Ontario, Canada's economic hub, announced Monday the suspension of its plan to build two new nuclear reactors, citing concerns about vendor Atomic Energy Canada Limited's viability, and pricing.

The provincial government said AECL's bid to build the two new nuclear power plants at its Darlington station, 43 miles (70 kilometers) east of Toronto, by 2018 was the only one to meet its terms and objectives.

The project was to be the first step in the modernization of Ontario's aging nuclear fleet.

France's Areva and Westinghouse Electric Company, a subsidiary of Japan's Toshiba, had also bid on the project in February.

But, in the end, none of the proposals presented "suitable" longterm energy costs for the province, Ontario Energy Minister George Smitherman said.

As well, "uncertainty regarding the company's future prevented Ontario from continuing with the procurement at this time," he said.

Ontario currently generates half of its electricity from 16 nuclear reactors that were built by AECL between 1970 and 1990.

In 2007, it announced plans to spend 26.5 billion dollars to replace aging units and renew its entire fleet over the coming years.

The daily Globe and Mail said recently that Ontario sought assurances in case of project cost overruns from the federal government, which is seeking to privatize AECL.

The stalled project is a blow to both struggling AECL and international nuclear firms, as this was the first in Canada to be open to foreign bids.

British energy group BG said Tuesday it will pay 1.055 billion dollars (748 million euros) to US peer Exco Resources for a 50-percent stake in a shale gas project in the United States.

Shales are sedimentary rocks that are rich in fossil fuels but are generally deemed expensive to extract gas from.

"This alliance brings material new resources and supply to our existing US business at a competitive price and in a prime location at the heart of the world's largest gas market," BG chief executive Frank Chapman said in a statement.

The project covers 120,000 acres (48,000 hectares) in eastern Texas and northern Louisiana.

-- Dow Jones Newswires contributed to this report --

Germany will help Bosnia to develop its energy sector and improve environmental standards with financing worth 53.5 million euros (74.9 million dollars), the government said Thursday.

Under a deal signed in Sarajevo the financing will comprise 22.5 million euros in grants, as well as favorable loans totalling 31 million euros from state-owned German bank KfW, a finance ministry statement said.

The funding is to be allocated towards the building of Bosnia's first wind farm, improvements in waste water disposal and upgrading hydro-power plants and the country's power distribution network.

Poor planning has led to rising costs and huge delays for a nuclear reactor going up in Finland, the country's biggest-ever construction project, officials said.

The plant on the island of Olkiluoto in western Finland, to be run by Finnish nuclear power company TVO, was meant to start production this summer.

But it is now not expected to open for another three years and Finnish authorities cannot hide their disappointment with Areva-Siemens, the Franco-German contractor running the building operations.

"They (Areva) started planning when they won the contract, which was of course too late. They should have used two years for planning (in advance)," said Jukka Laaksonen, director general of the Finnish safety agency STUK.

He told AFP that France's Areva also struggled to adapt to local Finnish rules, further delaying construction of what is billed as a groundbreaking project that will be the world's first third-generation nuclear reactor.

"The French did not understand at first the Finnish system, that no important device can be built before the plan is approved," Laaksonen said.

STUK said there were various problems in Olkiluoto over the years, including the quality of concrete, welding work and safety practices at the site.

Areva's managing director of Finnish operations Osmo Kaipainen defended the company's work on the project. "Authorities are never satisfied" when it comes to meeting safety regulations, he said.

He added that TVO was slow delivering Areva-Siemens' documents to STUK for validation, which are needed before moving from one building task to another.

TVO's project director Jouni Silvennoinen hit back, blaming Areva and Siemens for insisting the companies had spent "significantly more time on planning" than the contract asked for.

The building of the new reactor, which currently employs 4,000 people, began in 2005, two years after the initial deal was signed.

In January, Areva and TVO announced its opening would be pushed back to June 2012, three years later than planned.

The reactor was meant to start producing electricity this summer and costs were estimated to be around three billion euros (4.2 billion dollars).

But the delays have seen that price soar and now the three companies have turned to the Paris-based International Chamber of Commerce to claw back some compensation from the project.

Areva and Siemens are jointly seeking one billion euros from the arbitration process, while TVO is counter-claiming for 2.4 billion euros, according to a statement released by Germany's Siemens in January.

Areva has billed the site as heralding the "rebirth of the nuclear industry."

The government is expected to decide in early 2010 if any more additional reactors will be built and has hinted that only one more will be needed over the next decade. The parliament also has to approve the plan.

Built close to the Baltic sea, the new plant has been subject to fierce criticism from environmental groups such as Greenpeace.

They say the reactor, known as a European pressurised reactor, has not been sufficiently tested and so poses a safety risk.

"When the reactor was sold to Finns, it was said to be dramatically safer than current reactors," said Lauri Myllyvirta, Greenpeace's energy campaign manager in Finland. "But that claim is unfounded."

Dow Chemical announced plans Monday to join Algenol Biofuels in a pilot-scale project to use algae and carbon dioxide to produce ethanol fuel.

The facility is planned to be located at Dow's Freeport, Texas site.

The project will use Algenol's technology that calls for carbon dioxide and saltwater supplied to algae in photobioreactors to produce the biofuel.

Also contributing are the National Renewable Energy Laboratory (NREL), the Georgia Institute of Technology and Membrane Technology & Research, Inc.

Dow said the project aims for "a breakthrough process for ethanol production" that does not use food sources such as corn.

The United States is the world's top producer of corn-based ethanol, but critics say this diverts needed food supplies and land resources for fuel, raising food prices on world markets.

"This project and the innovative technology involved offers great promise in the battle to help slow, stop and reverse the growth of greenhouse gas emissions," said Andrew Liveris, Dow chairman and chief executive officer.

"We are very excited to be part of this ground-breaking alternative energy project, which is a good example of Dow's holistic approach to CO2 capture and storage by adding value through chemistry."

French state-controlled nuclear giant Areva will boost its capital by 15 percent and sell its transmission and distribution unit, trade union sources said Tuesday.

"Areva's supervisory committee has just announced a capital opening at the level of 15 percent" and that the "the sale of Areva T&D is still on the cards," the Federal Union of Nuclear Trade Unions (UFSN CFDT) said in a statement.

A source close to the matter later confirmed that the committee, at the end of a four-hour meeting, had backed the capital increase and the sale of the unit.

The capital opening would appear to reduce the state holding to 78 percent from its current level of 90 percent.

UFSN CFDT said it opposed the move, arguing that it would amount to "a rampant privatisation of nuclear operations" since it would dilute the state's share.

Areve said it would make an official announcement following the close of trade on the Paris stock exchange at 1530 GMT.

Spain will announce Thursday it will allow the country's oldest nuclear reactor to operate until 2013, two years beyond its intended 40-year lifespan, industry and environmental sources said.

A decision to extend the life of the Garona plant in northern Spain would be a U-turn for Socialist Prime Minister Jose Luis Rodriguez Zapatero who had vowed to gradually phase out nuclear power.

The plant's operating permit expires on Sunday but the president of Spanish utilities association UNESA told radio Cadena Ser that the government would allow it to operate "until 2013". It had been designed to function only until 2011.

Carlos Bravo, head of Greenpeace Spain's nuclear campaign, also said the government had decided to extend the life of the plant, one of Spain's six nuclear power plants, until 2013.

"The green credentials which the head of the government enjoyed have ended," he said.

Industry Minister Miguel Sebastian is scheduled to announce the government's decision on the plant at 6:00pm (1600 GMT).

Earlier, Zapatero told public radio RNE "the solution will be reasonable, reasoned, balanced and responsible" but would likely be criticised by both sides of the debate over the use of nuclear power.

Only one other nuclear plant in Europe that is older than Garona which is located in England and it is set to close in 2011, he added.

"It is an old plant, designed with decades-old technology, and we have to very much bear that in mind when thinking of our country's future," he said without elaborating.

Spain's six nuclear power plants produce around 20 percent of the country's electricity.

Garona is run by Nuclenor, which is jointly owned by Spain's two biggest utilities, Iberdrola and Endesa.

Kenya on Wednesday unveiled extensive plans to invest in renewable energy, including free distribution of one million energy-saving light bulbs in exchange for ordinary bulbs.

The measures announced by Prime Minister Raila Odinga also include subsidising the price of solar water heaters for public institutions, firms and households.

"The free distribution of energy-saving bulbs is expected to save 49 megawatts of power," Odinga said after an inaugural meeting of the country's National Task Force on Accelerated Development of Green Energy.

The move came a day after Kenya's power generating company announced the closure of one of its the hydroelectric plants due to low water levels caused by drought.

In addition, firms investing in local production of energy-saving bulbs, solar water heaters and other energy-saving devices will be offered interest free, long-term loans.

Kenya also plans to produce an additional 2,000 megawatts of electricity in the next three years through geothermal, wind and other sources such as solar, biogas and solid waste, Odinga said.

Currently the country of 37 million people produces 1,080 megawatts of power which reduces to less than 1,000 at peak hours and has been recording an annual demand for electricity of eight percent.

The European Comission is set to slap German power giant E.ON with a heavy fine for alleged illegal collaboration with French rival Gaz de France, the business daily Handelsblatt said on Wednesday.

The fine could amount to several hundred million euros, perhaps as much as a half billion (700 million dollars), sources close to the matter were quoted as saying.

That would make it one of the biggest ever levied by the European Union's executive body.

The commission launched an investigation against the two companies in mid 2007 concerning gas delivered via their joint pipeline Megal, which crosses southern Germany from the border with the Czech Republic to the one with France.

E.ON's Ruhrgas subsidiary and Gaz de France (GDF) allegedly agreed on quantities of gas to be transported to their domestic markets, which the commission says would constitute an illegal marketing arrangement, the report said.

E.ON asserts that it never adhered to such a clause in its deal with GDF, and that it formally abrogated it in 2004.

The commision's decision is to be made public next week, sources told Handelsblatt, and a spokesman for E.ON Ruhrgas said the company expected a decision shortly.

If E.ON is fined, its boss Wulf Bernotat plans to file a complaint, the report said.

Russia will fulfill all its contractual gas export commitments to the European Union, President Dmitry Medvedev told Euronews television Tuesday.

"We will respect all our obligations as the principal provider of hydrocarbons to Europe," Medvedev said, a day after Brussels opted to postpone talks on a strategic partnership covering energy, diplomatic and military ties with the Kremlin by way of response to the five-day war in Georgia.

Medvedev said European consumers, and by extension capitals, need have no fears of a "cold winter," as "no-one wants to see that."

Russian Prime Minister Vladimir Putin said Sunday that Russia would seek to "diversify" its energy export interests.

"We have no intention of limiting (energy exports) in any way; we will abide strictly by our contractual obligations," Putin had said.

"But we are going to enlarge and diversify our export possibilities for these products which are so essential to the global economy."

Russia supplies a quarter of the EU's gas needs, as well as a part of its oil requirements.

Nepal was hit by transport chaos Monday with buses and taxis off the roads in a strike over rising fuel prices and falling revenues.

Nepal's state-owned fuel supplier raised prices by up to 27 percent earlier this month to keep pace with surging global crude prices, but the government barred transport operators from raising fares by more than 25 percent.

Dinesh Bhandari, an official from the Nepal Transport Entrepreneurs' National Federation, said operators had been left out of pocket.

"The government should allow us to increase the fare up to 35 percent," he said.

The strike left commuters in Kathmandu and travellers across the country stranded.

Nepal relies on India for all of its fuel supplies and the land-locked Himalayan country's state-run fuel supplier has been selling fuel at a loss for years, building up millions of dollars in debt.

China's largest energy producer, China National Petroleum Corp (CNPC), on Wednesday began work on a major oil pipeline in southwestern Chad, state media reported here.

The pipeline, due to become operational in 2011, will transport crude from Koudalwa field some 300 kilometres south of N'Djamena to the Djarmaya refinery north of the capital.

The planned cost of the project has not been disclosed.

"Chadians have waited a long time for this opportunity," President Idriss Deby Itno was quoted as saying at the inauguration ceremony.

Deby added that he hoped oil resources can "contribute to economic development and the battle against poverty in our country."

Energy-hungry China has boosted its presence in Africa in recent years, primarily in a bid to guarantee oil supplies for its rapidly growing economy.

CNPC first invested in Chad in 2003, three years before Beijing re-established diplomatic relations with N'Djamena.

Chad, which only began to produce oil in 2003, currently produces around 170,000 barrels per day. Deby's office said the southwestern Chari-Baguirmi region is estimated to eventually be able to produce 60,000 bpd.

Oil prices eased in Asia on Thursday after a stronger-than-expected US energy stockpiles report offset market worries over tensions in the oil-rich Middle East, dealers said.

New York's main futures contract, light sweet crude for delivery in November, was 11 cents lower at 87.29 dollars a barrel in late morning trade.

"I think reality is coming back into play here," said Steve Rowles, an analyst with CFC Seymour in Hong Kong.

After six straight sessions of rising prices in New York, the contract finished lower there on Wednesday, settling at 87.40 dollars per barrel after spiking to a new high of 89.00 dollars in intra-day trade.

The fresh peak came just after the Turkish parliament voted to allow military strikes against Kurdish rebels based in northern Iraq.

Brent crude for December delivery was 36 cents lower at 82.77 dollars a barrel.

The Brent November contract expired on Tuesday after hitting an all-time high of 84.49 dollars.

Tensions along the Turkey-Iraq border helped oil prices gain more than four dollars this week before their pullback.

"The worst-case scenario was plaguing the market," Rowles said.

Turkish legislators on Wednesday approved a government motion seeking a one-year authorisation for one or more incursions into Iraq but the motion leaves it up to the government to determine the timing and scope of the operation and the number of troops to be sent.

A comment on Wednesday by US President George W. Bush highlighted uncertainties in the Middle East. He said he has warned world leaders they must prevent crude producer Iran from getting nuclear weapons "if you're interested in avoiding World War III."

Abdalla Salem El-Badri, chief of the Organisation of the Petroleum Exporting Countries (OPEC), expressed "concern" on Tuesday at surging prices but argued they did not reflect the true state of supply and demand.

The US Department of Energy (DoE) said Wednesday that American crude reserves jumped 1.8 million barrels in the week ending October 12, beating analyst forecasts of 1.05 million.

Stockpiles of distillates, which include diesel and heating oils, leapt by 1.0 million barrels, confounding market expectations of a drop of 750,000 barrels.

"The DoE's report is bearish. The builds in both gasoline and crude oil stockpiles were greater than forecast, and the build in distillate inventories was unexpected. Meanwhile, the demand numbers continue to look very weak," Eric Wittenauer, an analyst at AG Edwards, said during US trading hours.

China said Thursday it was "firmly" opposed to provisions in a new US clean energy bill that will make it easier to impose trade penalties on nations that reject limits to globe-warming pollution.

"China is firmly opposed to such measures," vice foreign minister He Yafei told reporters in Beijing.

"We are firmly against such attempts to advance trade protectionism under the pretext of climate change. It is not conducive to world economic recovery. It serves nobody's interests."

On Friday, the US House of Representatives narrowly passed legislation to limit pollution blamed for global warming, handing President Barack Obama a hard-fought major victory.

Lawmakers voted for the first time in US history to limit heat-trapping carbon emissions and shift the US economy to cleaner energy.

However, after the House of Representatives passed the legislation, Obama said he did not want the bill to be used to impose trade penalties on countries in the interest of curbing global warming, The New York Times reported.

The newspaper said Obama had told reporters at the White House that at a time when the global economy is still deep in recession, he thought "we have to be very careful about sending any protectionist signals out there."

The US Senate has still to vote on the energy bill.

China has shown increasing concern in recent years about the consequences of global warming.

But as part of ongoing global negotiations to replace the Kyoto Protocol when it expires in 2012, China has said the bulk of the responsibility for emissions cuts lies with developed nations.

Oil prices eased slightly in Asia on Wednesday but remained above 87 dollars per barrel in a market focussed on a potential Turkish incursion into northern Iraq.

While expressing concern at the price rise, the chief of the OPEC oil cartel said the world oil market remains well supplied.

New York's main oil futures contract, light sweet crude for delivery in November, was 23 cents lower in afternoon trade at 87.38 dollars per barrel.

In US trade on Tuesday, oil struck a record intra-day high of 88.20 dollars before dropping back to settle above 87 dollars for the first time, at 87.61 dollars per barrel.

On Monday it jumped more than two dollars.

Brent crude oil for December delivery was 23 cents lower at 83.32 dollars per barrel.

In London trade on Tuesday, Brent for November delivery advanced 1.41 dollars to settle at 84.16 dollars, after earlier hitting an all-time high of 84.49 during the session.

Oil prices surged as investors fixated on Turkey, where the parliament is expected to adopt a government motion on Wednesday to allow cross-border operations against bases of the Kurdistan Workers Party (PKK) in Iraq.

The White House has urged Turkey to refrain from any unilateral action that could further destabilise Iraq, while Iraq's deputy prime minister warned of "grave consequences" for the stability of his country and the region.

Steve Rowles, an analyst with CFC Seymour in Hong Kong, said the market has not been as worried over a geopolitical issue since last July when Israel and Hezbollah guerrillas battled in Lebanon.

That conflict led oil to spike to a then-record above 78 dollars per barrel.

Rowles said that while it is difficult to predict how the current tensions will play out, "I just think that overall the tensions will eventually subside."

Rowles said that Iraq "isn't the oil producer that it once was."

Abdalla Salem El-Badri, chief of the Organisation of the Petroleum Exporting Countries (OPEC), said Tuesday that the cartel was "concerned" at the price spike but argued current levels did not reflect the true state of supply and demand.

The market is "very well supplied," he said.

Rowles said he agreed. He said a weekly US Department of Energy report on inventories, to be issued later Wednesday, was expected to show a build up in crude stocks.

In the broader context he noted that the Atlantic Ocean hurricane season, which poses a potential threat to oil installations, is drawing to a close, and forecasts are for a relatively mild North American winter.

"Where is the problem?" he asked.

But Sucden analyst Michael Davies, commenting during US trading hours, said the surge in prices came amid "geopolitical and supply worries."

Many of Iraq's largest oil fields are located in the north of the troubled country.

The European Commission urged EU states on Thursday to prepare for a possible gas supply crisis by filling storage tanks ahead of the peak winter demand period.

Highly dependent on Russian gas shipped through Ukraine, EU countries are closely monitoring Kiev's efforts to pay for supplies needed to fill its storage tanks ahead of winter, eager to avoid the kind of cut-off seen in January.

"The January 2009 crisis highlighted the vulnerability of the EU to supply disruptions," the commission said after chairing a meeting with European gas experts.

"A number of member states are overwhelmingly dependent on one single supplier and one single supply route.

"In the light of the uncertain gas storage situation in Ukraine, the commission in particular recommended the member states to be better prepared for the coming winter period and to fill their gas storages from all possible available sources," it added.

Kiev is seeking 4.2 billion euros (5.9 billion dollars) in loans from international lenders to help pay for Russian gas supplies needed to fill Ukraine's storage facilities ahead of the winter to avert a new crisis.

However, an EU official has said that Ukraine is likely to get only half that amount.

The European Union is particularly interested in seeing that the tanks get filled because a quarter of its gas consumption is met with Russian supplies, 80 percent of which transits through Ukraine's pipeline network.

Many EU countries saw their supplies of Russian gas cut in the dead of winter in January as Russia and Ukraine locked heads in a payments dispute.

Danish exports of energy technology, in particular wind turbines, hit a record 64 billion kroner (8.6 billion euros, 12 billion dollars) in 2008, the Danish energy agency said in a study on Tuesday.

That is a 19-percent rise from 2007, an increase four times higher than that registered for other Danish exports, according to the report conducted jointly with the Danish Confederation of Industry.

The increase is also much higher than exports of energy technology in the 15 European Union member states prior to 2004 enlargement -- those countries saw an average growth of just 5.0 percent in 2008.

Danish Climate and Energy Minister Connie Hedegaard hailed the trend, saying in a statement that the numbers cemented Denmark's "strong international reputation for efficient energy solutions."

She said "these exports once again exceeded (Danish) exports of oil and gas in 2008."

The trend highlighted the potential of reaching "an ambitious climate agreement" at a UN summit in Copenhagen in December, Hedegaard said.

Energy technology is the Scandinavian country's second-biggest export sector after food products.

Its main markets for energy technology are Germany, the United States and Britain, with the three countries alone representing 40 percent of total exports in the sector.

However, the global economic crisis has since late 2008 slowed these exports, according to Anders Stouge, head of energy issues at the Danish Confederation of Industry.

He said the body expected better growth opportunities in the second half of 2010.

"It is now even more important to strengthen our efforts to make Denmark a global centre for for the development and sale of energy and climate technology," Stouge said in a statement.

The planned Nord Stream gas pipeline moved a step forward Thursday after a Finnish environment agency approved the project but told its backers to provide more information on potential environmental damage.

The 1,220-kilometre (760-mile) pipeline, which would deliver energy from Russia to Germany, needs the green light from Finland, Sweden and Denmark before building can begin as it will run close to their Baltic coastlines.

The Uusimaa regional enviromental authority said Nord Stream AG, a partnership between Russian state-run energy giant Gazprom and Germany's E.On Ruhrgas and BASF-Wintershall, must conduct "further investigations" into pollution damage, maritime safety and the impact on sealife nature among other things.

"We are committed to provide the further information that authorities have asked from us," Nord Stream spokesman Sebastian Sass told reporters.

This step is important as the Finnish government could not give the go-ahead to the project before the environmental agency had reported its findings.

A separate environmental planning authority must also review Nord Stream's plans before building can begin.

Once completed, Nord Stream will run under the Baltic Sea from the Russian port city of Vyborg to Greifswald, in northern Germany.

Prime Minister Matti Vanhanen said last month that the government would decide possibly in late September if it will give Nord Stream permission to use Finland's economic zone in the Baltic Sea to build the pipeline.

Russia and Germany have expressed strong support for the project estimated to cost some 7.4 billion euros (10.5 billion dollars) and Nord Stream hopes to have approval from Finland, Sweden and Denmark by the end of this year.

If that happens, building could start on pipeline in 2010 and some deliveries could be made at the end of 2010.

Turkey said Wednesday that it expects European lenders to release 1.2 billion euros (1.6 billion dollars) next week for a major dam project that critics say will flood a millenia-old historic site and displace thousands in the country's southeast.

The loan for the Ilisu Dam -- extended by an international consortium including Austrian, German and Swiss lenders -- was frozen for six months in January on the grounds that Turkey had failed to meet several criteria addressing the project's environmental and social impacts.

"We have succesfully carried out some important work in order to realize the project in accordance with international standards," Environment Minister Veysel Eroglu told a press conference here.

Turkey has completed 47 of the 89 conditions listed in the loan protocol and expects the funds to be released on July 6, Eroglu said.

But last week, the German daily Frankfurter Rundschau reported that Berlin had agreed to withdraw support from the project and that Austrian and Swiss authorities had also reached the same decision.

Asked what Turkey would do if the loan was not released, the minister said: "We will make that decision on July 6. But this dam will be built. We have the money and the capability to construct it," he said.

The Ilisu Dam project, on the Tigris River some 45 kilometers (28 miles) from the Syrian border, is part of an ambitious network of dams and power plants that Ankara hopes will revive the economy of the Kurdish-majority southeast wrecked by a 25-year Kurdish insurgency.

But the project has come under intense criticism especially for its impact on nearby Hasankeyf, a small impoverished town on the banks of the Tigris that was once a mighty city in ancient Mesopotamia, part of which will be flooded by dam waters.

Critics say the dam will destroy Hasankeyf's unique heritage that includes Assyrian, Roman and Ottoman monuments and displace an estimated 50,000 people.

"The criticism is untrue. This is the work of foreign powers who do not want Turkey to become a regional power," Eroglu said, but refused to elaborate.

Ankara says that the project, with its 1,200-megawatt powerplant, will generate 3.8 billion kWh of electricity annually, contribute 300 million euros to the economy, create thousands of jobs, and irrigate vast areas of farmland.

Under the project, the government will compensate those dislocated by the project and build a new town for Hasankeyf residents.

Officials say 80 percent of Hasankeyf's archaelogocal sites -- including tombs and hundreds of cave houses, already damaged by nature and years of neglect -- will remain above the planned waterline.

The project foresees the relocation of the monuments that would be flooded to a planned open-air museum nearby.

Oil slipped further in Asian trade Monday as investors continued to worry over the state of the US economy, the world's biggest energy user, analysts said.

New York's main contract, light sweet crude for August delivery dropped 70 cents to 68.46 dollars a barrel while Brent North Sea crude for August delivery sank 68 cents to 68.24 dollars.

Both contracts closed lower Friday.

"Oil pricing is under pressure from concerns regarding the weak oil demand in the US," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz.

Crude fell at the end of last week during US trading hours after official data released Friday showed spending by American consumers rose a weak 0.3 percent in May from April, supported mainly by a massive government stimulus.

Personal savings rate shot up to a 16-year high, indicating consumers were wary of spending amid rising unemployment and plummeting home values, the data showed.

The report by the Commerce Department is widely watched because consumer spending accounts for two-thirds of US economic activity and is considered key to recovery from the severe recession that began in December 2007.

Crude prices have spiked up in recent weeks, boosted in part by the weak US dollar which means lower oil cost for purchasers using foreign currencies.

New unrest in oil-producing Nigeria was another factor which saw crude prices rising above 71 dollars at one stage during intra-day trading Friday, analysts said.

"Oil markets continue to monitor developments in Nigeria. In recent weeks, militants have attacked oil industry infrastructure in Nigeria," said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney.

Nigeria, once Africa's leading oil producer, has seen its oil production affected by militants who claim they are fighting for a fairer share of oil wealth for impoverished communities in the Niger Delta.

The African country now produces about 1.8 million barrels of oil a day compared with 2.6 million in 2006.

China on Wednesday defended its restrictions on the export of some raw materials, which have sparked a US and EU trade action, saying they are in line with World Trade Organization (WTO) rules.

The United States and the European Union a day earlier filed a complaint with the WTO after Beijing put curbs on shipments of a number of materials including bauxite, coke and silicon metal.

They said the mix of quotas, export duties and minimum export prices were "in clear breach of international trade rules" and "troubling" as some of the materials cannot be found elsewhere.

But China said the policy was aimed at protecting the environment and broke no WTO regulations.

"The relevant export policies of the Chinese side are mainly intended to protect the environment and natural resources," the commerce ministry said in a statement faxed to AFP.

"The Chinese side deems the relevant policies are consistent with WTO rules."

It gave no further information.

The two Western powers called for WTO dispute settlement consultations with China regarding the restraints.

The launch of consultations is only the first step in the litigation process at the WTO, and is intended to explore whether an amicable solution is possible.

This can last up to 60 days and if no solution appears the plaintiffs can move to establish a WTO panel for a formal ruling.

World tea prices have rocketed but along misty tea-growing mountain slopes in Sri Lanka's central hills, farmers are facing disaster.

Despite production shortfalls coupled with increased demand making the daily cuppa dearer, the men and women who toil the land have little reason to cheer, for they must uproot tea bushes desiccated by a severe drought.

Tea farmer N. K. Atapattu, 42, picked a crop of nearly 2,000 kilograms (4,409 pounds) of tea leaves from his small plot last year but the crop is sharply down in the first quarter of this year.

The tea harvest fell more than 50 percent in the first three months of the year on the highlands, according to official figures, and Atapattu and his fellow farmers are praying for better weather.

Nalini Aluthgama, 61, says her newly planted home plot at the village of Kotmale, some 170 kilometres (106 miles) east of Colombo by road, is devastated.

"I have just removed over 100 dead tea bushes," Aluthgama said while volunteers joined in to uproot the dead wood. "Most of my plants are about three years old and they don't give much of a crop."

The volunteers get a token two dollars a day for working on the tea plots.

Dhammika Manaweera, 42, the secretary of a local tea farming association, says all her 53-strong membership have suffered because of the drought.

The British charity Oxfam has been helping the local community to learn more about new techniques in tea growing and get the maximum from their inputs, but when it comes to weather, they are helpless.

"We have taken these farmers to experts and taught them good agricultural practices, but they don't have income security because of uncertain weather," said Oxfam's Tharanga Godallage.

This is an area where climate change is affecting an entire community uprooted 25 years ago to make way for a hydro-irrigation reservoir which inundated their traditional farmlands.

"We were re-settled here in 1984. We had a drought in 1988 but this time it is worse," Manaweera said. "We have started replacing the dead tea bushes, hoping for rain. We are getting some right now but if there is too much of rain, it will also ruin us."

Small-time farmers are a vital component in Sri Lanka's tea industry, the country's largest foreign exchange earning commodity, and the authorities are taking their plight seriously.

An hour's drive along a narrow road through hill slopes is Sri Lanka's Tea Research Institute, which is trying to develop new types of drought-resistant tea bushes.

"There was frost damage on the crop earlier this year," said TRI director Sarath Abeysinghe. "It was frosty early in the morning and very dry and hot during the day. It could be attributed to global climate change. We can't predict the weather anymore."

The TRI is using artificial pollination to develop cultivars from the tea bush, botanically known as Camellia sinensis, to withstand harsh weather, but coming up with a successful variety could take decades.

He said the distinctive aromatic flavour of tea usually produced in the mountainous regions during February and March had been ruined by the drought.

The teas, known as Dimbula, are hot sellers among buyers in Japan and Germany.

"There have been times when we were not able to get a quality season because of the erratic weather," he said. "But this year has been worse."

The chief plant breeder at the TRI, Kumudini Gunasekare, said drought resistant cultivars are being developed by her team to address the new issue of climate change.

"Earlier we were concentrating mainly on enhancing yields -- drought was not an issue then -- but we are now focusing on drought-tolerant varieties," Gunasekare said.

World tea prices have risen by about 35 percent in the past year and supermarket prices are set to rise another 10 percent in June, but small farmers in Sri Lanka who account for more than two thirds of the country's production have not benefited.

Sri Lanka earned a record 1.23 billion dollars from tea exports in 2008 thanks to the global commodity boom in the first half last year, but the party is now over.

The drought means that the subsistence farmers will not benefit from the rising prices and the troubles ahead are not something they can forget with a refreshing cup of tea.

The IEA saw the risk of oil supply strains recede to 2013 at the earliest with demand growing sluggishly as many economies recovered only slowly from recession, in a report on Monday.

The International Energy Agency (IEA) said in its Mid-Term Oil Market Report that world oil demand would rise by an average 0.6 percent a year in 2008-2014, sharply less than the 1.6 percent forecast in its 2008 mid-term report.

"Relative to the medium term profiles presented in previous years, this scenario paints a delayed picture of threatened 'supply crunch' later in the projected period," it said.

The IEA, the energy-monitoring arm of the 30-nation Organization for Economic Cooperation and Development, had warned in April that oversupply of oil was crimping investment in new fields for the day when demand recovers.

It said in Monday's report that although weak demand could hold off a crunch, tighter supply forecasts for 2013 and 2014 raised the prospect of an "increasingly volatile" market in that period.

But the agency said that the economic outlook was uncertain and that according to an alternative growth model, yearly average demand could actually decline over the next few years if economic recovery took longer than forecast.

A steady erosion in world steel output since the start of the year slowed in May, when production declined at a weaker annual pace than in April, the World Steel Association said Friday.

Production in May was down 21 percent compared to May 2008, better than an annual output decline in April of 23.6 percent.

The association also said output in the first five months of the year to May fell 22 percent in the face of a global economic contraction that has reduced activity in the construction, automobile and aerospace industries.

The World Steel Association which represents 180 steel producers accounting for 85 percent of world output, said steel production in May came to 95.6 million tonnes.

China, after two months of declines, managed to reverse the trend in May, when production edged up 0.6 percent to 46.5 million tonnes compared with the same month in 2008.

But Asia as a whole saw output slide 7.0 percent in May, largely due to production declines in Japan.

Output in May fell 44.8 percent in the European Union, 33.6 percent in Russia and the former Soviet republics and 47.8 percent in North America.

Production in 2008 was down 1.2 percent at 1.329 billion tonnes after gains of 7.6 percent in 2007 and 9.1 percent in 2006, according to the World Steel Association.

World oil prices dropped below 105 dollars in Asian trade on Monday amid continuing concerns that energy demand would be affected by a slowing US economy, dealers said.

In afternoon trade, New York's main oil futures contract, light sweet crude for delivery in May, was 81 cents lower at 104.81 dollars per barrel.

The contract closed at 105.62 dollars per barrel during floor trading on Friday at the New York Mercantile Exchange.

Brent North Sea crude for May delivery fell 35 cents to 103.42 dollars a barrel, after settling at 103.77 in London on Friday.

Oil prices fell Friday after the United States Commerce Department reported that the US economy, the world's biggest oil consumer, grew at a tepid 0.6 percent in the fourth quarter last year.

Jason Feer, vice-president and general manager of energy market analysts Argus Media Ltd, said that because of an economic downturn in the United States, uncertainty clouds demand for oil over the next couple of months.

"The inventories overhang combined with softening demand is the reason for significant drops in pricing," he said in Singapore.

Economic output moderated in the fourth quarter during a widespread housing market downturn and as a related credit squeeze in the US banking system broadened in the final months of last year.

The credit crunch has worsened in recent months and a growing number of economists believe the US economy has now fallen into a recession.

Economic momentum slowed despite the US Federal Reserve's interest rate cuts. Since September, Fed policymakers have slashed the short-term federal funds rate to 2.25 percent from 5.25 percent in a bid to shore up growth.

Amid global supply disruptions, New York crude hit a record intraday high of 111.80 dollars on March 17 while London Brent scored a historic peak of 108.02 dollars earlier in March.

Oil breached 71 dollars in Asian trade Wednesday as political unrest in key crude producers Iran and Nigeria compounded the impact of a weaker US dollar, analysts said.

New York's main futures contract, light sweet crude for delivery in July, gained 70 cents to 71.17 dollars a barrel in afternoon trade.

Brent North Sea crude for August delivery advanced 67 cents to 70.91 dollars.

Jason Feer, Asia-Pacific general manager of energy market analysts Argus Media, said political problems in major oil producer Iran were helping push prices higher.

"It's one of those things where when there's a possibility of a major producer in the Gulf having a problem, there will be a knee jerk reaction in the market," Feer said.

Iran's election watchdog said Tuesday it was ready for a recount in the disputed presidential vote as the nation braced for further protests after at least seven people were killed in street battles, according to state media.

The Islamic republic is the second biggest crude oil producer in the Organization of the Petroleum Exporting Countries (OPEC), after Saudi Arabia.

The market was also kept jittery by heightened tensions in Nigeria after militants claimed attacks against facilities run by US oil giant Chevron, other analysts said.

The Movement for the Emancipation of the Niger Delta (MEND) has threatened to extend its operations beyond Delta State to others in the oil-rich but volatile southern region.

The US dollar meanwhile remained under pressure in Asian trade Wednesday after major emerging economies cast doubt on the greenback's long-term future as the world's main reserve currency, dealers said.

A weaker US currency makes dollar-priced crude cheaper for buyers holding stronger currencies. That tends to stimulate demand and push the market higher.

Beijing has suspended buying non-ferrous metals for state reserves after government stockpiling led to a surge in prices, Chinese media reported.

China has been building its inventories of metals, including 235,000 tonnes of copper, over recent months, Caijing magazine reported on its website over the weekend, citing Yu Dongming, an official with the state economic planner.

China also bought 590,000 tonnes of aluminium, 159,000 tonnes of zinc, 30 tonnes of indium and 5,000 tonnes of titanium, said Yu, who works in the National Development and Reform Commission's industry department.

"In the current market situation, aluminium firms have already started to make profits and non-ferrous metals prices have rebounded," he was quoted as saying.

"It's had the expected effect and, given these circumstances, we don't expect the state will continue to build its reserves."

Yu added that middlemen, rather than domestic companies that the government intended to support, had unexpectedly become "the biggest beneficiary" of Beijing's buying spree.

China has been buying up crude oil, copper, coal and a host of other key raw materials despite the financial slump having slashed demand for the exports responsible for the Asian giant's once ravenous appetite.

The State Reserve Bureau has been stockpiling, but so too have producers, distributors and other speculators hoping to profit from an expected rise in prices once the world economy starts to recover, analysts say.

Oil prices hit new record highs Tuesday amid heightened concerns about a potential Turkish incursion into oil-rich northern Iraq to attack Kurdish rebels.

New York's main oil futures contract, light sweet crude for delivery in November, closed above 87 dollars per barrel for the first time after striking a record 88.20 dollars in intraday trading.

The benchmark New York contract gained 1.48 dollars to settle at a record 87.61 dollars. On Monday it jumped more than two dollars a barrel.

In London, Brent North Sea crude for November advanced 1.41 dollars to settle at 84.16 dollars, after earlier hitting an all-time high of 84.49 dollars during the session.

Oil prices surged as investors fixated on Turkey, where the parliament was expected to approve a government motion to allow cross-border raids into Iraq for one year to root out the Kurdistan Workers Party (PKK).

"A good portion of the gains can be tied to the escalation in tensions between Turkey and Kurdish rebels, which has added a sizable geopolitical risk premium into prices over the last several trading sessions," said Michael Fitzpatrick, an analyst at MF Global.

The PKK, considered a terrorist group by Turkey and much of the international community, has been fighting for Kurdish self-rule in southeast Turkey since 1984.

The potential of a military conflict had the oil market on edge.

"This raises concerns any such action will jeopardize and possibly disrupt Northern Iraqi oil flows or flows through the Baku-Ceyhan pipeline across Turkey. If geopolitical tensions escalate further, prices have the potential to test 90 dollars this week," Fitzpatrick said.

Many of Iraq's largest oil fields are located in the north of the troubled country.

"The tensions in Turkey are the main driver here," said Nas Nijjar, a trader at CMC Markets.

"Now we have potential (supply) problems on top of that going into the winter."

Prices were additionally supported by concerns over potentially stretched global energy supplies, particularly during the forthcoming northern hemisphere winter, when demand for heating fuel hits a peak.

"Crude futures surged higher (on Tuesday), reaching fresh record highs in London and New York on continuing speculative and fund buying, amid persistent geopolitical and supply worries," said Sucden analyst Michael Davies.

OPEC chief Abdalla Salem El-Badri said the cartel was "concerned" at the price spike but argued that current levels did not reflect the true state of supply and demand in the market.

The Organization of the Petroleum Exporting Countries "is carefully watching developments in the oil market and has observed with concern the recent escalation in oil prices," OPEC chief El-Badri said in a statement.

"While (OPEC) does not favor oil prices at this level, it strongly believes that fundamentals are not supporting current higher prices and that the market is very well supplied," he added.

Dealers had been spooked Monday when OPEC cut its fourth-quarter non-OPEC production outlook by 110,000 barrels per day.

According to OPEC data, Iraq produced about 2.0 million barrels of crude per day in August. Before April 2003, it pumped an estimated 2.8 million bpd.

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The United States accused China Tuesday of pursuing a "troubling" industrial policy as it launched WTO action with the European Union against the Asian giant for restricting raw materials exports.

The two Western powers requested World Trade Organization (WTO) dispute settlement consultations with China regarding Beijing's export restraints on numerous important raw materials.

"China's measures appear to be part of a troubling industrial policy aimed at providing substantial competitive advantages for the Chinese industries using these inputs," US Trade Representative Ron Kirk told reporters in Washington.

The materials at issue were bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorus, and zinc -- key inputs for numerous downstream products in the steel, aluminum, and chemical sectors across the globe.

China is top global producer of these materials.

"We are going to the WTO today to enforce our rights, so we can provide American manufacturers with a fair competitive environment and put more American workers back on the job," Kirk said.

"China is a leading global producer and exporter of the raw materials in question, and access to these materials is critical for US industrial manufacturers."

He added that the United States "is very concerned that China appears to be restricting the exports of these materials for the benefit of their domestic industries, despite strong WTO rules designed to discipline export restraints."

European demand for steel, after shrinking by a third this year, should rise about 14 percent in 2010 as an inventory draw-down by steel users comes to an end, the European Confederation of Iron and Steel Industries (Eurofer) said on Thursday.

"In 2010 the stock cycle reversing to slightly positive will result in apparent steel consumption growing by almost 14 percent," the agency said in a statement.

Apparent steel consumption is determined by subtracting steel exports from domestic production and imports.

The current economic downturn and de-stocking by such steel-using sectors as construction and auto manufacturing has eroded steel consumption and will continue to do so in the third quarter, according to Eurofer.

The confederation for this year is forecasting a drop in apparent steel consumption of nearly 33 percent compared with 2008. Consumption was down 43 percent in the first six months.

But the federation said that beginning in the fourth quarter, the market should begin to show a slight rebound "as the negative effect of the stock cycle begins to ease."

"We finally see a little light at the end of the tunnel," said Eurofer director general Gordon Moffat.

The European Union and the United States on Tuesday launched WTO action against China, accusing it of restricting raw materials exports to feed its domestic market.

"The European Union has today requested WTO consultations with China regarding China's export restrictions on a number of key raw materials, which it considers are in clear breach of international trade rules," the EU commission said in a statement.

In Washington, US Trade Representative Ron Kirk accused China of pursuing a "troubling" industrial policy.

The two Western powers requested World Trade Organization (WTO) dispute settlement consultations with China regarding Beijing's export restraints.

"China's measures appear to be part of a troubling industrial policy aimed at providing substantial competitive advantages for the Chinese industries using these inputs," Kirk told reporters in Washington.

European industries have raised concerns for a number of years on such export restrictions -- quotas, export duties and minimum export prices -- which China applies on key raw materials, including yellow phosphorous, bauxite, coke, magnesium, silicon metal and zinc.

These materials are used notably in the aeronautics industry or in the production of steel, chemicals and semi-conductors and some cannot be found elsewhere.

EU Trade Commissioner Catherine Ashton complained: "The Chinese restrictions on raw materials distort competition and increase global prices, making things even more difficult for our companies in this economic downturn."

She added: "I hope that we can find an amicable solution to this issue through the consultation process."

Last week China defended its moves to restrict exports of some raw materials, saying it was acting to protect the environment.

"Taxing exports of some high energy-consuming and pollutant goods is to improve the world's trade environment and China's export structure, and to further enhance environmental protection measures," China's commerce ministry spokesman Yao Jian said then.

However Kirk complained that the actions "are hurting American steel, aluminum and chemical manufacturers among other industries that desperately need these materials to make their products."

"These actions also endanger thousands of jobs in America for those employed in these important sectors," he added.

In its accession to the WTO, China agreed to restrict the number of products subject to export tariffs.

China "expressly made the commitment that it would not engage in this type of behaviour," Kirk said.

Beijing's policy appeared to be aimed at creating "unfair preferences for Chinese industries" by making raw materials cheaper to them, thereby skewing costs right along the supply chain, he added.

European industries are dependent on imports of raw materials, and are therefore vulnerable to distortions in world commodities markets.

"Currently there is no level playing field for European industry with their Chinese competitors," the commission said.

"Once these resources are placed on the market, we believe they should be available without discrimination to domestic or foreign buyers. This is not the case today."

The launch of consultations is only the first step in the litigation process at the WTO.

It is intended to explore whether an amicable solution is possible.

This can last up to 60 days and if no such solution appears then the EU commission can move to establish a WTO panel for a formal ruling in the row.

Hong Kong gold prices closed higher on Tuesday at 942.00-943.00 US dollars an ounce, up from Monday's close of 939.50-940.50 US dollars.

It opened at 939.00-940.00 dollars.

Oil held above 70 dollars in Asia Wednesday after volatile trade overnight sparked by a weakening US dollar and political unrest in key crude producers Iran and Nigeria.

New York's main futures contract, light sweet crude for delivery in July, eased 13 cents to 70.34 dollars a barrel.

Brent North Sea crude for August delivery dipped seven cents to 70.17 dollars.

Prices eased due to "continued demand concerns and concerns that the market went up too high, too fast," said Bart Melek of BMO Capital Markets.

Crude soared more than two dollars to 72.77 dollars a barrel on Tuesday on a weakening greenback and indications of a US housing recovery, but retreated as traders realised the rally had been overdone.

The market was also reacting to developments in crude producers Iran and Nigeria, another analyst said.

"Political unrest following the presidential elections in Iran and bombing attacks on oil plants in Nigeria represent an explosive mix for the oil market," said Commerzbank commodities analyst Eugen Weinberg.

Iran's election watchdog said Tuesday it was ready for a recount in the disputed presidential vote as the nation braced for further protests after at least seven people were killed in street battles, according to state media.

The Islamic republic is the second biggest crude oil producer in the Organization of the Petroleum Exporting Countries (OPEC), after Saudi Arabia.

Meanwhile, tensions remained high in Nigeria after militants in the Niger Delta claimed attacks against facilities run by US oil giant Chevron.

The Movement for the Emancipation of the Niger Delta (MEND) also threatened to extend its operations beyond Delta State to others in the oil-rich but volatile southern region.

Hong Kong gold prices opened higher on Friday at 941.50-942.50 US dollars an ounce, up from Thursday's close of 933.50-934.50 dollars.

Hong Kong gold prices closed lower on Thursday at 938.00-939.00 US dollars an ounce, down from Tuesday's close of 942.00-943.00 US dollars.

It opened at 940.00-941.00 US dollars an ounce.

The city's financial markets were closed Wednesday for a public holiday.

Hong Kong gold prices opened lower on Thursday at 940.00-941.00 US dollars an ounce, down from Tuesday's close of 942.00-943.00 US dollars.

The city's financial markets were closed Wednesday for a public holiday.

The World Bank has launched a programme to help cities in developing countries achieve economic growth and high quality living standards without damaging the environment.

With around 90 percent of urban growth worldwide taking place in developing nations and at a rapid pace, city planners are in a race against time to put in place the right policies that will benefit future generations, the bank said.

"Urbanisation in developing countries may be the single greatest change in our century," it said in a book outlining how the bank can help cities achieve economic growth and still have clean air and water and expansive greenery.

The programme was developed by an international team of experts from urban planning, transport, energy water and waste management and draws from the experiences of well-managed cities around the world.

It incorporates the best practices from model cities such as Singapore, Stockholm in Sweden, Yokohama in Japan and Curitiba in Brazil.

In cooperation with the bank, other cities in developing countries can implement these practices, principles and other practical methods and tools in accordance with their own local conditions.

The programme complements the bank's efforts to promote sustainable development and help cut greenhouse gas emissions blamed for climate change.

Entitled "Ecological Cities as Economic Cities", the book cites projections that developing countries will treble their entire built-up urban area from 200,000 square kilometres (77,220 square miles) to 600,000 square km (231,661 square miles) between 2000 and 2030.

"One could say we are building a 'whole new world' at about 10 times the speed in countries with severe resource constraints," says the book, launched in Singapore at the weekend.

The rise of urban centres cannot be avoided because on average about 75 percent of global economic production takes place in cities, the book says.

In many developing countries the share of urban centres in the total national economic output is over 60 percent, it notes.

But while urbanisation has helped lift millions of people out of poverty, it has also led to an "unprecedented consumption and loss of natural resources", the book says.

Lack of planning and an explosion in population growth has led to pollution, urban blight, poor water and sanitation conditions and the mushrooming of slum areas.

"Calculations already show that if developing countries urbanise and consume resources as developed countries have, an ecological resource base as large as four planet Earths would be needed to sustain growth," the book says.

It adds however that cities like Singapore, Stockholm, Yokohama and Curitiba have shown that economic growth, high-quality living standards and protection of the environment can go together.

The book notes that many of the solutions adopted by these cities "are affordable even when budgets are limited, and they generate returns including direct benefits to the poor".

Yumiko Noda, the deputy mayor of Yokohama, said at a seminar on "liveable cities" held in Singapore to coincide with the book's launching that citizens' involvement was crucial to a city's success.

Yokohama in 2001 planned to cut the city's waste by 30 percent within 10 years but achieved its goal in just five years.

This has saved the city money and also slashed its carbon dioxide emissions, she said.

Jim Adams, World Bank vice president for East Asia and the Pacific, said the pace of urbanisation has highlighted the urgency for an integrated economic and ecological approach to development.

"There is only a short space of time in which to make an impact on how this development takes place," he said in a statement.

Japanese candidate Yukiya Amano said Thursday he was 'very pleased' after he won the race to head the International Atomic Energy Agency.

"This afternoon I have received the support from 23 countries which is the necessary number of votes to be selected as the next director general of the IAEA," Amano told journalists. "I am very pleased for this support."

Amano scraped through to victory in the sixth round of voting on Thursday, when 23 of the IAEA's 35 board members voted in his favour, 11 voted against and one country abstained.

He had been competing against South African ambassador Abdul Samad Minty.

The election process is not over, however.

Under the rules of procedure, all 145 IAEA member states are to meet again on Friday afternoon where they will formally appoint Amano "by acclamation".

But he will not be officially named until the IAEA's General Conference give its green light in September.

"If I have the privilege of being elected as the new director general of the IAEA, I will do my utmost to enhance the welfare of the human beings and ensure sustainable development through the peaceful use of nuclear energy," Amano said Thursday.

"Also, as a national coming from Japan, I'll do my utmost to prevent the spread of nuclear weapons. In order to do that, solidarity of all the member states countries from North, from South, from East and West is absolutely necessary."

German Chancellor Angela Merkel flew to Washington Thursday for talks with US President Barack Obama on the international economic crisis and climate protection.

Merkel told reporters before embarking on the two-day trip that she and Obama would also cover Iran, North Korea and Afghanistan and preparations for next month's Group of Eight summit in Italy.

She said she also hoped to clear a few obstacles on the road toward a landmark United Nations treaty on climate change in Copenhagen in December during her stay in the United States, the world's biggest emitter of greenhouse gases.

"It is about comparing notes on how we can achieve a deal in Copenhagen," she said.

"A lot has happened in the United States of America on this issue but there is still an enormous amount of work to do."

Merkel said there were also differences on new international rules for financial markets and against protectionism ahead of the G8 summit July 8-10 and a meeting of the Group of 20 industralised nations in Pittsburgh in September.

"We will have to surmount some difficulties to work toward fiscally sustainable development in the economy," Merkel said.

"We have to draw the right lessons from the economic crisis. The American president, Barack Obama, is of the same opinion."

Senior aides to the chancellor said this week that Merkel would like to hear Obama's "exit strategy" out of massive public spending to grapple with the economic crisis, with the spectre of runaway global inflation looming large.

It will be Merkel's first visit to Washington since Obama took office in January but her stop at the White House Friday will mark their third one-on-one talks this year.

Despite the flurry of meetings, most recently in the eastern German city of Dresden this month, Obama and Merkel have had to work to dispel rumours of friction between them.

A close advisor to the conservative chancellor, who had warm personal relations with Obama's predecessor George W. Bush, expressed exasperation with the persistent rumours in the US and German press.

"Merkel will not take part in a contest to see who gets along best with the American president," the advisor said on condition of anonymity.

President Nicolas Sarkozy on Wednesday held the first meeting of his reshuffled cabinet. Here is the full list of ministers and junior ministers in the new government.

Prime Minister: Francois Fillon

Minister of state for Ecology, Energy, Sustainable Development and Climate Change Negotiations: Jean-Louis Borloo

Minister of state for Justice: Michele Alliot-Marie

Minister for the Interior, Overseas Departments and Territorial Administration: Brice Hortefeux

Minister of Foreign and European Affairs: Bernard Kouchner

Minister for the Economy, Finance and Employment: Christine Lagarde

Minister of Defence: Herve Morin

Minister for Culture and Communication: Frederic Mitterrand

Minister for Immigration, Integration and National Identity: Eric Besson

Minister for Agriculture, Fisheries and Food: Bruno Le Maire

Minister for Labour, Social Relations and Solidarity: Xavier Darcos

Minister for National Education and Government Spokesman: Luc Chatel

Minister for Higher Education and Research: Valerie Pecresse

Minister for Health, Youth and Sports: Roselyne Bachelot

Minister in charge of the government's economic recovery plan: Patrick Devedjian

Minister for the Budget, Public Finances and the Civil Service: Eric Woerth

Minister for Town and Country Planning and Rural Affairs: Michel Mercier

Junior interior minister: Alain Marleix

Junior trade minister: Christian Estrosi

Junior justice minister: Jean-Marie Bockel

Junior labour minister: Laurent Wauquiez

Junior minister of European and foreign affairs: Pierre Lellouche

Junior ecology minister: Chantal Jouanno

Junior minister responsible for the digital economy: Nathalie Kosciusko-Morizet

Junior minister for housing and urban affairs: Benoist Apparu

Junior minister responsible for relations with parliament: Henri de Raincourt

Junior minister responsible for developing the Paris region: Christian Blanc

Junior minister responsible for overseas departments: Marie-Luce Penchard

Junior minister responsible for foreign trade: Anne-Marie Idrac

Junior minister for ecology and sustainable development: Valerie Letard

Junior minister responsible for transport: Dominique Bussereau

Junior minister responsible for the family and solidarity: Nadine Morano

Junior minister responsible for the elderly: Nora Berra

Junior responsible for trade, tourism, consumer affairs and small businesses: Herve Novelli

Junior minister responsible for urban affairs: Fadela Amara

High commissioner responsible for fighting poverty: Martin Hirsch

Junior minister for youth and sports: Rama Yade

Junior minister responsible for foreign aid and francophony: Alain Joyandet

Junior minister responsible for veterans' affairs: Hubert Falco