U.S. to pull out of Iraq after nearly 9 years of war (Reuters)

WASHINGTON (Reuters) – President Barack Obama vowed on Friday to pull all U.S. troops from Iraq this year, symbolically ending the war but dashing U.S. hopes of leaving a few thousand troops to buttress a still shaky Iraq and offset neighboring Iran's influence.

After months of negotiations with officials in Baghdad failed to reach an agreement to keep possibly thousands of U.S. troops in Iraq as trainers, Obama announced he would stick to plans to pull out the remaining force of 40,000 by year's end.

"After nearly nine years, America's war in Iraq will be over," Obama told reporters.

The announcement is a milestone more than eight and a half years after the Bush administration led the invasion to topple Saddam Hussein based on warnings of weapons of mass destruction that turned out not to exist.

Obama, eyeing a 2012 re-election campaign likely to be fought over his handling of the U.S. economy, is looking to wind down a decade of war in the Muslim world that did lasting damage to the U.S. image worldwide and stretched its military and budget to the brink.

In Iraq, where the U.S. force peaked at around 190,000 during the height of President George W. Bush's troop surge in 2007, almost 4,500 U.S. soldiers have died and the war has cost U.S. taxpayers over $700 billion in military spending alone.

Even as leaders of Iraq's fragile democracy seek to distance themselves from Washington, Iraq is only slowly getting to its feet after years of ferocious violence that shattered its society and killed tens of thousands of people.

While Washington has hailed Iraq's halting progress, especially as tumult has swept the Middle East, its political system remains gripped by perennial deadlock on issues dividing a religiously and ethnically fractured country.

Violence there is a far cry from the sectarian slaughter of 2006-07, but Iraq still suffers daily attacks from a stubborn insurgency allied with al Qaeda, and from Shi'ite militiamen.

"I wish we had been able to make more progress in resolving the internal differences while our troops are still there," said retired Gen. Brent Scowcroft, who was national security advisor to President George H.W. Bush, and became a prominent Cassandra before the Iraq war.

SHARED VISION FOR IRAQ?

Obama's announcement in the White House briefing room was freighted with political overtones.

The president, who was an early opponent of the war and campaigned on a promise to end it, repeated his mantra that "The tide of war is receding."

But prominent Republicans criticized the president. Sen. John McCain told Reuters the decision went against the advice of U.S. military commanders, could embolden Iran and likely will be met with alarm by Afghan President Hamid Karzai, who is already concerned about U.S. commitment to his country.

"In retrospect, I don't think the political side of the Obama administration ever had any serious intentions of keeping a residual force there because none of their actions were serious," said McCain, ranking GOP member of the Senate Armed Services Committee.

Obama made his announcement after a video conference with Iraqi Prime Minister Nuri al-Maliki. He said the two leaders agreed to stick to an earlier arrangement to pull the remaining 40,000 U.S. troops by year's end.

About 160 U.S. soldiers will remain behind under State Department authority to train Iraqi forces along with a small contingent of soldiers guarding the U.S. Embassy. There will also likely be a U.S. special operations presence in Iraq.

But the announcement underscores the gaps that remain between U.S. and Iraqi priorities and political realities.

Earlier this week, U.S. Defense Secretary Leon Panetta said American and Iraqi officials were continuing discussions that might permit his soldiers to stay beyond the December 31 deadline.

The prospect of extending the troop presence was very sensitive for Iraq's fractured political elite.

Maliki, heading a tenuous coalition including politicians vehemently opposed to foreign troops, eventually advocated a training presence but rejected any legal immunity for U.S. soldiers. Those terms were deemed unacceptable in Washington and in the end there was no deal to be had.

"This has been inevitable," said David Mack, a former U.S. ambassador in the Middle East.

"National security strategists in both Washington and Baghdad made a strong case for keeping US military forces beyond 2011, but the domestic politics in both countries were against it," he said.

U.S. MILITARY ROLE

The U.S. military role in Iraq has been mostly reduced to advising the security forces in a country whose military was rebuilt from scratch following the 2003 invasion.

Lingering weaknesses in Iraq's military capability would have been one reason to keep a larger U.S. troop presence.

Another was Iran. Chronically critical of Iran's nuclear program, Washington is especially sensitive to the prospect of an expansionist Iran following its recent allegations about a foiled Iranian plot to kill the Saudi ambassador in Washington.

"We remain very concerned that Iran is meddling, not just in the affairs of Iraq but of other countries in the region. And that's unacceptable," Pentagon spokesman George Little said this week when discussing a possible extended troop presence.

Brian Katulis, a security expert at the Center for American Progress in Washington, said the specter of Tehran dictating decisions to Baghdad was a red herring.

"Iranian influence is overstated," he said. "And it's not as if a few thousand U.S. troops was going to be a linchpin."

Both sides appeared to leave the door open to revising the arrangement announced on Friday. An Iraqi government advisor said after Obama's remarks that officials from both countries would discuss post-2011 trainers at their next meeting.

Even without soldiers, the U.S. presence will remain substantial. U.S. officials say the embassy in Baghdad, an imposing, fortified complex by the Tigris River in Baghdad's Green Zone, will be the largest in the world.

(Reporting by Tabassum Zakaria, Deborah Charles, Alister Bull and Warren Strobel in Washington and Patrick Markey in Baghdad; Writing by Missy Ryan; Editing by Jackie Frank and Philip Barbara)

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Ferry capsizes off Tanzania, nearly 200 dead (Reuters)

STONE TOWN, Zanzibar (Reuters) – Nearly 200 people drowned when an overloaded ferry capsized off east Africa as it sailed from Zanzibar to Pemba island, police said on Saturday, Tanzania's worst maritime disaster in at least 15 years.

Fishing boats, tour operators and diving instructors spent the night scouring the sea off the coast of Tanzania looking for survivors, many clinging to strewn cargo. One photo showed two men and a child floating on a mattress, clinging to a fridge.

Zanzibar police spokesman Mohamed Mhina told Reuters 192 bodies had been recovered and 606 passengers rescued from the Indian Ocean so far.

"There is a possibility that more bodies still remain at sea. Rescue workers are still searching for survivors and retrieving bodies," he said.

Two tug boats docked at Zanzibar's port, one carrying 17 bodies and another with 15 bodies, many of them children.

At the northern tip of the island, dozens of soldiers carried bodies onto white sand beaches, where thousands of people anxiously awaited news of survivors.

"The ferry flipped and capsized. There could be more bodies trapped inside the hull of the ship with the cargo," rescue worker Ali Ramadhan told Reuters at the port. "We suspect the ship was overcrowded with more than 800 passengers onboard. It is normal for these ferries to overload passengers and cargo."

THOUSANDS AWAIT NEWS

Zanzibar Police Commissioner Mussa Alli Mussa said early on Saturday that more than 500 people were on the ship's manifest. Abdual Said, registrar of Zanzibar's seafaring vessels, said the MV Spice Islander was licensed to carry 600 passengers.

The vessel had been sailing from Zanzibar to Pemba, the two main islands of the Zanzibar archipelago, a semi-autonomous region of Tanzania and popular beach destination for tourists.

Rescue worker Ramadhan said a lack of equipment was hampering rescue operations.

"A helicopter helped to rescue some survivors but with the high tide coming in some of the bodies could drift as far as (the Kenyan port city of) Mombasa," Ramadhan said.

A stream of military trucks brought in bodies to the Maisara football grounds in Zanzibar's main city, where tens of thousands of people gathered to identify the dead.

Emergency workers covered bodies in dark blankets and placed the victims' clothes on top so relatives could identify them.

Hundreds of people gathered outside the main Mnazi Mmoja Hospital where medical workers read out the names of survivors and posted lists on hospital walls.

"We are still receiving many bodies by truck loads ... The death toll will likely be much higher," doctor Karim Zah of the Mnazi Mmoja Hospital in Zanzibar told Reuters.

At the tourist destination of Nungwi at the northern tip of Zanzibar, fishing boats and diving vessels ferried survivors ashore. Crowds waded waist deep into the water as the boats approached, desperately seeking relatives.

"Many of us got here about 2.30 a.m. (2330 GMT) this morning," said Suleiman Amis, 32, who works on a local diving tour boat. "We sent out some boats to search for the survivors, but we did not find them until very, very late."

"We have friends who we know took that boat and we want to go back out to find them as soon as possible," he told Reuters.

Pemba is about 40 km (25 miles) from Zanzibar. Passengers who regularly take ferries between the two islands said the vessels are in a poor state and often overcrowded.

"They normally pack us in like sardines in a can. And for that I really fear this could be a very big disaster," said resident Mwnakhamis Juma.

A parent in Mkoani on Pemba island was already mourning his three children who were aboard. "I had two sons and a daughter coming back to Pemba from a school holiday break ... I am fearing for the worst," said Juma Bakar.

The government announced three days of mourning and Tanzanian President Jakaya Kikwete postponed a trip to Canada.

The government in Zanzibar said last month it planned to invest in bigger, more reliable vessels to ferry passengers between the two islands.

"We are fearing the greatest calamity in the history of Zanzibar. This is a disaster," said a government official, who declined to be named.

Tanzania's worst maritime disaster was in May 1996 on Lake Victoria. The MV Bukoba ferry sank with as many as 1,000 people on board. Only 114 passengers survived and the captain and eight officials were charged with the murders of 615 people.

Two small overloaded boats capsized and were swept away in high seas off Tanzania's coast in January this year. In May 2009 a vessel just off Zanzibar sank with dozens aboard, killing six.

(Additional reporting by Marton Dunai in Nungwi, Zanzibar; Writing by David Clarke and Yara Bayoumy; Editing by David Clarke)

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GM profit nearly doubles, slowdown risk ahead (Reuters)

DETROIT (Reuters) – General Motors Co's quarterly profit shot past Wall Street expectations, but its share price slipped as investors focused on the risks of a sputtering economy and resurgent Japanese rivals.

GM reported second-quarter profit that nearly doubled as people paid more for new cars like the Chevrolet Cruze, and the automaker took a larger share of global sales as major Japanese competitors were largely sidelined by the March earthquake.

GM shares, which rose after the results were announced, later fell 2.6 percent in morning trading.

"It was a solid quarter that shows GM's return to health is on track," said Edward Jones analyst Matt Collins. "But with Japanese automakers getting back in the game while the economy appears to be stalling, this is probably as good as it gets this year."

Coming out of bankruptcy, GM Chief Executive Dan Akerson and other executives said the company stripped out enough costs to make the business recession proof so it could thrive even in a weak auto market.

The first major test of that claim for investors, including the U.S. Treasury, will be how GM performs if the economy slips back into recession.

"There is an increased level of uncertainty," GM Chief Financial Officer Dan Ammann told reporters. "But what we're trying to do, and what we've done successfully, is to configure the business with a low break-even point and a strong balance sheet so we can handle whatever scenario comes along."

The U.S. automaker is pushing heavily into smaller, more fuel-efficient cars like the Cruze, but still relies heavily on sales of more profitable trucks in the U.S. market.

In the second quarter, GM raised prices and reduced discounts thanks to strong sales of vehicles such as the Cruze and the Chevy Equinox and the lack of competitive pressure from the likes of Toyota Motor Corp.

Jefferies analyst Peter Nesvold called GM's quarterly performance phenomenal because of a bigger-than-expected lift from higher prices. But he also said the results were not enough to dispel investor concerns about the economy.

"The market is clearly saying, 'I don't care what you did in the first half, I want to know what you're going to do in the second half and 2012.' And the market is saying, 'Whatever you think volume and revenues are going to be, you're too high,'" Nesvold said.

'BACK WITH A VENGEANCE'

GM's gains came as its Japanese rivals struggled with fewer vehicles to sell because of disruptions to the supply of auto parts after the Japan earthquake.

GM North American President Mark Reuss, speaking at an industry conference on Thursday, said the automaker was braced for Toyota, Honda Motor Co and Nissan Motor Co to "be back with a vengeance" this year in the U.S. market.

For the second quarter, GM's net income rose to $2.52 billion, or $1.54 per share, from $1.33 billion, or 85 cents per share, a year earlier.

The earnings per share blew past the $1.20 analysts polled by Thomson Reuters I/B/E/S had projected on average.

Revenue rose 19 percent to $39.4 billion, above the $36.74 billion analysts expected.

"We believe this quarter should begin to revive momentum around the GM story," Citi analyst Itay Michaeli said.

Michaeli said the results might prompt investors to raise their valuation for a stock that has dropped by more than 25 percent since the beginning of the year.

GM emerged from bankruptcy in 2009 after a $52 billion taxpayer-funded bailout. The U.S. Treasury owns 32 percent of GM's common shares, and how it unwinds that stakes remains an unanswered question.

GM's share of global vehicle sales rose to 12.2 percent in the quarter from 11.6 percent a year earlier. Toyota's slip allowed GM to retake its spot as the largest global automaker by sales volume in the first half.

If the economy falters in the second half of the year, GM may have to raise incentives on its vehicles to lure shoppers, analysts have said.

For the second half of the year, GM expects its adjusted profit before interest and taxes to be "modestly" lower than the first half, but full-year results to be better than in 2010.

GM ended the quarter with liquidity of almost $40 billion, up from $36.5 billion at the end of June. Ammann said the company's focus would be on maintaining its "fortress balance sheet" to reinvest in the business and withstand economic shocks.

"We want to return cash to shareholders. When and how and in what form that will happen has yet to be determined," he said.

(Reporting by Ben Klayman and Kevin Krolicki in Detroit; Editing by Derek Caney, John Wallace, Dave Zimmerman)

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