according to sharia principles, and used for hedging risk rather than speculation.

TO BE NOTED: From the FT:

"Derivatives forecast to make gradual return

By Robin Wigglesworth in Abu Dhabi

Published: May 20 2009 16:36 | Last updated: May 20 2009 16:36

Derivatives have become a bit of a bugbear for some regulators. They blame certain unregulated, over-the-counter instruments for exacerbating the financial crisis but sometimes lump them together with more common, listed derivatives.

The Gulf is no exception. As regulators across the world study the entrails of the financial crisis for lessons, there will be a natural slowdown in their introduction in the Gulf as well, bankers say. But most expect it only to be a matter of time before their use is more widely sanctioned.

Even in the relatively unsophisticated Gulf, many banks dabble in derivatives, but occasionally to disastrous effect.

Several Bahraini banks, and Abu Dhabi Commercial Bank in the United Arab Emirates, have lost significant amounts on credit derivatives such as asset-backed securities and collateralised debt obligations.

Most dramatically, Gulf Bank, one of Kuwait’s oldest and largest lenders, suffered a rare bank run and had to be rescued by the government after a large currency derivatives trade on behalf of a client went awry.

This has hardened attitudes among regional regulators towards such instruments, bankers admit.

Youssef Kamal, the Qatari finance minister, told the Financial Times last year that Gulf Bank’s predicament could never happen in Qatar because its institutions are prohibited from using derivatives.

But regional bankers insist a blanket ban is a mistake. “Derivatives are like a chainsaw,” observes one expert. “If you don’t know how to use one you can cause serious damage, but if you use them correctly and are well protected you will be fine.”

While the market for complex credit derivatives is unlikely to be resuscitated soon, bankers argue that simple, listed equity derivatives would be a boon for regional stock markets.

“There are some very opaque and complex derivatives, but many – such as futures, options and swaps – are very useful and important instruments for risk management and the proper functioning of capital markets,” says Jamal Al Kishi, head of Deutsche Securities Saudi Arabia.

Indeed, while Nasdaq Dubai is at present the only bourse that offers listed equity derivatives – it rolled out futures contracts on 21 UAE shares and a Nasdaq Dubai index last November – most exchanges in the region are keen to introduce full derivatives platforms to boost trading volumes.

NYSE Euronext has signed deals with the Qatar and Abu Dhabi stock exchanges to help provide technical support and expertise for derivatives, and the recently launched Bahrain Financial Exchange has targeted the instruments as a way to muscle in on the Middle East exchange market.

Though often thought of as un-Islamic, Muslim scholars say derivatives are permissible as long as they are structured according to sharia principles, and used for hedging risk rather than speculation.

Even Saudi Arabia has introduced them – albeit indirectly. Last year it introduced swap structures to allow foreigners to acquire the “economic rights” of individual Saudi stocks."

Nicholas Kristof on Darfur in the NY Times:

"A New Chance for Darfur

By NICHOLAS D. KRISTOF

If Barack Obama wants to help end the genocide in Darfur, he doesn’t have to look far for ideas of how to accomplish that. President Bush and his top aides have been given, and ignored( TRUE ), a menu of options for tough steps to squeeze Sudan — even destroy its air force — and those will soon be on the new president’s desk.

The State Department’s policy planning staff prepared the first set of possible responses back in 2004 (never pursued), and this year Ambassador Richard Williamson has privately pushed the White House to squeeze Sudan until it stops the killing.

Mr. Williamson, who is President Bush’s special envoy to Sudan, wrote a tough memo to Mr. Bush this fall outlining three particular steps the United States could take to press Sudan’s leader, President Omar Hassan al-Bashir:

•

The United States could jam all communications in Khartoum, the Sudanese capital. This would include all telephone calls, all cellular service, all Internet access. After two days, having demonstrated Sudan’s vulnerability, the United States could halt the jamming. ( I AGREE )

•

The United States could apply progressive pressure to Port Sudan, from which Sudan exports oil and thus earns revenue. The first step would be to send naval vessels near the port. The next step would be to search or turn back some ships, and the final step would be to impose a quarantine and halt Sudan’s oil exports. ( I AGREE )

•

The United States could target Sudanese military aircraft that defy a United Nations ban on offensive military flights in Darfur. The first step would be to destroy a helicopter gunship on the ground at night. A tougher approach would be to warn Sudan that unless it complies with international demands (by handing over suspects indicted by the International Criminal Court, for example), it will lose its air force — and then if it does not comply, to destroy all its military aircraft on the ground.( I WORRY ABOUT THIS ONE. MAYBE )

Officials frustrated by the administration’s passivity shared these possible steps with me, partly to make clear that Mr. Obama can do more if he has the political will.

Mr. Williamson has been one of the unsung heroes of the Bush administration, fighting tenaciously and secretly — even twice threatening to resign — to redeem American honor by confronting genocide. President Bush himself seemed open to tougher action, officials say, but Secretary of State Condoleezza Rice and Stephen Hadley, the national security adviser, always resisted, backed by the Pentagon. Ms. Rice and Mr. Hadley tarnished their own honor and America’s by advocating, in effect, acquiescence in genocide.

The naysayers’ objection was simple: Those are incredibly serious steps, with grave repercussions( NOT GOOD ENOUGH ).

They’re right. But then again, genocide is pretty serious, too.

That’s something that Mr. Obama and his aides understand. Partly for that reason, Sudan fears the Obama administration, and now for the first time in years, there’s a real chance of ousting President Bashir and ending his murderous regime.

Several factors are coming together. The leaders in Khartoum feel their government wobbling, particularly after rebels clashed with government soldiers on the outskirts of Khartoum earlier this year. They know that the International Criminal Court is expected to issue an arrest warrant for President Bashir, probably in February, but that no other top leader will be indicted after Mr. Bashir.

China, which for years has been President Bashir’s most important international supporter, now seems to be backing away — just as it eventually abandoned genocidal friends like Slobodan Milosevic and the Khmer Rouge. And an Arab state, Qatar, is now leading a serious diplomatic initiative to try to end the slaughter( GOOD FOR THEM ).

Thus there are growing whispers that key figures in the Sudanese regime may throw Mr. Bashir overboard in the coming months. The other leaders are ruthless and have blood on their hands as well, but some of them have in the past proved more willing to negotiate deals than Mr. Bashir has.

Hovering in the background is the risk that the north-south war in Sudan will resume, leading to a slaughter even worse than Darfur. One ominous sign is that Sudan is now stockpiling cash and weapons, apparently so that it can wage war on the south even if Port Sudan is blocked.

Mr. Williamson has suggested providing surface-to-air missiles to the separate government of South Sudan. Such weaponry would reduce the chance that Sudan would attack the south( YIKES. MAYBE. ).

If Mr. Obama and his aides can work with Europe, China and Qatar to keep the heat on — and to make clear that Sudan has no choice but to hand over President Bashir once the court issues the arrest warrant — then we just might avert a new war and end the first genocide of the 21st century in the new year."

My only problem is with increasing arms in the area and our military involvement. However, if I could be persuaded that these would be competently done, I would support them. Letting this happen is an international disgrace.