Analysis: Can United States defuse Koran burning uproar?

WASHINGTON (Reuters) - After a third day of bloody protests over the burning of the Koran, there is a sense that America is lurching from one image crisis to the next in Afghanistan, with no clear path for U.S. officials to defuse the latest uproar.

President Barack Obama apologized on Thursday for the burning of copies of the Koran on a U.S. base in Afghanistan, an

incident that has triggered far more outcry than another shocking incident: the emergence of a video last month showing Marines urinating on the corpses of what appear to be dead Taliban fighters.

Obama's apology over the Koran burning has been accompanied by other steps by the U.S. military meant to show remorse over what it sees as a tragic blunder. The Pentagon detailed new outreach to Muslim leaders, and the top U.S. commander in Afghanistan has promised training on the proper handling of religious materials as well as a swift investigation.

But analysts are doubtful more can be done to calm Afghans incensed by the destruction of Islam's holy book.

Instead, outrage in Afghanistan may have to simply run its course, leaving America to grapple with any fallout on its delicate campaign to foster reconciliation and forge a long-term security agreement with Afghanistan.

"The U.S. has pretty much done all it can do," said Lisa Curtis of the Heritage Foundation think-tank. "To a certain degree, all (the U.S.) can do now is wait for tempers to cool."

Whether more violence follows Friday prayers in Afghanistan could be an indicator whether the protests are still building, or beginning to peter out.

The Taliban has urged Afghans to target foreign military bases and kill Westerners in retaliation and, on Thursday, a man wearing an Afghan army uniform opened fire on two American servicemembers. NATO has declined to say if the shooting was connected to the protests.

President Hamid Karzai's office said on Thursday it wanted NATO to put on public trial those responsible.

But U.S. service members are usually shielded from local prosecution and a U.S. official, speaking on condition of anonymity, said it was highly unlikely a U.S. soldier would be disciplined outside the U.S. military justice system.

SERIES OF SCANDALS

The Koran burning incident is only the latest image nightmare for the Pentagon in Afghanistan. Earlier in February, the Pentagon grappled with fallout from a photo showing Marines with what looked like a Nazi SS flag.

In January, Defense Secretary Leon Panetta quickly condemned the video showing U.S. forces urinating on Taliban corpses.

Just a week ago, NATO-led forces killed eight young Afghans in an air strike that enraged the Afghan government and came on the heels of a United Nations report showing civilian casualties in the decade-long war rose again in 2011.

But perhaps the most damaging incident, at least regionally, took place just across the border in Pakistan last November, when Afghan-based American forces killed 24 Pakistani troops. That prompted Islamabad to cut off ground-supply routes used to truck in essential materials for the war effort in Afghanistan.

How the Koran-burning incident adds to the headaches of American military commanders remains to be seen, but there is palpable frustration in Washington.

Indeed, the scandal is hardly the first involving burning of the Koran. Defense Secretary Leon Panetta's predecessor, Robert Gates, was so worried about the fallout from a Florida pastor's plans to burn the Koran that, in 2010, he took the extraordinary step of calling him personally to try to talk him out of it.

That only bought time. In April of last year, the pastor went ahead and supervised the burning of the book in Florida, triggering days of protests in Afghanistan in which some two dozen people were killed, including seven U.N. staff.

The unrest appears to add to the U.S. military's challenges in Afghanistan, which commanders are trying to stabilize ahead of the scheduled withdrawal of most American combat forces by the end of 2014.

Washington is also trying to negotiate a security pact with Afghanistan to govern the presence of U.S. troops beyond that date and foster long-shot Afghan peace talks with the Taliban.

After the Marine urination video surfaced, the Taliban said it would not harm nascent efforts to broker peace talks. It was unclear whether the latest incident would be any more of a deal-breaker.

Bruce Riedel, a former CIA and White House official who chaired Obama's 2009 review of Afghan policy, said he doubted the Taliban would forgo reconciliation efforts because of the Koran burning.

(Additional reporting by Susan Cornwell; editing by Todd Eastham)

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Analysis: Obama goes on offense over high gasoline prices

WASHINGTON (Reuters) - As Republican presidential candidates toss barbs at Barack Obama over expensive gasoline, the U.S. president and his team are going on the offensive with a strategy to divert blame and prepare voters for higher costs.

In subtle and not so subtle ways, Obama, a Democrat, is raising the issue of high prices to promote his own policy priorities and blunt criticism from the men vying to unseat him in the November 6 election.

His strategy is both politically- and policy-oriented. The president wants to advance his plans to increase renewable energy sources and reduce U.S. reliance on foreign oil.

But he also needs to win the war of words to gain an upper hand over Republicans in Western battleground states such as Colorado, Nevada and New Mexico, where people drive a lot and feel the sting of rising prices acutely.

Republicans see many weaknesses to exploit. They blame Obama for not doing enough to increase domestic production of fossil fuels and cite his decision to block a new oil pipeline from Canada as evidence that he is beholden to environmentalists.

Rising gasoline costs have brought the issue to the forefront of the presidential campaign. So Obama has started to pepper his speeches with references to prices at the pump.

On Tuesday he cited the extension of the payroll tax cut as a welcome buffer for workers coping with the cost of gas. On Wednesday he proposed -- not for the first time -- getting rid of tax loopholes that benefit oil and gas companies.

On Thursday he'll go a step further, using a speech in Florida to outline his own accomplishments in the energy arena along with a long-term strategy to keep fuel prices down.

"This is a recurrent problem and it's a problem that reinforces the need that (Obama) identified back when he was a candidate for a comprehensive energy strategy," White House spokesman Jay Carney said. Obama advisers have pointed to growing demand in China and unrest in the Middle East as factors out of their control that are affecting the price of oil.

Average gasoline prices have climbed to their highest February levels on record, hitting $3.53 per gallon last week, according to MasterCard SpendingPulse data.

Gasoline prices have tracked crude oil prices, which have been bolstered by the threat of supply disruptions from the West's standoff with Iran over Tehran's nuclear program.

Some analysts say U.S. prices could hit $4 a gallon or more ahead of the summer when driving demand peaks.

POLITICAL BATTLE

Those prices hurt Obama politically as much as they hurt the country economically, and Republican presidential candidate Rick Santorum seized on them criticize the president for his environmental record.

"Folks are just starting to be able to breathe a little as the economy starts to come back a little bit, unemployment starts to go down," Santorum said at a campaign event last week.

"All of a sudden they are going to be hit with the same force of wind that hit us in 2008 in the summer that caused us to go into a recession. All because of the radical environmentalist policies of this president," Santorum said.

Carney dismissed Santorum's comments as "random statements by politicians seeking office." Obama is the first president to preside over growth in domestic oil production since President Jimmy Carter, also a Democrat.

Republican presidential candidate Newt Gingrich, the former speaker of the House of Representatives, promised at a debate with rivals on Wednesday night that the country would enjoy gasoline prices at $2.50 a gallon if he won the White House.

Analysts and strategists said Obama has few options to bring down gasoline prices in the short term and said his energy policies had evolved from focusing on renewable fuels to promoting nuclear energy and natural gas.

"Basically he's come a long way from the campaign of '08. I think that reflects pragmatism on his part," said Guy Caruso, a senior adviser on energy at the Center for Strategic and International Studies.

Progress or not, Obama has vulnerabilities when it comes to energy. Earlier this year he nixed TransCanada Corp's Keystone XL pipeline under severe pressure from environmentalists.

The president blamed Republicans for forcing him to take a decision under a tighter timeframe than the State Department said it needed to study the project.

Mitt Romney, the former governor of Massachusetts and off-and-on frontrunner for the Republican presidential nomination, said that decision was a sign that Obama wanted to please his political base more than he wanted to improve the economy.

VULNERABILITIES, FEW OPTIONS

Analysts say even if Keystone were approved, the increase in oil supplies would not affect gasoline prices for years, but the decision is nevertheless a key flashpoint in the election.

"The juxtaposition of the high gas prices and Keystone has (the White House) understandably nervous, and even though those two ... have almost nothing to do with each other substantively, they create a political narrative that Republicans could be successful in using to paint Obama as anti-energy and pro-high gas prices," a Democratic strategist said.

Politically, Obama's vulnerability over gasoline prices could be especially deadly in Western states that he needs to win to remain in the White House.

Charles Ebinger, director of the Energy Security Initiative at the Brookings Institution, said Republican candidates could gain traction with voters in that region by emphasizing fuel costs, though they -- like Obama -- had few options to suggest to bring prices down in the short term.

"Out there (a candidate) can get some resonance against the president by talking about high gasoline prices," he said.

"If someone comes back at him and says, 'What's your policy Mr. Santorum, Mr. Gingrich, or whomever, to lower gasoline prices today,' I don't think they'll have a good answer."

(Additional reporting by Matthew Robinson and Samuel Jacobs; Editing by Russell Blinch and Anthony Boadle)

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Analysis: Putin's state sector crackdown short on substance

MOSCOW (Reuters) - Vladimir Putin has ordered Russia's state firms to clean up their act, but without fundamental reforms he may only scratch the surface of endemic graft and conflicts of interest that tar the country's bloated national champions.

Such reforms would require Putin to dismantle an entrenched system of corruption, patronage and cronyism, in which many of his own allies are enmeshed through their ties with the state-owned giants that are the focus of the crackdown.

"The problem is that all these state companies are very well-connected, and not well controlled," said Elena Panfilova, the head of the Moscow office of anti-corruption body Transparency International.

The prime minister has his eyes on a triumphant return to the presidency in a March 4 election. As well as rhetorical swipes at unpopular oligarchs, Putin has taken aim at the state giants that dominate energy, infrastructure and banking.

"Of course it's a pre-election move, to show an effective program against corruption," said political consultant Dmitry Orlov, who advises the pro-Putin All-Russia People's Front movement.

"But this isn't just a PR move: It's a real move that affects thousands of managers at these companies and their suppliers."

In a bid to prevent state-appointed managers from rewarding themselves or their relatives with lucrative contracts, Putin has instructed all state companies to furnish details about the ownership of every firm with which they do business.

He has also told state auditors to investigate the biggest state-owned firms, including gas producer Gazprom, oil pipeline operator Transneft, railway company RZhD, and banks Sberbank and VTB.

The initiatives followed mass protests against alleged fraud in December's parliamentary election that also illustrate public frustration at Putin's failure to tackle business corruption.

The most popular opposition leader, blogger and shareholder activist Alexei Navalny, first gained fame by exposing dubious financial dealings at major state companies.

Navalny caused a public outcry in 2010 by leaking a confidential government report detailing massive cost overruns, which he said totaled $4 billion, in the construction of an oil export pipeline to the Pacific coast by Transneft.

While Putin has an electoral interest in preventing further such scandals - or at least being seen to do so - skeptics doubt he is serious about taking on vested interests with which he is himself closely entwined.

"SERIOUS CORRUPTION RISKS"

Corruption is widely acknowledged as one of the biggest deterrents to foreign investment. Russia saw a net capital outflow of $84 billion last year, while capital investment as a share of gross domestic product - at around 20 percent - is significantly below most other emerging markets.

The prime minister is talking tough. At a meeting with senior power-sector officials in December, he blasted managers for abusing their positions to line their own pockets.

Putin cited a government probe which showed that out of 352 state-appointed managers in the sector who were investigated, no fewer than 169 were involved in private businesses on the side.

These "pocket" companies - typically suppliers, contractors or intermediaries - had taken hundreds of millions of dollars offshore, he said. "It's no secret that this creates serious corruption risks, or at a minimum conflicts of interests," Putin fumed. "We need to bring order here."

Several officials singled out by Putin have since resigned, including regional power chiefs, two deputy general directors of the federal grid company FSK, and a deputy general director of MRSK Holding, which owns government stakes in 11 regional power distributors.

"It's encouraging that he's making an effort to force bureaucrats to clean up their act," said David Herne, director of the Specialised Research and Investment Group, a Moscow-based firm that invests in Russia's power sector.

"Unfortunately, the ones who are clean are the exception."

"LOOK IN THE MIRROR"

In a sign that the purge may be spreading to other sectors, several other senior managers have resigned from state companies in recent weeks, including Gazprom's head of production, and the head of procurement at Rosneft.

But Vladimir Milov, a former deputy energy minister who is now an opposition politician, said the personnel changes were linked to pre-election battles for influence and did not represent a serious attempt to tackle conflicts of interest.

"It's more important to investigate obvious cases than to instigate a major 'cover' operation, pretending that we are looking for hidden beneficiaries," he said.

"I would strongly advise Putin to look in the mirror. Because his own friends do major deals with major state-owned companies."

Milov cited the example of Arkady Rotenberg, Putin's former judo partner, who is now one of the biggest suppliers of steel pipes to Gazprom - a lucrative business that has boosted his fortune to $1.1 billion, according to Forbes magazine.

Both Rotenberg and Gazprom have denied any violation of rules, insisting that all tenders were competitive.

But such cases reinforce concerns that many analysts have about Gazprom's murky procurement practices and high costs.

"Gazprom has about $40 billion in capital investment each year, two-thirds of which is not producing value," said Anders Aslund, senior fellow at Washington's Peterson Institute for International Economics and a former economic adviser to the Russian government.

"It costs three times as much to build a pipeline per kilometer in Russia as it does in Norway."

LACK OF OVERSIGHT

To address such concerns, Putin ultimately needs to do more than replace sticky-fingered managers and impose tougher rules on the ones that remain.

In part, the lack of oversight reflects chronic weaknesses in the governance of state companies - a particularly serious issue in Russia where the government is often divided between competing lobbies, and state managers have close relations with officials who are supposed to control them.

"So many people report to the prime minister that he doesn't have the ability to monitor it all closely," said Herne. "And below him the lines of authority are diffuse, so if you're the manager of a state company you have wiggle room."

Although in principle the government has committed itself to reducing the state's economic role through privatization, in practice the large state companies have grown under Putin's government. The state's share of stock market capitalization has leapt from 24 percent in 2004 to some 50 percent today.

An even broader problem is weak public oversight. Anti-corruption campaigners say little progress is possible without a genuinely free press, a more independent parliament, and a greater role for civic bodies.

Until these issues are resolved, many Russians and foreign investors will be unconvinced by Putin's latest initiatives.

"We've seen a number of anti-corruption campaigns in Russia over the last decade," said Steven Dashevsky, director of Moscow-based investment firm Dashevsky & Partners, "And each campaign was followed by even greater corruption."

(Reporting by Jason Bush; Editing by Douglas Busvine and Paul Taylor)

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