Iran says it is converting uranium, easing bomb fears

DUBAI (Reuters) - Iran acknowledged on Tuesday that it was converting some of its higher-grade enriched uranium into reactor fuel, a move that could help to prevent a dispute with the West over its nuclear program hitting a crisis in mid-2013.

Conversion is one way for Iran to slow the growth in its stockpile of material that could be used to make a bomb. That stockpile is currently projected to reach a level intolerable to Israel in mid-year, just as Iran's room for negotiation is being limited by a presidential election in June.

Iranian Foreign Ministry spokesman Ramin Mehmanparast was asked at a weekly news conference about a Reuters report that Iran has converted small amounts of its 20-percent enriched uranium into reactor fuel.

"This work is being done and all its reports have been sent to the International Atomic Energy Agency (IAEA) in a complete manner," he was quoted as saying by the state news agency IRNA.

It was Iran's first acknowledgment that it had apparently resumed converting into fuel small amounts of uranium enriched to a concentration of 20 percent fissile material.

Iran's production of that higher-grade uranium worries the major powers because it is only a short technical step away from the 90-percent purity needed for a weapon.

On-off negotiations with the major powers and four rounds of U.N. Security Council sanctions have failed to persuade Iran to stop its enrichment activities, and the IAEA has been refused full access to investigate other suspect elements of the nuclear program.

Iran denies that it is seeking a weapon and says its nuclear program serves only peaceful purposes such as electricity and the production of medical isotopes.

CRITICAL MASS

But Israel, widely believed to be the only nuclear-armed country in the Middle East, has indicated that Iran's stockpile will reach a level in June at which it considers it must attack to stop Iran acquiring enough fissile material for a bomb. With a presidential election taking place that month, Tehran's room to make concessions to foreign powers is limited.

A U.S. official sought to reassure Israel this week on the determination of President Barack Obama, due to visit the region shortly, to curb Iran's nuclear program, according to an Israeli official who declined to be named.

Rose Gottemoeller, acting U.S. undersecretary of state for arms control and international security, "reiterated the Americans' commitment to preventing a nuclear Iran, and their worries about regional proliferation, were Iran to go nuclear", said the official, who met Gottemoeller.

Iran averted a potential crisis last year by converting some 100 kg of its 20-percent enriched uranium into fuel, suggesting to some that it was carefully keeping below the threshold set by Israel, while still advancing its nuclear technology.

It is not believed to have enriched uranium beyond 20 percent. A fuller picture is unlikely until a new IAEA report on Iran's nuclear activity, due by late February.

Separately, officials from the IAEA are due to hold talks in Tehran on Wednesday in the hope of restarting their long-stalled inquiry into Iran's nuclear program.

The U.N. agency, whose mission is to prevent the spread of nuclear weapons, has been trying for a year to negotiate a so-called structured approach with Iran that would give its inspectors access to sites, officials and documents.

The IAEA especially wants access to the Parchin military complex southeast of Tehran where it believes explosives tests relevant for nuclear weapons development may have taken place and been subsequently concealed, allegations that Iran denies.

"READY FOR DEAL"

Mehmanparast said Iran was ready to come to a "comprehensive agreement" with the IAEA if Tehran's nuclear rights were recognized. Part of this agreement could include a visit to Parchin, he said.

But Fereydoun Abbasi-Davani, head of the Atomic Energy Organisation of Iran, on Tuesday criticized the IAEA's handling of documents related to Iran, signaling the continued mistrust between the agency and Tehran.

"Unfortunately their system is not sufficiently secure," Abbasi-Davani said, according to the Iranian Students' News Agency (ISNA). "They need to be more careful in their interactions with Iran."

Last year Abbasi-Davani accused the U.N. agency of a "cynical approach" and mismanagement, and said "terrorists and saboteurs might have intruded" into the agency.

Iran and six world powers, known as the P5+1, are due to hold a new round of talks on the nuclear program in Kazakhstan on February 26.

U.S. Secretary of State John Kerry said on Friday that the powers were ready to respond if Iran came to the talks prepared to discuss "real substance".

Foreign Minister Ali Akbar Salehi, visiting Moscow, said Iran was "counting on there being positive and constructive steps made to resolve this problem at the upcoming meeting".

In Tehran, Salehi's spokesman Mehmanparast responded to news that North Korea had conducted its third nuclear test in defiance of existing United Nations resolutions by saying: "We need to come to a point where no country will have any nuclear weapons."

(Editing by Kevin Liffey)

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Italian ex-spy chief gets 10 years in CIA case

MILAN (Reuters) - Italy's former military intelligence chief was sentenced to 10 years in jail on Tuesday for his role in the kidnapping of an Egyptian Muslim cleric in an operation organized by the United States.

An American former CIA station chief was this month sentenced in absentia to seven years in jail after imam Abu Omar was snatched from a Milan street in 2003 and flown to Egypt for interrogation during the United States' "war on terror".

The Milan appeals court sentenced Niccolo Pollari, former head of the Sismi military intelligence agency, to 10 years in prison and his former deputy Marco Mancini to nine years.

The court also awarded a provisional 1 million euros in damages to the imam, the Ansa news wire reported, as well as 500,000 euros to the imam's wife.

Nicola Madia, a lawyer for Pollari, said he was disturbed by the decision and that his client would appeal to Italy's highest court. Pollari will not have to go to jail until the appeals process has been exhausted.

Madia said Pollari had not been able to defend himself properly because successive Italian governments had declared the case to be covered by state secrecy laws.

The sentences are part of the fallout from a campaign waged by then U.S. president George W. Bush after the September 11, 2001, attacks on the United States.

Abu Omar says he was tortured for seven months after being flown to Egypt in what was known as an "extraordinary rendition" operation. He was resident in Italy at the time of his abduction.

Former CIA Rome station chief Jeffrey Castelli and two other American officials were convicted in their absence by the Milan appeals court for their part in the plot, but are unlikely to serve their sentences.

Human rights groups have been fighting to expose heavy-handed tactics used by the CIA during the Bush administration.

(Reporting by Sara Rossi; Writing by Keith Weir; Editing by Kevin Liffey)

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Rising power Qatar stirs unease among some Mideast neighbors

DUBAI/DOHA (Reuters) - In the center of Cairo, young men hold up a burning flag for the cameras to show their fury at a nation they believe is meddling in their country and the wider Middle East.

It's a familiar image. But it's not the U.S. flag they are waving, it is that of Qatar, the Gulf state that has used its billions to spread its influence in the wake of the Arab Spring.

For most Western governments and officials, the influence of Qatar emir Sheikh Hamad bin Khalifa al-Thani's government is seen as broadly positive.

Qatar's neighbors are uneasy, however.

In Egypt, Libya and Syria, where Qatar tried to play a role post-Arab Spring, it finds itself blamed for much that has gone wrong on a local level. Close ties to Egypt's new leaders, the Muslim Brotherhood, have alarmed countries like the United Arab Emirates, where the Islamist group is still banned and which in January said it had foiled a Brotherhood-linked coup plot.

Senior officials in the UAE have long believed Qatar has long-term strategy to use the Brotherhood to redraw the region.

"There is both greater apprehension and appreciation for Qatar two years after the Arab awakening in the region," said Taufiq Rahim, Executive Director of Dubai-based geopolitics consultancy Globesight.

"While prior to the revolutions, Qatar was seen more as a mediator, its foreign policy recently has been much more proactive and in some cases partisan."

Some Western analysts and diplomats believe Qatar's leaders have been effectively improvising their way through the new landscape, experimenting to see what they can achieve with the massive wealth generated by its natural gas reserves over the past 15 years. An estimated $17 trillion in monetisable natural gas riches still remain in the ground.

Others, however, see a much more deliberate strategy.

"What we are seeing here is a high-stakes poker game for the future of the Middle East," said one Gulf-based Western diplomat on condition of anonymity.

Even supporters are concerned the country may be overstepping its boundaries and getting a reputation for playing favorites.

"There is widespread appreciation of the positive role that Qatar has played in the region," said Ari Ratner, a former advisor on the Middle East at the State Department and now fellow at the Washington-based Truman National Security Project.

"At the same time there is a broad consensus that the Qataris themselves would be better served by fully delivering on their pledges of aid and working through established governments rather than their preferred factions."

MUSLIM BROTHERHOOD?

The emirate has long been a country of sometimes baffling contradictions. While in many ways one of the most conservative of the Gulf states, it has also proved the most enthusiastic about the changes wrought by the Arab Spring.

Of the 1.9 million people who live there, only some 250,000 are ethnic Qataris, most of whom practice Wahhabism, the austere form of Islam also practiced in Saudi Arabia.

Sheikh Hamad and his glamorous second wife Sheikha Mozah have gained a reputation as modernizers in recent years, however, raising the country's profile significantly with the launch of the Al Jazeera television network and successful hosting of the 2006 Asian Games, as well as initiating the country's World Cup bid.

The emirate has always made a point of keeping as many diplomatic doors open as possible and has relished its role at the center of regional diplomacy. Of all the members of the regional Gulf Cooperation Council, it has long been the closest to Iran even as it courted Washington and hosted U.S. forces. It has been trying to inject new life into peace efforts between Sudan and rebel groups in Darfur with offers of development aid.

Its links to the Muslim Brotherhood may be similarly pragmatic and flexible. But some believe Qatar has made a risky bet to put the movement at the heart of its regional strategy.

The emirate has clearly emerged as something of a focal point for the group, originally founded in Egypt in 1928 and now with national chapters across much of the Islamic world.

Several key current or former members - including televangelist Yousef Al-Qaradwi, a former senior Brother widely watched across the region - reside in the country having fled other states. Western officials who have worked with the Qataris in Libya and Syria say they have invariably favored groups with Brotherhood connections.

Sandhurst-trained Sheikh Hamad is seen broadly sympathetic to the movement, diplomats say, while heir apparent Tamim bin Hamad al-Thani is widely believed to be closer still.

As early as 2009, senior officials from the UAE were briefing their U.S. counterparts that they believed Doha's rulers were using the group to destabilize their neighbors. According to a diplomatic cable released by Wikileaks, Abu Dhabi Crown Prince Mohammed bin Zayed al-Nahayan told U.S. officials Qatar was simply "part of the Brotherhood".

ARMS, AL JAZEERA

Senior Brotherhood officials deny any regional conspiracy; national chapters in different countries say they share ideology but have no direct links.

In their very occasional public statements, Qatari officials deny any special relationship with the group. Prime Minister Hamad bin Jassim bin Jabr al-Thani also rejected suggestions of a wider regional agenda from Qatar.

"We have a clear policy which is not to interfere in the internal affairs of any state," he told Kuwait's al-Rai newspaper in a September 2012 interview.

Few take that statement at face value, however.

Qatar's funding and direct support - including weaponry and the deployment of special forces - were key to building the capacity of opposition fighters first in Libya.

As President Mohammed Mursi's government in Egypt has struggled with mounting economic woes, Qatar has stepped up as an increasingly vital financial backer. In Syria, it has been a leading supplier of rebel arms.

But already, Qatar is feeling the heat for its actions. In Libya, Qatar is being blamed for an increasingly destabilizing rise in Islamist intolerance and violence. In Egypt, it finds itself caught up in the popular dissatisfaction with Mursi and accusations of economic imperialism: a multibillion dollar Suez Canal investment deal was described by protesters as a foreign attempt to seize control of vital national assets.

In Syria, critics say its shipments of arms to rebels has become a chaotic free-for-all. Current and former Western officials say Qatari officials and rich Arabs from Saudi Arabia and elsewhere have been cutting ad hoc deals on the Turkish-Syrian border with a disparate collection of opposition groups.

Even Al Jazeera - which played a crucial role in spreading the word of the 2011 unrest - is facing complaints of mounting and usually pro-Brotherhood bias. While the English-language service is seen as more neutral, the station's Arabic service is widely viewed as openly espousing a pro-Muslim Brotherhood agenda.

FAILURE TO COMMUNICATE?

Diplomats say Qatari officials have been surprised at the pushback.

One problem, those who watch Qatar closely say, is that with only a handful of senior royals and officials controlling policy it is all but impossible for the outside world to know what their strategy is.

Officials rarely answer media requests for information and there is no foreign ministry or government spokesman. For the handful of foreign media based in Doha, the only way of getting official comment is to accost officials at public events, and even then they are often tight-lipped.

No Qatari official was available to comment on this story.

"They are simply not explaining what they are doing properly," said one Doha-based analyst on condition of anonymity. "Conspiracy theories are rife."

Western governments and corporations with an eye on Qatar's vast gas wealth and investment portfolio have so far tended not to concern themselves too much with its politics. A higher profile is bringing with it greater scrutiny, however.

The arrest and sentencing of a local poet to life imprisonment late last year for writings critical of the government spurred widespread international condemnation and accusations of double standards.

Indeed, Qatar's problems with its neighbors may be only just beginning.

"People asking questions are met with walls of silence," said the Doha-based analyst. "That doesn't wash very well with an Egyptian who has just been shot in the leg in Tahrir Square."

(Additional reporting by Sami Aboudi; Editing by Sonya Hepinstall)

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China joins U.S., Japan in condemning North Korea nuclear test

SEOUL (Reuters) - North Korea conducted its third nuclear test on Tuesday in defiance of existing U.N. resolutions, drawing condemnation from around the world, including from its only major ally, China, which summoned the North Korean ambassador to protest.

The reclusive North said the test was an act of self-defense against "U.S. hostility" and threatened further, stronger steps if necessary.

It said the test had "greater explosive force" than the 2006 and 2009 tests. 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 year in power, pursuing policies that have propelled his impoverished and malnourished country closer to becoming a nuclear weapons power.

China, which has shown signs of increasing exasperation with the recent bellicose tone of its neighbor, summoned the North Korean ambassador in Beijing and protested sternly, the Foreign Ministry said.

Foreign Minister Yang Jiechi said China was "strongly dissatisfied and resolutely opposed" to the test and urged North Korea to "stop any rhetoric or acts that could worsen situations and return to the right course of dialogue and consultation as soon as possible".

China is a permanent member of the Security Council.

U.S. President Barack Obama labeled the test a "highly provocative act" that hurt regional stability and pressed for new sanctions.

"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 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.

Russian Foreign Minister Sergei Lavrov urged North Korea to abandon its nuclear arms program and return to talks. NATO condemned the test as an "irresponsible act" that posed a grave threat to world peace.

The test "was only the first response we took with maximum restraint", an unnamed spokesman for the North Korean Foreign Ministry, which acts as Pyongyang's official voice to the outside world, said in a statement carried by the official KCNA news agency.

"If the United States continues to come out with hostility and complicates the situation, we will be forced to take stronger, second and third responses in consecutive steps."

North Korea often threatens the United States and its "puppet", South Korea, with destruction in colorful terms.

North Korea told the U.N. disarmament forum in Geneva that it would never bow to resolutions on its nuclear program and that prospects were "gloomy" for the denuclearization of the divided Korean peninsula because of a "hostile" U.S. policy.

South Korea, still technically at war with the North after the 1950-53 civil war ended in a mere truce, also denounced the test.

The magnitude was roughly twice as large as that of 2009, Lassina Zerbo, director of the international data centre division of the Vienna-based Comprehensive Nuclear-Test Ban Treaty Organization, said. The U.S. Geological Survey said that a seismic event measuring 5.1 magnitude had occurred.

"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 strong response, the test is 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.

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 on its nuclear program, 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.

The European Union's foreign policy chief, Catherine Ashton, urged North Korea to refrain from further provocation.

EU member Denmark called on China to step up to the plate and use its influence to rein in its ally.

"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 and Chen Aizhu in BEIJING; Mette Fraende in COPENHAGEN; Adrian Croft, Charlie Dunmore and Justyna Pawlak in BRUSSELS; Editing by Nick Macfie)

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Air base falls as Assad's forces come under pressure

AMMAN (Reuters) - Syrian opposition fighters captured a military airport near the northern city of Aleppo on Tuesday in another military setback for President Bashar al-Assad's forces which have come under intensifying attack across the country.

The airport is the latest military facility to fall under rebel control in a strategic region situated between Syria's industrial and commercial center and the country's oil- and wheat- producing heartland to the east.

Fighting in the nearly two-year-old conflict has intensified in the three weeks since the political leadership of the opposition offered to negotiate a departure for Assad.

In the first direct government response, Syria's minister for "national reconciliation", Ali Haidar, said he was willing to travel abroad to meet Moaz Alkhatib, the Cairo-based president of the Syrian National Coalition opposition group.

Authorities had previously said they would talk to the "patriotic opposition" - figures who have not allied themselves with the armed rebellion. But most centrist opposition figures have left the country since Abdel-Aziz al-Khayyer, a proponent of dialogue and non-violence, was arrested last year.

"I am willing to meet Mr Khatib in any foreign city where I can go in order to discuss preparations for a national dialogue", Haidar told the Guardian newspaper.

But Haidar said the authorities rejected any dialogue that aims "to hand power from one side to another" and insisted that formal negotiation must take place on Syrian soil.

The main push for talks on a transition is coming from U.N. envoy Lakhdar Brahimi, a veteran diplomat who helped mediate an end to civil war in neighboring Lebanon and warned that Syria could become a failed state.

The Syrian uprising, in which 60,000 people have been killed, has been the bloodiest of the Arab revolts that already toppled four autocrats in Libya, Egypt, Tunis and Yemen.

With the minority Alawite sect, an offshoot of Shi'ite Islam, dominating power in Syria, the conflict has deepened the Shi'ite-Sunni divide in the Middle East.

JETS OVER DAMASCUS

In the capital Damascus, residents and activists said the army had moved tanks to central Abbasid Square to shore up its defensive lines after rebels breached it last week and then struck several security targets in the heart of the capital.

Jets bombarded rebel held areas in the east of the capital and in an expanse of farmland and urban areas known as Eastern Ghouta, from where rebels have launched an attack to cut off the loyalist supply lines.

"The bombing has been terrible. The centre of Damascus is shaking. You can hear the jets from here," said one woman.

Despite a large military arsenal - opposition activists reported several Scud missiles being fired at unknown targets from an army base north of Damascus - Assad's forces appeared to be on the defensive in many parts of the country.

The army and a plethora of security forces remain entrenched in fortress-like bases in Damascus and the provincial capitals, where their advantages in air power and heavy weaponry have kept the opposition from taking over the major cities.

Jarrah air base, 60 km (40 miles) east of Aleppo, came under the control of rebel units who have been surrounding it for weeks, and the highway linking Aleppo to the east of the country is in opposition hands, the Sham News Network said.

Video footage showed fighters from the Islamic Free Syria Movement inspecting the airport. Several fighter jets were shown on the ground at the airport and in concrete shelters.

Abu Abdallah Minbij, one of the opposition commanders who planned the attack on the airport, said by phone that two operational MiG jets and ammunition were found intact at the base, along with 40 disused fighter jets.

"The airport was being used to bomb northern and eastern rural Aleppo. By capturing it, we have cut the regime's supply line from Aleppo to the east," Minbij said.

He said the army will now struggle to send reinforcements to stop a rebel advance in the adjacent Raqqa province, where rebels have captured the country's largest hydro-electric dam this week.

In Sfeira, a nearby town in rural Aleppo, footage showed opposition fighters surrounding a captured tank in the middle of the town, with the body of three soldiers on the ground.

Assad's father, the late President Hafez al-Assad, used carrot and stick tactics to build alliances with the Sunni Muslim tribes in rural Aleppo and in Raqqa and Deir al-Zor to the east that cemented the decades long domination of his Alawite minority on the country.

But most of the alliances between the ruling minorities have broken down since the 22-month uprising erupted in March 2011.

Opposition activists said Liwa al-Islam, the largest rebel unit in the area, has thousands of fighters belonging to tribes that have abandoned Assad, such as the Anzeh tribe, which extends to Saudi Arabia.

They said the focus of rebel operations in Aleppo the last few weeks have been to neutralize four airports in the province, including Jarrah, which have been also used as artillery bases to shell surrounding rebel-held countryside and towns.

"The airports have been a source of aerial bombardment and indiscriminate shelling on rural Aleppo and on the city itself," activist Abu Louay al-Halabi said by phone from Aleppo.

He said rebels have hit planes on the ground belonging to two squadrons based in the airport of Minbij, 70 km (45 miles) northeast of Aleppo and overran several buildings in Nairab airport, which is adjacent to the city and remains in government hands.

"Once the airports are neutralized, the opposition's grip on Aleppo will become less tenuous and the fighters can concentrate on taking the whole city," Halabi said.

(Reporting by Khaled Yacoub Oweis; Editing by Peter Graff)

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Egypt court jails Israeli for two years: court sources

CAIRO (Reuters) - An Egyptian court sentenced an Israeli man to two years in prison for crossing illegally into the Sinai peninsula, court sources said on Tuesday.

Egypt said in December it had arrested the man after he slipped into the Sinai's Taba region and took photographs of security buildings.

State media at that time identified the man, Andrei Pshenichnikov, as a 24-year-old army officer. Israeli media said he was a civilian and a pro-Palestinian activist.

The ruling by the court in the Nuweiba area of Sinai was issued on Monday.

The court sources said Pshenichnikov had not given a convincing explanation for why he crossed into Egypt illegally when he could have entered as a tourist.

Sinai has suffered from lax security since Egypt's 2011 uprising, which overthrew President Hosni Mubarak. Egypt regained the peninsula, which Israel occupied during a 1967 war, after the two signed a peace deal in 1979.

The two countries have maintained an uneasy peace since then, and their relations have been marred by several high-profile cases in which Egyptian authorities accused Israel of espionage.

Israeli tourists have continued to holiday in the Sinai, although in lower numbers since a spate of bomb attacks on resorts from 2004 to 2006.

(Reporting by Yousri Mohamed; Writing by Alexander Dziadosz; Editing by Jon Hemming)

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Pope's resignation could hurt Berlusconi in Italian vote

ROME (Reuters) - Pope Benedict's resignation could limit the chances of former Italian prime minister Silvio Berlusconi closing the gap on the center-left frontrunner before this month's election, some pollsters and analysts say.

Berlusconi, who seemed certain to lose a few months ago, has staged an aggressive campaign based on tax-cut promises that has eroded the lead of Pier Luigi Bersani's Democratic Party (PD) and raised the prospect of an inconclusive outcome.

However, some pollsters say the pope's resignation could clip Berlusconi's wings by eclipsing the election campaign on television and newspapers at a time when he has just 12 days left to win over voters.

"This will put the campaign on ice for a while and that is bad news for Berlusconi who still needs to make up ground," said Renato Mannheimer, head of the ISPO polling agency.

Final polls published on Friday before a two-week blackout ahead of the February 24-25 vote gave Bersani an average lead of 5.7 points, down from above 10 percent before start of the campaign.

Under Italy's complicated voting system, that gap would give Bersani a comfortable majority in the Chamber of Deputies, but may not guarantee him a majority in the Senate, where seats are allocated on a regional basis.

Berlusconi's media blitz has involved a spate of "shock announcements" including the promised reimbursement of a hated housing levy, the abolition of payroll taxes on new hires, and an amnesty for tax evaders.

CAMPAIGN COVERAGE

With the election campaign relegated from page one to the around page 15 of the main newspapers on Tuesday, the impact of such announcements can be expected to be diluted for several more days at least.

The pope's decision also dominated Berlusconi's own media empire on Tuesday. He controls three of Italy's seven national free-to-air television channels and the largest magazine publisher.

Although coverage of the Vatican may taper off in the coming days, speculation over Benedict's successor will ensure that it shares the spotlight with the election right up to voting day.

"This is going to take visibility away from Berlusconi, and that should benefit the frontrunner, which is the PD," said Roberto D'Alimonte, Italy's top election expert. "Berlusconi needs space in the media to close the gap."

Another aspect cited by some commentators was a possible connection in voters' minds between the decision of the pope to step aside due to his age and the refusal of Berlusconi to do the same even though he has been prime minister four times and is himself 76-years-old.

"After the pope's announcement Berlusconi seems 20 years older," said political commentator Antonio Polito in a tweet that reflected scores of similar remarks on the social network.

However, some pollsters were sceptical that Benedict's historic decision could affect voting behaviour as all the biggest parties were well known and their broad policy positions have already been laid out.

Nicola Piepoli of the prominent Piepoli Institute said he believed the center left's lead had already stabilized, while Maurizio Pessato of the SWG agency said the election race would soon force its way back to the front of Italy's news agenda.

"One or two days won't change anything. Now 90 percent of the news is about the pope, but tomorrow it will be 70 percent, and the next day 50 percent and so on," Pessato said.

(Editing by Alison Williams)

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Iran denies officials to be questioned over Buenos Aires bombing

DUBAI (Reuters) - Tehran denied on Tuesday it had agreed to allow international investigators to question Iranian officials over the 1994 bombing of a Jewish community center in Buenos Aires as part of a plan to form a truth commission.

Following the bombing which killed 85 people, Argentinian authorities in 2007 secured Interpol arrest warrants for five Iranians and a Lebanese. Iran denies links to the attack.

Argentina said last month it had agreed with Iran to establish a "truth commission" made up of foreign legal experts to review all the relevant documentations of the attack, which Argentine courts accuse Tehran of sponsoring.

But Iranian Foreign Ministry spokesman Ramin Mehmanparast on Tuesday denied plans that Iranian officials would be questioned over the bombing.

"This report is a lie," Mehmanparast said during a news conference in Tehran reported by the Iranian Students' News Agency (ISNA).

Israel and Jewish groups had criticized the pact as they fear it could weaken the case against Iranian officials. It was also seen as a diplomatic victory for Iran as it faces international isolation and sanctions over its nuclear program.

The memorandum of understanding between Iran and Argentina reportedly outlined plans for Argentine legal officials to meet in Tehran to question people named by Interpol.

Iranian Defence Minister Ahmad Vahidi is among the Iranian officials sought by Argentina, which is home to Latin America's largest Jewish community.

(Reporting by Zahra Hosseinian; Editing by Angus MacSwan)

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Putin aims to soften Duma bill on preventing wealth going abroad

MOSCOW (Reuters) - President Vladimir Putin has submitted a bill to Russia's parliament aimed at preventing officials stashing illicit wealth abroad, seeking to make good on a pledge to crack down on corruption and stem capital flight.

But the text, published on Tuesday, is weaker than one already proposed by the State Duma, the lower house, which unlike Putin's bill would not allow apparatchiks to own property abroad or to open foreign bank accounts.

In his first annual address to the nation since returning to the Kremlin for a third presidential term, Putin called in December for "a whole system of measures to 'de-offshore' our economy".

The legislative initiative seeks to take the wind out of the sails of election protesters who rallied around slogans denouncing "swindlers and thieves" around Putin as he campaigned for the presidential election last March.

Russia has suffered annual net capital outflows of around $80 billion in recent years, much of which has been driven by officials shifting money abroad, say anti-corruption activists.

Russia ranks 133rd, alongside Honduras and Guyana, out of 174 states in Transparency International's 2012 Corruption Perception Index. It is under international scrutiny as it chairs the Group of 20 nations this year and has pledged to push forward the economic forum's anti-corruption agenda.

The bills are intended to apply to senior state and regional officials, lawmakers, judges, prosecutors, executives at state-owned companies and members of the central bank board.

THE PRICE OF LOYALTY

But Putin's draft stops short of stringent measures that could alienate the loyalists whom he relies on to uphold the 'vertical' power structure he has built up since first rising to Russia's highest office in 2000.

By allowing officials to open foreign accounts only through Russian banks, Putin's bill could benefit the state banks VTB and Sberbank, which have subsidiaries in several European countries.

Sberbank's head German Gref has lobbied for easier rules.

"This is a kind of a loophole that would make it possible to finance real estate investments abroad but under tighter control with better transparency," said Oleg Vyugin, a former Russian financial market regulator who now advises Morgan Stanley.

Putin's ruling party holds a secure majority over the chamber, but the fact that he has submitted his own version reflects Kremlin concern that the Duma version is too harsh.

Deputy Speaker Sergey Zheleznyak was quoted by the Interfax news agency as saying that Putin's proposal, while allowing ownership of property abroad, would require this to be properly declared.

That, say lawmakers and bankers, could lead to a compromise being passed that would put the onus on declaring personal wealth without unduly affecting officials who lead increasingly international lifestyles.

If an official, their spouse or children who are minors violate the law, that official would lose his or her job, according to Putin's draft.

After the law enters force, affected officials would have three months to close overseas accounts at foreign-owned banks and sell their investments in foreign stocks and bonds.

Putin's spokesman, Dmitry Peskov, said trusts would also be covered by the ban. Offshore trusts often make it possible to conceal the identity of an investment's beneficial owner.

(Reporting by Katya Golubkova and Maria Tsvetkova; Editing by Douglas Busvine and Liffey)

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Small Russian banks help Iran's oil exports: minister

MOSCOW (Reuters) - Small Russian banks are participating in schemes to finance Iranian oil exports, which are the target of U.S. and European sanctions against Tehran, Russian Energy Minister Alexander Novak said on Tuesday.

"Large (banks) are not taking part. Small ones are, yes," Novak told reporters, in the first such confirmation by a top Russian official.

"Major banks are not involved as they have taken into consideration the possibility of any sanctions to which they might become subject."

In 2011, the U.S. Congress passed a law requiring buyers of Iranian oil to make significant cuts to their oil purchases, or risk being cut off from the U.S. financial system.

The European Union followed suit by imposing sanctions last July against Iran's oil and shipping industries which barred Europe-based insurers from covering tankers that carry Iranian oil. Later, it also added bans on financial transactions and on sales to Iran of shipping equipment, among other measures.

Novak, who spoke after meeting Iranian Foreign Ali Akbar Salehi in Moscow, declined to name either the banks involved or the scale and nature of their possible financing of oil exports from Iran.

Salehi, in Moscow on a trade mission, said that Russian companies would be welcome to participate in developing the growing oil industry of the OPEC member state.

The West suspects of Iran of seeking to acquire atomic weapons, while Tehran insists its nuclear program is peaceful. Six-power talks with Iranian nuclear negotiators are due to be held in Almaty, Kazakhstan, on February 26.

(Reporting by Vladimir Soldatkin; Editing by Douglas Busvine and William Hardy)

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