Fed minutes short-circuit Wall Street rally

NEW YORK (Reuters) - Stocks dipped on Thursday after signs the Federal Reserve has growing concern about its highly stimulative monetary policy, giving investors reason to pull back after a two-day rally.
The minutes from the Fed's December policy meeting, released on Thursday, showed increasing reticence about adding to the central bank's $2.9 trillion balance sheet, which it expanded sharply in response to the financial crisis and recession of 2007-2009.
Some policymakers thought asset buying should be slowed or stopped before the end of 2013 while others highlighted the need for further stimulus. The Fed's policy of easy credit has helped push the S&P 500 to a 13.4 percent gain in 2012. Ending that policy would remove an incentive for investors to purchase riskier assets like stocks.
"The surprise was the changes to duration and extent of that program in 2013, but given the tone in previous Fed meeting minutes, it should not have been an entire surprise," said Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon.
Despite the concerns about the effects of its asset purchases, the Fed look set to continue its open-ended stimulus program for now.
Stocks pushed the S&P 500 index 4.3 percent higher in the previous two sessions. On Thursday investors turned their focus to coming battles in Congress, including the likelihood of bitter fights over budget cuts and raising the federal debt ceiling.
"We were definitely technically extended and ripe for a little bit of a consolidation and today is very orderly - traders and investors are still trying to digest the language and the details from the 2012 taxpayer act," Dickson said.
The Dow Jones industrial average <.dji> dropped 21.19 points, or 0.16 percent, to 13,391.36. The Standard & Poor's 500 Index <.spx> shed 3.05 points, or 0.21 percent, to 1,459.37. The Nasdaq Composite Index <.ixic> lost 11.70 points, or 0.38 percent, to 3,100.57.
Economic data showed U.S. private-sector employers shrugged off a looming budget crisis and stepped up hiring in December, offering further evidence of underlying strength in the economy as 2012 ended.
The government's broader monthly payrolls report, due on Friday, is expected to show the economy created 150,000 jobs compared with 146,000 in November, according to a Reuters poll. The U.S. unemployment rate is seen holding steady at 7.7 percent.
Retailers advanced after several major companies in the sector beat expectations of modest sales increases in December, with the S&P retail index <.spxrt> up 0.4 percent.
Shares in Costco Wholesale Corp rose 1 percent to $102.49 after the company reported a better-than-expected 9 percent rise in December sales at stores open at least a year.
Gap Inc stock climbed 2.3 percent to $32.09 following news that the retailer will buy women's fashion boutique Intermix Inc, the Wall Street Journal reported.
Family Dollar Stores Inc stumbled 13 percent to $55.74 on the company's report of lower-than-expected quarterly profit.
Volume was relatively strong, with about 6.68 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, slightly above the 2012 daily average of 6.42 billion.
Advancing stocks outnumbered declining ones on the NYSE by 1,692 to 1,321, while on the Nasdaq, decliners beat advancers 1,287 to 1,187.

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Hong Kong shares may trim strong 2013 start after Fed voices concern

HONG KONG, Jan 4 (Reuters) - Hong Kong shares could end a
two-day rally on Friday, tracking Wall Street weakness after
signs that the U.S. Federal Reserve has growing concerns about
its stimulative monetary policy.
Any losses could be limited if mainland China markets reopen
strongly on Friday, trading for the first day in 2013 after a
three-day New Year holiday.
On Thursday, the Hang Seng Index ended up 0.4 percent
at 23,398.6, its highest since June 1, 2011. The China
Enterprises Index of the top Chinese listings in Hong
Kong added 0.8 percent, reaching another peak since August 2011.
On the week, the indexes are up 3.2 and 5.5 percent,
respectively. The H-share index's relative strength index (RSI)
value suggests that it is now at its most overbought since
October 2010.
Elsewhere in Asia, Japan's Nikkei is up 3 percent in
its first trading session for the year, while South Korea's
KOSPI is down 0.4 percent at 0042 GMT.
FACTORS TO WATCH:
* Consolidation of Austria's cutthroat telecom market moved
ahead on Thursday when Hutchison Whampoa Ltd completed
its 1.3 billion euro ($1.7 billion) takeover of Orange Austria,
making it the country's third-biggest mobile operator.
* Hong Kong's Li & Fung Group agreed to acquire a
majority stake in South Korean children's apparel maker Suhyang
Networks for roughly 200 billion won ($188 million), a South
Korean newspaper reported on Thursday.
* Hong Kong November 2012 retail sales rose 9.5 percent from
a year earlier.
* Bestway International Holdings Ltd has cancelled
part of its mining area in Mongolia due to the implementation of
new regulations.
* Chinese property developer Kaisa Group Holdings Ltd
has issued $500 million in senior notes due 2020
bearing an interest rate of 10.25 percent per annum.
* Chinese property developer Country Garden has
issued $750 million senior notes due 2023 with an interest rate

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Asia stocks eke out gains on China hopes, oil eases

HONG KONG (Reuters) - Most Asian stock markets edged higher on Thursday on hopes of a steady economic revival in China, although oil gave back part of the previous session's strong gains as investors took some money off the table and braced for more U.S. budget battles.
The MSCI Asia Pacific ex-Japan index of stocks rose 0.2 percent following Wednesday's 2 percent jump on relief that U.S. politicians had averted the "fiscal cliff".
Data from China showing the services sector expanded in December continued to underpin expectations of an economic recovery that has helped spur a strong rally in Hong Kong-listed Chinese shares over the past month.
The China Enterprises index which rallied more than 4 percent in the previous session eased 0.2 percent. Onshore Chinese markets will resume trading on Friday.
"China looks like it's improving at the margin and the market has momentum that could last for at least a few months," said Christian Keilland, head of trading at BTIG in Hong Kong.
"Investors seem to have accepted that reforms are underway but they're going to happen at a slower pace."
Australian stocks rose 0.7 percent to their highest in more than 19 months, with mining giants Rio Tinto up 2.4 percent and BHP Billiton up 0.8 percent, among the top gainers on the benchmark S&P ASX/200 index.
South Korea's Kospi underperformed the region, falling 0.4 percent as automakers and other exporters slumped on a stronger Korean won, which hit a 16-month high against the dollar overnight.
In other currency markets, the Japanese yen bounced after hitting a 29-month low versus the dollar earlier in the day but analysts warned that any strength is likely to be short-lived.
"Technically dollar/yen looks somewhat overbought here. It's gone a long way in a very short time," said Callum Henderson, global head of FX research for Standard Chartered Bank in Singapore, adding that the dollar could see some consolidation in the near term before heading higher.
The euro which in overnight trading was close to a 8-1/2 month high against the dollar, slipped 0.1 percent.
The U.S. dollar rose 0.2 percent against a basket of major currencies.
President Barack Obama and congressional Republicans face even bigger budget battles in the next two months after a hard-fought deal averted the fiscal cliff of automatic tightening that threatened to push the U.S. into recession.
Strength in the dollar and profit-taking pushed oil prices lower with Brent crude slipping 0.3 percent and U.S crude futures down 19 cents to $92.93.
"After the initial excitement, reality sets in," said Victor Shum, oil consultant at IHS Purvin & Gertz. "There will be other negotiations and the deal is a compromise."

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South African rand weakens in muted trade

JOHANNESBURG (Reuters) - South Africa's rand softened against the dollar on Thursday in thin post-holiday trade, underperforming many emerging market currencies.
The rand was at 8.5168 to the dollar at 0651 GMT, 0.3 percent weaker than Wednesday's New York close, making it one of the worst performers in a basket of 20 emerging market currencies monitored by Reuters.
It had reached a 3-month high of 8.42 to the dollar early on Wednesday, lifted by U.S. lawmakers reaching a deal to avoid a "fiscal cliff" of tax increases and spending cuts that threatened the world's biggest economy.
The rand erased most of those gains later in the session.
Trading was expected to pick up next week when most market participants return from their holidays, giving the rand some direction.
"There's still a holiday mentality out there and liquidity has been very thin. The rand has been trading erratically," said one trader.
"We will only start seeing proper trades coming back into the market next week when market participants are back again."
The yield on the 2026 government bond was at 7.25 percent while the 2015 issue was yielding 5.33 percent.

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Brent falls towards $112; China data offsets US concerns

 Brent crude pared earlier losses to stay above $112 a barrel on Thursday as positive data reinforced hopes of an economic recovery in China, but the prospect of more budget battles in the United States and rising oil supply weighed on prices.
President Barack Obama and congressional Republicans face even bigger budget wrangling in the next two months after a hard-fought deal halted a round of automatic fiscal tightening that threatened to push the world's largest economy into recession.
Brent crude fell 29 cents to $112.18 a barrel by 0529 GMT after rising more than 1 percent on Wednesday to settle at the highest since October.
U.S. crude for February delivery was down 21 cents to $92.91 after closing at its highest since September.
"After the initial excitement, reality sets in," said Victor Shum, oil consultant at IHS Purvin & Gertz. "There will be other negotiations and the deal is a compromise."
Both contracts pared earlier losses of more than 50 cents after data showed China's services sector expanded in December, fueling hopes that the world's second largest economy is recovering.
Oil prices surged at the start of the year despite analysts' expectations of a lower price in 2013 as supply outweighs demand. Crude production in the United States has hit a 19-year high while Russia pumped the most oil in the world last year, ahead of Saudi Arabia.
"If one focuses on the oil fundamentals, pricing at the current level appears overbought," Shum said, pointing to the fragile global economy and the growth in oil production from non-OPEC countries.
"In 2013, OPEC may have to limit supply in order to accommodate a rise in non-OPEC oil production growth," he said.
In the United States, a major pipeline expansion that aims to ease the bottleneck at Cushing, Oklahoma -- a factor that has depressed U.S. crude prices -- should pump at full rates from the end of next week.
The spread between Brent and West Texas Intermediate has narrowed to about $19 a barrel, down from 2012 highs of about $26.
Investors will be scouring weekly data on U.S. jobless claims and oil inventories due later on Thursday for further cues on the economic health of, and fuel demand in, the world's largest economy.
U.S. commercial crude oil stockpiles likely fell last week due to lower imports as refiners drew down inventories for year-end tax purposes, a preliminary Reuters poll of eight analysts showed.
The American Petroleum Institute (API) will release its report on Thursday, delayed due to the New Year day's holiday on Tuesday. The U.S. government's Energy Information Administration (EIA) will issue its data on Friday.

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New Constitution divides Egypt as economy falters

New constitutions are usually greeted with great fanfare. They're assumed to carry both the promise of a fresh start and signal that a chaotic transition has come to an end.
But Egypt's new constitution is something else again. Signed into law on Dec. 26 by President Mohamed Morsi, the new charter has become a symbol of a sharply divided nation. Mr. Morsi's opponents charge the passage of the constitution is not the result of a national consensus, but evidence that the Muslim Brotherhood that propelled Morsi to power intends to push its agenda over the heads of secular-leaning and liberal political opponents.
While Morsi extended an olive branch to opponents in a nationally televised speech on Dec. 26, the country is at its most sharply polarized point since longtime dictator Hosni Mubarak was ousted in February 2011. Egypt is scheduled to hold parliamentary elections in about two months, and the runup to that election is more likely to exacerbate Egypt's open political wounds rather than heal them.
What will that mean? More street protests, more chaotic governance, and no short-term fixes for an economy that was weak at the time Mr. Mubarak fell and has gone from bad to worse. The Egyptian pound fell to its lowest point against the dollar in eight years this week, and the currency may say more about what happens to Egypt in the coming years than the contents of the new Constitution. Roughly 30 million of Egypt's 80 million people get by on $2 or less a day, and are heavily reliant on government subsidies. The Egyptian government spent $3 billion on its subsidized bread program alone last year.
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And with tourism in the dumps and a collapse in local and foreign investment, the government's ability to meet the most fundamental needs and demands of its citizens has been badly strained. Foreign reserves stood at about $36 billion at the start of 2011. Today, foreign reserves are at about $15 billion.
Finding a solution to Egypt's economic woes won't be easy. But for now, that issue is being pushed to the side, with a loose coalition of secular-leaning groups vowing to fight against the Muslim Brotherhood's agenda. The opposition argues that individual liberties are now threatened by the enshrining of aspects of Islamic law into the Constitution and giving Egypt's powerful military the right to detain and try civilians under some circumstances.
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Morsi promised a national dialogue this week and said "mistakes" were made in the drafting of the Constitution, but those remarks fell completely flat as a conciliatory gesture. In the past few weeks he's gotten everything he wanted and critics of the Constitution received zero concessions. Now that he has the document in hand, offers of "dialogue" are being seen as an attempt to put a magnanimous gloss on what was a bare-knuckle, winner-take-all contest that Morsi and the Muslim Brotherhood just won.
Leftists, so-called liberals, and Egyptians who want a secular approach to the state and Egyptian identity are furious and pondering their next moves. The Brotherhood, meanwhile, is sticking to the game plan that's made it the winner in all four elections held (two referendums, the last parliamentary election, and the presidential) since Mubarak was driven from power in February 2011: superior organization and on-the-ground mobilization.
While opponents of the Constitution pointed to low turnout in the referendum as a sign of general public dissatisfaction with the document, the Brothers have won both elections with overwhelming turnout and ones with small turnout. With the constitution set, next up are fresh parliamentary elections that the movement is going to pull out all the stops to dominate, just like it did last time.
That annulled parliamentary election has much to do with why Morsi's political opponents trust neither him nor his movement. In 2011, the Brothers loudly proclaimed that they had no intention of dominating Egyptian politics and vowed to contest only about 30 percent of the seats in the next parliament. The movement and its newly minted Freedom and Justice Party (FJP) also promised not to run a candidate for president.
But as the contours of the new Egypt started to emerge, and the prospect of a counter-revolution by military officers looked less likely, the Brothers abandoned both promises. Obviously, Morsi won the presidency. And as for Parliament, the Brother's contested 100 percent of the seats, winning almost half of them.
Now on Morsi's agenda is victory in the parliamentary election. If the Brothers can steamroll the opposition again, they'll hold the presidency, the legislature, and a Constitution written with little input from the country's secular-leaning forces.
But the real challenge is Egypt's weak economy and the increased suffering of its poor. Absent economic improvement, and soon, the turmoil of Egypt's past two years could well end up being overshadowed.

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Progress watch 2012: Smart phones, jobs returning to America, and war crimes trials

Good news is hard to find. That's partly because, no matter what the topic, there's so much distracting bad news: ongoing violence in Syria, America's allegedly imminent fiscal demise, the National Hockey League lockout. From the front page to the sports page, so little looks good.
It isn't just the cacophony of naysaying and fear that crowds out good news. It's also the nature of progress itself: Good news happens slowly. The American storytelling ethos loves narratives of overnight success, but real change isn't usually so sudden. Earlier this year, the World Bank announced that the number of people living on less than $1.25 a day – what policy wonks call "extreme poverty" – had dropped by half since 1990. That study might have been the biggest bit of good news to go overlooked this year, but consider this: Global extreme poverty was actually halved in 2010 – it took two years even to see that progress had happened.
Other highlights, too, have been subject to the long arc of incremental change. Nearly 90 percent of people globally have access to clean water, according to the World Health Organization. In Mexico, homicide rates – driven to outrageous levels in the drug wars – are down for the first time in six years.
Recommended: 2012's 'good news' stories
In The Hague, two international war criminals were found guilty in landmark rulings: the International Criminal Court convicted Thomas Lubanga, a Congolese rebel, of recruiting child soldiers. The conviction, after a two-year trial, was a first for the ICC, established a decade ago. The verdict "was the culmination of decades of hope that accountability for the most serious crimes would be achieved," says James Goldston, founding director of the Open Society Justice Initiative. "It took 10 years, but this conviction [is] an enormous accomplishment and a major step forward for international justice."
In a long-awaited verdict from a different court, the Special Court for Sierra Leone, former Liberian President Charles Taylor was convicted of war crimes. He is effectively the first former head of state to be convicted of war crimes. (The formal distinction goes to Karl Dönitz, who served as president of Germany for the 23 days between Hitler's suicide and the dissolution of the government after Germany's surrender in World War II.)
Not all of this year's good news comes on the heels of tragedy. In Nigeria, Egypt, and India, mobile technology is expanding entrepreneurship so quickly that small, mobile-tech-heavy businesses make up 38 percent of the gross domestic product, according to a study released earlier this year by global consultancy Booz Allen.
Americans are seeing their own mobile revolution – more than half of all Americans today use their cellphones to access the Internet, up from a third three years ago, according to the Pew Research Center. That puts the United States on the brink of a breakthrough: "Within a few years, [smart phone use] is going to be ubiquitous, and when you get that many people using smart phones, it transforms the economy, society, and politics," says Darrell West, director of the Center for Technology Innovation at the Brookings Institution in Washington.
Indeed, technology drives much of the change seen in America, even just this year. Sales of nonpolluting electric cars are surpassing expectations. And self-driving cars are now legal in California. Google conducted the first test of its self-driving car with a passenger who was chauffeured to the dry cleaner and Taco Bell. Even this flashy moment has been slower to brew than it may seem. "This has always been one of the more popular predictions about the future people were talking about in the '60s and '70s, back when they were discussing all the other sort of wide-eyed, post-cold-war futures," says Patrick Tucker, the director of communications at the World Future Society. Beyond being wide-eyed, self-driven automobiles might make passengers safer – computers are likely eventually to be better drivers than humans, Mr. Tucker says – and transform cities. Summoning one's car from even a mile away "removes the need for designing cities on the basis of the availability of on-site parking," he says. Ordering up an automobile also makes car sharing easier, which can reduce carbon emissions, he adds.
Even traditional travel by land, sea, and air has gotten safer this year. The accidental death rate for children in the US plunged 30 percent in the past decade, led by auto safety improvements such as increased use of seat belts and booster seats and safer vehicle design, according to the Centers for Disease Control and Prevention. Piracy and armed robbery at sea dropped to the lowest levels since 2009, when Somali piracy spiked, reports the International Chamber of Commerce International Maritime Bureau, which attributes the decline to improved policing by international navies and onboard security measures. And in the air, there were no major commercial airline crashes in the US in 2012, the 11th year in a row, says Todd Curtis, director of the AirSafe.com Foundation.
Election season debates overshadowed some exciting news about the economy, which may get a transforming boost from a new kind of robot: Baxter, the (comparatively) affordable factory robot from Rodney Brooks, the man who brought the world the Roomba vacuum cleaner. Tucker calls Baxter "the most unique factory robot that's ever been made" because of its dexterity. "It's about the size of an NFL linebacker, and it's got two arms [that] can pick up a whole bunch of types of objects and do a wide variety of very simple tasks," Tucker says.
"That doesn't sound ... as earthshaking as it is," he concedes. But it might be a major game changer. Most factory robots can perform a few specific tasks, and they can't easily be programmed to do something else. That's why they're seen on assembly lines for cars and appliances but not on those for toys or personal electronics, Tucker says. Baxter can handle the little items that need an update every season. And that might bring some of the manufacturing that's migrated to China back to the US.
Then again, some of that labor is already returning: This year, "reshoring" entered the lexicon as a way of talking about manufacturing jobs returning to the US, usually from China. There isn't tracking of official numbers for this, but the Reshoring Initiative estimates that 12 percent of the manufacturing jobs the economy has seen return since 2010 were from abroad.
Observers caution that the reshoring trend may be a fad; more time is needed to know for sure. That brings us back to the slow pace of progress. However maddening it may be, it is also undeniable: Things are getting better.
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"We're winning more than we're losing," says Jerome Glenn, director of the Millennium Project, a global futures research center and think tank. The project releases an annual "State of the Future" index, and this year's says that "the world is getting richer, healthier, better educated, more peaceful, and better connected, [and] people are living longer."
Mr. Glenn cautions that things aren't all rosy, and thumbing through any newspaper would suggest there are still plenty of world problems to make progress on. He compares it to making ice: Cooling water isn't too difficult, but turning it into ice requires serious energy. "We're at that point of going from water into ice in a sense of difficulty" of shared global challenges. It's time, he says, "to roll up our sleeves.

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Secret cremation for gang-rape victim sparks anger against Indian government

Protests became violent today in Delhi as the youth wing of the opposition Bhartiya Janata Party (BJP) pelted stones at police and tried to climb over barricades following news of the secret cremation of the body of the Delhi gang rape victim.
The young woman was cremated on the outskirts of Delhi Sunday morning, in an effort to prevent the public from swarming the funeral site. However, this only increased public resentment, reaffirming the growing perception that the government was being hostile to the protests.
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Protests began nearly two weeks ago, after the gang-rape and brutal assault of the 23-year-old on Dec. 16, with an outpouring of anger by Indians demanding greater protection for women from sexual violence. Demonstrators marched to Raisina Hill, which houses the presidential palace. There, on the first day of demonstrations a young girl breached security and entered the palace.
As protests became more organized on Facebook and by political organizations, more people took to the streets and the relationship between protestors and police grew more strained.
One protester was filmmaker Anusha Rizvi, who witnessed left-wing groups form a circle and peacefully protest within it. “By afternoon we heard policemen announce loudly in their walkie talkies that they would start charging on the crowd. The regular police went behind and the police criss-crossed through the group of people in the circle.”
The police then charged the crowds with batons, fired tear gas and water canons. The government later said the police had little choice because the protests had become violent. However, many witnesses say the police charged on nonviolent crowds who were sitting on the road.
“I couldn’t see anything. I just heard the two cracks of a split bamboo stick on my back, butt, and thighs. Then I heard the police screaming ... and then I saw a boot kicking my knees and shin,” wrote graphic designer Sangeeta Das in a widely circulated Facebook note.
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Lokesh, an activist with the feminist organization Streemukti Sangathan, said that a few people were seen pelting stones out of frustration but the rest tried to stop them. “I don’t know who they were,” she said, “but ... the government was ignoring us and not responding to the protests.”
That the police wanted to disperse the protests and not simply respond to stray stone-pelting became clear when it also attacked media personnel and their vehicles, say observers.
“News channels had declined [a] government request to leave the site and [so] they showered our broadcast vans [with a water hose] to make us leave,” said one journalist on condition of anonymity. Another journalist was injured when a tear gas shell exploded near her. The Information and Broadcasting Ministry later issued an “advisory” asking news channels to show restraint with their reporting, threatening action if they didn’t.
Metro stations in central Delhi were closed for nearly a week. India Gate and Raisina Hill were cordoned off from most traffic.
“This is how the government handles public protest across India, even firing directly at protestors and killing them,” says political scientist Nivedita Menon. “Be it agitations against nuclear plants or land grabs, this is the language of the government,” she says echoing the views of many Indians as the protest movement has become as much about police repression as it has been about the safety of women.
TO QUELL POPULAR ANGER
The government has appointed a special commission designed to give recommendations on how to keep women safe and has made various statements to assuage public anger to little avail.
“The government didn’t have to take the burden of guilt in this case, it could have shared people’s grief,” says political commentator Ajoy Bose, adding that since the anticorruption protests of 2011 the government has showed it has become scared of demonstrations. “There is a huge disconnect between the government and the people, the government no longer knows how to interact,” he said adding that that, too, has angered Indians.
Barkha Dutt, editor of the NDTV news channel, tweeted, ”From day one the government needed to (and didn't) show Compassion, Communication and Commonsense. Now their attempts seem forced, puny, insincere.”
Still, say some, directing anger at the government is misplaced. “The protestors are taking the easy way out by blaming government apathy. The state only reflects a deeply misogynistic society – the protestors need to look within, not without,” said columnist Mihir Sharma.

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UN envoy: Without deal in Syria, think Somalia not Yugoslavia

• A daily summary of global reports on security issues.
After a week of attempting to craft a peace plan that both President Bashar al-Assad and the Syrian opposition would agree to, the United Nations' envoy to Syria said the situation will not stabilize on its own and that a political deal is no closer.
“People are talking about a divided Syria being split into a number of small states like Yugoslavia,” Lakhdar Brahimi said, according to The New York Times. “This is not what is going to happen. What will happen is Somalization – warlords."
“The situation is bad and it’s getting worse,” Brahimi also said, according to Bloomberg Businessweek. “I can’t see anything other than these two paths: Either there will be a political solution that will meet the ambitions and legitimate rights of the Syrian people, or Syria will turn into hell.”
He warned that the violence could claim as many as 100,000 lives in 2013.
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According to the New York Times, Mr. Assad did not respond to Mr. Brahimi's proposals and a Syrian opposition leader declined an invitation to Moscow to meet with Russian officials. Sergei Lavrov, Russia's foreign minister, said Assad could not be convinced to leave the country, which the opposition has insisted is a precondition for talks.
Speaking about the yawning gap that has to be bridged for the two sides to sit down for talks, CNN reports that Brahimi said, "The Syrians disagree violently. On one side, the government says we are doing our duty to protect our people from ... terrorists. On the other side, they say the government is illegitimate," Brahimi said. "They are not talking about the same problem. They are talking about two different problems."
Brahimi's comments came the day after what CNN said might be the bloodiest day in the uprising – on Dec. 29, at least 399 people were killed.
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According to Reuters, Mr. Lavrov pinned the blame for continuing violence on the opposition, even though the US, European countries, and most Arab states back the opposition's demand that Assad's removal from power come first.
"When the opposition says only Assad's exit will allow it to begin a dialogue about the future of its own country, we think this is wrong, we think this is rather counterproductive," he said. "The costs of this precondition are more and more lives of Syrian citizens."
But the Syrian opposition's calculus has changed over the last couple months. A string of victories has made it optimistic abut winning the war in the end, and therefore less flexible in negotiations, according to Reuters.
REGIME STILL HAS STRENGTH
But despite their recent success, "the government still has the bigger arsenal and a potent air force. It controls most of the densely populated southwest of Syria, the Mediterranean coast, most of the main north-south highway and military bases countrywide," Reuters notes.
Russia appears to be making an effort to secure a meeting, agreeing to meet the opposition representative outside of Russia if he insists. Bloomberg reports that, according to RIA Novosti, the foreign ministry said talks could be held in Geneva or Cairo instead.
Meanwhile, Brahimi is rapidly losing ground support in Syria, Reuters reports.
The envoy's credibility with the rebels appears to have withered. In the rebel-held town of Kafranbel, demonstrators held up banners ridiculing Brahimi with English obscenities.
"We do not agree at all with Brahimi's initiative. We do not agree with anything Brahimi says," the rebel chief in Aleppo province, Colonel Abdel-Jabbar Oqaidi, said on Friday.

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Obama's pivot to Asia? Middle East will still demand attention in 2013.

Nearly four years ago, President Barack Obama addressed a packed, enthusiastic crowd at Cairo University and promised a "new beginning" between the United States and the Muslim world.
In that speech, Mr. Obama outlined a vision for a new era of economic cooperation in the Middle East, one of steadfast US support for democracy, and of reset priorities.
"I've come here to Cairo to seek a new beginning between the United States and Muslims around the world, one based on mutual interest and mutual respect," he said then.
While Obama ended the war in Iraq on a schedule provided to him by his predecessor, George W. Bush, many of the promises in that speech went unfulfilled. The Guantánamo Bay military prison was never closed. Progress on peace between Palestinians and Israelis was not made. The promised economic development of Afghanistan, beset by a war that Obama now looks set to end in 2014, never took root.
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Nevertheless, four years later, he's got his new beginning – not by his own hand, and not the one he would have either imagined or wanted when he made his series of stirring promises in Cairo.
The self-immolation and death of Mohamed Bouazizi in Tunisia in December 2010 led to the sharpest change in the politics of the Middle East since the 1960s. The events of the past year in Egypt, Syria, Tunisia, and Libya have cemented a radical new reality that Obama will have to contend with in his second term.
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For all the talk of a US strategic "pivot" to Asia, a dramatically changed Middle East looks set to suck up a huge portion of American diplomatic energy and attention in the coming years. Old, comfortable patterns of dealing with regional dictators like Egypt's Hosni Mubarak and Tunisia's Zine El Abidine Ben Ali have been severely disrupted. Islamists, long feared by the US, have since won power in free elections in Egypt and Tunisia, and are among those fighting the secular regime in Syria.
SYRIA'S DENOUEMENT
In Syria, the civil war has claimed more than 40,000 lives, and there are threats to US interests in both the demise of Bashar al-Assad's regime there, if it comes, and in his survival. As this year draws to a close, the US has edged closer to full-fledged support for elements of the uprising against Mr. Assad even as it labeled one of the opposition's most effective fighting groups, the jihadi Jabhat al-Nusra, a foreign terrorist organization.
The denouement there, when it comes, could well have destabilizing ripples for neighboring Lebanon and Iraq. Syria's chemical weapons stockpiles are a reality that can't be ignored, and the prospect of those weapons falling into the hands of jihadi groups has the Obama administration drawing up contingency plans for possible intervention.
Israel, while it's had a long cold war with Assad's Syria and continues to occupy the Golan Heights, nevertheless is frightened by the prospect of yet another Sunni Islamist regime, rather than a secular nationalist one, on its doorstep.
TROUBLES AT HOME FOR ISRAEL
The Israeli-Palestinian conflict is also moving into new, dangerous waters. The so-called peace process that began with the Oslo Accords in 1993 has petered out completely. In 2009, Obama called for an end to Israeli settlement construction in the West Bank and early in his presidency leaned hard on Israeli Prime Minister Benjamin Netanyahu for at least a temporary freeze. But expansion has continued unabated, and the Obama administration appears to have lost interest in pressing the issue.
In the West Bank, Palestinian Authority President Mahmoud Abbas has been weakened by his failure to negotiate an end to the encroaching Israeli settlements, and in Gaza the Islamist movement Hamas remains as entrenched as ever.
In November, Israel was a hairbreadth away from an invasion of Gaza that was only avoided at the last minute by a negotiated cease-fire. A key figure in heading off that crisis was Egypt's president, Mohamed Morsi, the Muslim Brotherhood stalwart whom the US turned to as intermediary with Hamas.
BROTHERLY RELATIONS
The rise to power of the Islamist Muslim Brotherhood in Egypt captures the peril for the US of this new beginning. Mr. Morsi was elected in a free election, but the country's new constitution, which is set to pass a referendum this month, is filled with alarming elements in terms of personal freedoms and minorities' rights.
The state of that country's economy has deteriorated sharply thanks to the political turmoil of the past two years, with clashes in Cairo between supporters of Morsi and his opponents in November being the latest reminder that the authoritarian stability of the Mubarak years has been replaced by something fluid and hard to predict.
Many of the Egyptian liberals and secularists who listened to Obama's Cairo speech so appreciatively now grumble that he's backing the Brothers as they seek to cement their power and influence over the country. In the year ahead, and beyond, Obama will have to weigh criticism of Egyptian suppression of civil liberties on the one hand against a desire for Egyptian cooperation in keeping Hamas, an offshoot of the Muslim Brotherhood, contained in Gaza.
There are still other shoes to drop in the region. Libya is struggling to create a new order after decades of one-man rule by Muammar Qaddafi, with weapons smuggling rife along its desert borders and sharp clashes there still to be worked out over the role of Islam in the country's political life. In Bahrain, a close US ally and home to the US Navy's Fifth Fleet, a Sunni monarchy is contending with the simmering political discontent of the country's Shiite majority, which is challenging Obama's earlier assertion of a personal commitment to advocating "governments that reflect the will of the people."
EAST OF THE MIDDLE EAST
The one constant from four years ago is hardly reassuring: the slow, steady progress of Iran's nuclear program. Obama has spearheaded an effort among Western governments to financially isolate Iran, with restrictions on its oil sales and the financial transactions of its central bank, which have taken a heavy toll on Iran's economy but have done little to lessen the commitment of Ayatollah Khamenei, the country's supreme leader, to what he insists is a peaceful nuclear program.
For now, Iran continues to insist on its right to nuclear enrichment, which the US argues is producing material that could be eventually used in a nuclear bomb.
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The situation in Afghanistan and Pakistan is as fraught as ever. Yes, Osama bin Laden was killed in a daring raid in Pakistan by US troops in 2011. But, notwithstanding billions of dollars in annual US aid, that country continues to provide a home to militants, and Shakil Afridi, a Pakistani doctor who helped the US track Mr. bin Laden to his compound in Abbottabad, remains in a Pakistani jail.
In Afghanistan, the Army is completely reliant on US financing and technical support to operate, and the Taliban appear no weaker than they did when Obama took office.
As the Obama administration looks ahead to 2013 and its new challenges, it is looking over a Middle East landscape transformed from four years ago. The old ways of doing business in the region aren't going to work anymore. How Obama must miss them.

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