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U.S. regulators ditch net neutrality rules as legal battles loom

By David Shepardson

WASHINGTON (Reuters) – The U.S. Federal Communications Commission voted along party lines on Thursday to repeal landmark 2015 rules aimed at ensuring a free and open internet, setting up a court fight over a move that could recast the digital landscape.

The approval of FCC Chairman Ajit Pai’s proposal in a 3-2 vote marked a victory for internet service providers such as AT&T Inc, Comcast Corp and Verizon Communications Inc and hands them power over what content consumers can access. It also is the biggest win for Pai in his sweeping effort to undo many telecommunications regulations since taking over at the agency in January.

Democrats, Hollywood and companies such as Google parent Alphabet Inc and Facebook Inc had urged Pai, a Republican appointed by U.S. President Donald Trump, to keep the Obama-era rules barring service providers from blocking, slowing access to or charging more for certain content. The new rules give internet service providers sweeping powers to change how consumers access the internet but must have new transparency requirements that will require them to disclose any changes to consumers.

The meeting, held amid protests online and in front of the FCC headquarters in Washington, was evacuated before the vote for about 10 minutes due to an unspecified security threat, and resumed after law enforcement with sniffer dogs checked the room.

White House spokeswoman Sarah Sanders told reporters the administration “supports the FCC’s efforts. At the same time, the White House certainly has and always will support a free and fair internet.”

New York Attorney General Eric Schneiderman, a Democrat, said in a statement he will lead a multi-state lawsuit to challenge the reversal.

Shares of Alphabet, Apple Inc and Microsoft Corp moved lower after the vote.

The FCC said the rules would take effect in a few months after the White House Office of Management and Budget formally approves them.

Pai has argued that the 2015 rules were heavy handed and stifled competition and innovation among service providers.

“The internet wasn’t broken in 2015. We weren’t living in a digital dystopia,” he said on Thursday.

NEXT STEPS

Consumers are unlikely to see immediate changes but smaller startups worry the lack of restrictions could drive up costs or lead to their content being blocked.

Internet service providers say they will not block or throttle legal content but may engage in paid prioritization. They argue that the largely unregulated internet functioned well in the two decades before the 2015 order.

Republican FCC Commissioner Mike O’Rielly noted that self-driving vehicles and remotely monitored medical procedures may require internet service and that their needs could be given priority “over cat videos.”

O’Rielly said it is unlikely any internet provider would voluntarily submit to a “PR nightmare” by “attempting to engage in blocking, throttling or improper discrimination. It is simply not worth the reputation cost.”

Still, Democrats have pointed to polls showing a repeal is deeply unpopular and say they will prevail in protecting the rules, either in the courts or in U.S. Congress.

Immediately after the vote, Senator Edward Markey, a Democrat, said he and 15 other senators planned to introduce a resolution to undo the FCC action and restore the net neutrality rules.

FCC Commissioner Jessica Rosenworcel, a Democrat, said in a written dissent released on Thursday that the decision grants internet providers “extraordinary new power” from the FCC.

“They have the technical ability and business incentive to discriminate and manipulate your internet traffic,” she said. “And now this agency gives them the legal green light to go ahead.”

Several state attorneys general said before the vote they would oppose the ruling, citing issues with the public comment period. Other critics have said they will consider challenging what they see as weaker enforcement.

The 2015 rules were intended to give consumers equal access to web content and prevent broadband providers from favoring their own content. Those practices are now allowed as long as they are disclosed.

The broadband industry cheered the move. USTelecom, a lobbying group representing internet providers and broadband companies said after the vote they had “renewed confidence” to make network investments, particularly in rural communities.

On the other side, the trade group Internet Association, whose members include content providers Alphabet, Facebook and Pandora Media Inc, said “the fight isn’t over” and that it was weighing legal options in a lawsuit against the FCC order.

A University of Maryland poll had found more than 80 percent of respondents opposed a repeal. The survey of 1,077 registered voters was conducted online by the Program for Public Consultation from Dec. 6-8.

(Reporting by David Shepardson, Diane Bartz, Katanga Johnson; Writing by Chris Sanders; Editing by Meredith Mazzilli and Bill Trott)

In first, U.S. presents its evidence of Iran weaponry from Yemen

By Phil Stewart

WASHINGTON (Reuters) – The United States on Thursday presented for the first time pieces of what it said were Iranian weapons supplied to the Iran-aligned Houthi militia in Yemen, describing it as conclusive evidence that Tehran was violating U.N. resolutions.

The arms included charred remnants of what the Pentagon said was an Iranian-made short-range ballistic missile fired from Yemen on Nov. 4 at King Khaled International Airport outside Saudi Arabia’s capital Riyadh, as well as a drone and an anti-tank weapon recovered in Yemen by the Saudis.

Iran has denied supplying the Houthis with such weaponry and on Thursday described the arms displayed as “fabricated.”

The United States acknowledged it could not say precisely when the weapons were transferred to the Houthis, and, in some cases, could not say when they were used. There was no immediate way to independently verify where the weapons were made or employed.

But U.S. Ambassador to the United Nations Nikki Haley expressed confidence the transfers could be blamed on Tehran.

“These are Iranian made, these are Iranian sent, and these were Iranian given,” Haley told a news conference at a military hangar at Joint Base Anacostia-Bolling, just outside Washington.

All of the recovered weapons were provided to the United States by Saudi Arabia and the United Arab Emirates, the Pentagon said. Saudi-led forces, which back the Yemeni government, have been fighting the Houthis in Yemen’s more than two-year-long civil war.

The unprecedented presentation – which Haley said involved intelligence that had to be declassified – is part of President Donald Trump’s new Iran policy, which promises a harder line toward Tehran. That would appear to include a new diplomatic initiative.

“You will see us build a coalition to really push back against Iran and what they’re doing,” Haley said, standing in front of what she said were the remnants of the Nov. 4 missile.

Israel, Saudi Arabia and the United Arab Emirates, who view Tehran as a threat, seized upon the U.S. presentation in calls on Thursday for international action.

Still, it was unclear whether the new evidence would be enough to win support for sanctions on Iran from some U.N. Security Council members, like Russia or China.

British U.N. Ambassador Matthew Rycroft said he didn’t think “there’s anything that could convince some of my council colleagues” to take U.N. action against Iran. Still, he said “we’re going to be pursuing with them nonetheless.”

Under a U.N. resolution that enshrines the Iran nuclear deal with world powers, Tehran is prohibited from supplying, selling or transferring weapons outside the country unless approved by the U.N. Security Council. A separate U.N. resolution on Yemen bans the supply of weapons to Houthi leaders.

Iran rejected the U.S. accusations as unfounded and Iran’s Foreign Minister Javad Zarif, on Twitter, drew a parallel to assertions by then-U.S. Secretary of State Colin Powell to the United Nations in 2003 about U.S. intelligence on weapons of mass destruction in Iraq.

No weapons of mass destruction were found in Iraq after the U.S.-led invasion.

IRAN LINKS

The Pentagon offered a detailed explanation of all of the reasons why it believed the arms came from Iran, noting what it said were Iranian corporate logos on arms fragments and the unique nature of the designs of Iranian weaponry.

That included the designs of short-range “Qiam” ballistic missiles. The Pentagon said it had obtained fragments of two Qiam missiles, one fired on Nov. 4 against the airport and another fired on July 22.

The Pentagon cited corporate logos it said matched those of Iranian defense firms on jet vanes that help steer the missile’s engine and on the circuit board helping drive its guidance system. It also said the missile’s unique valve-design was only found in Iran.

Iran, it said, appeared to have tried to cover up the shipment by disassembling the missile for transport, given crude welding used to stitch it back together.

“The point of this entire display is that only Iran makes this missile. They have not given it to anybody else,” Pentagon spokeswoman Laura Seal said. “We haven’t seen this in the hands of anyone else except Iran and the Houthis.”

A Dec. 8 U.N. report monitoring Iran sanctions found that the July 22 and Nov. 4 missiles fired at Saudi Arabia appeared to have a “common origin,” but U.N. officials were still investigating the claims that Iran supplied them.

A separate Nov. 24 U.N. report monitoring Yemen sanctions said four missiles fired into Saudi Arabia this year appear to have been designed and manufactured by Iran, but as yet there was “no evidence as to the identity of the broker or supplier.”

The U.N. Iran and Yemen sanctions monitors “saw a majority” of the weaponry displayed by Haley, said a spokesman for the U.S. mission to the United Nations.

The Pentagon put on display other weapons with designs it said were unique to Iran’s defense industry. It pointed to a key component of a Toophan anti-tank guided missile and a small drone aircraft, both of which it said were recovered in Yemen by the Saudis.

It also showed components of a drone-like navigation system like the one the Pentagon says was used by the Houthis to ram an exploding boat into a Saudi frigate on Jan. 30. The United Arab Emirates seized the system in late 2016 in the Red Sea, the Pentagon said.

The U.N. Security Council is due to be briefed publicly on the latest U.N. report monitoring Iran sanctions on Tuesday.

(Additional reporting by Michelle Nichols at the United Nations; Editing by Alistair Bell and James Dalgleish)

Homegrown attacks rising worry in U.S. as Islamic State weakens abroad

By Joseph Ax

NEW YORK (Reuters) – The online video’s message was clear: Supporters of Islamic State who could not travel overseas to join the militant group should carry out attacks wherever they were in the United States or Europe.

Bangladeshi immigrant Akayed Ullah, 27, followed those instructions on Monday when he tried to set off a homemade bomb in one of New York’s busiest commuter hubs, in an attack that illustrates the difficulty of stopping “do-it-yourself” attacks by radicals who act alone.

While harder to stop than attacks coordinated by multiple people – whose communications may be more easily monitored by law enforcement or intelligence agencies – they also tend to do less damage. Ullah was the person most seriously wounded when his bomb ignited but did not detonate in an underground passageway linking the Port Authority Bus Terminal and the Times Square subway statin; three others sustained lesser injuries.

“They tend to be less organized and less deadly,” said Seamus Hughes, a former adviser at the U.S. government’s National Counterterrorism Center. “That’s because you’re dealing with more, for lack of a better word, amateurs.”

The do-it-yourself style of attack is on the rise in the United States, according to research by the Program on Extremism at George Washington University, where Hughes is deputy director.

The United States has seen 19 attacks perpetrated by Islamic State-inspired people since the group declared a “caliphate” in June 2014 after capturing broad swaths of Iraq and Syria. Of those, 12 occurred in 2016 and 2017, almost twice as many as in the two preceding years.

“You’re going to see continued numbers of plots and, unfortunately, attacks,” Hughes said.

Ullah began immersing himself in Islamic State propaganda as early as 2014, three years after he arrived in the United States as a legal immigrant, according to federal prosecutors who charged him with terrorism offenses. They said in court papers that Ullah’s computer records showed that he viewed ISIS videos urging supporters of the group to launch attacks where they lived.

Experts said the success of Western allies in retaking most of Islamic State’s territory could inspire more attacks out of anger or vengeance.

“No group has been as successful at drawing people into its perverse ideology as ISIS,” Federal Bureau of Investigation Director Christopher Wray said in congressional testimony last week. “Through the internet, terrorists overseas now have access into our local communities to target and recruit our citizens.”

National security analysts generally divide such perpetrators into three broad categories.

Some attackers act at the direction of a group, like the Islamic State-backed militants who carried out coordinated attacks in Paris in 2015, killing 130; others have some limited contact with an organization but act largely on their own. A third type has no communication with a group but engage in violence after being radicalized by online propaganda.

It is easier for trained, battle-hardened ISIS fighters to travel from the Middle East to Europe than for them to reach the United States. That helps explain why U.S. attacks have largely been the work of “self-made” terrorists, said Brandeis University professor and radicalization expert Jytte Klausen.

“In these recent cases, we’ve seen very few indications that there was any type of direct training,” Klausen said.

Self-directed perpetrators are the hardest for investigators to identify. Their ranks appear to include Ullah, as well as two other recent New York attackers: Ahmad Rahimi, the man who injured 30 with a homemade bomb in Manhattan in September 2016, and Sayfullo Saipov, the Uzbek immigrant accused of killing eight by speeding a rental truck down a bike lane in October.

While that type of attacker typically is less destructive, there are important exceptions. Oklahoma City bomber Timothy McVeigh and Terry Nichols killed 168 people, and Omar Mateen gunned down 49 people at a gay nightclub in Orlando last year.

“A single individual or two can still create a lot of damage,” said Max Abrahms, a professor at Northeastern University who studies terrorism. “But they’re not able to wage sustained terrorist campaigns.”

(This story has been refiled to restore dropped word “as” in 6th paragraph)

(Reporting by Joseph Ax; Editing by Scott Malone and Jonathan Oatis)

Federal Communications Commission repeals net neutrality rules

By David Shepardson

The approval of FCC Chairman Ajit Pai’s proposal marks a victory for internet service providers like AT&T Inc, Comcast Corp and Verizon Communications Inc and hands them power over what content consumers can access.

Democrats, Hollywood and companies like Google parent Alphabet Inc and Facebook Inc had urged Pai, a Republican appointed by U.S. President Donald Trump, to keep the Obama-era rules barring service providers from blocking, slowing access to or charging more for certain content.

Consumer advocates and trade groups representing content providers have planned a legal challenge aimed at preserving those rules.

The meeting was evacuated before the vote for about 10 minutes due to an unspecified security threat, and resumed after sniffer dogs checked the room.

FCC Commissioner Mignon Clyburn, a Democrat, said in the run-up to the vote that Republicans were “handing the keys to the Internet” to a “handful of multi-billion dollar corporations.”

Pai has argued that the 2015 rules were heavy handed and stifled competition and innovation among service providers.

“The internet wasn’t broken in 2015. We weren’t living in a digital dystopia. To the contrary, the internet is perhaps the one thing in American society we can all agree has been a stunning success,” he said on Thursday.

The FCC voted 3-2 to repeal the rules.

Consumers are unlikely to see immediate changes resulting from the rule change, but smaller startups worry the lack of restrictions could drive up costs or lead to their content being blocked.

Internet service providers say they will not block or throttle legal content but that they may engage in paid prioritization. They say consumers will see no change and argue that the largely unregulated internet functioned well in the two decades before the 2015 order.

(Reporting by David Shepardson; Writing by Chris Sanders; Editing by Jonathan Oatis and Meredith Mazzilli)

Putin says U.S. gripped by fabricated spymania, praises Trump

By Vladimir Soldatkin and Jack Stubbs

MOSCOW (Reuters) – Russian President Vladimir Putin said on Thursday the United States was in the grip of a fabricated spymania whipped up by President Donald Trump’s opponents but he thought battered U.S.-Russia relations would recover one day.

Putin also praised the U.S. president for what he said were his achievements.

“I’m not the one to evaluate the (U.S.) president’s work. That needs to be done by the voters, the American people,” Putin told his annual news conference in Moscow, in answer to a question.

“(But) we are objectively seeing that there have been some major accomplishments, even in the short time he has been working. Look at how the markets have grown. This speaks to investors’ trust in the American economy.”

Trump took office in January, saying he was keen to mend ties which had fallen to a post-Cold War low. But since then, ties have soured further after U.S. officials said Russia meddled in the presidential election, something Moscow denies.

Congress is also investigating alleged contacts between the Trump election campaign and Russian officials amid fears that Moscow may have tried to exercise improper influence.

Putin dismissed those allegations and the idea of a Russia connection as “fabricated”.

“This is all invented by people who oppose Trump to give his work an illegitimate character. The people who do this are dealing a blow to the state of (U.S.) domestic politics,” he added, saying the accusations were disrespectful to U.S. voters.

Moscow understood that Trump’s scope to improve ties with Russia was limited by the scandal, said Putin, but remained keen to try to improve relations.

“COMMON THREATS”

Washington and Moscow had many common interests, he said, citing the Middle East, North Korea, international terrorism, environmental problems and the proliferation of weapons of mass destruction.

“You have to ask him (Trump) if he has such a desire (to improve ties) … or whether it has disappeared. I hope that he has such a desire,” said Putin.

“We are normalizing our relations and will develop (them) and overcome common threats.”

Putin, who is running for re-election in March, agreed with a questioner who said he faced no credible high-profile political opponents, but pledged to work to try to create a more balanced political system.

The promise drew mockery from his critics, who accuse him of using state TV, the courts and the police to demonize and marginalize the liberal opposition.

He seems sure to win comfortably in March and extend his grip on power into a third decade.

He said he planned to run as an independent candidate and garner support from more than one party, in a sign the former KGB officer may be keen to strengthen his image as a “father of the nation” rather than as a party political figure.

Putin said it was too early to set out his electoral program, but named priority issues as helping forge what he called a flexible political system, nurturing a high-tech economy, improving infrastructure, healthcare, education and productivity and increasing people’s real incomes.

Putin, 65, has been in power, either as president or prime minister, since the end of 1999.

(Reporting by Moscow bureau; writing by Andrew Osborn; editing by Andrew Roche)

With no deal on children’s health plan, U.S. states scramble for Plan B

By Jilian Mincer and Yasmeen Abutaleb

NEW YORK/WASHINGTON (Reuters) – For Nancy Minoui of Portland, Oregon, and Crystal Lett of Dublin, Ohio, Congress’ failure to fund the Children’s Health Insurance Program is not some distant tale of political wrangling.

For Minoui, it’s about how to provide care for her daughter, Marion Burgess, born last Valentine’s Day with a hole in her heart. For Lett it’s about providing care for her 6-year-old son, Noble, who was born with a complex genetic disorder.

They are among thousands of parents across the country scrambling to look after low-income children whose medical care is funded by a traditionally bipartisan program, known as CHIP, that is now facing a shutdown after Congressional Republicans tied its fate to other legislative battles.

U.S. states, which administer the program but rely on federal funds, and healthcare providers are now preparing for the shutdown they had desperately hoped to avoid.

Virginia began on Tuesday sending notices to tens of thousands of families that the 20-year-old program would close by Jan. 31 without new federal funding. Connecticut is due to mail similar notices this week.

More than a dozen states, including New York and Utah, are poised to send warning notices to families by the end of this month.

Some hospitals and medical providers are encouraging patients to schedule additional doctor appointments and refill prescriptions before the deadline. Others, like the Texas Children’s Hospital, are identifying families with the most seriously ill children, including cancer patients and transplant recipients, to help obtain alternate coverage.

CHIP provides health benefits to almost 9 million children whose families earn too much to be eligible for Medicaid but cannot afford private insurance, and has enjoyed bipartisan support since it was enacted in 1997.

But this year, funding for the program expired on Sept. 30. Congressional Republicans have tied its fate to other legislative battles, including attempts to repeal Obamacare and a newer effort to overhaul the U.S. tax system.

Lawmakers had hoped to pass a five-year CHIP funding extension before they adjourned for the year. But aides in the House of Representatives and the Senate say they may not get to it until early 2018.

In the meantime, states have been spending down whatever was left of their CHIP funds, and some have received temporary relief from a $3 billion reserve.

Minnesota became the first state to run out of money altogether in November, and is keeping the program afloat from its own budget, projecting a $178 million deficit if Congress does not act next year.

Oregon expects to run out of federal money before the end of 2017, while Colorado was the first to begin notifying families of a Jan. 31 cutoff in late November.

A third of states expect to exhaust funds by the end of January, and an additional 21 expect to run out by the end of March, according to the Kaiser Family Foundation. More than 1.2 million children are expected to lose health benefits if funding is not restored in 2018.

“We are spending a ridiculous amount of time and energy trying to kick Congress in the seat of their pants to get this done,” Oregon Governor Kate Brown, a Democrat, said in an interview.

HOSPITALS PROMISING CARE

Hospitals have convened emergency meetings to see how they can salvage care for seriously ill patients, and determine their own financial hit from covering more uninsured children, according to interviews with nearly a dozen hospital officials.

“No child should be the pawn of politics,” said Dr. Judy Aschner, physician-in-chief of Children’s Hospital at Montefiore in New York City. “We provide all levels of care to children and their families, regardless of ability to pay, and will continue to do so whatever the outcome for CHIP.”

Denver Health Medical Center sent letters last week to 9,500 patients, encouraging them to schedule exams and refill prescriptions before the deadline. Dr. Meg Tomcho, a pediatrician affiliated with the hospital, plans to work additional shifts and write prescriptions for three months rather than one to accommodate families.

Jill Pidcock of Glenwood Springs, Colorado, scheduled early appointments for her two sons. She and her husband dropped their health insurance a few years ago, and CHIP has made a huge difference, particularly for her 14-year-old, who has autism.

Minoui, of Portland, Oregon, said her 10-month-old daughter may need heart surgery in the coming months.

“It’s hard enough when your child is sick and you’re waiting to see if they can get well, let alone waiting to see if you’re going to be covered,” Minoui said.

State officials have debated when to notify families, hoping that Congress would come through and spare them anxiety. Some must meet state laws requiring 30-day or 60-day advance notice of the program’s shutdown.

Lett, of Dublin, Ohio doesn’t know how she will afford care for her son, Noble, who, because of his complex genetic disorder Prader-Willi Syndrome, requires daily growth hormone injections, numerous doctor visits and multiple therapy sessions each week.

Lett works two part-time jobs in order to have flexibility for his many appointments.

“We’re holding onto the hope that they will do the right thing by our family and everybody else’s family,” she said.

(Reporting by Jilian Mincer in New York and Yasmeen Abutaleb in Washington; Editing by Michele Gershberg and Leslie Adler)

Exclusive: U.S. suspends aid to Somalia’s battered military over graft

By Katharine Houreld

NAIROBI (Reuters) – The United States is suspending food and fuel aid for most of Somalia’s armed forces over corruption concerns, a blow to the military as African peacekeepers start to withdraw this month.

African Union (AU) troops landed in Mogadishu a decade ago to fight al Shabaab Islamist militants and Somali forces are supposed to eventually take over their duties.

But the United States, which also funds the 22,000-strong peacekeeping force, has grown frustrated that successive governments have failed to build a viable national army.

Diplomats worry that without strong Somali forces, al Shabaab could be reinvigorated, destabilize the region and offer a safe haven to other al Qaeda-linked militants or Islamic State fighters.

The U.S. suspension of aid came after the Somali military repeatedly failed to account for food and fuel, according to private correspondence between the U.S. and Somali governments seen by Reuters.

“During recent discussions between the United States and the Federal Government of Somalia, both sides agreed that the Somali National Army had failed to meet the standards for accountability for U.S. assistance,” a State Department official told Reuters last week, on condition of anonymity.

“We are adjusting U.S. assistance to SNA units, with the exception of units receiving some form of mentorship, to ensure that U.S. assistance is being used effectively and for its intended purpose,” the official said.

The U.S. suspension comes at a sensitive time. The AU force – with troops from Burundi, Djibouti, Ethiopia, Kenya and Uganda – is scheduled to leave by 2020. The first 1,000 soldiers will go by the end of 2017.

The State Department official said Washington would continue to support small, Somali special forces units mentored by U.S. personnel and would work with the Somali government to agree criteria that could restore support to other units.

“It is true that some concerns have been raised on how support was utilized and distributed. The federal government is working to address these,” Somali Minister of Defence Mohamed Mursal told Reuters.

WHERE’S THE AID?

Documents sent from the U.S. Mission to Somalia to the Somali government show U.S. officials are increasingly frustrated that the military is unable to account for its aid.

The documents paint a stark picture of a military hollowed out by corruption, unable to feed, pay or arm its soldiers – despite hundreds of millions of dollars of support.

Between May and June, a team of U.S. and Somali officials visited nine army bases to assess whether the men were receiving food the United States provides for 5,000 soldiers.

“We did not find the expected large quantities of food at any location … there was no evidence of consumption (except at two bases),” the U.S. team wrote to the Somali government.

At one base, less than a fifth of the soldiers listed by Somali commanders were present. The best-staffed base had 160 soldiers out of 550. Only 60 had weapons.

“Many appeared to be wearing brand new uniforms. This implied they were assembled merely to improve appearances,” the letter, seen by Reuters, said.

An ongoing assessment of the Somali military this year by the Somali government, African Union and United Nations drew similar conclusions.

The joint report seen by Reuters said many soldiers lacked guns, uniforms, food, vehicles or tents. Troops relied on support from AU forces or local militias to survive.

“The SNA is a fragile force with extremely weak command and control,” the report said. “They are incapable of conducting effective operations or sustaining themselves.”

Most units don’t have radios, leaving soldiers to rely on runners to get help when mobile networks go down, the report said. Troops lacked paper to write reports, toilets, boots and medical equipment such as tourniquets. Many slept under trees.

SNA units were at 62 percent of their authorized strength on average. Only 70 percent of them had weapons, the report said.

Although the report was deeply critical, diplomats praised the government for trying to quantify the scope of the problem.

“The government deserves massive praise for doing it and being willing to talk about it,” Michael Keating, the U.N.’s top official in Somalia, told Reuters.

CASH PAYMENTS SUSPENDED

The United States also suspended a program paying soldiers $100 monthly stipends in June after the federal government refused to share responsibility for receiving the payments with regional forces fighting al Shabaab.

Washington has spent $66 million on stipends over the past seven years but has halted the program several times, concerned the money was not going to frontline soldiers.

One Somali document seen by Reuters showed members of a 259-strong ceremonial brass band were receiving stipends this year meant for soldiers fighting militants.

The State Department’s watchdog said in a report published in October there were insufficient checks on the program and U.S. stipends could fund forces that commit abuses – or even support insurgents.

Officially, Somalia’s military is 26,000 strong, but the payroll is stuffed with ghost soldiers, pensioners and the dead, whose families may be receiving their payments, diplomats say.

Intermittent payments from the government have forced many active soldiers to sell their weapons, ammunition or seek other work – practices the U.S. stipends were designed to curb.

Washington has whittled down the number of troops it pays to 8,000 from over 10,000 but there is still no reliable payroll, said a Mogadishu-based security expert.

Defence Minister Mursal said the United Nations is creating a biometric database and plans to help the Somali government make cash payments directly to soldiers via mobile phones.

The new government will also set up a separate system for widows, orphans, and the wounded so the payroll would adequately represent military strength, he said.

UNDER ATTACK

The weakness of Somali forces has deadly consequences. The insurgency is striking with ever larger and more deadly attacks in the capital Mogadishu and major towns.

A truck bomb killed more than 500 people in October and a suicide bomber killed at least 18 at a police academy on Thursday.

Yusuf, a 35-year-old Somali soldier stationed near the Indian Ocean port of Kismayu, knows what it’s like to depend on local militias and AU forces to stay alive.

On Sept. 26, insurgents attacked his base at Bula Gadud, killing 15 colleagues and wounding scores more before the local Jubaland militia and AU peacekeepers saved them.

“We lost several key members in that battle especially my close friend,” he told Reuters. “We tried to retreat … after using all the ammunition we had.”

A senior Somali security source said when the attack happened, the battalion of more than 1,000 soldiers had only been issued 300 guns.

Defence Minister Mursal said the Somali troops at Bulagadud have since been sent more weapons.

Somalia’s national security plan calls for a military of 18,000 soldiers, funded by the central government and operating country-wide.

Getting there will be hard. Security experts say the military is dominated by a powerful clan, the Hawiye, which would be reluctant to lose control of the lucrative security assistance revenue stream.

Many regional governments within Somalia already see the Hawiye-dominated federal forces as rivals rather than allies.

The government’s ability to push reforms depends on balancing demands from federal member states, lawmakers, clan leaders and international partners, the U.N.’s Keating said.

“It’s going to take a long time and its going to run into massive clan resistance,” he said. “Some clans are very dominant in the security forces.”

Somalia’s partners also need to get serious and coordinate better, said Matt Bryden of the think-tank Sahan Research.

According to Sahan, donors – including the EU, AU, Turkey and Uganda – have trained more than 80,000 Somali soldiers since 2004. Bryden said records are so poor it was not clear if many had taken multiple courses, or just quit afterwards.

“It’s like sand through your fingers – where are they all?”

(Additional reporting by Phillip Stewart in Washington D.C. and Khadar Hared in Nairobi; editing by David Clarke)

Wall St. set to rise at open as tax reform enters last lap

By Rama Venkat Raman

(Reuters) – Wall Street was poised to open higher on Thursday, aided by gains for banking shares and news that the Republicans’ tax code overhaul should face final votes in Congress before the year-end.

A final bill could be formally unveiled on Friday, with decisive votes expected next week in both chambers.

On Wednesday, Republicans in the Senate and the House reached a deal on final tax legislation, paving the way for final votes next week on a package that would slash the corporate tax rate to 21 percent.

“We have a pretty positive background, investors are focused on the tax deal that they are closed to an agreement between the House and the Senate,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

“It will take some time to go through the details, what that means for specific companies but it’s consistent with the general positive tone.”

Traders also focused on a $52.4 billion stock deal between Walt Disney <DIS.N> and Twenty-First Century Fox <FOXA.O>.

Shares of media baron Rupert Murdoch’s Fox fell marginally in choppy trading after Walt Disney agreed to buy the Fox’s film, television and international businesses. Disney shares were also down 0.9 percent.

Goldman Sachs <GS.N>, JPMorgan <JPM.N>, Wells Fargo <WFC.N> and Bank of America <BAC.N> rose between 0.52 percent and 0.86 percent ahead of market open.

Shares of big banks recovered early in the day from an initial decline after the Federal Reserve raised rates by 25 basis points but kept its outlook for 2018 and 2019 unchanged.

At 8:34 a.m. ET (1334 GMT), Dow e-minis <1YMc1> were up 32 points, or 0.13 percent, with 8,450 contracts changing hands.

S&P 500 e-minis <ESc1> were up 1.5 points, or 0.06 percent, with 69,766 contracts traded.

Nasdaq 100 e-minis <NQc1> were up 6 points, or 0.09 percent, on volume of 7,313 contracts.

U.S. retail sales increased more than expected in November as the holiday shopping season got off to a brisk start, pointing to sustained strength in the economy.

A Commerce Department report showed retail sales rose 0.8 percent in November, while economists polled by Reuters has forecast a 0.3 percent rise.

Among other big movers, Express Scripts <ESRX.O> gained about 2 percent after pharmacy benefit manager forecast full-year 2018 earnings that topped analysts’ expectations.

U.S.-listed shares of Valeant Pharmaceuticals <VRX.N> fell 4.2 percent after JPMorgan cut the stock’s rating to ‘underweight’.

Israel-based drugmaker Teva Pharmaceutical’s <TEVA.N> shares soared 15 percent after the company announced job cuts, asset sale and dividend suspension in an overhaul to pay back debt.

(Reporting by Rama Venkat Raman in Bengaluru; Editing by Arun Koyyur)

Ohio passes law barring abortion over Down syndrome diagnosis

By Kim Palmer

CLEVELAND (Reuters) – Women in Ohio would be prohibited from receiving abortions because of a fetal Down syndrome diagnosis under a bill that passed the state senate on Wednesday and is heading to Republican Governor John Kasich’s desk.

Lawmakers voted 20-12 in favor of the law, which criminalizes abortion if the physician has knowledge that the procedure is being sought due to a diagnosis of Down syndrome, a genetic disorder caused when abnormal cell division results in an extra full or partial copy of chromosome 21.

Doctors would lose their medical licenses in the state and face a fourth-degree felony charge under the law if they were to perform an abortion with that knowledge. Mothers would not face criminal charges.

The bill makes Ohio the third state to pass a law outlawing abortions due to fetal anomalies. Similar laws were passed in Indiana and North Dakota. The Indiana provision was struck down by a U.S. District Judge in September after a lawsuit filed by the American Civil Liberties Union.

Kasich spokesman Jon Keeling declined to say whether the governor would sign the measure into law. He added that when Kasich was asked about a similar bill in the Ohio House, he had called it “appropriate.”

Abortion opponents cheered the move and said they expected the governor to sign the law.

“Every Ohioan deserves the right to life, no matter how many chromosomes they have,” said Mike Gonidakis, president of Ohio Right to Life.

Abortion-rights supporters wore “STOP THE BANS” T-shirts in the Senate chamber on Wednesday as the vote went forward.

The law “will create a chilling effect on the medical profession in our state and could result in a shortage of gynecologists willing to practice in Ohio,” Kellie Copeland, executive director of NARAL Ohio, an abortion-rights advocacy group, said in a phone interview on Wednesday.

The ACLU of Ohio said it was still evaluating the final bill before deciding whether to pursue legal action.

Kasich has 10 days to sign the bill into law after it is delivered to his office. If he does so, it will mark the 20th piece of Ohio legislation restricting abortion rights and funding for reproductive health passed in the six years he has been governor.

Unlike many other anti-abortion laws in the state, the Down syndrome bill did not pass strictly along party lines, with some Republicans joining the entire Democratic caucus in voting against the measure.

(Reporting by Kim Palmer; Editing by Patrick Enright and Matthew Lewis)

China says war must not be allowed on Korean peninsula

By Ben Blanchard

BEIJING (Reuters) – War must not be allowed to break out on the Korean peninsula and the issue must be resolved through talks, Chinese President Xi Jinping said on Thursday, while U.N. Secretary-General Antonio Guterres warned of the danger of “sleepwalking” into conflict.

Xi made his comments to visiting South Korean President Moon Jae-in just days after U.S. Secretary of State Rex Tillerson offered to begin direct talks with North Korea without pre-conditions.

But the White House said on Wednesday that no negotiations could be held with North Korea until it improved its behavior. The White House has declined to say whether President Donald Trump, who has taken a tougher rhetorical line toward North Korea, approved Tillerson’s overture.

Russian President Vladimir Putin said Tillerson’s offer of direct contacts with North Korea was “a very good signal”, while warning that a U.S. strike on the North would have catastrophic consequences.

North Korea tested its most advanced intercontinental ballistic missile on Nov. 29, which it said could put all of the United States within range, in defiance of international pressure and U.N. sanctions.

While South Korea and China share the goal of getting North Korea to give up its nuclear weapons and stop testing increasingly sophisticated long-range missiles, the two have not seen eye-to-eye on how to achieve this.

Meeting in Beijing’s Great Hall of the People, Xi told Moon that the goal of denuclearising the Korean peninsula must be stuck to, and that war and chaos cannot be allowed to happen, state media said.

“The peninsula issue must in the end be resolved via dialogue and consultation,” Xi was cited as saying.

China and South Korea have an important shared interest in maintaining peace and stability, and China is willing to work with South Korea to prevent war and promote talks, Xi added.

China would support North and South Korea to improve relations as this was good for easing tension, he said.

Xi’s warm tone followed nearly a year of tense relations between the two countries.

‘DRAMATIC CIRCUMSTANCES’

China has been furious about the deployment of the U.S.-made Terminal High Altitude Area Defence (THAAD) anti-missile system in South Korea, saying its powerful radar can see far into China and will do nothing to ease tension with North Korea.

China and South Korea agreed in late October that they would normalize exchanges and move past the dispute over THAAD, which froze trade and business exchanges, and Moon has been keen to put the dispute behind them.

Xi reiterated China’s position on THAAD and said he hoped South Korea would continue to “appropriately handle” the issue.

Guterres, speaking to reporters in Tokyo after meeting Japanese Prime Minister Shinzo Abe, said Security Council resolutions on North Korea’s nuclear and missile programs must be fully implemented by Pyongyang and other countries.

“It is very clear that the Security Council resolutions must be fully implemented, first of all by North Korea, but by all other countries whose role is crucial to … achieve the result we all aim at, which is the denuclearization of the Korean peninsula,” Guterres said.

He added that Security Council unity was also vital “to allow for the possibility of diplomatic engagement” that would allow denuclearization to take place.

“The worst possible thing that could happen is for us all to sleepwalk into a war that might have very dramatic circumstances,” Guterres said.

He said he expected a meeting of the U.N. Security Council on Friday would deliver a strong expression of unity and the need for diplomacy to resolve the issue.

Japan says now is the time to keep up maximum pressure on North Korea, not start talks on its missile and nuclear programs.

China and Russia, however, have welcomed Tillerson’s overture.

Russian President Vladimir Putin said a strike on North Korea by the United States would have catastrophic consequences and that he hoped to work with Washington eventually to resolve the crisis on the Korean peninsula.

Russia does not accept North Korea’s nuclear status, Putin told an annual news conference. But he also said that some of Washington’s past actions had provoked North Korea into violating a 2005 pact to curb its nuclear program.

“We believe the two sides should now stop aggravating the situation,” Putin said.

North Korea justifies its weapons programs as necessary defense against U.S. plans to invade. The United States, which has 28,500 troops in South Korea, a legacy of the 1950-53 Korean war, denies any such intention.

(Additional reporting by Linda Sieg in TOKYO,; Denis Pinchuk in MOSCOW and Christine Kim in SEOUL; Writing by Robert Birsel; Editing by Clarence Fernandez)

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