Survey: Oil May Lose Top Rank as Cheapest Energy

By JOHN PORRETTO AP Energy Writer

Over the next 20 years or so, oil and natural gas will lose top ranking as the world's most affordable energy sources, according to a survey of energy executives released Wednesday.

In this May 2, 2007 file photo, workers are shown at a drilling site within the Fort Worth, Texas,...

In this May 2, 2007 file photo, workers are shown at a drilling site within the Fort Worth, Texas, city limits. Over the next 20 years or so, oil and natural gas will lose top ranking as the world's most affordable energy sources, according to a survey of energy executives released Wednesday, Dec. 10, 2008. (AP Photo/Donna McWilliam, File)

(AP)

Deeper wells in more inhospitable places, both political and geological, have altered presumptions of doing business in the oil patch.

Nearly three out of four executives and managers surveyed last month by Deloitte LLP said oil and gas are the cheapest available energy sources for now, though only 23 percent believe that will be the case in 25 years.

Deloitte, which conducted the wide-ranging survey of 52 industry professionals via telephone, released the results Wednesday at its annual oil and gas conference in suburban Houston. Most of the executives work for companies with annual revenues of more than $100 million.

The sampling revealed a growing concern about the sustainability of oil and natural gas in the coming years. Future sources of fossil fuels, the cost of producing them and the price consumers will pay are some of the biggest uncertainties facing the industry.

"Clearly, the oil and gas professionals involved in our survey are starting to think about the nation's transition to renewable energy and other alternative fuels," said Gary Adams, vice chairman of Deloitte's oil and gas practice.

Last week Exxon Mobil Corp., the world's largest publicly traded oil company, expanded its energy outlook to include a new section on the development of all "viable" forms of energy and public policy on climate risk.

Exxon has steadfastly maintained that it is an integrated oil company, however, and that fossil fuels will provide 80 percent of all global energy needs through 2030.

The ongoing global economic malaise and its effect on crude demand in the next couple of years was a hot topic at the conference.

Adam Sieminski, an energy economist at Deutsche Bank, painted a bleak picture, saying global oil demand could fall by 700,000 or 800,000 barrels a day in 2009, a steeper decline than many other forecasts.

The U.S. Energy Information Administration said Tuesday it expects global oil consumption to decline by 450,000 barrels a day next year, down from a November forecast of flat demand. Total world consumption is between 85 million and 86 million barrels a day, according to the EIA.

"Not only could we lose 700,000 or 800,000 barrels a day next year, but very possibly it could be twice that number," Sieminski said during a presentation.

He said crude could fall as low as $30 a barrel in the near term, but only because of the recession.

"Once the global economy recovers, I think you need a price somewhere in the $75, $80, $85 range in order to get the investment required to sustain production," Sieminski said.

Of the executives interviewed by Deloitte, 53 percent said they think the U.S. could run out of reasonably priced oil within the next quarter century, and 56 percent said the world is likely to face the same scenario in the next 50 years.

Few question that fossil fuels will be a vital energy source worldwide for many years. And the world's biggest oil and gas companies continue to spend far more trying to find new sources of oil and gas than they do on alternatives such as solar and wind.

Just last month, the International Energy Agency said more than a trillion dollars in annual investments to find new fossil fuels will be needed for the next two decades to avoid an energy crisis that could choke the global economy.

The Paris-based agency stressed it's essential for the world's energy companies to continue investing in new projects despite crude prices that have tumbled 70 percent since hitting a record high in July.

Slightly more than 40 percent who took part in the Deloitte sampling said the U.S. energy situation is better today than it was five years ago, while 50 percent said it was worse. Six percent weren't sure.

Three out of four said shifting away from the nation's reliance on fossil fuels for transportation needs is an appropriate goal for the country, yet most think the best alternative right now is natural gas. About 30 percent said electric plug-in vehicles are the most promising alternative.

Among the survey's other findings, 42 percent of respondents cited government regulation as the most significant deterrent to investing more in exploration and production. About 30 percent said it was geopolitical risks and 12 percent cited commodity price volatility.

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Will oil prices recover after tanking in 2008?

Oil prices have experienced wild fluctuations in 2008

The oil price gyrated wildly in 2008, hitting an all-time high above $147 a barrel on July 3 – followed by four-year lows. The big question now is: Where next?

Until the credit crunch saw global markets freeze, demand for oil had been rocketing, mainly because of rapid development in countries such as India and China.

However, the financial crisis changed that. Demand plummeted in the latter part of 2008 and global inventories grew. In the third quarter of 2008, US oil consumption shrank by about 1m barrels per day (bpd) – or around 5pc. It is likely to have fallen further in the fourth quarter.

To keep the market in balance, Opec cut supply. In December, the cartel, which controls 40pc of global oil output, agreed its deepest cut ever, bringing the total cut in quotas in the second half of 2008 to 4.2m bpd.

But even this failed to support the price, which fell almost 10pc in the next two sessions.

There were two reasons for this fall. It is obvious that demand deterioration continues as the
global economy falls deeper into recession, but the market was also sceptical whether Opec members would comply with the cut. This followed news that only 85pc of the previous 1.5m barrel quota reduction had been implemented.

The latest cut of 2.2m bpd is due to start on January 1. Analysts are unsure whether members will stick to their production quota, so there is uncertainty about oil supply over the next few months.

Then there's Russia, the world's second-largest oil exporting nation. Opec had hoped the country would join in with co-ordinated cuts in output. Russia sent its highest-level delegation ever to Opec's December meeting, but said it was not going to join in with Opec's actions. US pressure was probably behind Russia's decision. Analysts warned that Congress could campaign to have Russia thrown out of the G8 if it got too close to Opec.

One other cause of the oil-price spike was a slide in the value of the dollar. As the currency weakened investors bought dollar-denominated assets as a hedge against inflation, helping propel oil to close to $150 a barrel.

However, the global economy's deterioration saw investors repatriate assets they saw as risky. This caused a flight back into cash and these positions were unwound.

Over 2009, the currency markets are likely to be volatile and difficult to predict. If dollar strength persists, this is likely to keep the oil price subdued.

However, the Federal Reserve has slashed US interest rates and signalled that it could soon be printing money to try to stop the recession turning into a depression. Many analysts feel that this will be bearish for the dollar, and a dollar fall would once again boost the oil price.

Ultimately, what happens to the oil price depends on whether the recent fiscal stimulus packages work. If they do and economies improve then demand recovery will be bullish for the oil price.

If the packages fail the outlook for a recovery in oil prices is bleak. Economic contagion in the West is already hitting China's manufacturing base.

Earlier this month Merrill Lynch oil analyst Francisco Blanch said the oil price could drop to $25 in 2009 if China falls into recession. He put the chances of this happening at one in three. However, he added: "If we reignite economic growth, we will have a shortage of energy again." In this case, Mr Blanch predicted oil at $150 a barrel in two or three years.

Most analysts are downbeat on the oil price in the short term. Deutsche Bank analyst Michael Lewis said: "Many commodity prices are set to overshoot to the downside in response to the worst downturn in economic activity since the Great Depression."

In the long term, low oil prices could be damaging, as they stop investment in the discovery of new sources. Speaking at a recent summit of energy ministers held in London, Gordon Brown warned that if nations cut investment in oil production, demand will eventually exceed supply again, forcing prices up.

Geo-political issues may also come into play. The escalation of attacks between Israel and Hamas in Gaza caused a spike in the oil price on Monday. If problems persist in the region this is likely to provide a floor for the oil price in the early part of the year.

There are also the actions of the Movement for the Emancipation of the Niger Delta (MEND) in Nigeria. Attacks by the rebels contributed to the oil price spike in early 2008, as the country is the world's eighth-largest crude oil exporter and the US's fifth-largest source for imported oil. Major exporters Iran and Venezuela also continue to sabre rattle with the US, which could prompt more supply fears.

Ultimately, however, the outlook for the oil price in 2009 depends on where or not government action to tackle the economic crisis works. Mervyn King has warned that the UK could flirt with deflation in 2009 – and if deflation becomes a major global problem the outlook for the oil price is decidedly bearish.

Should the stimulus packages start to work and become reflationary this would be bullish for the price of oil. When it comes to the direction of the oil price in 2009, it's quite simple really – as Bill Clinton once said: It's the economy, stupid.

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Dozens die in Bangkok nightclub

The aftermath of the Bangkok fire

At least 59 people have been killed in a fire in a nightclub in the Thai capital, Bangkok, police say.

More than 100 others were injured in the blaze, which broke out as people celebrated the New Year.

Bodies wrapped in white cotton were laid out on the pavement in front of the club, named as the Santika, in central Bangkok's Thong Lor district.

Police said they were investigating what sparked the fire in the club, popular with both Thais and foreigners.

The blaze was now under control but the death toll could rise, a fire official said.

'Spread quickly'

"We were all dancing and suddenly there was a big flame that came out of the front of the stage and everybody was running away," one woman told Reuters news agency.

Police are investigating what sparked the fire in the club

Local reports blamed either fireworks or an electrical fault for the blaze, which happened just after midnight.

Andrew Long, a British man living in Bangkok, told the BBC that survivors leaving the club said fire broke out on the stage after fireworks were lit.

Another witness, Tos Maddy, said he heard what he thought was an electrical explosion.

"Everything went boom and people started running. The fire went very quickly," he told Reuters.

The club had only one main exit, at the front, and many people had been trapped inside, reports said.

A policeman said those killed died from burns, smoke inhalation and injuries received during a stampede to escape.

Most of the bodies were found in the basement of the two-storey building, rescue workers told the Associated Press news agency.

Those injured were being treated at the nearby Bangkok Hospital.

The club was very large, capable of holding several hundred people, reports the BBC's Jonathan Head from Bangkok.

Thailand's capital is renowned for its nightlife, but many clubs are loosely regulated and often have very poor fire safety systems, our correspondent adds.

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YouTube, Twitter: Weapons in Israel's Info War

By Nathan Hodge

Days after sending aircraft to strike Hamas militants in Gaza, the Israeli government is launching a campaign to dominate the blogosphere.

Among other things, the Israeli military has started its own YouTube channel to distribute footage of precision airstrikes. And as I type, the Israeli consulate in New York is hosting a press conference on microblogging site Twitter. It's pretty interesting to see the Israeli-Palestinian conflict reduced to tweets of 140 characters or less ("We hav 2 prtct R ctzens 2, only way fwd through neogtiations, & left Gaza in 05. y Hamas launch missiles not peace?"; "we're not at war with the PAL people. we're at war with a group declared by the EU& US a terrorist org").

The Jerusalem Post quotes Maj. Avital Leibovich, the head of the Israeli Defense Forces' foreign press branch on the digital media campaign. "The blogosphere and new media are another war zone," she says. "We have to be relevant there."

It appears, however, that some of the YouTube posts have already been scrubbed. A note on the page of the pro-Israel YouTube channel reads: "We are saddened that YouTube has taken down some of our exclusive footage showing the IDF's operational success in operation Cast Lead against Hamas extremists in the Gaza Strip. ... It is also worth noting that one of the videos removed had the highest number of hits (over 10,000) at the time of its removal."

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Why Israel Won’t Allow Journalists Into Gaza

Overnight, the Jerusalem Post carried a story titled Navy Sends Activist Boat Back to Cyprus which said:

The Navy has turned back a boat trying to carry pro-Palestinian protesters to the Gaza Strip, officials said Tuesday

Foreign Ministry spokesman Yigal Palmor said the boat ignored an Israeli radio order to turn back early Tuesday. He said the boat tried to outmaneuver the navy ship and crashed into it, lightly damaging both vessels. The navy then escorted the boat to the territorial waters of Cyprus.

In a report from the AFP, Israeli authorities said is was all just a mistake:

Israeli foreign ministry spokesman Yigal Palmor told AFP that the naval vessel tried to contact the aid boat by radio for identification and to inform it that it could not enter Gaza.

"After the boat did not answer the radio, it sharply veered and the two vessels collided, causing only light damage," Palmor said.

The Israeli spokesman accused the pro-Palestinian activists of "seeking provocation more than ever."

But this time, a reporter, Karl Penhaul from CNN, was actually on the boat - and gave the report you see above as the events were happening:

... the boat while still in international waters has been rammed by Israeli patrol boats, our vessel has been damaged ...there's been some damage to a roof section and to glass windows around the steering area and the captain says that the vessel is taking on a small amount of water, that at this stage is not life threatening but the ship was very severely rammed by one of those Israeli patrol boats, those patrol boats have been following the vessel for the half hour prior to the ramming incident ... they rammed the vessel without warning but after the ramming there was a radio message saying the Israeli patrol boat was accusing the Dignity of being involved in terrorist activities.

No wonder Israel is continuing their refusal to allow foreign journalists into Gaza.

By: Siun

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U.S. man pleads guilty to acting as agent for Israe

By Daniel Trotta and Randall Mikkelsen

NEW YORK/WASHINGTON (Reuters) - An 85-year-old former U.S. Army employee pleaded guilty on Tuesday to acting as an unregistered agent of Israel and admitted he gave classified documents to the Jewish state in the 1980s.

Court documents show the defendant, Ben-Ami Kadish, reported to the same handler as Jonathan Pollard, an American who spied for Israel in the 1980s and triggered a scandal that rocked U.S.-Israeli relations.

Kadish's plea indicates the Israeli spy network that obtained U.S. nuclear secrets through Pollard spread further than previously acknowledged.

It comes as the Bush administration considers a new request by Pollard for a commutation of his life sentence.

Prosecutors say Ben-Ami Kadish provided classified documents, including some relating to U.S. missile defense systems, to an Israeli agent, Yosef Yagur, who photographed the documents at Kadish's residence.

Yagur was one of Pollard's handlers, according to court documents.

From 1980 to 1985, Yagur asked Kadish to obtain classified documents, which Kadish retrieved from the U.S. Army's Picatinny Arsenal in Dover, New Jersey, according to Kadish's sworn statement.

Pollard, a former U.S. Navy intelligence analyst, is serving life in prison term after pleading guilty to spying for Israel in 1986. His case has led Jews in the United States and Israel to plea for clemency and a new request by Pollard is under Bush administration review.

Israel gave Pollard citizenship in 1996 and acknowledged he was one of its spies in 1998.

Though the United States and Israel are close allies, the Pollard case revealed how the thirst for intelligence trumped that friendship.

Kadish, a Connecticut-born U.S. citizen, faces a maximum of five years in prison at his February 13 sentencing in federal court in Manhattan but it is possible he will not serve any time.

Sentencing guidelines call for a maximum of six months and prosecutors said they would not oppose a sentence without jail time, according to his plea agreement.

He had been free on bail since shortly after his arrest in April on four counts of conspiracy and espionage as a result of an investigation that began in 2005.

The Israeli embassy had no immediate comment.

Kadish used his security clearance to borrow 50 to 100 classified documents from the arsenal's library, including some "concerning nuclear weaponry" and others relating to a modified version of an F-15 fighter jet that the United States had sold to an unidentified country, the complaint said.

A third pertained to the U.S. Patriot missile air defense system.

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The Myth Of Putin's Popularity

A lot has been made of the recent public unrest in Russia and the brutality with which the authorities have responded. If you haven't seen the videos yet, there are plenty on youtube, including this one and this one. My fellow blogger Brian Whitmore, has written that the protests are sign that the tacit deal -- the social bribe -- between Vladimir Putin and the Russian people is coming unraveled under the pressure of the financial crisis.

Outside observers often marvel at how "popular" Putin is among Russians, but inside the Kremlin they are aware of how thin that popularity is and that troubles them. Even back in the good old days of 2007, the Kremlin tolerated no dissent and went to seemingly ridiculous lengths to hold down opposition from people like former Prime Minister Mikhail Kasyanov and former Deputy Prime Minister Boris Nemtsov, even though they had no chance of attracting significant support. A year ago, I wrote this:

"Popularity" in Russia is something the Kremlin gives and takes away. Six days after the largely unknown Viktor Zubkov was named prime minister in September, a poll found that 40 percent of Russians thought he'd be the next president of Russia. Because Putin is the only political figure with any significant stature in Russia, he attracts personal credit for everything that happens in the country, all of which is positively spun in the state-controlled media. However, the presidential administration understands how quickly setbacks can erode even Putin's support, as it learned in 2001 when Putin was lambasted for failing to show sympathy for the trapped crew of the "Kursk" nuclear submarine and in 2005 when pensioners took to the streets in the thousands calling for Putin's resignation because of a controversial social-benefits reform. Putin's popularity ratings are a bubble that exists within a political vacuum, a bubble that nonetheless needs to be continuously pumped up with injections of hot air from state television.

Now, as tensions rise, there are increasing hints of dissent even within the ranks of the establishment that further demonstrate how thin the support for Putinism in Russia may be.

Robert Amsterdam's blog has performed a great service by capturing and translating a unique document of dissent before it was flushed down the memory hole. They found a posting on a forum of the Russian Interior Ministry's website that was apparently written by a disaffected police officer, a professional who is tired of being used for political ends.

The power knows that actions of people's protest are possible, and that the consequences could be unpredictable. A question. On whom is the power relying? Who can save it from the people's wrath? Who will help hold on to what has been pillaged? That would be you and me, colleagues. The Russian police. We are going to disperse the protesters, like we did on 1 May of 1993 and in October of that same year, like we dispersed the Russian March in 2008. So, in everything that has taken place with our Motherland since the year 1993, there is our guilt.... A question. Are we going to be the dogs-on-a-chain of this regime?

As might have been expected, that posting has been removed from the website and the URL merely has an ironic message apologizing for the "inconvenience."

And we shouldn't neglect the tale of Joe the Roofer, the former juror in the trial of the alleged killers of investigative journalist Anna Politkovskaya who exposed the lie that jurors had requested the trial be closed to the public out of fear for their safety. He was "rewarded" for coming forward by being kicked off the jury.

This train of thought also leads us back to May, when the deputy chairwoman of the Supreme Arbitration Court, Yelena Valyavina, shocked observers when she testified in open court about how a presidential-administration official named Valery Boyev systematically pressured judges and, in particular, pressured her to issue a Kremlin-friendly ruling about the privatization of a company in Tolyatti. I wrote about the story here.

Ironically, Valyavina was testifying in a defamation case filed by Boyev against broadcast journalist Vladimir Solovyov for saying on air: "There are no independent judges in Russia, only judges dependent on Boyev." The trial was expected to bring about further juicy revelations because three other high-ranking judges had been called by the defense to testify. But the day after Valyavina's appearance, Boyev apparently decided he was man enough to take a little heat in the press and withdrew his complaint against Solovyov. The unspoken testimony of the other judges is still hanging in the air.

One would think that Boyev would be an embarrassment to the boy reformer Dmitry Medvedev, but as far as I can tell he continues to be the shadowy administration front man on legal issues.

Following the Tolyatti thread leads us to the case of former Samara Oblast Arbitration Court Judge Nadezhda Kostyuchenko. Kostyuchenko claims she was removed from the bench after she refused to adopt the Kremlin's stances regarding the same privatization case that Valyvina testified about. She says the chairman of the Samara court threatened her and her children. This summer the European Court of Human Rights agreed to hear her complaint. "Vremya novostei" quoted A Just Russia Duma Deputy Gennady Gudkov as commenting that "the number of honest, uncorrupted judges in Russia is being reduced."

Reading about the Tolyatti "business dispute," the pressure on the courts, and the purported role of the presidential administration reminded me of the scandalous interview that formerly Kremlin-connected fund manager Oleg Shvartsman gave to "Kommersant" in November 2007 in which he cast some light on the "voluntary-compulsory" measures that Putin insiders (he named especially First Deputy Prime Minister Igor Sechin) in order to implement a "velvet reprivatization." A month later, after losing all his insider contracts and finding himself on the wrong end of several legal actions, Shvartsman backed off of his assertions, saying his words had been "distorted."

The Shvartsman case, in turn, reminded me of an interview RFE/RL did in August with Dmitry Travin, deputy editor in chief of the St. Petersburg business weekly "Delo." Travin said that while there is a thin layer of oligarchs who are making out like bandits in Putin's Russia, the rest of the business community is pretty sick of "non-market" interference ruining their business models. He went so far as to say that a lot of businesspeople in Russia "hate the regime" and are just waiting to "stick a knife in its back":

Business's support for the government is a very strange thing. After the case of [former Yukos owner Mikhail] Khodorkovsky, everyone became obedient. They are constantly swearing their loyalty to the authorities. But when you start speaking to people privately, it is hard to find anyone who doesn't hate this regime and the position in which it has placed Russian business. I don't think anything is going to change in this regard. If the regime is weakened, business will be the first segment of society to stick a knife in its back. But until the regime is weakened politically, business has to play by the rules of the of the game that were laid down in October 2003 during the Khodorkovsky case.... The stability of the authorities rests on oil, gas, economic growth, and the expectations of the public, which are more or less satisfied at present. But if economic growth disappears and real incomes cease to grow, or if public expectations become so great that even oil and gas cannot satisfy them, then affection for the authorities will wane.

In short, the protests in Vladivostok, Khabarovsk, and other cities are far from the only indication that the often-cited 70 percent favorable rating for Putin is as much of an illusion -- a shadow show of lights and mirrors -- as the rest of the democratic facade in Russia (elections, parties, etc.).

Putin knows better than anyone that it is lonely at the top.

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Lawyer: Jena Six teen shot himself out of despair

By KEVIN McGILL, Associated Press Writer

AP – In this Thursday, Sept. 27, 2007 picture, Mychal Bell, one of the Jena Six, appears at a news conference …

NEW ORLEANS – One of the central figures in the 2007 Jena Six civil rights case never gave up pursuing his football career, even after his well-publicized run-ins with the law. Mychal Bell, an 18-year-old high school running back, clung to the hope that he could earn a college football scholarship. Then came another legal scrape this Christmas Eve.

After news broke of his arrest on a shoplifting charge, Bell shot himself in the chest Monday with a .22-caliber handgun. He remained hospitalized Tuesday but police said his chest wound was not life-threatening.

"When it was broadcast that he was charged with shoplifting he just felt that the whole year had been wasted and that he had worked all of that time for nothing," said Louis Scott, who represented Bell in the case where Bell and five other black teenagers were charged in the 2006 beating of a white classmate.

Bell's grandmother, Rosie Simmons, and mother, Melissa Bell, told police that "Mychal had made comments over the past two days that, because of the current media attention he had because of the shoplifting arrest, he didn't feel like he could live anymore," Monroe Police Lt. Jeff Harris said, reading from a police report.

Bell and the other members of the "Jena Six" once faced attempted murder charges in the beating at Jena High School, in north central Louisiana's Lasalle Parish. The charges for all the defendants were eventually reduced. But the severity of the original charges brought widespread criticism and eventually led more than 20,000 people to converge in September 2007 on the tiny town of Jena for a major civil rights march.

After being sentenced to 18 months following his guilty plea to juvenile charges, Bell moved from Jena to Monroe, where he was in foster care. He was released from state supervision on Dec. 4, said Bill Furlow, a spokesman for Reed Walters, the district attorney for LaSalle Parish.

A football star at Jena High until the Barker beating, Bell had hoped to play for Monroe's Carroll High School, where he is on track to graduate in the spring. But the Louisiana High School Athletic Association wouldn't grant him a fifth year of eligibility to play. Bell had spent 10 months in prison awaiting trial after his 2006 arrest in the beating case.

"He had kept his grades up and he had worked out the whole year even though he couldn't play. He had dealt with the fact that the state athletic association would not let him play high school ball," Bell's lawyer, Louis Scott said Tuesday.

It was unclear whether his dreams of a college football career were realistic. According to Scott, family members believed Bell was having encouraging discussions with the University of Louisiana-Monroe. School spokesman Adam Prendergast declined comment. A message was left Tuesday for the school's director of football operations, Peter Martin.

Police said Bell's Christmas Eve arrest came after he allegedly tried to steal several shirts and a pair of jeans from a department store and fled when a security guard and off-duty police officer tried to detain him. After they found him hiding under a car, Bell "swung his arms wildly" and one of his elbows struck the security guard with a glancing blow, according to a police report. He was freed on $1,300 bond.

Scott said he believed the arrest likely resulted from a misunderstanding.

"I would be very surprised if he was shoplifting," Scott said. "I had seen him working out every day even though he knew he wasn't going to be able to play high school football."

Monday's shooting was reported at 7:40 p.m. According to the police report, Bell was staying at his grandmother's home and his mother was visiting at the time. Melissa Bell told police she and Simmons heard a gunshot coming from Mychal's room. They found him on his bed, wounded in the chest. It was not clear Tuesday who owned the gun.

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Somalia's president quits office

Abdullahi Yusuf was appointed president four years ago

Somalia's President Abdullahi Yusuf has resigned - a move which adds to the chaos in the country as Ethiopian troops are to withdraw shortly.

Mr Yusuf's resignation follows a power struggle with Prime Minister Nur Hassan Hussein, who parliament backed after Mr Yusuf tried to sack him.

Various Islamist and nationalist groups control most of southern Somalia.

Some experts say Mr Yusuf's departure could make it easier to reach a peace deal with moderate Islamists.

The president had clashed in recent months with Mr Nur over attempts to negotiate a peace deal with the Islamist-led armed opposition.

We welcome the resignation of the President Abdullahi Yusuf as a democratic step forward taken by Somalia Nur Hassan Hussein Prime Minister Somalia facing further power struggle Profile: Abdullahi Yusuf

BBC Somali service editor Yusuf Garaad says the president's departure has removed one obstacle to peace but it is unclear what happens next, especially if the government collapses altogether.

Mr Yusuf is reported to have flown out of Baidoa, where parliament is based, to his home region - the semi-autonomous area of Puntland in the north.

Under the constitution, speaker of parliament Aden Mohamed Nur becomes acting president until MPs elect within 30 days a new president, who will then nominate a new prime minister.

Mr Yusuf was chosen by MPs four years ago at the end of a long process that was supposed to bring peace to Somalia, which has not had an effective national government since 1991.

But government forces only control parts of the capital, Mogadishu, and the town of Baidoa.

Renewed fighting

Mr Nur - the prime minister Mr Yusuf tried to sack - appeared pleased with the president's resignation, say a BBC correspondent in Mogadishu.

"We welcome the resignation of the President Abdullahi Yusuf as a democratic step forward taken by Somalia," he said.

Al-Shabab is fighting a relatively new rival Islamist militant group

Meanwhile, a relatively new self-styled moderate Islamist group, Ahlu Sunna Waljamaca, which seized two towns in central Somalia over the weekend, continued to fight militants from the hardline al-Shabab on Monday.

Ethiopian government spokesman Bereket Simon told the BBC's Focus on Africa programme that Ethiopia had had nothing to do with Mr Yusuf's departure and it would not affect plans for Ethiopian troops to leave Somalia.

The BBC's Mohammed Olad Hassan in Mogadishu says no-one has publicly declared their candidature to succeed the president.

A weary-looking Mr Yusuf told MPs in Baidoa: "As I promised when you elected me on October 14, 2004, I would stand down if I failed to fulfil my duty, I have decided to return the responsibility you gave me."

'Obstacle to peace'

In his speech, broadcast on national radio, he said: "When I took power I pledged three things.

SOMALIA'S WOES 3m need food aid - a third of the population 1m displaced Government only controls Baidoa Islamist groups control much of southern Somalia No effective government since 1991 Piracy on the rise Ethiopia's Somalia dilemma Somalis grow fearful of Islamists

"If I was unable to fulfil my duty I will resign. Second, I said I will do everything in my power to make government work across the country. That did not happen either.

"Third, I asked the leaders to co-operate with me for the common good of the people. That did not happen," he said, according to Associated Press news agency.

Last week, Mohamed Mahamud Guled, who Mr Yusuf tried to install as prime minister, resigned saying his appointment was destabilising the government.

Mr Yusuf had faced criticism for appointing Mr Guled in defiance of Somali MPs, who overwhelmingly rejected the dismissal of his predecessor.

Mr Guled said he had chosen to resign "so that I am not seen as a stumbling block to the peace process which is going well now".

The regional grouping, Igad, which brokered the talks leading to Mr Yusuf's election, this month imposed sanctions on him, calling him an obstacle to peace.

Fighting between the Ethiopia-backed government and the insurgents has left some one million people homeless and much of Mogadishu deserted.

Some three million people - a third of the population - need food aid.

And the lack of leadership has led to a surge in piracy off the Somali coast.

A small African Union peacekeeping force is based in Mogadishu but analysts say they would be unable to withstand an Islamist advance.

The UN has rejected calls to send its own mission to Somalia.

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Shoe-throwing journalist's trial postponed

Evan Vucci / AP file

Iraqi journalist Muntadhar al-Zeidi throws a shoe at President George W. Bush during a new conference with Iraq Prime Minister Nouri al-Maliki in Baghdad on December 14.

BAGHDAD - The trial of the journalist who threw his shoes at President George W. Bush has been postponed, an Iraqi official said Tuesday.

The trial of Muntadhar al-Zeidi was to begin Wednesday on charges of assaulting a foreign leader. But Abdul-Sattar Bayrkdar, a spokesman for Iraq's Higher Judicial Court, said that the trial has been postponed indefinitely pending a high court ruling on what charges the journalist should face.

Al-Zeidi threw his shoes at Bush during a Dec. 14 joint news conference with Prime Minister Nouri al-Maliki.

The gesture of contempt for the U.S. invasion and occupation of Iraq made al-Zeidi a folk hero in Iraq and thousands of people have demonstrated for his release.

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Czechs, next EU president, defend Israeli strikes

PRAGUE (Reuters) - The Czech Republic, which takes over the European Union's presidency on January 1, defended Israel's strikes against Hamas on Tuesday.

The EU has called for a cease-fire to end the violence that has killed almost 350 Palestinians. Czech Foreign Minister Karel Schwarzenberg said Israel had the right to defend itself.

"Let us realise one thing: Hamas increased steeply the number of rockets fired at Israel since the cease-fire ended on December 19. That is not acceptable any more," Schwarzenberg told daily Mlada Fronta Dnes in an interview.

France, which will hand over the EU's rotating presidency to Prague, has condemned Israel's strikes and the rocket attacks from Hamas militants and called for both to stop immediately.

It also said it deplored the many civilian casualties and condemned Israel's "disproportionate use of force," echoing comments from U.N. Secretary-General Bank Ki-moon, who has also called for a cease-fire.

Schwarzenberg, a staunch ally of Washington, said Hamas had excluded itself from serious political debate due to its rocket attacks on Israel. He also indirectly blamed the group for the growing death toll, saying it put its bases and gun warehouses in densely populated areas.

"Why am I one of the few that have expressed understanding for Israel? ... I am enjoying the luxury of telling the truth," Schwarzenberg told the daily.

He said under the Czech EU presidency he would try to push through a policy that would lead to peace, saying "I would be very happy if it helped the Palestinians."

He said he would not support either side in the conflict but rather work as a mediator. The paper cited his office as saying he would take part in an extraordinary of EU foreign ministers in Paris on Tuesday evening to discuss the attacks.

Hamas won elections in Gaza in 2006 and then took over the coastal strip in 2007 after routing rival Fatah forces loyal to President Mahmoud Abbas.

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