Category Archives: Industry Jobs Oil Economics

Cant Make More Land? China can…

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China has been aggressive in the region of the South China sea over island disputes and territory ownership. This was part in parcel the cause of the Obama administration Asia pivot. In recent years, China has become much more assertive in their military investments and power in that region. But building new islands is making the West very nervous as well as S. Korea, Vietnam, Philippines and Japan. No one is really speaking to this build-up.

Beijing Shocks US With Unbelievable Progress of Airstrip in South China Sea

New satellite imagery shows the extent of China’s construction of artificial islands in the South China Sea. Fiery Cross Reef could soon serve as a military-grade runway in the middle of the ocean. And despite its own military presence in the region, US officials are in panic.

Dredging sand from the seafloor, the Chinese government has been steadily building artificial landmasses atop sunken reefs in the Spratly Islands archipelago. In part, the islands will be used to bolster emergency response in the region. But Beijing also says the islands will be used as military defense posts, which worries officials in Washington, already concerned about a growing Chinese influence.

Images obtained by IHS Jane’s Defense Weekly from Airbus Defence and Space show just how rapid the island growth has been. With construction beginning only last year, Fiery Cross Reef is now home to China’s first airstrip in the South China Sea. With 503 metered already paved, the runway could be as long as 3,000 meters once completed. That’s long enough to support heavy military transport planes and fighter jets, according to Washington’s Center for Strategic and International Studies.

Progress of construction on Fiery Cross Reef
Progress of construction on Fiery Cross Reef

Existing People’s Liberation Army Air Force runways on the mainland range in length from 2,700 meters to 4,000 meters.

Satellite imagery also shows that a second 3,000 meter airstrip could be in the works on Subu Reef, another island being built in the archipelago.

Fiery Cross will also host a large seaport on the island’s southwest end. Imagery shows floating crane fortifying sea walls with concrete.

For US officials already concerned about the island construction, the existence of runways has reinvigorated those fears.

“The United States has a strong interest in preservation of peace and security in the South China Sea,” a spokesman for the US State Department said, according to Reuters. “We do not believe that large-scale land reclamation with the intent to militarize outposts on disputed land features is consistent with the region’s desire for peace and stability.”

A destroyer of the South China Sea Fleet of the Chinese Navy fires a missile during a training exercise.
Senate Demands Formal US Strategy to Stop China in South China Sea

But despite this supposed interested in “peace,” the US military has steadily increased its own presence in the region. In February, the US Navy admitted that it was flying its most advanced spy plane – the P-8A Poseidon – out of the Philippines to monitor the region.

Washington has also organized a series of war exercises with allied nations in the South China Sea. Earlier this month, the US and Indonesia participated in joint military exercises, in a move which was seen by some as a warning against Chinese expansion. Another series of war games conducted between the US and the Philippines will begin next week. Known as the Balikatan, the drills are “designed to increase our capability to defend our country from external aggression,” military spokesman Lieutenant-Colonel Harold Cabunoc told Reuters.

While publicly decrying China’s island construction as “aggressive,” US Senator John McCain, chairman of the Senate Armed Services Committee, has called on the Obama administration to move more military resources into the Pacific.

Nearly 12,000 soldiers will take part in this year’s Balikatan military exercises.
Hint to Beijing? US Organizes Massive War Games With Philippines in South China Sea

Speaking before a seminar in Washington on Thursday, Cui Tiankai, China’s ambassador to the United States, defended Beijing’s right to install military defenses in its own territory. He said there “should be no illusion that anyone could impose on China unilateral status quo” or “repeatedly violate China’s sovereignty without consequences.”

He also noted that the UN’s Convention on Law of the Sea forbids the United States from conducting “intensive and close-range reconnaissance in other countries’ exclusive economic zone.”

The South China Sea is a hotly debated stretch of water through which nearly $5 trillion in trade passes each year. While China argues that most of the area is its own territory, the Philippines, Malaysia, Vietnam, Taiwan, and Brunei also make overlapping claims.

 

There is California and then the Rest of the Country

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by Kevin D. Williamson
California’s drought provides a useful lesson. I am glad California is having a drought. Not because I hate California (I love California) or Californians (I hate them only a little, for what they’ve done to California) or Central Valley farmers (some of my best friends . . .) or even Governor Jerry Brown, droll disco-era anachronism that he is, but because the episode presents an excellent illustration of the one fundamental social reality that cannot be legislated away or buried under an avalanche of government-accounting shenanigans and loan guarantees or brought to heel by politicians no matter how hard the ladies and gentlemen in Sacramento and Washington stamp their little feet: scarcity.
California has X amount of water at its disposal, and it has politicians in charge of overseeing how it gets divvied up. Which politicians? The same ones responsible for the current sorry state of California’s water infrastructure, of course. Should be a hoot.
The main claimants are these: Farmers, who by some estimates consume about 80 percent of the water used in California. Agriculture is a relatively small component of California’s large and diverse economy, but California nonetheless accounts for a large share of the nation’s agricultural output. Both of those things are, in a sense, the good news: If market-rate water costs were imposed on California farms, as they should be, then any higher costs could be passed along — not only to consumers, but up and down the supply chain — in a very large global market, where they should be digested more easily. People with lawns, including people with the very large and complex lawns known as golf courses, who account for an extraordinary amount of California’s non-agricultural water use.
In arid Southern California, and especially in the golf-loving desert resort communities of the Coachella Valley, keeping the grass green often accounts for more than half — and sometimes much more than half — of residential water use. How thirsty is grass? Consider that 200 square feet of California swimming pool uses less water over the course of three years than does 200 square feet of California lawn. (Yes, I know: volume versus surface area, but the math still works out.) And about half of the water used on lawns is lost to the wind, because sprinkler systems spray water in the air rather than on the grass. The goddamned delta smelt, a.k.a. “the world’s most useless fish,” whose comfort and happiness demanded the dumping of some 300 billion gallons of fresh water into the San Francisco Bay — and thence into the Pacific Ocean — in 2009 and 2010. That’s enough fresh water to cover the state of New Jersey nearly three inches deep. The smelt’s delicious friend, the salmon, is a co-claimant.
Governor Brown’s response is a textbook example of the central planner’s fatal conceit. He issued an executive order imposing 25 percent cuts on the state’s 400 local water agencies, which supply about 90 percent of Californians’ water but do not supply the farms that consume most of the state’s water. That 25 percent figure looks bold and authoritative, but when was the last time you saw the production, consumption, or price of a scarce commodity in the real world move by such neat increments?
When something disturbs the equilibrium of the world’s oil markets — which happens every single day — then the markets make minuscule, complex adjustments, and continue to make them around the clock — the markets never sleep — with producers and consumers both modifying their behaviors to accommodate the new economic realities as they emerge. Amazingly (but not amazingly), this happens with no Governor Brown in charge of the process. You’ve never seen the price of pork bellies or soybeans simply jump 25 percent and stay there indefinitely, or rice or wheat consumption fall by neat round numbers. But Governor Brown imagines that he can rationally manage by fiat the consumption of the most important commodity in the world’s seventh-largest economy. Good luck with that. Governor Brown’s solution/non-solution has been criticized for failing to impose serious new restrictions on farmers. There are several reasons for this: First, Governor Brown probably does not want to reinforce the impression that his administration is an instantiation of insular coastal soy-latte progressivism staffed by feckless urbanites of the sort who believe that grapes come from Trader Joe’s and who are therefore willing to see the state’s rural interior gutted; second, and to give a decent if often foolish man proper credit, Governor Brown probably is not much inclined to impose heavy new burdens on the state’s relatively poor and downwardly mobile agricultural corridor, and to see large numbers of the poorest Californians thrown out of work; third, farmers already have seen their water allowances docked.
Among tragedies of the commons, California’s water situation is Hamlet, a monumental work fascinating for all of the possibilities it raises and not given to easy resolution. But even given the underlying complications, from the hydrological to the legal (California’s system of water rights is remarkably complex), the fundamental problem is that nobody knows what a gallon of water in California costs. Water allocations are made mainly through politics rather than through markets, with the state’s legal regime explicitly privileging some water uses over others. There are two possible ways to allocate water in California: The people in Sacramento, Governor Brown prominent among them, can pick and choose who gets what, with all of the political shenanigans, cronyism, inefficiency, and corruption that brings. Or Californians can get their water the same way they get most everything else they need and value: by buying it on the open market.
This is an excellent opportunity to apply the cap-and-trade model that many progressives favor when it comes to carbon dioxide emissions, with an important difference: This deals with real, physical scarcity, not artificial scarcity created by regulation. (Incidentally, it here bears repeating that notwithstanding the inaccurate proclamations of Governor Brown and President Obama, California’s drought almost certainly is not the result of global warming; the climate models supporting the scientific consensus on global warming predict wetter winters for California, not the drier winters that have produced the current crisis. California’s climate is complex, but a great deal of it is dominated by desert and arid to semi-arid Mediterranean conditions.)

As the economist Alex Tabarrok puts it: “California has plenty of water — just not enough to satisfy every possible use of water that people can imagine when the price is close to zero.” As noted, the water-rights picture is complicated, but it is not so complicated that California could not 1) calculate how much water is available for consumption; 2) subtract preexisting claims; 3) auction off the remainder, with holders of preexisting water rights allowed to enter that market and trade their claims for money.
A gallon of water used to green up a lawn in Burbank and a gallon of water used to maintain a golf course in Palm Springs and a gallon of water used to irrigate almonds in Chico would be — and should be — on exactly the same economic and political footing. As Professor Tabarrok notes, San Diego residents use about twice as much water per capita as do residents of Sydney, a city whose climate is comparably arid and whose residents are comparably well-off, a situation that is almost certainly related to the fact that San Diegans pay about one half of a cent per gallon for household water. Governor Brown wants to be the man who decides what is and is not a good use of California’s water; in defending his decision not to impose further restrictions on farmers, he said: “They’re not watering their lawn or taking long showers. They’re providing most of the fruits and vegetables of America and a significant part of the world.” That is no doubt true. But the only way to discover what that is really worth — not in sentimental, good-enough-for-government-work terms, but in cold-eyed dollar terms — is to allow real prices for water to emerge. My own suspicion is that California’s almonds and avocados will remain in high demand when the water used in their cultivation is properly priced on an open market. Relatively small gains in the efficiency of agricultural irrigation would go a long way toward helping California live with the water it has. So would converting a few million suburban lawns to desert landscaping. So would ceasing to dedicate large amounts of fresh water to political projects of dubious value. Which to choose? Before that question can be answered, there is the prior question: “How to choose who chooses?” The rational answer is that water consumers should choose how water gets used, provided that each of them pays the real price for his choices. California’s largest crop is grass — by which I do not mean marijuana, but lawns. Until the day comes when a ton of fresh-cut grass fetches a higher price than a ton of avocados, my guess is that California’s farmers will do fine under a market-based water regime. But maybe not. Everyone has his own favorite drought bugaboo: suburban lawns, almond farms, the delta smelt, golf courses, illegal marijuana cultivation, etc.
Given enough time, somebody will figure out a way to blame this all on the Koch brothers, illegal immigrants, or the Federal Reserve. But the fact is that nobody knows — nobody can know — what the best use of any given gallon of water in California is. Californians can put their money where their parched mouths are, or they can let Governor Brown play Ceres-on-the-Bay, deciding which crops grow and which do not. Whether the commodity is water or education or health care, if you care about something, put a price tag on it. You can’t afford for it to be cheap, and you sure as hell can’t afford for it to be free.*** Now look at the legislative issues in your state to determine what similar actions are being taken. While you’re at it, how does your state compare to the others fiscally?

States across the U.S. share the common goal of economic prosperity, but they differ vastly in how they set out to achieve it. The latest edition of the American Legislative Exchange Council- Arthur Laffer Rich States, Poor States competitiveness index examines policies that maximize economic growth and assesses which states are on the path to prosperity and which are more likely headed to the poorhouse.
For the eighth consecutive year, Utah has remained #1. Rounding out the top 10 for 2014 are: North Dakota, Indiana, North Carolina, Arizona, Idaho, Georgia, Wyoming, South Dakota and Nevada. At the other end of the spectrum, New York obtained the lowest ranking at #50. Working backward, Vermont ranked 49, preceded by Minnesota, Connecticut, New Jersey, Oregon, California, Montana, Maine, and Pennsylvania.

 states Alec

The rankings are a combination of past economic performance (economic growth, net migration and employment) and forward-looking policy variables such as taxes, debt, and the presence of right-to-work laws.

States at the top earned their rankings by implementing policies that energized their economies, attracted businesses and entrepreneurs, and expanded employment and income. So what are these energizing policies that could help states at the bottom boost their economies? Based on both past and present rankings, low income taxes and right-to-work laws provide the most bang for the buck.

Analysis provided alongside last year’s rankings showed economic growth in the nine states with no personal income tax averaged 62 percent from 2003 to 2013 while the nine highest income tax states grew by an average of only 47 percent. And states with no income tax experienced twice the rate of population growth (14 percent) as the highest income tax states (7 percent).

The growth gap between high-tax and low-tax states translates into more than a $100 billion in lost annual output for big, bottom-ranking states like California (#44) and New York (#50). And while it may seem counterintuitive, tax revenue increased substantially more in the nine states with no income tax than it did in the highest income tax states. Lower taxes produce a larger economic pie, and a larger pie means bigger slices for all—including the state tax revenue.

States with right-to-work laws that prevent workers from being coerced to pay union dues attract more businesses and workers, which in turn grow their economies. Compared to forced-union states, right-to-work states experienced twice the rate of employment growth from 2003–2013, one-quarter higher income growth, and one-third greater output growth. What’s more, right-to-work states experienced a 3 percent increase in net migration, while forced-union states suffered a 1 percent loss in net migration.

Competition is inherent in any ranking, and competition among the states is a good thing. Fortunately for states at the bottom of the rankings, research and analysis such as Rich States, Poor States provides an open playbook for prosperity.

Greece, Nazis, Germany, Russia and the Euro

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Greece has a new government and on tap is a huge payment of debt to the International Monetary Fund. Greece is in no position to meet this payment of $450 million. So Greece is looking to other countries for help and could be prepared to give up several pieces of key infrastructure. Iran, Greece and China are eager to come to the rescue, which could add to the power balance in Europe.

The Prime Minister of Greece, Alexis Tsipras is himself has a communist background.

Greece Nazi occupation: Athens asks Germany for €279bn

The Greek government says Germany owes Greece nearly €279bn (£204bn; $303bn) in war reparations for the Nazi occupation during World War Two.

It is the first time Greece has officially calculated what Germany allegedly owes it for Nazi atrocities and looting during the 1940s.

However, the German government says the issue was resolved legally years ago.

Greece’s radical left Syriza government is making the claim while struggling to meet massive debt repayment deadlines.

 

Reacting to the Greek claim, German Economy Minister Sigmar Gabriel said it was “dumb” to link Greece’s bailout by the eurozone with the question of war reparations.

“To be honest I think it’s dumb. I think that it doesn’t move us forward one millimetre on the question of stabilising Greece,” he said.

He said ordinary Greek citizens however deserved “huge respect” for their economic sacrifices under the bailout programme. The Greek elite had “plundered” the country, he complained.

‘Legally closed’

Greek Prime Minister Alexis Tsipras raised the reparations issue when he met German Chancellor Angela Merkel in Berlin last month.

The new figure given by Greek Deputy Finance Minister Dimitris Mardas includes €10.3bn for an occupation loan that the Nazis forced the Bank of Greece to pay.

“According to our calculations, the debt linked to German reparations is 278.7bn euros,” Mr Mardas told a parliamentary committee investigating responsibility for Greece’s debt crisis.

Mr Mardas said the reparations calculation had been made by Greece’s state general accounting office.

German soldiers raising the German war flag over the Acropolis
Greece was invaded by Nazi Germany in 1941 – here German soldiers raise their flag over the Acropolis

Berlin paid 115m Deutschmarks to Athens in 1960 in compensation – a fraction of the Greek demand. Greece says it did not cover payments for damaged infrastructure, war crimes and the return of the forced loan.

Germany insists the reparations issue was settled in 1990, before Germany reunified.

The budget spokesman for Chancellor Merkel’s Christian Democrats, Eckhardt Rehberg, reiterated on Tuesday that “the reparations issue is for us closed, politically and legally – the same applies to the so-called forced loan”.

Syriza politicians have frequently blamed Germany for Greek citizens’ hardship under the austerity imposed by international lenders.

Mr Tsipras is trying to renegotiate the €240bn EU-IMF bailout that saved Greece from bankruptcy. Greece has not received bailout funds since August last year, as the lenders are dissatisfied with the pace of Greek reforms.

A Greek repayment of €448m to the International Monetary Fund is due this Thursday.

Greek Finance Minister Yanis Varoufakis has said that Greece “intends to meet all obligations to all its creditors, ad infinitum”.

In the Artic, NATO vs. Putin

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4/3/2015 – OFFUTT AIR FORCE BASE, Neb.  — Two B-52 Stratofortresses from the 5th Bomb Wing, Minot Air Force Base, N.D., and a pair from the 2nd Bomb Wing, Barksdale Air Force Base, La., completed today simultaneous, roundtrip sorties from their U.S. bases to the Arctic and North Sea regions, respectively.

The training mission, coined POLAR GROWL, allowed the aircrews to hone their navigation skills and enhanced their ability to work with Allied partners, while demonstrating U.S. Strategic Command capacity.

“These flights, demonstrating the credible and flexible ability of our strategic bomber force in internationally-recognized flight information regions, are the culmination of months of planning and coordination,” said Adm. Cecil D. Haney, U.S. Strategic Command commander. “They are one of many ways we demonstrate interoperability, compliance with national and international protocols and due regard for the safety of all aircraft sharing the air space.”

Each of the two legs of POLAR GROWL provided unique training opportunities, all while testing the bomber force’s command and control apparatus’ ability to support two synchronized flight paths. The bomber crews flying the North Sea route participated in dissimilar air intercept maneuvers with fighter aircraft flown by the Royal Canadian Air Force, the U.K.’s Royal Air Force and the Royal Netherlands Air Force. In addition to conducting dissimilar air intercept maneuvers with Royal Canadian Air Force fighters, bomber crews on the Arctic leg of the mission transited around the North Pole, providing the crews invaluable training in polar navigation.

“Today’s dynamic global security environment is an interdependent world where international partnerships are foundational,” Haney continued. “Exercises and operations such as these bomber flights enable and enhance relationships with our Allies and partners, and allow others to understand what capabilities U.S. Strategic Command brings to the equation.”

The U.S. regularly conducts combined training and theater security cooperation engagements with Allies and partners. The combined training provided in POLAR GROWL follows the participation of B-52s in NATO Exercise NOBLE JUSTIFICATION in October 2014 and the deployment of B-52s and B-2s to RAF Fairford, U.K., in June 2014, both of which provided occasions to train alongside U.S. Allies and partners.

“The long-range nature of the mission, coupled with the opportunity to interact, in real-time, with Allied aircraft was an invaluable experience that simply can’t be replicated out of the cockpit,” said Maj. Nathan Barnhart, 343rd Bomb Squadron instructor radar navigator. “Training like this ensures we are ready to respond to any and all mission directives across the globe.”

Flown in support of both U.S. European Command and U.S. Northern Command, POLAR GROWL was specifically designed to demonstrate U.S. commitment to Allies and enhancement of regional security, and not directed at any country.

Additionally, U.S. forces conduct all flights in accordance with the procedures outlined in the International Civil Aviation Organization international standards and recommended practices. By conducting flights that follow the ICAOs fundamental objectives, regional safety is enhanced to prevent any chance of misunderstanding.

The B-52 Stratofortress is capable of delivering large payload of precision nuclear or conventional ordnance over long ranges, while also providing decision makers the ability to rapidly project military power and generate decisive effects.

*** The United States and NATO is performing these operations because of Putin.
For the interactive map go here.
Russia has been ramping up its military presence in the Arctic, reopening abandoned Soviet-era bases, boosting its troop presence, building new facilities, and refurbishing infrastructure and air fields across a region that stretches from Russia’s borders with Norway and Finland to the seas off Alaska. The push reflects a new emphasis under President Vladimir Putin on the Arctic as a region of strategic importance that is also rich in oil and gas reserves.
The push comes as melting sea ice opens up those Arctic energy resources, prompting a scramble by Russia and other Arctic nations — Denmark, Canada, the United States, and Norway – to stake competing territorial claims. Mouse over and click each dot to see details of Russia’s Arctic expansion.
***
Putin is being quite shrewd while Jens Stoltenberg, the newly assigned Secretary General of NATO was real stupid.

Oslo (AFP) – Russian ships docked at what was once a secret Norwegian naval base in the Arctic have prompted concern from the NATO country’s former top military leaders, anxious about its resurgent eastern neighbour roaming nearby.

 

Norway’s jagged Arctic coastline has regained its strategic importance since tensions between Russia and NATO members have spiked to levels not seen since the fall of the Soviet Union.

The rocky relations have led some to criticise the shutting down of Olavsvern Naval Base, a massive complex burrowed into a mountain near the northern town of Tromsoe, that has been closed since 2009.

Shuttering it was driven by the then seemingly reduced threat from Moscow and its massive Northern Fleet based on Russia’s nearby Kola Peninsula.

“We sold the only base worthy of the name that we had up there. It’s pure madness,” former vice admiral Einar Skorgen, who commanded Norway’s northern forces, told AFP.

Skorgen and other critics say Norway has robbed itself of a crucial foothold in the far north, forcing its submarines to travel hundreds of extra miles from their bases to defend the region.

On top of that, three Russian ships have spent the winter docked deep within the mountain hideaway, once a closely guarded military facility.

“We are the only country along with Russia to have a permanent presence in the Barents Sea, where we share a common border. Obviously our navy should be stationed there, including our submarines,” Skorgen said.

“If the ships aren’t there where they are needed, they might as well be scrapped altogether.”

The way the base changed hands and ended up being rented to Russian research vessels — some of them seismic survey ships reportedly linked to state-owned energy giant Gazprom — has added further fuel to their anger.

When no buyers answered the armed forces’ initial advert on Norway’s version of eBay, a Norwegian businessman clinched the deal in 2013 for a mere 40 million kroner ($5 million, 4.6 million euros) — a steal given that NATO ploughed nearly 4 billion kroner into its construction.

“There are no longer any secrets surrounding this base,” said its new landlord Gunnar Wilhelmsen.

“Not since the military and NATO agreed to put it on sale over the Internet, along with photographs of every nook and cranny.”

– Historic ‘blunder’ –

Nonetheless, the potential for Russian military activity aboard research vessels has many military experts worried, particularly former top-ranking officers who are more prone to speaking their mind.

“Russia is a country where the state has a say over all commercial or semi-state business. It’s clear, very few people know what happens on these vessels,” said retired vice admiral Jan Reksten, formerly second in command of the Norwegian military.

He said the sale of Olavsvern was “a double loss” as “Norway’s armed forces lost an important base and now there are Russian vessels docked there.”

In an ironic twist to the tale, the decision to close the base was taken by the leftist government of Jens Stoltenberg, who has gone on to become NATO’s current secretary general and who has warned countries not to lower their guard when it comes to Russia.

Kjell-Ola Kleiven, a blogger writing on security issues in Norway, calls the affair the “biggest blunder in recent history” in an oil-rich country which boasts the world’s largest sovereign wealth fund.

“With 7,000 billion kroner in the bank,” he wrote, “you would have thought that the Norwegian nation had the means and savvy to retain ownership of Olavsvern base.”

Despite the protests, Norway’s current right-wing government has shown no signs of reversing the decision made by its predecessors.

“There are no plans to re-establish military installations in Olavsvern,” Audun Halvorsen, political advisor to the defence minister, told AFP in an email.

“The owner of the site can use it as he sees fit and the armed forces do not have the authority to impose restrictions, nor any mandate to monitor civilian ships that dock there,” he added.

“Any suspected irregular activity is a matter for the police and legal authorities.”

Iran Nuclear Framework (MOU) Achieved

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This is NOT a final deal, it is only a Memorandum of Understanding that has a date of June 30 attached to it. That of course is an organic date also. There are ‘snap-back’ sanctions threats in place IF the IAEA determines that Iran has violated conditions.  What major question that remains is what are the real cures to Iran violating the conditions by the IAEA.

Iran still will have 5000-6000 centrifuges spinning and those provide Iran less than a year for a break-out condition, meaning a weapon can still be gained.

• The basis for an agreement for a peaceful Iranian nuclear program and a lifting of sanctions against that nation has been reached, EU foreign policy chief Federica Mogherini announced Thursday in Switzerland. “We have reached solutions on key parameters of a joint comprehensive plan of action,” she said.

• Iran’s enrichment capacity and stockpile would be limited, and Iran’s sole enrichment facility would be at the Natanz nuclear facility, Mogherini said. Other nuclear facilities would be converted for other uses, she said.

• Under the agreement, the nuclear facility at Fordow would be converted to a nuclear physics and technology center and the facility at Arak would be redesigned as a heavy-water research reactor that will not produce weapons-grade plutonium.

• The European Union would terminate all nuclear-related economic and financial sanctions against Iran, and the United States would do the same once Iran’s implementation of the agreement is confirmed, according to announcements of the deal.

• The United Nations would terminate all previous resolutions sanctioning Iran, and would incorporate other restrictions for an agreed-upon period, according to Thursday’s announcements.

Lausanne, Switzerland (CNN)The United States and other world powers have agreed on the general terms of a deal meant to keep Iran’s nuclear program peaceful, a major breakthrough after months of high-stakes negotiations.

The deal, announced Thursday evening in Switzerland, calls for Iran to limits its enrichment capacity and stockpile in exchange for the European Union lifting economic sanctions that have hobbled Iran’s economy.

Iran also agreed to enrich nuclear materials only at one plant, with other nuclear facilities converted for other uses, said Federica Mogherini, foreign policy chief for the European Union.

The United States would lift many sanctions on Iran after Iran’s implementation of the agreement is confirmed.

Leading negotiators announced the deal in a news conference in Lausanne, Switzerland, where they have been meeting for months.

Negotiators must resolve additional details of a final deal by the end of June. The announcement marks the end of a round of talks that started last week.

They were supposed to reach a framework for a deal by Tuesday but stretched the talks into Thursday.

The world powers involved in the talks were the United States, Russia, China, France, the United Kingdom and Germany.

The talks, aimed at reaching a preliminary political deal on Iran’s nuclear program, blew past their initial, self-imposed deadline of late Tuesday as Iranian and U.S. negotiators struggled to find compromises on key issues.

But the negotiators doggedly continued their work in Lausanne, trying to overcome decades of mistrust between Tehran and Washington.

The mutual mistrust has been a serious problem in the talks, Iranian Foreign Minister Javad Zarif said earlier Thursday.

“I believe respect is something that needs to be exercised in practice and in deeds, and I hope that everyone is engaging in that in mutual respect,” he said.

‘A few meters from the finishing line’

Iran wants swift relief from punishing sanctions that have throttled its economy. And Western countries want to make sure any deal holds Iran back from being able to rapidly develop a nuclear weapon.

The Obama administration needed something solid enough it can sell to a skeptical Congress, which has threatened to impose new sanctions on Iran. The potential deal is also coming under sustained attack from Israeli Prime Minister Benjamin Netanyahu.