Last-ditch talks to keep Iran under nuclear limits headed for failure

Iran's top nuclear negotiator Abbas Araqchi and Secretary General of the European External Action Service (EEAS) Helga Schmit attend a meeting of the JCPOA Joint Commission in Vienna, Austria, June 28, 2019. REUTERS/Leonhard Foeger

By John Irish and Francois Murphy

VIENNA (Reuters) – Last-ditch talks to persuade Tehran not to exceed nuclear limits within days were on course for failure on Friday, as Iranian officials said their demands had not been met and Washington rebuffed European calls to ease sanctions to allow negotiations.

A week after Washington called off air strikes just minutes before impact, diplomats say Iran is on course within days to exceed the threshold of enriched uranium allowed under its nuclear deal with world powers, which Washington quit last year.

Any such move would reshape the diplomatic landscape, at a time when European officials are warning that a small mistake on either side could push the United States and Iran to war.

Iranian officials met in Vienna with representatives of the countries that are still party to the nuclear deal — Britain, France, Germany, Russia and China. The Iranians repeated their demand that they be allowed to sell oil.

The talks were a “last chance for the remaining parties … to gather and see how they can meet their commitments towards Iran,” Foreign Ministry spokesman Abbas Mousavi said.

Despite abandoning the deal, Washington has demanded European countries force Iran to continue complying with it. Iran says it cannot do so unless the Europeans provide it with some way to receive the deal’s promised economic benefits.

“For one year we exercised patience. Now it is the Europeans’ turn to exercise patience,” Mousavi said. “They should try to find solutions, practical solutions.”

French President Emmanuel Macron said this week that he would ask U.S. President Donald Trump to ease sanctions to allow negotiations to begin. But the plea seemed to have fallen on deaf ears, with Trump’s Iran envoy saying on Friday sanctions would remain in place to end Iranian oil exports altogether.

“We will sanction any imports of Iranian crude oil… There are right now no oil waivers in place,” Brian Hook, the U.S. Special Representative On Iran, told reporters in London.

European countries, which opposed Trump’s decision to abandon the deal and reimpose sanctions, have promised to find ways to allow Iran access to trade in return for continuing to comply. But in practice, the effort has failed, with major European companies canceling all plans to invest in Iran.

DEADLINES

Iran has set a number of deadlines in recent weeks after which it would cease complying with specific terms of the nuclear deal. The first expired on Thursday, the date Tehran said the quantity of enriched uranium it is holding could exceed the deal’s permissible threshold.

Diplomats in Vienna, headquarters of the U.N. nuclear agency IAEA, told Reuters on Thursday that the latest data from inspectors suggested the threshold had not yet been breached, but it could be as soon as Saturday or Sunday.

Another deadline, when Iran says it could enrich uranium to a purity forbidden under the deal, expires on July 7.

Iran says that if it does exceed thresholds, the steps would be reversible and it still aims to keep the deal in place.

The crisis between Iran and the United States that began with Trump’s withdrawal from the pact has escalated in recent weeks after Washington sharply tightened its sanctions from the start of May to halt all Iranian oil exports.

The Trump administration argues that the 2015 agreement reached under his predecessor Barack Obama was too weak because many terms are not permanent and it excludes non-nuclear issues such as missiles and Iran’s regional behavior. Washington says the aim of sanctions is to force Tehran to renegotiate.

Tehran says there can be no talks as long as sanctions are in place and Washington is ignoring the deal it already signed.

The confrontation took on a military dimension in recent weeks, with Washington blaming Tehran for attacks on ships in the Gulf, which Iran denies. Iran shot down a U.S. drone last week, saying it had entered its air space. Washington said the drone was in international skies, and Trump ordered, then aborted, retaliatory air strikes on Iranian targets.

Any move by Iran that violated the terms of the nuclear deal would put pressure on the Europeans to take sides.

“We will repeat to the Iranians that nuclear issues are not negotiable. We want them to stay in the accord, but we won’t accept them messing us around,” a senior European diplomat said before Friday’s meeting.

The cornerstone of European efforts to placate the Iranians is the creation of INSTEX, a mechanism to use barter to allow some trade that would avoid entanglement in U.S. sanctions.

Almost six months after it was created, it is still not operational and diplomats say it will be able to handle only small volumes for items like medicine, not the large oil sales Iran is seeking.

“If INSTEX fails to meet Iran’s demands within the framework of the nuclear deal, we will take the next steps more decisively,” Mousavi said, adding that “the implementation of the EU’s trade mechanism has been delayed due to some lack of commitments”.

(Additional reporting by Bozorgmehr Sharafedin and Guy Faulconbridge in London and Parisa Hafezi in Dubai; Editing by Peter Graff)

Iran on course to exceed nuclear pact limit within days: diplomats

FILE PHOTO: A general view of Bushehr nuclear power plant, 1,200 km (746 miles) south of Tehran, August 21, 2010. REUTERS/Raheb Homavandi

By Francois Murphy and Christopher Gallagher

VIENNA/TOKYO (Reuters) – Iran is on course to breach a threshold in its nuclear agreement with world powers within days by accumulating more enriched uranium than permitted, although it has not done so yet, diplomats said, citing the latest data from U.N. inspectors.

France, one of the European powers caught in the middle in an escalating confrontation between Washington and Tehran, said it would ask U.S. President Donald Trump to suspend some sanctions on Iran to allow negotiations to defuse the crisis.

A week after Trump called off air strikes on Iran minutes before impact, world leaders are trying to pull the two countries back from the brink, warning that a mistake on either side could lead to war.

“I want to convince Trump that it is in his interest to re-open a negotiation process (and) go back on certain sanctions to give negotiations a chance,” French President Emmanuel Macron said in Japan, where he is due to meet Trump on the sidelines of a summit in coming days.

A move by Tehran that clearly breached its 2015 nuclear agreement with world powers would transform the diplomatic landscape and probably force European countries to take sides.

Macron said he had two priorities: de-escalating military tension and keeping Iran from violating the accord, which European countries still hope to save even though Trump ignored their advice and quit it last year.

The latest data from U.N. inspectors suggested Iran had not yet violated the deal on Thursday, despite having named it as a day when it might do so.

“They haven’t reached the limit… It’s more likely to be at the weekend if they do it,” said one diplomat in Vienna, headquarters of the U.N. nuclear agency IAEA, on condition of anonymity.

“OBLITERATION”

The United States withdrew from the pact last year under which Iran accepted curbs on its nuclear program in return for access to international trade. Iran has said it wants to abide by the agreement but cannot do so indefinitely as new U.S. sanctions mean it is receiving none of the benefits.

The escalating crisis has put the United States in the position of demanding its European allies enforce Iranian compliance with an accord Washington itself rejects.

The United States sharply tightened its sanctions last month, ordering all countries to halt purchases of Iranian oil, the main source of revenue to feed Iran’s 80 million people.

Trump’s aborted air strikes last week were the culmination of weeks of heightened military tension. Washington accused Iran of being behind attacks on ships in the Gulf, which it denies.

Last week Iran shot down a U.S. drone it said was in its air space. The United States said it was in international skies.

Since the aborted air strikes last week there have been no major incidents, but rhetoric on both sides has become menacing.

This week Trump threatened Iran’s “obliteration” if it attacked U.S. interests while Rouhani, typically the mild-mannered face of the Tehran government, called White House policy “mentally retarded”. Trump later said he hoped to avoid war, which would be short and not involve boots on the ground.

IRANIAN RESPONSE

In the latest volley in the war of words, Iran’s parliament speaker Ali Larijani said the downing of the U.S. drone had taught Washington the cost of violating Iranian air space.

“Iran’s reaction will be stronger if they repeat their mistake of violating our borders,” Iran’s Tasnim news agency quoted Larijani as saying.

The Trump administration says its ultimate goal is to force Iran back to the table for negotiations. It argues that the 2015 deal, negotiated under Trump’s predecessor Barack Obama, was too weak because it is not permanent and does not cover non-nuclear issues, such as Iran’s missile program and regional behavior.

Iran says it cannot negotiate further unless the United States observes the existing agreement and lifts sanctions.

Tehran says Washington would be to blame if it ends up breaching the limit on uranium stockpiles, since the deal allows it to sell excess uranium abroad to reduce its holdings, but U.S. sanctions have prevented this.

It has set a separate deadline of July 7 when it could breach another major threshold, on the level of purity of uranium it has enriched.

(Additional reporting by Christopher Gallagher in Tokyo; Writing by Peter Graff; Editing by Jon Boyle)

U.S., North Korea in behind-the-scenes talks over third summit, Moon says

FILE PHOTO: North Korea's leader Kim Jong Un and U.S. President Donald Trump talk in the garden of the Metropole hotel during the second North Korea-U.S. summit in Hanoi, Vietnam February 28, 2019. REUTERS/Leah Millis

By Hyonhee Shin

SEOUL (Reuters) – The United States is in behind-the-scenes talks with North Korea over a possible third summit and has proposed working-level negotiations that have been stalled since the second such meeting in February, South Korean President Moon Jae-in said on Wednesday.

FILE PHOTO: South Korea's President Moon Jae-in attends a press meeting at the Royal Palace in Stockholm, Sweden June 14, 2019. Henrik Montgomery/TT News Agency/via REUTERS

FILE PHOTO: South Korea’s President Moon Jae-in attends a press meeting at the Royal Palace in Stockholm, Sweden June 14, 2019. Henrik Montgomery/TT News Agency/via REUTERS

Moon, in written answers to questions posed by visiting foreign journalists, said there was no reason to talk of a “stalemate” just because there had been no official dialogue, aimed at the denuclearization of North Korea.

U.S. President Donald Trump and North Korean leader Kim Jong Un held their second meeting in the Vietnamese capital of Hanoi in February but failed to reach a deal due to differences between U.S. calls for denuclearization and North Korean demands for relief from sanctions.

“Both sides have been engaged in dialogue in regard to a third summit,” Moon said.

“It’s noteworthy that the behind-the-scenes talks have been preceded by the mutual understanding of each other’s position gained through the Hanoi summit.”

The United States had made a proposal for working-level talks, Moon said, urging North Korea to return to the negotiating table “at the earliest date possible”.

North Korea pursued nuclear and missile program for years in defiance of U.N. Security Council resolutions and U.N. and U.S. sanctions.

Moon has been an ardent champion of efforts to end the confrontation, vowing to play a mediator role in nudging North Korea into giving up its nuclear weapons in exchange for an end to sanctions and security guarantees.

The Hanoi breakdown was a blow for Moon, who days before the summit offered to “ease the burden” of the United States by providing concessions to the North through inter-Korean economic initiatives which he seeks to revive.

Moon did not specify when and how the U.S. proposal was made. But U.S. Secretary of State Mike Pompeo said on Sunday that a recent exchange of letters between Trump and Kim boosted hopes for a restart of talks, calling it a “very real possibility.”

North Korea’s official KCNA news agency said on Sunday that Trump’s letter had “excellent content” and Kim would “seriously contemplate” it, without elaborating.

‘NEXT LEVEL’

Stephen Biegun, the U.S. special envoy for North Korea who led working-level talks ahead of the Hanoi summit, is visiting Seoul from Thursday for meetings with South Korean officials before joining Trump, who is due in South Korea this weekend.

Trump is considering visiting the demilitarized zone separating the two Koreas, where Kim and Moon had their historic first summit last year, a South Korean official said. The two Koreas are technically still at war after their 1950-53 conflict ended in a truce, not a treaty.

But a U.S. official said on Tuesday that Trump had no plans to meet Kim during his trip and declined to comment on whether Trump would go to the DMZ.

Trump wanted to travel to the DMZ on a 2017 visit to South Korea but heavy fog prevented it.

“The resumption of negotiations between North Korea and the United States will take it to the next level. I believe everything has now fallen into place for that to happen,” Moon said.

The Hanoi summit cast doubt on Kim’s commitment to denuclearize. There has been little progress since then, with Pyongyang resuming some limited testing of weapons and being aloof toward dialogue offers both from Washington and Seoul.

There is also a gray area over talk about the denuclearization of the “Korean peninsula”, which, by North Korea’s reckoning, includes the regional U.S. nuclear umbrella protecting Japan and South Korea. The United States only wants North Korea to denuclearize.

Moon said Kim had told him he wanted to “finalize a denuclearization process as soon as possible and to concentrate on economic development”.

Moon called for the North to scrap the “passive stance” it has presented since the Hanoi summit and take action on its past promises.

“By responding to the U.S. proposal for working-level negotiations, it can also show its determination to denuclearize,” he said.

The questions for the written interview were provided by Reuters, AP, AFP, Yonhap, Kyodo, Xinhua and Tass ahead of a symposium on the Korea peace process hosted by Yonhap in Seoul on Thursday.

(Reporting by Hyonhee Shin; Editing by Nick Macfie)

Iran says U.S. sanctions on Khamenei mean end of diplomacy

FILE PHOTO: Iran's Supreme Leader Ayatollah Ali Khamenei waves his hand as he arrives to deliver a speech during a ceremony marking the 30th death anniversary of the founder of the Islamic Republic Ayatollah Ruhollah Khomeini in Tehran, Iran June 4, 2019. Official Khamenei website/Handout via REUTERS

By Parisa Hafezi

DUBAI (Reuters) – New U.S. sanctions against Iran’s supreme leader and foreign minister have closed off diplomacy, Iran said on Tuesday, blaming the United States for abandoning the only route to peace just days after the two foes came within minutes of conflict.

U.S. President Donald Trump signed an executive order imposing sanctions on Monday against Supreme Leader Ayatollah Ali Khamenei and other senior figures. Sanctions against Foreign Minister Mohmmad Javad Zarif are expected later this week.

The moves came after Iran shot down a U.S. drone last week and Trump called off a retaliatory air strike minutes before impact, which would have been the first time the United States had bombed Iran in decades of hostility between them.

Trump said he decided at the last minute that too many people would die.

“Imposing useless sanctions on Iran’s Supreme Leader and the commander of Iran’s diplomacy is the permanent closure of the path of diplomacy,” Iranian Foreign Ministry spokesman Abbas Mousavi said on Twitter.

“Trump’s desperate administration is destroying the established international mechanisms for maintaining world peace and security,” Mousavi tweeted.

In a televised address, President Hassan Rouhani said sanctions against Khamenei would have no practical impact because the cleric had no assets abroad.

Rouhani, a pragmatist who won two elections on promises to open Iran up to the world, described the U.S. moves as desperate and called the White House “mentally retarded” – an insult Iranian officials have used in the past about Trump but a departure from Rouhani’s own comparatively measured tone.

Rouhani and his cabinet run Iran’s day-to-day affairs, while Khamenei, in power since 1989, is Iran’s ultimate authority.

“The White House actions mean it is mentally retarded,” Rouhani said. “Tehran’s strategic patience does not mean we have fear.”

Russian Foreign Minister Sergei Lavrov said the situation around Iran was developing toward a dangerous scenario, RIA news agency reported.

“OPEN DOOR”

Trump’s hawkish national security adviser, John Bolton, visiting Israel, repeated earlier offers to hold talks, as long as Iran was willing to go beyond the terms of a 2015 nuclear deal with world powers which Trump abandoned last year.

“The president has held the door open to real negotiations to completely and verifiably eliminate Iran’s nuclear weapons program, its pursuit of ballistic missile delivery systems, its support for international terrorism and other malign behavior worldwide,” Bolton said in Jerusalem. “All that Iran needs to do is to walk through that open door.”

The United States has imposed crippling economic sanctions against Iran since last year, when Trump withdrew from an agreement between Tehran and world powers to curb Iran’s nuclear program in return for the lifting of sanctions.

The crisis has escalated sharply since last month, when the Trump administration tightened the sanctions, ordering all countries to halt purchases of Iranian oil.

That has effectively starved the Iranian economy of the main source of revenue Tehran uses to import food for its 81 million people, and left Iran’s pragmatic faction with no benefits to show for its nuclear agreement.

Washington says the 2015 agreement reached under Trump’s predecessor Barack Obama did not go far enough because it is not permanent and does not cover issues beyond the nuclear program, such as missiles and regional behavior.

Iran says there is no point negotiating with Washington when it has abandoned a deal that was already reached.

The downing of the U.S. drone – which Iran says was over its air space and the United States says was international skies – was the culmination of weeks of rising tensions that had begun to take on a military dimension.

The United States and some regional allies have blamed Iran for attacks on tankers in the Gulf, which Tehran denies. Washington’s European allies have repeatedly warned both sides of the danger that a small mistake could lead to war.

Russian Security Council Secretary Nikolai Patrushev came to Iran’s support, saying the drone was in Iranian airspace when it was shot down and that the evidence on the tanker attacks was of poor quality and unprofessional, not enough to draw conclusions.

During a visit to Jerusalem, Patrushev also said it was unacceptable to portray Iran as a threat to international security and called for restraint to help defuse the situation.

Washington says forcing Iran to the table is the purpose of its sanctions. Tehran has said it is willing to talk if the United States lifts the new sanctions first, although Tuesday’s statements appear to toughen that stance.

Trump is leaving a path open to diplomacy with Iran but Tehran would be making a mistake if it interprets his restraint over the downing of a drone as weakness, U.S. disarmament ambassador Robert Wood told a conference in Geneva.

“We will not initiate a conflict against Iran, nor do we intend to deny Iran the right to defend its airspace but if Iran continues to attack us, our response will be decisive,” he said.

U.S. officials have launched a diplomatic campaign to rally their allies in the face of the escalating crisis. Foreign Secretary Mike Pompeo jetted to the Middle East on Monday to meet leaders of Saudi Arabia and the United Arab Emirates, Gulf Arab states that favor the toughest possible line against Iran.

The U.S. envoy on Iran, Brian Hook, is visiting Europe, where he is likely to get a frostier reception from allies who support the nuclear deal. They believe Trump’s decision to quit the accord was a mistake that has strengthened Iran’s hardline faction, weakened its pragmatists and endangered regional peace.

Iran says it still aims to comply with the nuclear deal, but cannot do so indefinitely unless it receives some benefits. It has given European countries until July 8 to find a way to shield its economy from U.S. sanctions, or else it will enrich uranium to levels banned under the deal.

(Reporting by Parisa Hafezi; Writing by Peter Graff; Editing by Jon Boyle/Mark Heinrich)

U.S. holds out for more from Mexico in talks over tariffs, border

By Roberta Rampton

WASHINGTON (Reuters) – Mexican and U.S. officials are set to resume talks on trade and migration on Thursday, with the United States resisting calls from its southern neighbor, businesses and some Republican lawmakers to ease up on a plan to impose import tariffs on Mexico.

Vice President Mike Pence, who led an initial round of negotiations in Washington on Wednesday, said talks were positive but emphasized the Trump administration still wants Mexico to commit to working harder to combat illegal immigration.

“We welcomed the efforts of the Mexican officials to offer solutions to the crisis at our southern border, but we need Mexico to do more,” Pence said on Thursday.

He was echoing President Donald Trump, who said on Wednesday that “not nearly enough” progress was made in the first round of talks, and warned that the tariffs would go into effect on Monday if Mexico cannot help stem the flow of mostly Central American migrants heading for the U.S. border.

Last week, Trump said Mexico must take a harder line on migrants or face 5% tariffs on all its exports to the United States from June 10, rising to as much as 25% later this year.

The unexpected announcement rattled global financial markets and even Trump’s fellow Republicans fretted about the potential economic impact on U.S. businesses and consumers who would have to absorb the costs.

MEXICO ECONOMY

Mexico would also take an economic hit that analysts warn could spark a recession. Credit ratings agency Fitch downgraded Mexico’s sovereign debt rating on Wednesday, citing trade tensions among other risks, while Moody’s lowered its outlook to negative.

Staff-level meetings are scheduled to begin at 2 p.m. (1800 GMT) on Thursday with Mexican officials at the White House, a White House official said. Mexican Foreign Minister Marcelo Ebrard earlier had meetings at the U.S. State Department.

The immigration issue came into sharper focus on Wednesday with news that U.S. border officers said they apprehended more than 132,000 people crossing from Mexico in May, the highest monthly total in more than a decade and reaching what officials said were “crisis” levels.

German bond yields fell to new lows on Thursday and U.S. treasury yields resumed their fall as trade tensions doused a rally fueled by hopes for more central bank stimulus ahead of a European Central Bank meeting. [US/]

Sentiment had soured on a lack of progress in talks between U.S. and Mexican officials, and Trump issuing a fresh threat to hit China with tariffs on at least another $300 billion worth of goods.

With Trump on a trip to Europe until Friday night, a quick agreement in the U.S.-Mexico talks is not anticipated by the U.S. side, although Mexican President Andres Manuel Lopez Obrador struck a positive note.

“The U.S. authorities have behaved very well, (including) President Trump, because they haven’t closed themselves off to dialogue and we hope that a deal is reached today,” he told a news conference on Thursday.

Nevertheless, Mexican officials have prepared a list of U.S. products that may face retaliatory tariffs if talks do not end in agreement.

The tariffs would target U.S. products from agricultural and industrial states regarded as Trump’s electoral base, a tactic China has also used with an eye toward the Republican’s re-election bid in the 2020 U.S. presidential election.

Mexico ramped up efforts to halt the flow of Central American migrants crossing the border to the United States on Wednesday, with Mexican soldiers, armed police and immigration officials blocking migrants along its own southern border with Guatemala.

It was unclear whether the hardening of Mexico’s response would appease Trump, who is struggling to make good on his key 2016 presidential campaign promise to build a wall along the U.S.-Mexico border as part of a hard-line immigration stance.

Senator Chuck Grassley, Republican chairman of the finance committee, had expressed hope on Wednesday of a quick deal with Mexico but he was more cautious on Thursday.

“The fact that there wasn’t any agreement probably isn’t surprising as long as they are going to be here two or three days,” said Grassley, one of several Republican lawmakers who have expressed concern about imposing tariffs on Mexico.

(Reporting by Roberta Rampton in Washington; Additional reporting by Alexandra Alper, Susan Cornwell and Lesley Wroughton in Washington and Anthony Esposito and Diego Ore in Mexico City; Writing by Alistair Bell; Editing by Bernadette Baum and James Dalgleish)

Exclusive: China backtracked on almost all aspects of U.S. trade deal – sources

FILE PHOTO: Chinese Vice Premier Liu He, right, looks as U.S. Treasury Secretary Steven Mnuchin, center, swaps places with his Trade Representative Robert Lighthizer during a photograph session before they proceed to their meeting at the Diaoyutai State Guesthouse in Beijing, Wednesday, May 1, 2019. Andy Wong/Pool via REUTERS

By David Lawder, Jeff Mason and Michael Martina

WASHINGTON/BEIJING (Reuters) – The diplomatic cable from Beijing arrived in Washington late on Friday night, with systematic edits to a nearly 150-page draft trade agreement that would blow up months of negotiations between the world’s two largest economies, according to three U.S. government sources and three private sector sources briefed on the talks.

The document was riddled with reversals by China that undermined core U.S. demands, the sources told Reuters.

In each of the seven chapters of the draft trade deal, China had deleted its commitments to change laws to resolve core complaints that caused the United States to launch a trade war: Theft of U.S. intellectual property and trade secrets; forced technology transfers; competition policy; access to financial services; and currency manipulation.

U.S. President Donald Trump responded in a tweet on Sunday vowing to raise tariffs on $200 billion worth of Chinese goods from 10 to 25 percent on Friday. timed to land in the middle of a scheduled visit by China’s Vice Premier Liu He to Washington to continue trade talks.

The United States said on Wednesday the higher tariffs would go into effect on Friday, according to a notice posted on the Federal Register.

Trump said on Wednesday that China is mistaken if it hopes to negotiate trade later with a Democratic presidential administration.

“The reason for the China pullback attempted renegotiation of the Trade Deal is the sincere HOPE that they will be able to ‘negotiate’ with Joe Biden or one of the very weak Democrats,” Trump tweeted. Trump also said he would be happy to keep tariffs on Chinese imports in place.

The stripping of binding legal language from the draft struck directly at the highest priority of U.S. Trade Representative Robert Lighthizer – who views changes to Chinese laws as essential to verifying compliance after years of what U.S. officials have called empty reform promises.

Lighthizer has pushed hard for an enforcement regime more like those used for punitive economic sanctions such as those imposed on North Korea or Iran than a typical trade deal.

“This undermines the core architecture of the deal,” said a Washington-based source with knowledge of the talks.

‘PROCESS OF NEGOTIATION’

Spokespeople for the White House, the U.S. Trade Representative and the U.S. Treasury Department did not immediately respond to requests for comment.

Chinese Foreign Ministry spokesman Geng Shuang told a briefing on Wednesday that working out disagreements over trade was a “process of negotiation” and that China was not “avoiding problems”.

Geng referred specific questions on the trade talks to the Commerce Ministry, which did not respond immediately to faxed questions from Reuters.

Lighthizer and U.S. Treasury Secretary Steven Mnuchin were taken aback at the extent of the changes in the draft. The two cabinet officials on Monday told reporters that Chinese backtracking had prompted Trump’s tariff order but did not provide details on the depth and breadth of the revisions.

Liu last week told Lighthizer and Mnuchin that they needed to trust China to fulfill its pledges through administrative and regulatory changes, two of the sources said. Both Mnuchin and Lighthizer considered that unacceptable, given China’s history of failing to fulfill reform pledges.

One private-sector source briefed on the talks said the last round of negotiations had gone very poorly because “China got greedy.”

“China reneged on a dozen things, if not more … The talks were so bad that the real surprise is that it took Trump until Sunday to blow up,” the source said.

“After 20 years of having their way with the U.S., China still appears to be miscalculating with this administration.”

FURTHER TALKS THIS WEEK

The rapid deterioration of negotiations rattled global stock markets, bonds and commodities this week. Until Sunday, markets had priced in the expectation that officials from the two countries were close to striking a deal.

Investors and analysts questioned whether Trump’s tweet was a negotiating ploy to wring more concessions from China. The sources told Reuters the extent of the setbacks in the revised text were serious and that Trump’s response was not merely a negotiating strategy.

On Wednesday morning, U.S. stock market indexes were mostly weaker again, pointing to a third straight day of losses on Wall Street. The S&P 500 has fallen more than 2 percent so far this week. Yields on benchmark U.S. Treasury securities fell to the lowest in more than a month.

Chinese negotiators said they couldn’t touch the laws, said one of the government sources, calling the changes “major.”

Changing any law in China requires a unique set of processes that can’t be navigated quickly, said a Chinese official familiar with the talks. The official disputed the assertion that China was backtracking on its promises, adding that U.S. demands were becoming more “harsh” and the path to a deal more “narrow” as the negotiations drag on.

Liu is set to arrive in Washington on Thursday for two days of talks that just last week were widely seen as pivotal; a possible last round before a historic trade deal. Now, U.S. officials have little hope that Liu will come bearing any offer that can get talks back on track, said two of the sources.

To avert escalation, some of the sources said, Liu would have to scrap China’s proposed text changes and agree to make new laws. China would also have to move further toward the U.S. position on other sticking points, such as demands for curbs on Chinese industrial subsidies and a streamlined approval process for genetically engineered U.S. crops.

The U.S. administration said the latest tariff escalation would take effect at 12:01 a.m. Friday (0401 GMT), hiking levees on Chinese products such as internet modems and routers, printed circuit boards, vacuum cleaners and furniture.

The Chinese reversal may give China hawks in the Trump administration, including Lighthizer, an opening to take a harder stance.

Mnuchin, who has been more open to a deal with improved market access, and at times clashed with Lighthizer, appeared in sync with Lighthizer in describing the changes to reporters on Monday, while still leaving open the possibility new tariffs could be averted with a deal.

Trump’s tweets left no room for backing down, and Lighthizer made it clear that, despite continuing talks, “come Friday, there will be tariffs in place.”

(Additional reporting by Chris Prentice and Dan Burns in NEW YORK, and Jing Xu and Ben Blanchard in BEIJING; Editing by Simon Webb, Brian Thevenot and Paul Simao)

Trump says U.S.-China trade deal may be reached in four weeks

U.S. President Donald Trump talks with with China's Vice Premier Liu He in the Oval Office of the White House in Washington, U.S., April 4, 2019. REUTERS/Jonathan Ernst

By Jeff Mason and David Lawder

WASHINGTON (Reuters) – U.S. President Donald Trump said on Thursday the United States and China were close to a trade deal that could be announced within four weeks, while warning Beijing that it would be difficult to allow trade to continue without a pact.

The two countries are engaged in intense negotiations to end a months-long trade war that has rattled global markets, but hopes of a resolution soared after both sides expressed optimism following talks in Beijing last week.

Speaking to reporters at the White House at the start of a meeting with Chinese Vice Premier Liu He, Trump said some of the tougher points of a deal had been agreed but there were still differences to be bridged.

“We’re getting very close to making a deal. That doesn’t mean a deal is made, because it’s not, but we’re certainly getting a lot closer,” Trump said in the Oval Office.

“And I would think with, oh, within the next four weeks or maybe less, maybe more, whatever it takes, something very monumental could be announced.”

Trump said he would hold a summit with Chinese President Xi Jinping if there were a deal.

Xi assured Trump that text of the China-U.S. trade could be finalized soon, in a message conveyed by Liu He.

According to state-run news agency Xinhua, Liu He told Trump that Xi believed under his and Trump’s leadership, China-U.S. relations will make new and greater progress.

Xi said that in the past month or more, the two sides’ trade teams had maintained close contact and “achieved new and substantive progress on issues in the text of two countries’ trade agreement”.

“I hope the two sides’ trade teams can continue working in the spirit of mutual respect, equality, and mutual benefit to resolve each other’s concerns, and finish negotiations on the text of the China-U.S. trade agreement soon,” Xi said to Trump through Liu.

KEEPING LEVERAGE

Trump declined to say what would happen to U.S. tariffs on $250 billion worth of goods as part of a deal. China wants the tariffs lifted, while U.S. officials are wary of giving up that leverage, at least for now.

Asked about the benefits of an agreement for China, Trump said: “It’s going to be great for China, in that China will continue to trade with the United States. I mean, otherwise, it would be very tough for us to allow that to happen.”

Goods trade between the United States and China, the world’s two largest economies, totaled $660 billion last year, according to U.S. Census Bureau data, consisting of imports of $540 billion from China and $120 billion in exports to China.

On China’s behalf, Liu cited “great progress” in the talks because of Trump’s direct involvement and expressed hope that the talks would lead to “a good result.”

U.S. SEEKS SWEEPING CHANGES

Trump has previously threatened to impose punitive tariffs on all imports from China, more than a half-trillion dollars worth of products.

U.S. Trade Representative Robert Lighthizer, who is leading the talks for the Trump administration, said there were still some “major, major issues” to resolve and praised Liu’s commitment to reform in China.

Asked about the remaining sticking points, Trump mentioned tariffs and intellectual property theft. He said he would discuss tariffs with Liu in their meeting.

“Some of the toughest things have been agreed to,” Trump said. He later said that an enforcement plan for a deal remained a sticking point as well.

“We have to make sure there’s enforcement. I think we’ll get that done. We’ve discussed it at length,” he said.

Lighthizer and Treasury Secretary Steven Mnuchin are holding talks in Washington with a Chinese delegation this week after meeting together in Beijing last week. The current round of talks is scheduled to go through Friday and possibly longer.

Hopes that the talks were moving in a positive direction have cheered financial markets in recent weeks. But U.S. stocks were mixed on Thursday as investors waited for more developments in the trade negotiations, with the Dow Jones industrial Average slightly higher, and the S&P 500 and Nasdaq Composite slightly lower. [.N]

The United States is seeking reforms to Chinese practices that it says result in the theft of U.S. intellectual property and the forced transfer of technology from U.S. companies to Chinese firms.

Administration officials initially envisioned a summit between Trump and Xi potentially taking place in March, but some U.S. lawmakers and lobbying groups have said recently they were told that the administration was now aiming for a deal in late April.

OUTSTANDING ISSUES

White House economic adviser Larry Kudlow said last week that the talks were “not time-dependent” and could be extended for weeks or even months longer.

While some reform pledges by Beijing are largely set, including an agreement to avoid currency manipulation, an enforcement mechanism to ensure that China keeps its pledges and the status of U.S. tariffs on $250 billion worth of Chinese goods must be resolved.

“China has been very clear, publicly and privately, that they would like to see all the tariffs removed,” U.S. Chamber of Commerce international affairs chief Myron Brilliant told reporters on Tuesday.

“The (Trump) administration has been equally clear that they want to keep some of the tariffs in place as a way to have leverage over China fulfilling its obligations under whatever final package is reached.”

(Reporting by Jeff Mason and David Lawder; Additional reporting by Chris Prentice and Michael Martina in BEIJING; Editing by Peter Cooney, Simon Cameron-Moore and Michael Perry)

U.S.-China trade talks continue, Trump not expected to announce summit: official

FILE PHOTO: U.S. President Donald Trump and China's President Xi Jinping arrive for a state dinner at the Great Hall of the People in Beijing, China, November 9, 2017. REUTERS/Jonathan Ernst/File Photo

WASHINGTON (Reuters) – The White House is not expected to announce a date on Thursday for a trade summit between U.S. President Donald Trump and Chinese President Xi Jinping, a senior administration official said, as negotiators for the two sides launch another day of talks.

China and the United States are in the middle of intense negotiations to end a months-long trade war that has rattled global markets.

After meetings in Beijing last week, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are holding talks with a Chinese delegation in Washington this week.

Trump is slated to meet with China’s top trade negotiator, Liu He, at 4:30 p.m. (2030 GMT) at the White House. The Wall Street Journal and the New York Times reported that he was expected to announce a date for a summit at that time, but a senior administration official told Reuters that was incorrect.

“The White House is not expected to announce a date for a meeting,” the official said.

Trump administration officials have cited progress in the talks on tricky aspects, including reforming practices that Washington objects to by Beijing such as the intellectual property theft and forced transfer of technology from U.S. companies doing business in China.

Hopes that the talks were moving in a positive direction have cheered investors.

Administration officials initially envisioned a summit between Trump and Xi potentially taking place in March, but that period passed while talks continued.

How to enforce a deal as well as when and whether to lift tariffs on billions of dollars of goods have been sticking points in what appear to be the final stages of the talks.

(Reporting by Jeff Mason; Editing by Susan Thomas)

Brexit delayed? PM May requests three-month extension, EU pushes back

Britain's Prime Minister Theresa May answers questions in the Parliament in London, Britain, March 20, 2019 in this screen grab taken from video. Reuters TV via REUTERS

By Elizabeth Piper, Kylie MacLellan and William James

LONDON (Reuters) – Prime Minister Theresa May asked for a three-month delay to Brexit on Wednesday to buy time to get her twice-rejected departure deal though parliament, but the request faced immediate resistance from the European Commission.

May’s initiative came just nine days before Britain is formally due to leave the European Union and marked the latest twist in more than two years of negotiations that have left British politics in chaos and the prime minister’s authority in tatters.

After the defeats in parliament opened up the possibility of Britain leaving the EU without a deal and a smooth transition, May said she remained committed to leaving “in an orderly manner” and wanted to postpone Brexit until June 30.

Her announcement prompted uproar in parliament, where the opposition Labour Party accused her of “blackmail, bullying and bribery” in her attempts to push her deal through, and one prominent pro-Brexit supporter in her own Conservative Party said seeking a delay was “betraying the British people”.

Britain voted in 2016 to leave the EU by 52 to 48 percent, but the decision has split the country, opening up divisive debates over the future of the economy, the nation’s place in the world and the nature of Britishness itself.

Some European capitals have welcomed May’s extension plan, with Germany saying a disorderly British departure would be in nobody’s interest.

But a European Commission document seen by Reuters said the delay should either be several weeks shorter, to avoid a clash with European elections in May, or extend at least until the end of the year, which would oblige Britain to take part in the elections.

The pound fell sharply as May requested her extension. [GBP=D3]

BREXIT CRISIS

Nearly three years after the United Kingdom voted to leave the European Union, British politicians are still arguing over how, when or even if the world’s fifth largest economy should leave the bloc it first joined in 1973.

When May set the March 29 exit date two years ago by serving the formal Article 50 divorce papers, she declared there would be “no turning back” but parliament’s refusal to ratify the withdrawal deal she agreed with the EU has thrust her government into crisis.

On Wednesday, May wrote to European Council President Donald Tusk to ask for a delay.

“As prime minister I am not prepared to delay Brexit any further than the 30th of June,” May told a rowdy session of parliament.

“I have therefore this morning written to President Tusk, the president of the European Council, informing him that the UK seeks an extension to the Article 50 period until the 30th June,” she said.

She said she planned to ask parliament to vote a third time on her departure deal, which lawmakers have voted down twice. She did not say when the vote would happen.

But May did say delaying Brexit did not rule out the possibility that Britain could leave without a deal.

The Labour Party said by choosing a short delay May was forcing British lawmakers to decide between accepting a deal they have already rejected or leaving without a deal.

Many pro-Brexit members of May’s Conservative Party are opposed to a longer delay because they fear it could mean Brexit might never happen. They argue Britain can do well outside the European Union even though an abrupt departure would cause short-term pain.

EU PUSHES BACK

“Any extension offered to the United Kingdom should either last until 23 May 2019 or should be significantly longer and require European elections,” the EU document said.

“This is the only way of protecting the functioning of the EU institutions and their ability to take decisions.”

May said it was not in Britain’s interests to take part in European elections.

Britain must decide by April 11 if it will participate in the May 23 European election, creating an effective deadline for parliament to pass May’s deal for an orderly Brexit.

The document also said the EU should offer Britain just one extension as multiple delays would leave the bloc in limbo.

European Commission President Jean-Claude Juncker had warned May against requesting a Brexit delay beyond the European elections, unless Britain takes part, an EU spokeswoman said.

While the United Kingdom remains divided over Brexit, most agree it will shape the economic future of generations to come and, if it goes badly, could undermine the West and threaten London’s position as the dominant global financial capital.

The loss of Britain for the EU is the biggest blow yet to more than 60 years of effort to forge European unity after two world wars, though the 27 other members of the bloc have shown surprising unity during the tortuous negotiations.

EU leaders are expected to decide on May’s request for a Brexit delay at a summit in Brussels on Thursday. But some diplomats said the final decision could be pushed into next week.

(Additional reporting by by Kate Holton and Alistair Smout in London and Alastair MacDonald in Brussels; Writing by by Guy Faulconbridge and Giles Elgood; Editing by Janet Lawrence)

Wall Street gains as U.S.-China trade talks advance

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., February 13, 2019. REUTERS/Brendan McDermid

By Amy Caren Daniel

(Reuters) – U.S. stocks gained on Friday, led by a bounce in shares of financials, as investors were optimistic about the ongoing trade talks to resolve a bruising tariff dispute between the United States and China.

Talks between the world’s largest economies will continue next week in Washington, with both sides saying this week’s negotiations in Beijing made good progress.

“Trade talks have been completed in Beijing and the good news is that they are planning on having another round of negotiations in Washington next week,” said Art Hogan, chief market strategist at National Securities in New York.

“The market is predicated on a positive outcome from the trade negotiations.”

Hopes of a trade deal ahead of a March 1 deadline has helped the trade-sensitive industrial sector gain more than 16 percent so far this year, making it the best performing S&P sector.

The sector rose 0.97 percent boosted by bellwethers Boeing Co and Caterpillar Inc.

Leading the gains among the 11 major S&P sectors trading higher were financial companies up 1.66 percent, after a more than 1 percent fall in the prior session.

The sector was hit by a fall in U.S. treasury yields on Thursday after bleak retail sales data in December suggested a sharp slowdown in economic activity at the end of 2018.

Another concern for markets was a threat by President Donald Trump to declare a national emergency in an attempt to fund his U.S.-Mexico border wall without congressional approval.

Still, he agreed to sign the bill that lacked money for his wall, but prevents another damaging government shutdown.

At 9:53 a.m. EDT the Dow Jones Industrial Average was up 275.89 points, or 1.08 percent, at 25,715.28, the S&P 500 was up 22.19 points, or 0.81 percent, at 2,767.92 and the Nasdaq Composite was up 21.83 points, or 0.29 percent, at 7,448.79.

PepsiCo Inc shares rose 2.6 percent after the soda maker forecast an increase in revenue growth. Nvidia Corp rose 2.0 percent and helped push the technology sector 0.29 percent higher, after the chipmaker forecast sales for its current fiscal year above expectations.

Advancing issues outnumbered decliners by a 3.76-to-1 ratio on the NYSE and a 2.69-to-1 ratio on the Nasdaq.

The S&P index recorded 38 new 52-week highs and no new lows, while the Nasdaq recorded 43 new highs and 10 new lows.

(Reporting by Amy Caren Daniel and Shreyashi Sanyal in Bengaluru; Editing by Arun Koyyur)