-stalled talks on Iran's nuclear program.

Addressing world powers involved in the talks, Jalili said: "We officially told them to come back to the negotiation based on cooperation."

Iran's ambassador to Germany, Alireza Sheikh-Attar, told the Mehr news agency on Dec. 31 that "we will soon send a letter, after which (new) talks will be scheduled."

Foreign Minister Ali Akbar Salehi was also quoted by a website of the state broadcaster as telling a visiting Chinese foreign ministry official that "Iran is prepared for the continuation of nuclear negotiations" on the basis of a Russian proposal.

Lockheed Wins Contract for UAE Anti-Missile System

Washington - The Pentagon awarded U.S. defense giant Lockheed Martin Corp. with a $1.96 billion contract Dec. 30 to supply the United Arab Emirates with a missile defense system.

Under the contract, Lockheed will deliver two Terminal High Altitude Area Defense or Thaad systems that include radar, interceptors and launchers, according to a Pentagon statement.

The project is part of President Barack Obama's plans to build up a regional defense in the Middle East to counter Iran's growing arsenal of ballistic missiles.

Under the plan, land-based interceptors would be tied in with a detection network on U.S. Navy Aegis-class warships.

UAE is the first country to purchase the expensive Thaad system.

The announcement came amid rising tensions with Iran and a day after the United States confirmed the signing of a $30 billion arms deal to provide another Gulf ally - Saudi Arabia - with 84 new fighter jets.

Boeing Wins Contract for U.S. Missile Shield

WASHINGTON - Boeing won a $3.48 billion contract to retain its leading role in building a U.S. shield against long-range ballistic missiles, defeating rival Lockheed Martin Corp., officials said Dec. 30.

The U.S. Missile Defense Agency announced the decision for the seven-year contract in which Boeing will test, engineer and manufacture the system designed to thwart potential attacks from intercontinental ballistic missiles.

Chicago-based Boeing was joined by partner Northrop Grumman, which will oversee the ground system and other aspects of the project, Boeing said in a statement.

Boeing offered "innovative solutions and a cost-effective approach to program management and execution," said Dennis Muilenburg, president and CEO of Boeing Defense, Space and Security.

Lockheed, based in Bethesda, Md., had hoped to edge out Boeing, which has been the prime contractor for the anti-missile program since 2001.

The ground-based mid-course missile defense system has had a mixed record on missile tests, with two failures in 2010. The program has also faced cost overruns due to faulty parts, and the Pentagon is now requiring contractors to absorb the cost of defects in the future.

Turkish Leaders Struggle with Airstrike Aftermath

ANKARA - Turkey's government is struggling to contain the fall-out from a blunder in which the military killed 35 young Kurdish smugglers in an air strike they thought was directed at Kurdish separatist militants.

KURDISH PEOPLE MOURN for victims of a Turkish air raid at the cemetery of Gulyazi Village, Sirnak province, near the Iraqi border on Dec. 30. (Bulent Kilic / AFP via Getty Images)

The conservative, Islamist-rooted Justice and Development Party (AKP) has followed previous administrations in cracking down on the separatist rebels of the Kurdistan Workers Party (PKK). But it is no closer to finding a solution to the complaints of the country's substantial Kurdish minority.

Turkey's military said they directed Dec. 28's air strike near the Iraqi border against what they thought was a group of around 40 fighters from the PKK, with whom they have been involved in a bitter, decades-long conflict.

When the dust cleared, however, the bodies were of local villagers - most of them between the ages of 16 and 20 - who had been smuggling cigarettes and fuel across the border.

Grief-stricken, enraged local villagers had denounced the attack within hours; local television pictures showed them using mules to carry the dead down off the snow-covered mountains in Uludere district.

But while the AKP conceded Dec. 29 that there could have been a blunder, it took until Dec. 30 for Turkish Prime Minister Recep Tayyip Erdogan to unequivocally acknowledge the mistake.

Expressing regret for the killing of 35 Kurds, he offered his condolences to the victims for what he described as an "unfortunate and distressing" incident.

At the same time, however, Foreign Minister Ahmet Davutoglu insisted that Turkey was engaged an anti-terrorist operation against the PKK while respecting the rule of law. The blunder Dec. 28 had been an exception, he said.

Media commentators and opposition politicians were scathing of the AKP's handling of the crisis.

"The state bombed its own people," was the headline in the liberal daily Taraf.

Fikret Bila, a columnist with Milliyet newspaper, remarked on CNN-Turk television: "The government is always readying to take credit, notably for economic successes.

"One wonders why no one has apologized on behalf of the government."

Kemal Kilicdaroglu, head of the main opposition Republican People's Party (CHP), called for the government to act - and for those responsible to resign.

The outrage within the Kurdish community itself expressed itself in protests in several cities Dec. 29 and 30, with some protesters clashing with the police.

Down near the border with Iraq, some bereaved villagers dismissed talk of an error, accusing the army of having deliberately targeted the civilians. The PKK itself made the same case.

"This massacre was no accident ... It was organized and planned," Bahoz Erdal of the PKK's armed wing said in a statement.

The PKK took up arms in Kurdish-majority southeastern Turkey in 1984, sparking a conflict that has claimed about 45,000 lives. But clashes between the rebels and the army have escalated in recent months, with Turkey raiding PKK bases inside northern Iraq in October in response to an attack that killed 24 soldiers in the border town of Cukurca.

"The government cannot, must not have this affair covered up," Rusen Cakir,a specialist on the Kurdish issue, wrote in the Vatan newspaper. "To do so would only spur the PKK on to step up its attacks."

After he came to power in 2002, Erdogan pushed through important reforms granting greater rights to the Kurds, who make up 15 million of the nation's 73 million population. But after the heavy losses suffered by Turkey's army in October, he bowed to public pressure and hardened his line against the Kurdish rebels.

Resolving the Kurdish conflict remains one of the toughest challenges facing Turkey, the world's 17th-largest economy and a major regional player. The air strike Dec. 28 only made that task harder.

Thatcher Warned Over Navy Before Falklands Invasion

LONDON - Prime minister Margaret Thatcher was warned about the risks in slashing Britain's navy, a year before the 1982 Argentine invasion of the Falkland Islands, secret files released Dec. 30 showed.

Her foreign secretary Lord Peter Carrington also warned defense secretary John Nott that axing Britain's Antarctic patrol ship would send all the wrong signals about London's willingness to defend the Falklands.

Documents released after 30 years locked away in Britain's National Archives showed that the head of the Royal Navy was fuming in 1981 about planned defense cuts.

First sea lord Adm. Henry Leach, who later told Thatcher that Britain could and should send a naval task force to retake the Falklands following the April 1982 invasion, was furious with her a year earlier over her "unbalanced devastation" of the armed forces.

"I note with regret but understanding that the tightness of your program precludes your seeing me personally as requested," he wrote in a stinging note to the premier.

"I am confident however that you will at least spare two minutes to read this note from the professional head of the navy before you and your Cabinet colleagues consider a proposition substantially to dismantle that navy."

Leach concluded: "We are on the brink of a historic decision.

"War seldom takes the expected form and a strong maritime capability provides flexibility for the unforeseen. If you erode it to the extent envisaged I believe you will foreclose your future options and prejudice our national security."

The files also include a letter from Carrington to Nott, urging him against axing the Antarctic patrol ship HMS Endurance, warning it would send the wrong signal to Buenos Aires at a time of tension over the Falklands.

"Unless and until the dispute is settled, it will be important to maintain our normal presence in the area at the current level," he wrote. "Any reduction would be interpreted by both the islanders and the Argentines as a reduction in our commitment to the Islands and in our willingness to defend them."

His appeal was, however, rejected and HMS Endurance was less than a month from being withdrawn from service when the first Argentinians landed on Britain's South Georgia overseas territory in March 1982.

Diplomatic friction between Argentina and Britain has intensified since 2010, when London authorized oil prospecting around the islands, which have a population of around 3,000.

Britain would "never" negotiate the sovereignty of the Falklands against its citizens' wishes, Prime Minister David Cameron said in a Christmas message to the Falklands.

Thatcher, now 86, retired from politics and suffering from dementia, is back in the limelight thanks to the biopic film "The Iron Lady," which hits cinemas around the world next month.