Venezuela rejects "absurd" rumors over Chavez's death

CARACAS (Reuters) - Senior aides and relatives of Venezuela's Hugo Chavez countered on Friday a crescendo of rumors that the socialist president may be dead from cancer, saying he was still battling for his life.

"There he is, continuing his fight, his battle, and we are sure of victory!" his older brother Adan Chavez, the governor of Barinas state, told cheering supporters.

Speculation about Chavez, 58, hit fever pitch this week, fed in part by assertions from Panama's former ambassador to the Organization of American States (OAS), Guillermo Cochez, that the Venezuelan leader had died.

"The launching of absurd and bizarre rumors by the right wing simply discredits them and isolates them further from the people," said Chavez's son-in-law Jorge Arreaza, adding that the president was "calm" in a hospital with his family and doctors.

Apart from one set of photos showing Chavez lying in a Havana hospital bed, he has not been seen nor heard from in public since December 11 surgery in Cuba, his fourth operation.

The president made a surprise pre-dawn return to a military hospital in Caracas last week, with none of the fanfare that had accompanied his previous homecomings after treatment.

Vice President Nicolas Maduro, the OPEC nation's de facto leader and Chavez's preferred successor, urged Venezuelans to stay calm, patient and respectful of the president's state.

"The treatments Commander Chavez is receiving are tough, but he is stronger than them," Maduro said after a Catholic Mass in Chavez's honor at a chapel in the hospital.

"He's in good spirits, battling ... . Leave him in peace. He deserves respect for his treatments, because he's a man who has given everything for our fatherland."

Opposition politicians accuse the government of being deceitful about Chavez's condition, and compare the secrecy over his medical details with the transparency shown by other Latin American leaders who have suffered cancer.

"Maduro has lied repeatedly to the president's supporters and to Venezuelans about his real situation," opposition leader Henrique Capriles said on Friday. "Let's see how they explain to the nation in coming days all the lies they have told."

Panamanian diplomat Cochez said Chavez's relatives had switched off his life support several days ago after he had been in a vegetative state since the end of December. He challenged officials to prove him wrong by showing the president in public.

HIGH STAKES

Across the South American nation of 29 million people, Venezuelans are extremely anxious, speculating almost non-stop about Chavez's condition and wondering what the potential end of his 14-year rule might mean for them.

Adding to the tension, several dozen opposition-supporting students have chained themselves together in a Caracas street, demanding to see the president and arguing that Maduro has no right to rule because he was not elected.

With the country on edge, the relatively routine shooting by police of a murder suspect during a gun battle in downtown Caracas on Friday forced Information Minister Ernesto Villegas to take to Twitter to issue reassurances.

"(Some people) took advantage of the episode to try to sow panic in the city center," he said. "The situation is calm."

Should Chavez die or step down, a vote would be held within 30 days, probably pitting Maduro against Capriles for leadership of the country which boasts the world's biggest oil reserves.

The stakes are high for the region, too. Chavez has been the most vocal critic of Washington in Latin America and financed hefty aid programs for leftist governments from Cuba to Bolivia.

Amid the flurry of rumors, Spain's ABC newspaper said on Friday that Chavez had been taken to a presidential retreat on La Orchila island in the Caribbean off Venezuela's coast with his closest family to face the "final stages" of his cancer.

Venezuelan officials have frequently lambasted ABC as being part of an "ultra-right" conspiracy spreading lies about Chavez.

"The bourgeoisie harass him and they assault him constantly," added Maduro, singling out ABC and Colombia's Caracol radio for particular criticism.

"Stop the attacks on the commander! Stop the rumors, stop trying to create instability!"

In the latest of a series of short updates on Chavez's health, the government said last week that his breathing difficulties had worsened, and he was using a tracheal tube.

Officials say he suffered a severe respiratory infection following the six-hour operation he had in December for a cancer that was first detected in his pelvic region in June 2011.

Chavez has never said what type of cancer he has.

Remarkably, two opinion polls this week showed that a majority of Venezuelans - 60 percent in one survey, 57 percent in another - believe he will be cured.

Chavez's millions of passionate supporters, who love his down-to-earth style and heavy spending of oil revenue on welfare policies, are struggling to imagine Venezuela without him.

"Of course, he's coming back, back to government," said Jose Urbina, 47, though he was also buying photos of Chavez at a pro-government rally as mementoes. "I want to remember him. I want to put them in my house."

(Additional reporting by Girish Gupta; Editing by Kieran Murray and Xavier Briand)

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Italians vote in crucial election for euro zone

ROME (Reuters) - Italians began voting on Sunday in one of the most closely watched elections in years, with markets nervous about whether it can produce a strong government to pull Italy out of recession and help resolve the euro zone debt crisis.

Some of the first people to cast their ballots expressed fears that no clear winner would emerge, leading to political stalemate and a coalition that may not govern for long.

"I think we will have to go to elections again ... I expect instability for the next two years," said Vincenzo D'Ouria, voting in Milan.

Italians started voting at 8 a.m. (0700 GMT). Polling booths will remain open until 10 p.m. on Sunday and open again between 7 a.m. and 3 p.m. on Monday. Exit polls will come out soon after voting ends and official results are expected by early Tuesday.

The election is being followed closely by financial markets with memories still fresh of the potentially catastrophic debt crisis that brought technocrat Prime Minister Mario Monti to power more than a year ago.

Monti and his wife cast their votes at a polling booth in a Milan school on Sunday morning. His centrist bloc would only enter a future government as a junior partner of a bigger party.

Final polls published two weeks ago showed center-left leader Pier Luigi Bersani with a 5-point lead, but analysts disagree about whether he will be able to form a stable majority that can make the economic reforms Italy needs.

Bersani is now thought to be just a few points ahead of center-right rival Silvio Berlusconi, the four-times prime minister who has promised tax refunds and staged a media blitz in an attempt to win back voters.

A huge final rally by anti-establishment-comedian-turned-politician Beppe Grillo on Friday highlighted public anger at traditional parties.

Grillo's 5-Star movement, made up of political novices, is in third place in its first general election, polls suggest, and popular support from voters across the political spectrum has increased uncertainty about the outcome.

"Italians want change, but you cannot achieve that with Grillo. They are far too inexperienced for the Italian parliamentary machine," said Cristina Rossi, 40, a civil engineer who was on her way to vote for Bersani's Democratic Party in Milan.

"I fear the outcome will be a weak government, but maybe this is just a necessary transition to be able, in one or two years, to chose someone who can really govern Italy."

Italy, the euro zone's third-largest economy, is stuck in deep recession, struggling under a public debt burden second only to Greece's in the 17-member currency bloc and with a public weary of more than a year of austerity policies.

BERLUSCONI CRITICISM

Berlusconi hogged the headlines on Sunday after he used news conference at his soccer club AC Milan's training ground to break the campaign silence imposed on politicians in the day before polls open.

He told reporters that Italy's magistrates were "more dangerous than the Sicilian mafia" and had invented allegations he had held sex parties in order to discredit him.

The 76-year-old billionaire, who is appealing a jail sentence for tax fraud and is on trial accused of having sex with an underage prostitute, was criticized by his rivals for making a political statement during a ban on campaigning.

While the center left is still expected to gain control of the lower house, thanks to rules that guarantee a strong majority to whichever party wins the most votes nationally, a much closer battle will be fought for the Senate, which any government also needs to control to be able to pass laws.

Seats in the upper house are awarded on a region-by-region basis, meaning that support in key areas can decisively influence the overall result.

Pollsters still believe the most likely outcome is a center-left government headed by Bersani and possibly backed by Monti.

But strong campaigning by Berlusconi and the fiery Grillo, have thrown the election wide open. Surveys showed up to 5 million voters will make up their minds at the last minute.

The Interior Ministry urged some 47 million eligible voters in Italy not to let bad weather put them off, and said it was prepared to handle snowy conditions in some northern regions to ensure everyone had a chance to vote.

STAGNANT ECONOMY

Whatever government emerges from the vote will have the task of pulling Italy out of its longest recession for 20 years and reviving an economy largely stagnant for two decades.

The main danger for Italy and the euro zone is a weak government incapable of taking firm action, which would rattle investors and could ignite a new debt crisis.

Monti replaced Berlusconi in November 2011 after Italy came close to Greek-style financial meltdown while the center-right government was embroiled in scandals.

The former European Commissioner launched a tough program of spending cuts, tax hikes and pension reforms which won widespread international backing and helped restore Italy's credibility abroad after the scandals of the Berlusconi era.

Italy's borrowing costs have since fallen sharply after the European Central Bank pledged it was prepared to support countries undertaking reforms by buying unlimited quantities of their bonds on the markets.

But economic austerity has fuelled anger among Italians grappling with rising unemployment and shrinking disposable incomes, encouraging many to turn to Grillo, who has tapped into a national mood of disenchantment.

(Additional reporting by Cristiano Corvino and Lisa Jucca in Milan; Editing by Robin Pomeroy)

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Syrian opposition says Assad cannot be part of deal

CAIRO (Reuters) - The opposition Syrian National Coalition is willing to negotiate a peace deal to end the country's civil war but President Bashar al-Assad must step down and cannot be a party to any settlement, members agreed after debating a controversial initiative by their president.

The meeting of the 70-member Western, Arab and Turkish-backed coalition began on Thursday before Syrian Foreign Minister Walid al-Moualem is due for talks in Moscow, one of Assad's last foreign allies, and as U.N. mediator Lakhdar Brahimi renews efforts for a deal.

After an angry late night session in which coalition president Moaz Alkhatib came under strong criticism from Islamist and liberal members alike for proposing talks with Assad's government without setting what they described as clear goals, the coalition adopted a political document that demands Assad's removal and trial for the bloodshed, members said.

A draft document seen by Reuters that was circulated for debate said Assad cannot be party to any political solution and has to be tried, but did not directly call for his removal.

"We have adopted the political document that sets the parameters for any talks. The main addition to the draft is a clause about the necessity of Assad stepping step down," said Abdelbasset Sida, a member of the coalition's 12 member politburo who has criticized Alkhatib for acting alone.

"We removed a clause about a need for Russian and U.S. involvement in any talks and added that the coalition's leadership has to be consulted before launching any future initiatives," he added.

Still, the agreement marked a softening of tone by the coalition because previously it had insisted that Assad must step down before any talks with his government could begin.

In an indication that Syria's strongman remains defiant, Brahimi said Assad had told him he will remain president until his term ends in 2014 and then run for re-election.

Brahimi told al-Arabiya television he wants to see a transitional government formed in Syria that would not answer to any higher authority and lasts until U.N.-supervised elections take place in the country.

"I am of the view that U.N. peacekeepers should come to Syria as happened in other countries," Brahimi said.

BOMB, AIR STRIKES

The opposition front convened in Cairo on a day when a car bomb jolted central Damascus, killing 53 people, wounding 200 and incinerating cars on a busy highway close to the Russian Embassy and offices of the ruling Baath Party.

Syrian state television blamed the suicide blast on "terrorists". Central Damascus has been relatively insulated from the 23-month conflict that has killed around 70,000 people, but the bloodshed has shattered suburbs around the capital.

In the southern city of Deraa near the border with Jordan, activists said warplanes bombed the old quarter for the first time since March 2011, when the town set in a wheat-growing plain rose up against Assad, starting a national revolt.

A rebel officer in the Tawheed al-Janoub brigade which led an offensive this week in Deraa said there were at least five air strikes on Thursday. The Syrian Observatory for Human Rights said 18 people were killed, including eight rebel fighters.

Coalition member Munther Makhos, who was forced into exile in the 1970s for his opposition to Assad's father, the late President Hafez al-Assad, said supplies from Iran and Russia were giving government forces an awesome firepower advantage.

"It would be surreal to imagine that a political solution is possible. Bashar al-Assad will not send his deputy to negotiate his removal. But we are keeping the door open," Makhos said.

Makhos is the only Alawite in the Islamist-dominated coalition. The Alawite sect, an offshoot of Shi'ite Islam which accounts for about 10 percent of Syria's population but makes up most of the intelligence apparatus and dominates the army and the political system, has generally remained behind Assad.

With Alawites feeling increasingly threatened by a violent Sunni backlash, Alkhatib, a cleric from Damascus who played a role in the peaceful protest movement against Assad at the beginning of the uprising in 2011, has been calling on Alawites to join the revolution, saying their participation will help preserve the social fabric of the country.

Alkhatib's supporters say the initiative has popular support inside Syria from people who want to see a peaceful departure of Assad and a halt to the war that has increasingly pitted his fellow Alawites against Syria's Sunni Muslim majority.

But rebel fighters on the ground, over whom Alkhatib has little control, are generally against the proposal.

The Syrian Islamic Liberation Front, which represents armed brigades, said in a statement it was opposed to Alkhatib's initiative because it ignored the revolt's goal of "the downfall of the regime and all its symbols".

"We are demanding his accountability for the bloodshed and destruction he has wreaked. I think the message is clear enough," said veteran opposition campaigner Walid al-Bunni, who supports Alkhatib.

Alkhatib formulated the initiative in broad terms last month after talks with the Russian and Iranian foreign ministers in Munich but without consulting the coalition, catching the umbrella organization by surprise.

Among Alkhatib's critics is the Muslim Brotherhood, the only organized group in the political opposition.

A Brotherhood source said the group will not scuttle the proposal because it was confident Assad is not interested in a negotiated exit, which could help convince the international community to support the armed struggle for his removal.

"Russia is key," the source said, speaking on condition of anonymity. "We are showing the international community that we are willing to take criticism from the street but the problem is Assad and his inner circle. They do not want to leave."

PLAY FOR RUSSIA

Russia hopes Alkhatib will visit soon in search of a breakthrough. Bunni said Alkhatib would not go to Moscow without the coalition's approval and that he would not be there at the same time as Moualem.

"In my opinion Alkhatib should not go to Moscow until Russia stops sending arms shipments to the Assad regime," Bunni said.

Formal backing by the coalition for Alkhatib's initiative gives it more weight internationally and undermines Assad supporters' argument that the opposition is too divided to be considered a serious player, opposition sources said.

Coalition members and diplomats based in the region said Brahimi asked Alkhatib in Cairo last week to seek full coalition backing for his plan, which resembles the U.N. envoy's own ideas for a negotiated settlement.

One diplomat in contact with the opposition and the United Nations had said a coalition approval of Alkhatib's initiative could help change the position of Russia, which has blocked several United Nations Security Council resolutions on Syria.

The diplomat said only a U.N. resolution could force Assad to the negotiating table, and a U.N. "stabilization force" may still be needed to prevent an all-out slide into a civil war.

"Brahimi has little hope that Assad will agree to any serious talks," the diplomat said. "Differences are narrowing between the United States and Russia about Syria but Moscow remains the main obstacle for Security Council action."

(Editing by Paul Taylor and Mohammad Zargham)

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French hostages seized in Cameroon found safe: report

PARIS (Reuters) - Seven French hostages kidnapped in Cameroon have been found alive in a house in northern Nigeria and are safe with Nigerian authorities, French television reported on Thursday.

The hostages, four children and three adults, were captured by Islamist militants this week while on a tourist excursion to the Waza national park near the Nigerian border with Cameroon.

It was the first case of foreigners being seized in the mainly Muslim north of Cameroon, a former French colony, but the region is considered within the operational sphere of Islamist sect Boko Haram and fellow Nigerian Islamist militants Ansaru.

"The hostages are safe and sound and are in the hands of Nigerian authorities," BFMTV quoted an officer from Cameroon's army as saying.

France's minister for veterans' affairs, who told parliament on Thursday that seven hostages abducted from Cameroon had been released, said minutes later there was no official confirmation that they had been freed.

A French diplomatic source said there would be no official confirmation until French authorities had received physical proof the hostages had been freed or they were in French hands.

(Reporting By Emile Picy and Nicholas Vinocur in Paris; Additional reporting by Joe Brock in Abuja; Editing by Pravin Char)

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Bulgaria government resigns amid growing protests

SOFIA (Reuters) - Bulgaria's government resigned on Wednesday after violent nationwide protests against high electricity prices, joining a long list of European administrations felled by austerity after Europe's debt crisis erupted in late 2009.

Many Bulgarians are deeply unhappy over high energy costs, power monopolies, low living standards and corruption in the European Union's poorest country and protesters clashed again with police late on Tuesday.

Tens of thousands of Bulgarians have rallied in cities across the country since Sunday in protests which have turned violent, chanting "Mafia" and "Resign".

Prime Minister Boiko Borisov had tried to calm protests by sacking his finance minister, pledging to cut power prices and punishing foreign-owned companies - risking a diplomatic row with EU partner the Czech Republic - but the measures failed to defuse discontent.

"I will not participate in a government under which police are beating people," Borisov said as he announced his resignation on Wednesday. Parliament is expected to accept the resignation later in the day.

Borisov, a former bodyguard to communist dictator Todor Zhivkov, can now try to form a new government, using his rightist GERB party's strong position in parliament. If he fails an election scheduled for July may be brought forward.

GERB's popularity had held up well until late last year because austerity measures were relatively mild compared with many other European countries, with salaries and pensions frozen rather than cut. In the last opinion poll, taken before protests grew last weekend, the opposition Socialists were nearly tied with GERB.

Many Bulgarians are feeling frustrated with unemployment hitting a 10-month high of 11.9 percent and the average salary stuck at 800 levs ($550) a month. Frustrations boiled over when heating bills rose during the winter.

Bulgaria raised the costs of electricity - politically sensitive since bills eat a huge part of modest incomes - by 13 percent last July, but the real impact was not felt until households started using electrical power for heat in winter.

"The resignation is the only responsible move," said Kantcho Stoychev, an analyst with pollster Gallup International. "It also gives Borisov some legitimacy to stay in political life in the future, despite the violent police actions last night."

Borisov has said the electricity distribution license of central Europe's largest listed company, Czech-based CEZ will be revoked, setting Bulgarian on a collision course with the Czech Republic, which owns 70 percent of the company.

The Czech government has already stepped into a row between the company and Albania, which revoked the company's license last month. Czech Prime Minister Petr Necas said Bulgaria's move was highly politicized and asked for an explanation.

Since the onset of the debt crisis in 2009, more than of the EU countries have elected new governments.

(Additional reporting by Angel Krasimirov; Editing by Jeremy Laurence)

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Chavez back in Venezuela, on Twitter with four million followers

CARACAS (Reuters) - After Hugo Chavez spent two months out of the public eye for cancer surgery in Cuba, the Venezuelan government hailed his homecoming on Monday and said the president had achieved another milestone - four million followers on Twitter.

The 58-year-old flew back from Havana before dawn and was taken to a military hospital. No new details were given on his health, and there were no images of his arrival. Officials say his condition remains delicate.

The normally loquacious socialist leader, who is struggling to speak as he breathes through a tracheal tube, took to Twitter with a passion back in April 2010, tweeting regularly and encouraging other leftist Latin American leaders to do likewise.

His @chavezcandanga account quickly drew a big mixed following of fans, critics and others just curious to see how his famously long speeches and fiery anti-U.S. invective would work within the social media network's 140-character limit.

But as he fought the cancer and underwent weeks of grueling chemotherapy and radiation therapy, he began to tweet less and less frequently, before stopping altogether on November 1.

Early on Monday morning, he made his reappearance.

"It was 4:30, 5 a.m. He got to his room and surprised everyone: rat-tat-tat, he sent three or four messages, and at that moment fireworks began to go off around the country," Vice President Nicolas Maduro said in a televised cabinet meeting.

During the day, Maduro added, the president's number of followers had shot up to well over four million.

"It's incredible, in just a few hours ... he's the second most-followed president in the world (after Barack Obama), and the first if we make the comparison by per capita," he said.

Obama has more than 27 million Twitter followers and is No. 5 most followed globally. Chavez is Twitter's No. 190 globally.

4TH MILLION FOLLOWER

Maduro said Chavez's four millionth follower was a 20-year-old single Venezuelan woman named Alemar Jimenez from the gritty San Juan neighborhood in downtown Caracas, near the military hospital where the president arrived earlier in the day.

"She's one of the golden generation of youth who support the fatherland and have been waiting with growing love for commander Hugo Chavez," Maduro said, before presenting a dazzled-looking Jimenez to the cameras and giving her a bunch of flowers.

"We were really emotional" she said, recounting how she was with her mother when they heard Chavez had returned. "I sent him a message on Twitter saying he must get better."

There are still big questions over the president's health. He could have come back to govern from behind the scenes, or he may be hoping to ease political tensions and pave the way for a transition to Maduro, his preferred successor.

Chavez has often ordered followers to fight back against opposition critics of his self-styled revolution by using social media, leading from the front himself on Twitter and referring to the Internet as a "battle trench."

As his ranks of followers grew, Chavez said he hired 200 assistants to help him respond to messages - which he said were a great way to receive first-hand the requests, demands, complaints and denunciations of citizens in the thousands.

During his re-election campaign last year, the government launched an SMS text message service that forwards his tweets to cellphones that lack Internet service, broadening their reach to the poorest corners of the South American country.

"He's a communication revolution!" Maduro said, later unbuttoning his shirt on TV to show he was wearing a T-shirt bearing Chavez's eyes emblazoned across his chest.

For the tens of thousands who signed up on Monday to follow Chavez on Twitter, it is unclear how much will be posted there in the weeks and months ahead. Venezuela's 29 million people are mostly wondering something similar.

(Additional reporting by Diego Ore; Editing by Todd Eastham)

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U.N. says has list of Syrian war crimes suspects

GENEVA (Reuters) - Syrians in "leadership positions" who may be responsible for war crimes have been identified, along with units accused of perpetrating them, United Nations investigators said on Monday.

Both government forces and armed rebels are committing war crimes, including killings and torture, spreading terror among civilians in a nearly two-year-old conflict, they said.

The investigators' latest report, covering the six months to mid-January, was based on 445 interviews conducted abroad with victims and witnesses, as they have not been allowed into Syria.

The independent team, led by Brazilian Paulo Pinheiro, called on the U.N. Security Council to "act urgently to ensure accountability" for grave violations, possibly by referring the violators to the International Criminal Court for prosecution.

"The ICC is the appropriate institution for the fight against impunity in Syria. As an established, broadly supported structure, it could immediately initiate investigations against authors of serious crimes in Syria," the 131-page report said.

It added: "Individuals may also bear criminal responsibility for perpetuating the crimes identified in the present report. Where possible, individuals in leadership positions who may be responsible were identified alongside those who physically carried out the acts."

Karen Konig AbuZayd, one of the four commissioners on the team of some two dozen experts, told Reuters: "We have information suggesting people who have given instructions and are responsible for government policy. People who are in the leadership of the military, for example."

"It is the first time we have mentioned the ICC directly. The Security Council needs to come together and decide whether or not to refer the case to the ICC. I am not optimistic."

But its third list of suspects, building on lists drawn up in the past year, remains secret. It will be entrusted to U.N. High Commissioner for Human Rights, Navi Pillay, upon expiry of its current mandate at the end of March, the report said.

Pillay, a former judge at the ICC, said on Saturday that Syrian President Bashar al-Assad should be probed for war crimes and called for immediate action by the international community, including possible military intervention.

"The evidence collected sits in the safe in the office of the High Commissioner against the day it might be referred to a court and evidence would be examined by a prosecutor," said a European diplomat.

The death toll in Syria is likely approaching 70,000 people, Pillay told the Security Council last week in a fresh appeal for it to refer Syria to the ICC, the Hague-based war crimes court.

Government forces have carried out shelling and aerial bombardment across Syria including Aleppo, Damascus, Deraa, Homs and Idlib, the independent U.N. investigators said, citing corroborating evidence gathered from satellite images.

"In some incidents, such as in the assault on Harak, indiscriminate shelling was followed by ground operations during which government forces perpetrated mass killing," it said, referring to a town in the southern province of Deraa where residents told them that 500 civilians were killed in August.

"SPREADING TERROR"

"Government forces and affiliated militias have committed extra-judicial executions, breaching international human rights law. This conduct also constitutes the war crime of murder. Where murder was committed as part of a widespread or systematic attack against a civilian population, with knowledge of that attack, it is a crime against humanity," the U.N. report said.

They have targeted queues at bakeries and funeral processions, in violence aimed at "spreading terror among the civilian population", it said.

"Syrian armed forces have implemented a strategy that uses shelling and sniper fire to kill, maim, wound and terrorize the civilian inhabitants of areas that have fallen under anti-government armed group control," the report said.

Government forces had used cluster bombs, it said, but it found no credible evidence of either side using chemical arms.

Rebel forces fighting to topple Assad in the protracted and increasingly sectarian conflict have committed war crimes include murder, torture, hostage-taking and using children under age 15 in hostilities, the U.N. report said.

"They continue to endanger the civilian population by positioning military objectives inside civilian areas," it said. Rebel snipers had caused "considerable civilian casualties".

"The violations and abuses committed by anti-government armed groups did not, however, reach the intensity and scale of those committed by government forces and affiliated militia."

Foreign fighters, many of them from Libya, Tunisia, Saudi Arabia, Lebanon, Iraq and Egypt, have radicalized the rebels and helped detonate deadly improvised explosive devices, it said.

The two other commissioners are former chief ICC prosecutor Carla del Ponte and Vitit Muntarbhorn of Thailand.

"It is an investigative mechanism and its evidence can be given to relevant judicial authorities when the time comes. In the interim, it is the one piece of U.N.-approved machinery shining a light on abuses," the European diplomat said.

Referring to del Ponte, who joined in September, the diplomat said: "She brings a harder-edged prosecutorial lens so when they are looking at the evidence she is very well placed to know what sort of evidence would assist a later judicial process."

(Reporting by Stephanie Nebehay; Editing by Alistair Lyon)

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Pakistan faces growing anger over sectarian bombings

QUETTA, Pakistan (Reuters) - Pakistan's unpopular government, which is gearing up for elections expected within months, came under fire on Sunday for failing to improve security after a sectarian bombing in the city of Quetta killed 81 people.

The nuclear-armed country's leaders have done little to contain hardline Sunni Muslim groups which have stepped up a campaign of bombings and assassinations of minority Shi'ites.

On Saturday, Lashkar-e-Jhangvi (LeJ), seen as the most ruthless Sunni sectarian group, claimed responsibility for the attack in Quetta, which deepened suspicions among Shi'ites that Pakistan's intelligence agencies were turning a blind eye to the bloodshed or even supporting extremists.

"The terrorist attack on the Hazara Shi'ite community in Quetta is a failure of the intelligence and security forces," Nawab Zulfiqar Ali Magsi, governor of Baluchistan province, said while touring a hospital.

Leaders of the ethnic Shi'ite Hazara community called on the government to take decisive action, and Pakistanis warned that sectarian violence was spiraling out of control.

"The government is responsible for terrorist attacks and killings in the Hazara community because its security forces have not conducted operations against extremist groups," said Aziz Hazara, vice president of the Hazara Democratic Party.

"We are giving the government 48 hours to arrest the culprits involved in the killing of our people and after that we will launch strong protests."

The death toll from Saturday's bombing rose overnight, with most of the casualties in the main bazaar of the town, capital of Baluchistan, near the border with Afghanistan.

Most of the dead were Hazaras. A senior security official said the figure could rise as 20 people were critically wounded.

On Sunday, people searched for survivors under blocks of cement torn off buildings by the blast. A large blood stain could be seen on a wall near the site.

Many shops and bazaars were closed. Relatives of the wounded responded for an appeal for blood made by hospitals.

"The government knows exactly who is doing what and who is behind all this," said Mohammad Imran, a local trader. "If the government wants (to prevent it), no one can take even a kitchen knife into any market."

POVERTY, CORRUPTION, POWER CUTS

Critics say Pakistan's intelligence agencies previously supported groups like LeJ to fight against Indian forces in Kashmir and failed subsequently to control them.

Now Shi'ites in Quetta and other cities say they are under siege. "We have grown tired of picking up the bodies of our loved ones," said Nasir Ali, 45, a government employee. "I have lost three family members so far in such blasts."

LeJ has also said it was behind a bombing last month in Quetta which killed nearly 100 people, one of Pakistan's worst sectarian attacks.

After that incident, Shi'ite leaders called on Pakistan's military to take over security in Quetta and take on the LeJ.

Growing sectarian violence is piling pressure on the U.S.-backed administration, which already faces a Taliban insurgency, to deliver stability.

"This is a case of barbarity and heartlessness. This is happening because we are divided and not supporting each other," said Malik Afzal, a Sunni student.

"Unless we decide to unite, we will continue to get killed. Today they (Shi'ites) have died. Tomorrow we (Sunni Muslims) will die. The next day, others will get killed."

Pakistani intelligence officials say extremist groups, led by LeJ, want to destabilise the nation through sectarian violence and pave the way for a Sunni theocracy.

More than 400 Shi'ites were killed in Pakistan last year, many by hitmen or bombs. Some hardline Shi'ite groups have struck back by killing Sunni clerics.

"If the government cannot give protection to our community then allow us to protect our own," said Ghulam Abbas, 32, a political worker for the Hazara Democratic Party.

The schism between Sunnis and Shi'ites developed after the Prophet Muhammad died in 632 when his followers could not agree on a successor.

(Reporting by Gul Yousufzai; Editing by Ron Popeski)

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Exclusive: North Korea tells China of preparations for fresh nuclear test - source

BEIJING (Reuters) - North Korea has told its key ally, China, that it is prepared to stage one or even two more nuclear tests this year in an effort to force the United States into diplomatic talks, said a source with direct knowledge of the message.

Further tests could also be accompanied this year by another rocket launch, said the source, who has direct access to the top levels of government in both Beijing and Pyongyang.

North Korea conducted its third nuclear test on Tuesday, drawing global condemnation and a stern warning from the United States that it was a threat and a provocation.

"It's all ready. A fourth and fifth nuclear test and a rocket launch could be conducted soon, possibly this year," the source said, adding that the fourth nuclear test would be much larger than the third, at an equivalent of 10 kilotons of TNT.

The tests will be undertaken, the source said, unless Washington holds talks with North Korea and abandons its policy of what Pyongyang sees as attempts at regime change.

North Korea also reiterated its long-standing desire for the United States to sign a final peace agreement with it and establish diplomatic relations, he said. North Korea remains technically at war with both the United States and South Korea after the Korean war ended in 1953 with a truce.

In Washington, U.S. State Department spokeswoman Victoria Nuland urged North Korea to "refrain from additional provocative actions that would violate its international obligations" under three different sets of U.N. Security Council resolutions that prohibit nuclear and missile tests.

North Korea "is not going to achieve anything in terms of the health, welfare, safety, future of its own people by these kinds of continued provocative actions. It's just going to lead to more isolation," Nuland told reporters.

The Pentagon also weighed in, calling North Korea's missile and nuclear programs "a threat to U.S. national security and to international peace and security."

"The United States remains vigilant in the face of North Korean provocations and steadfast in our defense commitments to allies in the region," said Pentagon spokeswoman Major Catherine Wilkinson.

Initial estimates of this week's test from South Korea's military put its yield at the equivalent of 6-7 kilotons, although a final assessment of yield and what material was used in the explosion may be weeks away.

North Korea's latest test, its third since 2006, prompted warnings from Washington and others that more sanctions would be imposed on the isolated state. The U.N. Security Council has only just tightened sanctions on Pyongyang after it launched a long-range rocket in December.

Pyongyang is banned under U.N. sanctions from developing missile or nuclear technology after its 2006 and 2009 nuclear tests.

North Korea worked to ready its nuclear test site, about 100 km (60 miles) from its border with China, throughout last year, according to commercially available satellite imagery. The images show that it may have already prepared for at least one more test, beyond Tuesday's subterranean explosion.

"Based on satellite imagery that showed there were the same activities in two tunnels, they have one tunnel left after the latest test," said Kune Y. Suh, a nuclear engineering professor at Seoul National University in South Korea.

Analysis of satellite imagery released on Friday by specialist North Korea website 38North showed activity at a rocket site that appeared to indicate it was being prepared for a launch (http://38north.org/2013/02/tonghae021413/).

NORTH 'NOT AFRAID' OF SANCTIONS

President Barack Obama pledged after this week's nuclear test "to lead the world in taking firm action in response to these threats" and diplomats at the U.N. Security Council have already started discussing potential new sanctions.

North Korea has said the test was a reaction to "U.S. hostility" following its December rocket launch. Critics say the rocket launch was aimed at developing technology for an intercontinental ballistic missile.

"(North) Korea is not afraid of (further) sanctions," the source said. "It is confident agricultural and economic reforms will boost grain harvests this year, reducing its food reliance on China."

North Korea's isolated and small economy has few links with the outside world apart from China, its major trading partner and sole influential diplomatic ally.

China signed up for international sanctions against North Korea after the 2006 and 2009 nuclear tests and for a U.N. Security Council resolution passed in January to condemn the latest rocket launch. However, Beijing has stopped short of abandoning all support for Pyongyang.

Sanctions have so far not discouraged North Korea from pursuing its nuclear ambitions.

"It is like watching the same movie over and over again," said Lee Woo-young, a professor at Seoul's University of North Korean Studies. "The idea that stronger sanctions make North Korea stop developing nuclear programs isn't effective in my view."

The source with ties to Beijing and Pyongyang said China would again support U.N. sanctions. He declined to comment on what level of sanctions Beijing would be willing to endorse.

"When China supported U.N. sanctions ... (North) Korea angrily called China a puppet of the United States," he said. "There will be new sanctions which will be harsh. China is likely to agree to it," he said, without elaborating.

He said however that Beijing would not cut food and fuel supplies to North Korea, a measure it reportedly took after a previous nuclear test.

He said North Korea's actions were a distraction for China's leadership, which was concerned that the escalations could inflame public opinion in China and hasten military build-ups in the region.

The source said he saw little room for compromise under North Korea's youthful new leader, Kim Jong-un. The third Kim to rule North Korea is just 30 years old and took over from his father in December 2011.

He appears to have followed his father, Kim Jong-il, in the "military first" strategy that has pushed North Korea ever closer to a workable nuclear missile at the expense of economic development.

"He is much tougher than his father," the source said.

(Additional reporting by Arshad Mohammed and Phillip Stewart in WASHINGTON; Writing by David Chance; Editing by Raju Gopalakrishnan, David Brunnstrom and Jackie Frank)

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Meteorite hits central Russia, more than 500 people hurt

CHELYABINSK, Russia (Reuters) - More than 500 people were injured when a meteorite shot across the sky and exploded over central Russia on Friday, sending fireballs crashing to Earth, shattering windows and damaging buildings.

People heading to work in Chelyabinsk heard what sounded like an explosion, saw a bright light and then felt a shockwave according to a Reuters correspondent in the industrial city 1,500 km (950 miles) east of Moscow.

A fireball blazed across the horizon, leaving a long white trail in its wake which could be seen as far as 200 km (125 miles) away in Yekaterinburg. Car alarms went off, windows shattered and mobile phone networks were interrupted.

"I was driving to work, it was quite dark, but it suddenly became as bright as if it was day," said Viktor Prokofiev, 36, a resident of Yekaterinburg in the Urals Mountains.

"I felt like I was blinded by headlights," he said.

No fatalities were reported but President Vladimir Putin, who was due to host Finance Ministry officials from the Group of 20 nations in Moscow, and Prime Minister Dmitry Medvedev were informed.

A local ministry official said such incidents were extremely rare and Friday's events might have been linked to an asteroid the size of an Olympic swimming pool due to pass Earth at a distance of 27,520 km (17,100 miles) but this was not confirmed.

Russia's space agency Roscosmos said the meteorite was travelling at a speed of 30 km (19 miles) per second and that such events were hard to predict. The Interior Ministry said the meteorite explosion had caused a sonic boom.

Russia's Emergencies Ministry said 514 people had sought medical help, mainly for light injuries caused by flying glass, and that 112 of those were kept in hospital. Search groups were set up to look for the remains of the meteorite.

"There have never been any cases of meteorites breaking up at such a low level over Russia before," said Yuri Burenko, head of the Chelyabinsk branch of the Emergencies Ministry.

WINDOWS BREAK, FRAMES BUCKLE

Windows were shattered on Chelyabinsk's central Lenin Street and some of the frames of shop fronts buckled.

A loud noise, resembling an explosion, rang out at around 9.20 a.m. (12:20 a.m. ET). The shockwave could be felt in apartment buildings in the industrial city's center.

"I was standing at a bus stop, seeing off my girlfriend," said Andrei, a local resident who did not give his second name. "Then there was a flash and I saw a trail of smoke across the sky and felt a shockwave that smashed windows."

A wall was damaged at the Chelyabinsk Zinc Plant but a spokeswoman said there was no environmental threat.

Although such events are rare, a meteorite is thought to have devastated an area of more than 2,000 sq km (1,250 miles) in Siberia in 1908, smashing windows as far as 200 km (125 miles) from the point of impact.

The Emergencies Ministry described Friday's events as a "meteor shower in the form of fireballs" and said background radiation levels were normal. It urged residents not to panic.

Chelyabinsk city authorities urged people to stay indoors unless they needed to pick up their children from schools and kindergartens. They said what sounded like a blast had been heard at an altitude of 10,000 meters (32,800 feet).

The U.S. space agency NASA has said an asteroid known as 2012 DA14, about 46 meters in diameter, would have an encounter with Earth closer than any asteroid since scientists began routinely monitoring them about 15 years ago.

Television, weather and communications satellites fly about 500 miles higher. The moon is 14 times farther away.

(Additional reporting by Natalia Shurmina in Yekaterinburg and Gabriela Baczynska in Moscow, Writing by Alexei Anishchuk and Timothy Heritage, Editing by Michael Holden)

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North Korea nuclear test prompts stern warnings from neighbors

SEOUL/TOKYO (Reuters) - South Korea sent a stern warning to North Korea on Thursday, two days after the North tested a nuclear bomb, saying it could strike the isolated state if it believed an attack was imminent as it deployed a new cruise missile to drive home its point.

North Korea conducted its third nuclear test on Tuesday, in defiance of U.N. resolutions, pushing it further along the path of developing a workable long-range nuclear missile and drawing condemnation from the United States, Japan, Europe and the North's only major ally, China.

Pyongyang said that the test was designed to bolster its defenses due to the hostility of the United States, which has led a push to impose sanctions on the country after its long-range missile launch.

North Korea on Thursday repeated its warning that any further sanctions would provoke it into taking firmer action.

Seoul warned that it would strike if attacked. South Korea has already relaxed rules allowing troops on the border to return fire directly without seeking permission from the army chiefs.

"The cruise missile being unveiled today is a precision-guided weapon that can identify and strike the window of the office of North Korea's leadership," Defence Ministry spokesman Kim Min-seok told reporters."

Japan, which has little capacity to strike at the North if threatened by an attack because of the constraints of its pacifist constitution, said it had the right to develop such capability in response to changes in the regional security situation - but had no plan to do so at present.

"When an intention to attack Japan is evident, the threat is imminent, and there are no other options, Japan is allowed under the law to carry out strikes against enemy targets," Defence Minister Itsunori Onodera told Reuters in an interview.

"Given Japan's political environment and the peace-oriented diplomacy it has observed, this is not the time to make preparations (for building such capability)," he said.

"But we need to carefully observe the changing security environment in the region."

Any sign that Japan was moving to develop such a capability would upset neighbors China and South Korea, where memories of Tokyo's past military aggression run deep and which have reacted strongly in the past to suggestions it might do so.

It is unlikely the United States, which acts as a security guarantor for both its allies, would permit any major escalation in any conflict with North Korea.

Japan and China are engaged in a bitter island dispute that has soured relations between the two and alarmed Washington while Seoul and Tokyo have also clashed verbally over a separate disputed island.

DIPLOMATIC STAKES RAISED

The United States and its allies are pushing for new sanctions at the U.N. Security Council aimed at slowing North Korea's nuclear and long-range missile development.

President Barack Obama spoke to Japanese Prime Minister Shinzo Abe on Wednesday about North Korea's nuclear test and reaffirmed U.S. commitments to Japan's security.

"They pledged to work closely together to seek significant action at the United Nations Security Council and to cooperate on measures aimed at impeding North Korea's nuclear and ballistic missile programs," the White House said in a statement after the call.

The United States and its allies are believed to be pushing to tighten the noose around North Korea's financial transactions in a bid to starve its leadership of funding.

Japan's Onodera called on the North's biggest benefactor, China, to join in strengthening the sanctions.

"I think China is the one that is most concerned about the development ... From now on, it is necessary for us, including China, to seek effective steps, effective economic measures (against North Korea)."

North Korea has repeatedly said it is planning what it terms "stronger measures" against the United States and its allies, although it hasn't specified what those could be.

It is not capable of hitting the United States, but its medium-range missiles can hit Japan and South Korea. It also has an estimated 8,000 artillery systems stationed within 100 km of the heavily militarized border between the two Koreas.

"If the U.S. and its allies challenge the DPRK (Democratic Peoples Republic of Korea) with 'strong measures', (a) 'financial freeze' and fresh pressure and 'sanctions' over its underground nuclear test, it will react to them with stronger measures for self-defence," its KCNA news agency said on Thursday.

Australia signaled its displeasure with Pyongyang by banning diplomats seeking to reopen an embassy there from visiting the country.

While it was still unclear what fissile material North Korea used in its third nuclear test - its statements appeared to indicate that it was likely plutonium as it is easier to miniaturize than uranium - it seemed that initial environmental fears about the test were not realized.

China's Environment Ministry said it had found no abnormal radiation from the test site, which is around 100 km from its border. South Korea too said it had not detected any radiation.

(Additional reporting by Fayen Wong in SHANGHAI; Rob Taylor in CANBERRA; Writing by David Chance; Editing by Linda Sieg and Nick Macfie)

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Pope asks for support after decision to resign, says strength diminishing

VATICAN CITY (Reuters) - Pope Benedict, in his first public comments since he announced that he would become the first pontiff in centuries to resign, on Wednesday said he was fully aware of the gravity of his decision but confident that it would not hurt the Church.

"Continue to pray for me, for the Church and for the future pope," he said in unscripted remarks at the start of his weekly general audience, one of his last public appearances before he resigns on February 28.

The pope, who looked and sounded strong, was interrupted several times by thunderous applause from the some 8,000 faithful and tourists who packed the vast audience hall.

In brief, prepared remarks that mirrored those he read to stunned cardinals when he announced his decision on Monday, the pope said God would continue to guide the Church because it was much more than its earthly leader.

"I took this decision in full freedom for the good of the Church after praying for a long time and examining by conscience before God," he said.

He said he was, "well aware of the gravity of such an act but at the same time aware of not being able to carry out my (papal) ministry with the physical and spiritual force that it requires".

Benedict said he was sustained by the "certainty that the Church belongs to Christ, who will never stop guiding it and caring for it".

He said that "he felt almost physically" the affection and kindness he had received since he announced the decision.

Later on Wednesday, an Ash Wednesday Mass that was originally scheduled to have taken place in a small church in Rome, has been moved to St Peter's Basilica so more people can attend.

Unless the Vatican changes the pope's schedule, it will be his last public Mass.

(Reporting By Philip Pullella; editing by Barry Moody)

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North Korea conducts third nuclear test, drawing new sanctions threat

SEOUL (Reuters) - North Korea conducted its third nuclear test on Tuesday in defiance of existing U.N. resolutions, angering the United States and Japan and prompting its only major ally, China, to call for calm.

The North said the test had "greater explosive force" than the 2006 and 2009 tests that were widely seen as small-scale. Its KCNA news agency said it had used a "miniaturized" and lighter nuclear device, indicating that it had again used plutonium which is more suitable for use as a missile warhead.

North Korean leader Kim Jong-un, the third of his line to rule the country, has presided over two long-range rocket launches and a nuclear test during his first a year in power, pursuing policies that have propelled his impoverished and malnourished country closer to becoming a nuclear weapons power.

U.S. President Barack Obama labeled the test a "highly provocative act" that hurt regional stability and he and other states that are members of U.N. Security Council pressed for new sanctions on the isolated country.

"The danger posed by North Korea's threatening activities warrants further swift and credible action by the international community. The United States will also continue to take steps necessary to defend ourselves and our allies," Obama said in a statement.

The Security Council will meet later on Tuesday to discuss its reaction to the test, although North Korea is already one of the most heavily sanctioned states in the world and has few external economic links that can be targeted.

Japanese Prime Minister Shinzo Abe said the test was a "grave threat" that could not be tolerated. U.N. Secretary-General Ban Ki-moon said the test was a "clear and grave violation" of U.N. Security Council resolutions.

China, which has shown signs of increasing exasperation with its neighbor, repeated calls for the "denuclearization" of the Korean peninsula and urged its client state and others to react calmly, while pressing Pyongyang not to ramp up tension further, something the North had threatened in the run-up to the test.

"We strongly urge North Korea to abide by its non-nuclear commitment and not to take any further actions that would worsen the situation", it said in a statement.

China is a permanent member of the Security Council.

South Korea, still technically at war with the North after the 1950-53 civil war ended in a mere truce, said the size of the seismic activity indicated a nuclear explosion slightly larger than the North's two previous tests at 6-7 kilotons, although that is still relatively small. The Hiroshima bomb was around 20 kilotons.

The U.S. Geological Survey said that a seismic event measuring 5.1 magnitude had occurred on Tuesday, with North Korea later confirming the nuclear test.

"It was confirmed that the nuclear test that was carried out at a high level in a safe and perfect manner using a miniaturized and lighter nuclear device with greater explosive force than previously did not pose any negative impact on the surrounding ecological environment," KCNA said.

Despite China's tame response, it likely to be a major embarrassment for Beijing, the North's sole major economic and diplomatic ally.

"The test is hugely insulting to China, which now can be expected to follow through with threats to impose sanctions," said Mark Fitzpatrick of the International Institute for Strategic Studies think tank.

North Korea trumpeted the announcement on its state television channel to patriotic music against the backdrop of an image of its national flag.

It linked the test to its technical prowess in launching a long-range rocket in December, a move that triggered the U.N. sanctions, backed by China, that Pyongyang said prompted it to take Tuesday's action.

The North's ultimate aim, Washington believes, is to design an intercontinental ballistic missile capable of carrying a nuclear warhead that could hit the United States. North Korea says the program is aimed merely at putting satellites in space.

North Korea used plutonium in previous nuclear tests and prior to Tuesday there had been speculation it would use highly enriched uranium so as to conserve its plutonium stocks as testing eats into its limited supply of the material that could be used to construct a nuclear bomb.

"VICIOUS CYCLE"

Despite its three nuclear tests and long-range rocket tests, North Korea is not believed to be close to manufacturing a nuclear missile capable of hitting the United States.

South Korea's Yonhap news agency said Pyongyang had informed China and the United States of its plans to test on Monday, although this could not be confirmed.

When North Korean leader Kim, 30, took power after his father's death in December 2011, there were hopes the he would bring reforms and end Kim Jong-il's "military first" policies.

Instead, the North, whose economy is smaller than it was 20 years ago and where a third of children are believed to be malnourished, appears to be trapped in a cycle of sanctions followed by further provocations.

"The more North Korea shoots missiles, launches satellites or conducts nuclear tests, the more the U.N. Security Council will impose new and more severe sanctions," said Shen Dingli, a professor at Shanghai's Fudan University. "It is an endless, vicious cycle."

But options for the international community appear to be in short supply, as North Korea is already one of the most heavily sanctioned states on earth.

Tuesday's action appeared to have been timed for the run-up to February 16 anniversary celebrations of Kim Jong-il's birthday, as well as to achieved maximum international attention.

Significantly, the test comes at a time of political transition in China, Japan and South Korea, and as Obama begins his second term. He will likely have to tweak his State of the Union address due to be given on Tuesday.

Japanese Prime Minister Shinzo Abe is bedding down a new government and South Korea's new president, Park Geun-hye, prepares to take office on February 25.

China too is in the midst of a once-in-a-decade leadership transition to Xi Jinping, who takes office in March. Both Abe and Xi are staunch nationalists.

The longer-term game plan from Pyongyang may be to restart talks aimed at winning food and financial aid. China urged it to return to the stalled "six-party" talks, hosted by China and including the two Koreas, the United States, Japan and Russia.

Its puny economy and small diplomatic reach mean the North struggles to win attention on the global stage - other than through nuclear tests and attacks on South Korea, last made in 2010.

"Now the next step for North Korea will be to offer talks... - any form to start up discussion again to bring things to their advantage," said Jeung Young-tae, senior research fellow at the Korea Institute for National Unification in Seoul.

EU member Denmark called on China to step up to the plate and use its influence at the Security Council to rein in its ally, using unusually blunt language.

"This deserves only one thing and that is a one-sided condemnation," said Foreign Minister Villy Sovndal.

"North Korea is likely the most horrible country on this planet."

(Additional reporting by Jack Kim, Christine Kim and Jumin Park in SEOUL; Linda Sieg in TOKYO; Louis Charbonneau at the UNITED NATIONS; Fredrik Dahl in VIENNA; Michael Martina in BEIJING; Mette Fraende in COPENHAGEN; Editing by Nick Macfie)

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Back to the future as G20 comes to Russia

MOSCOW (Reuters) - Group of 20 policymakers have an ideal chance in Moscow this week to ponder whether monetary policy largesse will blunt their will to carry out the economic reforms needed to put global growth on a sustainable footing.

On their drive from the airport to the city center, down highways clogged with luxury cars, it may dawn on finance ministers and central bankers that Russia, this year's G20 host, got there first.

Some will check in to the five-star Ritz-Carlton hotel near the Manezh, the former 19th-century cavalry stable by the Kremlin walls where they meet this weekend. But convenience comes at a price: almost $17,000 per night for a luxury suite.

The world's largest oil producer has, through much of the Vladimir Putin era, been minting money as its central bank bought up hundreds of billions of export petrodollars, and the government spent its way out of the 2009 slump.

But the side-effects -- political complacency, declining competitiveness and a misallocation of capital towards conspicuous consumption and prestige projects -- increasingly outweigh the benefits to Russia's $2.1 trillion economy.

Some economists say Russia's story could foretell the outcome of ultra-loose monetary policy in the United States, Britain, Japan and symbolized by European Central Bank President Mario Draghi's vow last July to do "whatever it takes" to see the euro through its debt crisis.

"Russia has oil; Europe has Draghi," Tim Ash, the London-based head of emerging markets research at Standard Bank, said on a recent trip to Moscow. "Europe is catching up to all the problems that Russia has done nothing about for the past decade."

Others say that may be stretching the point but there are certainly signs that the zeal for major economic and regulatory reforms in Europe has faded somewhat since Draghi took the sting out of the debt crisis.

CURRENCY WARS

The G20 accounts for 90 percent of the world's economy and two-thirds of its population. Russia has taken the helm this year as the group has split between borrowers seeking to grow out of a debt trap and surplus countries keener on austerity.

Gone is the shared sense of purpose that embodied the G20 summit in London of 2009, which created a huge financial backstop to stem the crisis that resulted from the collapse of Wall Street investment bank Lehman Brothers.

"The G20 has really struggled in the past couple of years after its really great 2008 and 2009," Jim O'Neill, the outgoing chairman of Goldman Sachs Asset Management and leading emerging markets economist, told Reuters.

"It's already desperately searching for an identity."

Russia, holder of the world's fourth-largest gold and foreign exchange reserves, also finds itself on the barricades in an as yet merely rhetorical "currency war" after its central bank accused Japan's new government of protectionist monetary policy.

But, G20 sources and economists say, officials are likely to tone down their rhetoric over competitive currency devaluations.

"I don't see how anybody can complain. Washington is keeping quiet because that's what it has done for the past 30 years," said O'Neill.

SUPPLY VS DEMAND

For its G20 presidency, Moscow has drawn up an agenda focusing on jobs and investment, improved financial regulation and deficit reduction that is enthusiastically backed by the International Monetary Fund and World Bank.

But in a world suffering a dearth of demand, there is likely to be pushback, again led by the United States, against Russia's push for "binding and realistic" goals to cut borrowing.

A target set at the G20's Toronto summit in 2010 to halve budget deficits expires this year, and one G20 source told Reuters there could be heated debate as the euro zone's dominant economy, Germany, calls for new deficit targets to be set.

Here, at least, Russia can show some leadership by pointing to its own balanced budget, and its adoption last year of a so-called fiscal rule intended to reduce the dependence of its public finances on oil and gas revenues.

"Russia's agenda reflects their own policy preoccupations. To the extent that it is relevant to a broader global forum, that will be a fluke," said Christopher Granville, managing director of Trusted Sources, an emerging markets consultancy.

"But it's not an agenda that's way off in outer space."

Policymakers will hope to set aside friction between Russia and the West over trade and human rights during the build-up to this September's G20 summit in St Petersburg, given the forum's focus on economic issues.

Russia, a country of more than 140 million people, says it is up to the task of leading the G20, not least thanks to its experience as half of the 'G2' that once dominated global diplomacy during the Cold War.

"It's used to thinking kind of big," said Russia's top financial diplomat, summit 'sherpa' Ksenia Yudayeva.

But things may be more tricky next year, part two of a double-header, when Russia chairs the G8. Moscow is the odd one out in what Granville calls "a group of like-minded Western countries with Japan as an honorary member".

Putin, elected for a third term as president last March after four years as prime minister, has made international summits and sporting events an important part of his development agenda for Russia.

He will host the G8 summit in the summer of 2014 in Sochi, the venue of the next Winter Olympics, and hosts the World Cup soccer finals in 2018.

Russia expects to spend $50 billion on preparing for the Sochi Games, a sum that would make it the most expensive Olympics. That is progress at a high price.

(Additional reporting by Lidia Kelly and Lesley Wroughton, editing by Mike Peacock)

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Israel's Lieberman says Palestinian peace accord impossible

JERUSALEM (Reuters) - Israel has no chance of signing a permanent peace accord with the Palestinians and should instead seek a long-term interim deal, the most powerful political partner of Prime Minister Benjamin Netanyahu said on Saturday.

The remarks by Avigdor Lieberman, an ultranationalist whose joint party list with Netanyahu narrowly won a January 22 election while centrist challengers made surprise gains, seemed designed to dampen expectations at home and abroad of fresh peacemaking.

A spring visit to Israel and the Palestinian territories by U.S. President Barack Obama, announced this week, has stirred speculation that foreign pressure for a diplomatic breakthrough could build - though Washington played down that possibility.

In a television interview, ex-foreign minister Lieberman linked the more than two-year-old impasse to pan-Arab political upheaval that has boosted Islamists hostile to the Jewish state.

These include Hamas, rivals of U.S.-backed Palestinian President Mahmoud Abbas, who control the Gaza Strip and spurn coexistence with Israel though they have mooted extended truces.

"Anyone who thinks that in the center of this socio-diplomatic ocean, this tsunami which is jarring the Arab world, it is possible to arrive at the magic solution of a comprehensive peace with the Palestinians does not understand," Lieberman told Israel's Channel Two.

"This is impossible. It is not possible to solve the conflict here. The conflict can be managed and it is important to manage the conflict ... to negotiate on a long-term interim agreement."

Abbas broke off talks in late 2010 in protest at Israel's settlement of the occupied West Bank. He angered Israel and the United States in November by securing a U.N. status upgrade that implicitly recognized Palestinian independence in all the West Bank, East Jerusalem and Gaza.

Israel insists it will keep East Jerusalem and swathes of West Bank settlements under any eventual peace deal. Most world powers consider the settlements illegal because they take up land seized in the 1967 Middle East war.

Lieberman, himself a West Bank settler, said the ball was "in Abu Mazen's (Abbas') court" to revive diplomacy.

Abbas has demanded Israel first freeze all settlement construction. With two decades gone since Palestinians signed their first interim deal with Israel, he has ruled out any new negotiations that do not solemnize Palestinian statehood.

Netanyahu's spokesman Mark Regev noted that Lieberman, in the Channel Two interview, had said he was expressing his own opinion.

Asked how Netanyahu saw peace prospects for an accord with the Palestinians, Regev referred to a speech on Tuesday in which the conservative prime minister said that Israel, while addressing threats by its enemies, "must also pursue secure, stable and realistic peace with our neighbors".

Netanyahu has previously spoken in favor of a Palestinian state, though he has been cagey on its borders and whether he would be prepared to dismantle Israeli settlements.

Lieberman's role in the next coalition government is unclear as he faces trial for corruption. If convicted, he could be barred from the cabinet. Lieberman denies wrongdoing and has said he would like to regain the foreign portfolio, which he surrendered after his indictment was announced last year.

(Writing by Dan Williams; Editing by Stephen Powell)

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Japan may release data proving Chinese radar incident: media

TOKYO (Reuters) - Japan may release data it says will prove a Chinese naval vessel directed its fire control radar at a Japanese destroyer near disputed islands in the East China Sea, local media reported.

Japan has said a Chinese frigate on January 30 locked its targeting radar on a Japanese destroyer - a step that usually precedes the firing of weapons - but China insists that its vessel used only ordinary surveillance radar.

The incident has added to tensions between the two nations over the disputed islands.

Japan will consider how much normally classified data it can release, the media reports said, citing comments by Japan Defence Minister Itsunori Onodera on local television.

"The government is considering the extent of what can be disclosed," Kyodo news agency quoted Onodera as saying.

China has accused Japan of smearing its name with the accusations, and on Saturday, the official Xinhua news agency continued the war of words.

"By spreading false accusations and posing as a poor victim, Japan had intended to tarnish China's image so as to gain sympathy and support, but a lie does not help," it said in an English language commentary.

"China has been exercising maximum restraint and stayed committed to solving the dispute through dialogue and consultation."

Japan and China have been involved in a series of incidents in recent months in the East China Sea where Chinese and Japanese naval vessels regularly shadow each others movements.

Both countries claim a small clusters of islands, known as Diaoyu in China and Senkaku in Japan, believed to be rich in oil and gas. Controlled by Japan, possession of the uninhabited outcrops and the sea surrounding them would provide China with easier access to the Pacific.

Hopes had been rising for an easing in tensions, including a possible summit between Japanese Prime Minister Shinzo Abe and Chinese Communist Party chief Xi Jinping. But the radar issue has seen China and Japan engage in a fresh round of invective.

China's Defence Ministry on Thursday said Japan's complaints did not "match the facts". The Chinese ship's radar, it said, had maintained regular alerting and surveillance operations and the ship "did not use fire control radar".

Japan's position against China has hardened since Abe led his conservative party to a landslide election victory in December, promising to beef up the military and stand tough in territorial disputes.

The commander of U.S. forces in the Asia-Pacific said the squabble between Japan and China underlined the need for rules to prevent such incidents turning into serious conflict.

China also has ongoing territorial disputes with other Asian nations including Vietnam and the Philippines over islands in the South China Sea.

(Reporting by Tim Kelly; Additional reporting by Ben Blanchard in BEIJING; Editing by Michael Perry)

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China, Japan engage in new invective over disputed isles

BEIJING (Reuters) - China and Japan engaged on Friday in a fresh round of invective over military movements near a disputed group of uninhabited islands, fuelling tension that for months has bedeviled relations between the Asian powers.

An increasingly muscular China has been repeatedly at odds with others in the region over rival claims to small clusters of islands, most recently with fellow economic giant Japan which accused a Chinese navy vessel of locking radar normally used to aim weapons on a Japanese naval ship in the East China Sea.

China's Defence Ministry rejected Japan's complaint about the radar, its first comment on the January 30 incident. It said Japan's intrusive tracking of Chinese vessels was the "root cause" of the renewed tension.

A Japanese official dismissed the Chinese explanation for incident saying China's actions could be dangerous in the waters around the islets, known as Diaoyu in China and Senkaku in Japan, believed to be rich in oil and gas.

Japanese Prime Minister Shinzo Abe led his conservative party to a landslide election victory in December, promising to beef up the military and stand tough in territorial disputes.

On Thursday, another border problem was brought into focus when Japan said two Russian fighter jets briefly entered its air space near long-disputed northern islands, prompting Japan to scramble combat fighters. Russia denied the accusation.

The commander of U.S. forces in the Asia-Pacific said the squabble between Japan and China underlined the pressing need for rules to prevent such incidents turning into serious conflict.

"What we need in the South China Sea is a mechanism that prevents us turning our diplomacy over to young majors and young (naval) commanders ... to make decisions at sea that cause a problem (that escalates) into a military conflict that we might not be able to control," Admiral Samuel Locklear told a conference in the Indonesian capital.

China is in dispute with several Southeast Asian countries including the Philippines and Vietnam over parts of the South China Sea, which is potentially rich in natural resources.

Locklear said governments and their leaders had to understand the potential for things to get out of hand.

"In this case, I think that point has been made pretty clear," he said in reference to international reaction to the dispute between China and Japan.

"IRRESPONSIBLE"

China's Defence Ministry, in a faxed statement late on Thursday, said Japan's complaints did not "match the facts". The Chinese ship's radar, it said, had maintained regular alerting operations and the ship "did not use fire control radar".

The ministry said the Chinese ship was tracked by a Japanese destroyer during routine training exercises. Fire control radar pinpoints the location of a target for missiles or shells and its use can be considered a step short of actual firing.

Japan, the ministry said, had "made irresponsible remarks that hyped up a so-called China threat, recklessly created tension and misled international public opinion".

"Japanese warships and airplanes have often conducted long periods of close-range tracking and surveillance of China's naval ships and airplanes," the Chinese Defence Ministry said.

"This is the root cause of air and maritime security issues between China and Japan."

In Tokyo, Japan's Chief Cabinet Secretary Yoshihide Suga told a news conference Japan could not accept China's explanation and Japan's accusation came after careful analysis.

"We urge China to take sincere measures to prevent dangerous actions which could cause a contingency situation," Suga said.

Japanese Defence Minister Itsunori Onodera said this week that the radar incident could have become very dangerous very quickly, and it could have been seen as a threat of military force under U.N. rules.

Hopes had been rising recently for an easing of the tension, which was sparked, in part, by Japan's nationalization of three of the privately owned islets last September.

Fears that encounters between aircraft and ships could bring an unintended clash have given impetus to efforts to improve links, including a possible summit between Abe and Chinese leader Xi Jinping, who takes over as head of state in March.

(Additional reporting by Linda Sieg in TOKYO, Joathan Thatcher in JAKARTA; Editing by Ron Popeski and Robert Birsel)

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Khamenei rejects offer of direct talks with U.S.

DUBAI (Reuters) - Iran's highest authority, Ayatollah Ali Khamenei, on Thursday rejected an offer of direct talks made by U.S. Vice President Joe Biden this week, saying they would not solve the problems between them, Iranian media reported.

"Some naive people like the idea of negotiating with America, however, negotiations will not solve the problems," Khamenei said in a speech to officials and members of Iran's aerospace force, IRIB reported.

"If some people want American rule to be established again in Iran, the nation will rise up to face them," he said.

"American policy in the Middle East has been destroyed and Americans now need to play a new card. That card is dragging Iran into negotiations."

Khamenei made his comments just days after Joe Biden said the United States was prepared to meet bilaterally with the Iranian leadership. "That offer stands but it must be real and tangible," Biden said in a speech in Munich.

Relations between Iran and the United States were severed in 1979 after the overthrow of Iran's pro-western monarchy and diplomatic meetings between officials have since been very rare.

Currently U.S.-Iran contact is limited to talks between Tehran and a so-called P5+1 group of powers on Iran's disputed nuclear program which are to resume on February 26 in Kazakhstan.

Many believe no deal on settling the nuclear issue is possible without a U.S.-Iranian thaw. But any rapprochement would require direct talks addressing many sources of mutual mistrust that have lingered since Iran's 1979 Islamic Revolution and the subsequent U.S. embassy hostage crisis in Tehran.

Moreover, although his re-election last November may give President Barack Obama a freer hand to pursue direct negotiations, analysts say Iran's own presidential election in June may prove an additional obstacle to progress being made.

(Reporting By Marcus George; Editing by Jon Boyle)

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Tsunami kills at least five in Solomons after big Pacific quake

(Reuters) - A powerful 8.0 magnitude earthquake set off a tsunami that killed at least five people in a remote part of the Solomon Islands on Wednesday and triggered evacuations across the South Pacific as island nations issued tsunami alerts.

The quake struck 340 km (211 miles) east of Kira Kira in the Solomons, the Pacific Tsunami Warning Center in Hawaii said as it issued warnings for the Solomons and other South Pacific nations including Australia and New Zealand. It later canceled the warnings for the outlying regions.

A tsunami measuring 0.9 metres (three feet) hit near the town of Lata on the remote Santa Cruz island, swamping some villages and the town's main airport as people fled to safety on higher ground.

More than three dozen aftershocks up to magnitude 6.6 rocked the region in the hours after the quake, the U.S. Geological Survey said.

Lata hospital's director of nursing, Augustine Pilve, told New Zealand television that five people had been killed, including a boy about 10 years old, adding that more casualties were possible as officials made their way to at least three villages that may have been hit.

"It's more likely that other villages along the coast of Santa Cruz may be affected," he said.

Disaster officials in the Solomon Islands capital Honiara told the Solomon Islands Broadcasting Corp. that they believed six people were dead and that five villages had suffered damage.

Solomon Islands Police Commissioner John Lansley said it was too early to fully assess the damage or casualty numbers, and said authorities hoped to send aircraft to the region on Thursday to help determine the extent of the damage.

Luke Taula, a fisheries officer in Lata, said he watched the tsunami as it came in small tidal surges rather than as one large wave.

"We have small waves come in, then go out again, then come back in. The waves have reached the airport terminal," he told Reuters by telephone.

The worst damage was to villages on the western side of a point that protects the main township, he said.

"There are reports that some communities have been badly hit, their houses have been damaged by the waves."

About 5,000 people lived in and around the town, but the area was deserted as people fled to higher ground, Taula said.

HOT SPOT

The Solomons, perched on the geologically active "Pacific Ring of Fire", were hit by a devastating tsunami following an 8.1 magnitude quake in 2007. At least 50 people were killed then and dozens left missing and more than 13 villages destroyed.

"It's an area that is very prone to earthquakes," said Jonathan Bathgate, seismologist at Geoscience Australia. "We've had seven 6-plus magnitude earthquakes in this region since January 31, so it has been very active in the past week."

Initial signs were that the tremor was a thrust quake, in which vertical movement in the continental plates generates higher risk of tsunami, Bathgate added.

Authorities in the Solomons, Fiji, Guam and elsewhere had urged residents to higher ground before the Pacific Tsunami Warning Center canceled its alerts.

"The earthquake would have to be quite a bit bigger to make a much more sizeable tsunami," said Brian Shiro, geophysicist for the center in Hawaii.

(Reporting by James Grubel in CANBERRA,; Additional reporting by Michael Perry and Lincoln Feast in SYDNEY and Alex Dobuzinskis in LOS ANGELES)

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