Special Report: Tsunami evacuees caught in $30 billion Japan money trap

By Taiga Uranaka and Antoni Slodkowski

ISHINOMAKI Japan (Reuters) - Thirty billion dollars in funding for roads, bridges and thousands of new homes in areas devastated by the tsunami in Japan three and a half years ago is still languishing unspent in the bank. That means Keiko Abe is heading into a fourth winter of sub-zero temperatures in a cramped, temporary dwelling that is succumbing to the elements.

"I'm just clenching my teeth until I can move out and live like a human being again," says Abe, 66, as she stands in the dim light of her living room with enough space for a couch, table and television. A gray mould clings to some walls of the prefab structure, where Abe has lived with her husband since shortly after a 9-metre (30 feet) wall of water obliterated large swathes of the city of Ishinomaki on the afternoon of March 11, 2011.

Abe, who lost her home and everything in it that day, is now the victim of a funding quagmire that has left her and tens of thousands of other evacuees stranded in temporary units that were supposed to house them for no more than two years.

Japanese government funds budgeted for reconstruction and transferred to local governments are stuck in banks across the tsunami-ravaged northeast, a Reuters review of budget and bank deposit data and interviews with bank officials reveals. The central government has paid out more than $50 billion directly to local governments in Miyagi, Iwate and Fukushima prefectures, the areas hardest hit by the disaster. But about 60 percent of that money remains on deposit in the region's banks.

Ishinomaki, where more than 3,700 people died in the tsunami – the most casualties of any city in the disaster – has been deeply affected by the funding paralysis. The port city, where 56,000 buildings were damaged, has been showered with money for reconstruction – about $4.1 billion in the three years after it was hit.

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Cars crushed by the March 11 earthquake and tsunami are seen in Ishinomaki, Miyagi prefecture, in th …

But almost 60 percent of the money, or $2.3 billion, remains in bank deposits. And fewer than five percent of the planned new homes for the city's nearly 25,000 evacuees have been completed.

"I've given up on the local authorities," says Abe. "They don't think about us."

BUREAUCRATS IN TOKYO

A few minutes' drive from Abe's temporary home, the mayor of Ishinomaki sits in his office directing part of the blame for the hold-ups at bureaucrats in Tokyo. "It's a massive disaster but central government officials are acting as if these were normal times," says Hiroshi Kameyama, referring to the red tape he confronts in getting building plans approved. "It's one of the reasons why public works are delayed."

Makoto Kitamura, the deputy director general of the Reconstruction Agency, says local government spending of reconstruction money has been accelerating. "The pace of the construction projects has also been picking up," he told Reuters, sitting in his office in Tokyo. "So it is not something you should worry about."

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A picture frame and water marks are seen at a wall of a kindergarten destroyed by the March 11 earth …

For Prime Minister Shinzo Abe, the reconstruction delays are a potential time bomb. Before he became prime minister in December 2012, Abe campaigned in parliamentary elections on a pledge to speed up reconstruction – a promise he has repeated on both anniversaries of the disaster since he took office. As opposition leader he chided the government for not moving fast enough on rebuilding: "Japan has no future without reconstruction of disaster-hit areas," he declared during a tour of Fukushima, where the tsunami crippled a nuclear plant.

As prime minister, he vowed in March 2013 that "reconstruction will have made a lot of progress and our lives will be better by March 11 next year." A year later he repeated the promise: The government would make the year ahead one in which "everyone in disaster-hit areas feels the progress of reconstruction."

So far, about 2,700 housing units of a planned 29,000 have been completed in the tsunami-hit areas. In its housing plan issued more than a year ago, the government said it aimed to complete 15,000 homes by March next year. It has since scaled back that target to 10,000 units.

A labor shortage exacerbated by the siphoning of workers away from the disaster zone to build commercial facilities for the 2020 Tokyo Olympic Games has slowed reconstruction. So have a spike in the cost of building materials and problems in procuring land in the disaster zone.

Initial government estimates for the cost of building a new home have been far off the mark. In 2011, the Reconstruction Agency budgeted $158,000 for a new home. In April, it revised that estimate upward, for a second time, to $217,000 – almost 40 percent higher than the original figure.

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A construction site of public housing for tsunami survivors is pictured in Hebita area on the outski …

"We are struggling to keep up with the rise in costs," Michio Oka, a section chief in Ishinomaki's reconstruction office, told Reuters. "Because of the sharp rise in material and labour costs we have failed to attract contractors."

CLOSED FUNDING LOOP

Much of the reconstruction cash has ended up on the ledger of 77 Bank in Sendai, some 50 kilometers (30 miles) west of Ishinomaki. Government deposits at 77 Bank, the region's largest lender, have jumped four-fold to almost $17 billion in the past three years as reconstruction money flooded in, the bank said.

Yoshikazu Onodera, a 77 Bank executive, said the rapid inflow of deposits has been a challenge for the bank to manage since the money could be withdrawn on short notice. The solution, said Onodera, has been to invest in short-term government bonds. As a result, 77 Bank's government bond holdings have risen two and a half times to $20 billion since 2011.

Like 77 Bank, other regional lenders have also ploughed funds into Japanese government bonds, creating a closed loop of financing. By buying government bonds, the banks' investments are essentially helping to fund the borrowing that the government undertook to make the disaster-related allocations in the first place. The central government issued $130 billion worth of reconstruction bonds in the three years after the disaster.

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Members of a search and rescue team walk in an area destroyed by the March 11 earthquake and tsunami …

The unspent funds sitting in bank deposits also come at a cost to Tokyo. The government is under mounting pressure to cut a public debt load that is more than twice as large as annual economic output.

Bank officials said they did not expect the money to be withdrawn soon because building projects face further delays. "It's almost certain reconstruction efforts will not be completed within the national government's five-year period," said Ryutaro Katsube, a spokesman for the Bank of Iwate. "Municipalities are already asking for extensions."

Forging consensus among residents over reconstruction plans "is a time-consuming process," said Kitamura of the Reconstruction Agency, which is responsible for the disbursement of $20 billion out of the $50 billion allocated directly to local governments. "This is the result of going through the necessary process."

Separate from the money allocated directly to the prefectures, the central government has poured $140 billion into disaster-relief and reconstruction projects, including emergency loans to small- and medium-sized businesses hit by the tsunami.

PERMANENT HOMES

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A construction site of public housing for tsunami survivors is pictured in Hebita area on the outski …

In the Ishinomaki suburb of Hebita where Keiko Abe has been told her new home will be ready by spring, six workers pumped water out of a construction site on a mid-September afternoon after heavy rain had swamped the area. The foundations have been laid for some homes but there were few signs of building activity. Several cranes and trucks stood idle next to piles of sand and gravel.

A group of women sitting around a wooden table in a nearby evacuee community, eating pickled onions and cake, discussed their predicament. "We feel abandoned and forgotten," said Mitsue Sasaki, 69, who has been living in a temporary home for three years. "They think they can keep us here forever."

"I was allocated a flat, but so what," said Mitsuko Muramatsu, 67, an ex-tax office official. "Right now it's a cloud, it's an empty space."

Mayor Kameyama, 72, a former chemistry professor, is concerned with the mental health of the evacuees. "I'm worried that many people are becoming weak and depressed," he said, sitting in a deep armchair in his office. "If they don't stay healthy and lose the will to move to a new place, it will be a huge problem."

The government's five-year reconstruction plan was built on unrealistic assumptions, said Yoshikiyo Shimamine, the chief economist at Dai-ichi Life Research Institute in Tokyo. "Given bottlenecks such as labor shortages and material cost rises and difficulties in getting consensus among residents who are relocated, reconstruction budgets are not something that can be spent within five years," he said.

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A night view of the Kaisei temporary housing complex, where evacuees from the coastal area live in I …

Officials in Ishinomaki, home to 150,000 people, say spending the more than $4 billion in reconstruction aid has proven tough. With all of the city-owned land having been designated for temporary housing after the tsunami, the local government had to negotiate the purchase of an additional 9,000 plots to build permanent homes, the reconstruction office's Oka said. That inflated the price of a plot of land in Ishinomaki by 15 percent last year, the biggest jump anywhere in Japan.

Before the city could buy land, it had to track down the legal owners. That proved tedious, said Oka. Officials discovered that in many instances, properties had been passed down without proper inheritance procedures.

NO BIDDERS FOR PROJECTS

Other areas have been beset by similar delays. Miyagi, the prefecture that includes Ishinomaki and Sendai, planned to build some 15,000 public housing units by March 2016. In early October it extended that deadline by two years.

After the tsunami, about a third of public works projects in Miyagi failed to attract bidders in the first round as construction companies say they held back for fear the projects would be unprofitable, Miyagi prefecture officials said. That failure rate compares with just 3 percent before the disaster.

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Keiko Abe, a tsunami survivor, poses inside a prefabricated room at the Kaisei temporary housing com …

To be sure, rebuilding a city like Ishinomaki is a vast logistical undertaking. Parts of the city need to be built from scratch.

A strip of Ishinomaki's shoreline where 6,500 homes once stood has been declared too dangerous to build on. And many local government officials, who would otherwise have played a role in reconstruction, either died in the tsunami or had their homes destroyed and are themselves living in temporary dwellings.

"It's the largest such operation ever attempted in modern Japan," says Kazusue Konoike, a special adviser to Konoike Construction Co., which is building public housing units in the country's northeast. "The construction industry as a whole has several times the amount of work it used to have before the disaster. That's why naturally there is a shortage of workers and machines."

Prior to the earthquake and tsunami there were five buildings with reinforced concrete that were taller than five storeys in Ishinomaki, says Hirotaka Kamata, a sales representative at Endo Kogyo, a construction company working in the city. "Right now the city is building about 20. It's like building something in three years that took 50 post-war years to build."

Kamata says his company is also worried about making long-term investments when it knows the tsunami-fueled building boom will only last a few more years. "The reconstruction budget is huge," he said. "The more money you pump the faster the construction companies will run away. There's no way we can take on any more work."

(The story was refiled to fix the headline)

(Editing by Peter Hirschberg, Bill Tarrant and Kevin Krolicki.)

• Politics & Government
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• Ishinomaki
• tsunami in Japan
• Shinzo Abe
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Iraqi Kurdish forces enter Syria to fight Islamic State

By Humeyra Pamuk and Omer Berberoglu

SURUC Turkey (Reuters) - A first group of Iraqi Kurdish peshmerga fighters entered the besieged Syrian town of Kobani on Thursday to help push back Islamic State militants who have defied U.S. air strikes and threatened to massacre its Kurdish defenders.

Kobani, on the border with Turkey, has been encircled by the Sunni Muslim insurgents for more than 40 days. Weeks of U.S.-led air strikes have failed to break their stranglehold, and Kurds are hoping the arrival of the peshmerga will turn the tide.

The siege of Kobani -- known in Arabic as Ayn al-Arab -- has become a test of the U.S.-led coalition's ability to stop Islamic State's advance, and Washington has welcomed the peshmerga's deployment. It has intensified its air strikes in the past two days ahead of their arrival.

A first contingent of about 10 peshmerga fighters arrived in Kobani from Turkey to prepare the way for a convoy equipped with heavy weapons, but gunfire and shelling by Islamic State fighters on the border area appeared to be causing delays.

"ISIL has intensified its attacks on the border gate after the news of the peshmerga's arrival ... and the clashes have been fierce," Idris Nassan, deputy foreign minister of Kobani district, told Reuters by telephone from Kobani.

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A convoy of peshmerga vehicles is escorted by Turkish Kurds on their way to the Turkish-Syrian borde …

The peshmerga fighters already in Kobani were trying to secure safe passage for the weapons convoy and the Turkish authorities, fearing a spillover onto Turkish soil, also wanted them to wait until the security situation was clearer, he said.

"With the ISIL shelling and the clashes, the whole process is taking time," Nassan said.

Hemin Hawrami, a senior official in the Kurdistan Democratic Party in Iraq, wrote on Twitter that the peshmerga already in Kobani were assessing where the heavy weapons would be deployed.

Around 100 peshmerga fighters arrived by plane in southeastern Turkey on Wednesday, joined later that night by a land convoy of vehicles carrying arms including a cannon and truck-mounted machine guns.

In a compound protected by Turkish security forces near the border town of Suruc, the fighters were donning combat fatigues and preparing their weapons, a Reuters correspondent said.

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A convoy of peshmerga vehicles is welcomed by Turkish Kurds after crossing into Turkey near the Habu …

U.S. forces stepped up air strikes on Islamic State positions in an apparent bid to help clear the way for the peshmerga. U.S. Central Command said there had been 10 strikes near Kobani since Wednesday, hitting two small insurgent units and destroying seven fighting positions and five buildings.

MORE TROOPS POSSIBLE

Syria condemned Turkey for allowing foreign fighters and "terrorists" to enter Syria in a violation of its sovereignty. Its foreign ministry described the move as a "disgraceful act".

Turkey, which is a staunch backer of rebels fighting to oust Syrian President Bashar al-Assad, dismissed the comments.

"The Syrian regime has no legitimacy. Such statements from a regime that has lost its legitimacy are astonishing," a senior Turkish government official said.

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Kurdish men ride a motorbike past Turkish policemen guarding the gate of a camp that hosts Peshmerga …

Around 200 Free Syrian Army (FSA) fighters have also entered Kobani from Turkey to support the fight against Islamic State, according to rebel commander Abdul Jabbar al-Oqaidi and a second Turkish government official.

Nizar Al Khateeb, commander of an FSA unit that has been fighting alongside the Kurds in Kobani, said the FSA, peshmerga and Syrian Kurds would work from the same operations room and had no problem with the YPG, the main Syrian Kurdish armed group defending the town, leading the operation.

The FSA is a term covering dozens of armed groups fighting Assad but with little or no central command, and widely outgunned by Islamist insurgents elsewhere in the conflict.

Iraqi Kurdistan President Masoud Barzani said he was prepared to deploy more forces to Kobani if asked.

"Whenever the situation on the ground necessitates and more forces are requested from us and there is passage for them, we will send more forces to protect Kobani and defeat terrorists in Western Kurdistan," he said.

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An explosion following an air-strike is seen in the Syrian town of Kobani from near the Mursitpinar  …

Islamic State has caused international alarm by capturing large expanses of Iraq and Syria, declaring an Islamic "caliphate" that extends across the borders between the two.

Its fighters have slaughtered or driven away Shi'ite Muslims, Christians and other communities who do not share their ultra-radical brand of Sunni Islam.

In Iraq, the bodies of 220 members of a Sunni tribe captured by Islamic State this week have been found in two locations, according to security officials and witnesses.

The Islamic State advance has deepened Syria's existing conflict. The United Nations said on Thursday the humanitarian crisis in the country was getting worse as all parties show "callous disregard" for millions of suffering civilians.

CALL FOR PROTESTS

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A convoy of peshmerga vehicles makes its way to the Turkish-Syrian border, near the town of Kiziltep …

The United States and its allies in the coalition have made clear they do not plan to send troops to fight Islamic State in Syria or Iraq, but they need fighters on the ground to capitalize on their air strikes.

Syrian Kurds have called for the international community to provide them with heavier weapons and munitions and they have received an air drop from the United States.

But NATO member Turkey accuses Kurdish groups in Kobani of links to the militant PKK (Kurdistan Workers' Party), which has fought a three-decade insurgency against the Turkish state and is regarded as a terrorist group by Ankara, Washington and the European Union.

Ankara fears Syria's Kurds will exploit the chaos by following their brethren in Iraq and seeking to carve out an independent state in northern Syria, emboldening PKK militants in Turkey and derailing a fragile peace process.

That has enraged Turkey's own Kurdish minority, complicated efforts to provide aid, and meant the negotiations to enable the passage of the peshmerga were delicate and complex.

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An explosion following an air-strike is seen in the Syrian town of Kobani from near the Mursitpinar  …

"If (Islamic State) defeats the Kurds in Kobani it will lead to a reaction amongst the Kurds around the world, including Turkey," said Fuad Hussein, chief of staff to Barzani.

"There is huge interaction: what happens here, what happens in Kobani, what happens in Turkey: it affects each other so we must manage it," he told Reuters.

Turkey's pro-Kurdish HDP party, which accuses the government of favoring Islamic State over the Kurds, called for marches on Saturday in solidarity with Kobani.

Around 40 people were killed in violence that swept the southeast earlier this month as Kurdish protesters expressed fury over Turkey's refusal to send its own troops across the border to defend the besieged town.

The peshmerga were given a heroes' welcome as their convoy of jeeps and flatbed trucks snaked its way for around 400 km (250 miles) through Turkey's mainly Kurdish southeast on Wednesday.

(Additional reporting by Alexander Dziadosz in Beirut, Isabel Coles in Arbil, Orhan Coskun, Gulsen Solaker and Ayse Sarioglu in Ankara; Writing by Nick Tattersall; Editing by Giles Elgood)

• Unrest, Conflicts & War
• Politics & Government
• Islamic State
• Turkey
• Syria

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Clashes erupt as Israeli police kill Palestinian suspected of shooting Jewish far-rightist

By Luke Baker

JERUSALEM (Reuters) - Israeli police on Thursday shot dead a 32-year-old Palestinian man suspected of having tried hours earlier to kill a far-right Jewish activist, leading to fierce clashes in East Jerusalem and fears of a new Palestinian uprising.

The Al-Aqsa compound, or Temple Mount, a holy site at the heart of the latest violence, was shut down for almost an entire day to all visitors as a security precaution. It was the first full closure of the site, venerated by both Jews and Muslims, in 14 years. Late on Thursday Israeli police reopened the complex.

Palestinian President Mahmoud Abbas denounced Israel's actions as "tantamount to a declaration of war" and his Fatah party called for a "day of rage" on Friday. It was not clear if Al Aqsa would be opened to Muslims on their holy day.

Moataz Hejazi's body lay in blood among satellite dishes and a solar panel on the rooftop of a three-storey house in Abu Tor, a district of Arab East Jerusalem, as Israeli forces sealed off the area and repelled stone-throwing Palestinian protesters.

Hejazi was suspected of shooting and wounding Yehuda Glick, a far-right religious activist who has led a campaign for Jews to be allowed to pray at the Al-Aqsa compound.

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Mourners carry the body of Moataz Hejazi into a Muslim cemetery in east Jerusalem October 30, 2014.  …

Glick, a U.S.-born settler, was shot as he left a conference at the Menachem Begin Heritage Centre in Jerusalem late on Wednesday. His assailant escaped on the back of a motorcycle.

A spokesman for the center said Hejazi had worked at a restaurant there. Glick, 48, remains in serious but stable condition with four gunshot wounds, doctors said.

Residents said hundreds of Israeli police were involved in the pre-dawn search for Hejazi. He was tracked down to his family home in the hilly backstreets of Abu Tor and eventually cornered on the terrace of an adjacent building.

"Anti-terrorist police units surrounded a house in the Abu Tor neighborhood to arrest a suspect in the attempted assassination of Yehuda Glick," Israeli police spokesman Micky Rosenfeld said. "Immediately upon arrival they were shot at. They returned fire and shot and killed the suspect."

Locals identified the man as Hejazi, who was released from an Israeli prison in 2012 after serving 11 years. Israeli police fired stun grenades to keep back groups of angry residents, who shouted abuse as they watched from surrounding balconies.

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Mourners carry the body of Moataz Hejazi into a Muslim cemetery in east Jerusalem October 30, 2014.  …

One Abu Tor resident, an elderly Arab man with a walking stick who declined to be named, described Hejazi as a troublemaker and said "he should have been shot 10 years ago". Others said he was a good son from a respectable family.

"They are good people, he does nothing wrong," said Niveen, a young woman who declined to give her family name.

Hamas and Islamic Jihad, two militant groups, praised the shooting of Glick and mourned Hejazi's death.

RELIGIOUS TENSIONS

East Jerusalem, which Israel captured and occupied in the 1967 Middle East war, has been a source of intense friction in recent months, especially around Silwan, which sits in the shadow of the Old City and Al-Aqsa.

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A Palestinian protester fires a homemade weapon at Israeli security forces during clashes in east Je …

Jewish settler organizations have acquired more than two dozen buildings in Silwan over the years, including nine in the past three months, and moved settler families into them, an effort to make the district more Jewish. Around 500 settlers now live among approximately 40,000 Palestinians residents.

The influx of settlers combined with tension over the site, Islam's third-holiest shrine and the holiest place in Judaism, have contributed to the most fractious atmosphere in East Jerusalem since the second Intifada or uprising began in 2000.

The United States condemned the shooting of Glick but urged all sides to exercise restraint and maintain the "historic status quo" at the Jerusalem holy site.

On Thursday, crowds of young Palestinian men and boys blocked off streets near where Hejazi was killed with rubbish skips and lit fires. They smashed tiles and bricks and used the pieces to throw at Israeli police, masking their faces with bandannas or pulling hooded tops around their heads.

Police responded with tear gas, scattering the crowd. Clashes continued for hours after Hejazi was killed.

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A Palestinian protester gestures as he hides behind a metal container during clashes with Israeli se …

"It is not a good situation, it is the worst, everyone is angry," said Galib Abu Nejmeh, 65, who wandered down the rock-strewn street dressed in a smart brown suit and tie.

"It is becoming like another Intifada," he said, comparing it to the scenes in East Jerusalem in the late 1980s, when Palestinians first rose up against Israeli occupation.

After Glick was shot, far-right Jewish groups urged supporters to march on Al-Aqsa on Thursday morning. That prompted Israeli police to shut access to the site to everyone -- Muslims, Jews and all tourists.

Glick and his backers, including Moshe Feiglin, a far-right member of Prime Minister Benjamin Netanyahu's Likud party, are determined to change the status quo that has governed Al-Aqsa since Israel seized the walled Old City in 1967.

Those rules state that Jordan's religious authorities are responsible for administering Al-Aqsa and that while Jews may visit the marble-and-stone esplanade, which includes the 7th-century golden Dome of the Rock, they cannot pray there.

Glick and his supporters argue that Jews should have the right to pray at their holiest site, where two ancient Jewish temples once stood, even though the Israeli rabbinate says the Torah forbids it and many Jews consider it unacceptable.

(Additional reporting by Ori Lewis in Jerusalem, Ali Sawafta and Noah Browning in Ramallah, Nidal al-Mughrabi in Gaza and Arshad Mohammed in Washington; editing by Jeremy Gaunt and Dominic Evans)

• Society & Culture
• Unrest, Conflicts & War
• East Jerusalem
• Israeli police
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Burkina president rejects opposition calls to step down after violence

By Mathieu Bonkoungou and Joe Penney

OUAGADOUGOU (Reuters) - Burkina Faso's President Blaise Compaore said on Thursday he would stay in power at the head of a transitional government until after elections, rejecting opposition calls for him to step down immediately following a day of violent protests.

The head of the armed forces, General Honore Traore, had earlier dissolved parliament and announced talks with all political parties to create an interim government to take the West African country to democratic elections within a year.

The move came after at least three protesters were shot dead and scores wounded in clashes with security forces as demonstrators attacked the homes of senior members of the ruling party and symbols of Compaore's long rule.

Hundreds of people had earlier stormed parliament, looting the building and setting it on fire, while others ransacked state television, forcing it off the air.

Protests also gripped Bobo Dioulasso, Burkina's second-largest city, and other towns across the gold and cotton-producing country.

"I have heard the message, understood it and taken note of strong desire for change," Compaore said in a statement broadcast on BF1 TV. "I am available to open talks on a transitional period at the end of which I will hand over power to the democratically elected president."

Compaore, who seized power in a military coup in 1987, said he had dissolved his government and was lifting martial law that was announced earlier in the day.

He also scrapped plans for an unpopular constitutional amendment that would have allowed him to seek reelection next year, a prospect that had sparked Thursday's protests.

Regional West African bloc ECOWAS had said earlier on Thursday that it would not accept any party seizing power through non-constitutional means - suggesting diplomatic pressure to leave Compaore in place.

A delegation from the African Union, the United Nations and ECOWAS was due in Burkina Faso on Friday to hold talks with all parties involved.

"BLAISE LEAVE"

Protesters had faced off with security forces for several hours outside the presidential palace as opposition leaders held talks with senior military officials in an attempt to ease Compaore from power.

Both opposition politicians and ordinary demonstrators made it plain they did not want any role for Compaore in a transition.

"We want Blaise Compaore to leave. We want change," said George Sawadogo, a 23-year-old student.

The fate of Compaore, a close military ally of the United States and former colonial power France, will be closely watched by other governments across West and Central Africa, where a number of long-serving leaders are reaching the end of their constitutional terms.

Burkina Faso is one of the world's poorest nations but has positioned itself as a mediator in regional crises. It is also a key ally in Western operations against al Qaeda-linked groups in West Africa.

White House spokeswoman Bernadette Meehan had earlier said in a statement that the United States was deeply concerned by the deteriorating situation in Burkina Faso and called on all parties to end the violence and respect democratic norms.

France, which has a special forces base there that conducts operations across the Sahel, also appealed for restraint by all sides. Its ambassador had held talks with opposition leaders on Thursday.

CONCERN ABOUT PROSECUTION

Compaore has ruled the nation with a firm grip but has faced increasing criticism in recent years, including defections by members of his party. He weathered a military and popular uprising in 2011 thanks to the support of his elite presidential guard.

Diplomatic pressure had mounted over the past year for Compaore to step down in 2015, amid calls from his own entourage for him to seek re-election, diplomats said.

A letter from French President Francois Hollande to Compaore earlier this month, seen by Reuters, offered France's support in finding him a job with an international organization.

Diplomats, however, say Compaore has been concerned about the possibility of losing his immunity from prosecution, particularly in the wake of the trial of former Liberian leader Charles Taylor in the Hague.

Burkina Faso's former president Thomas Sankara, a leftist leader dubbed Africa's Che Guevara, was killed in the coup that swept Compaore to power. Protesters in the streets of Ouagadougou waved photographs of Sankara and signs reading, "Sankara look at your sons. We are fighting your fight."

At the headquarters of state television, which was forced off the air after the building was taken, jubilant protesters posed on the set of the evening news program.

Burkina Faso, the fourth-largest gold producer in Africa, is home to several international mining firms including TrueGold , IamGold and Randgold Resources .

"There's been no impact on our operations whatsoever," said Doug Reddy, senior vice president for business development at Endeavour Mining , which has a mine near the southern border with Ghana. "Obviously, we're monitoring the situation and we're keeping in touch with our people in the mine."

(Additional reporting by Daniel Flynn, David Lewis and Bate Felix in Dakar, Joe Bavier and Ange Aboa in Abidjan, John Irish in Paris; Writing by Daniel Flynn; Editing by Tom Heneghan and Ken Wills)

• Politics & Government
• Unrest, Conflicts & War
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Ukraine, Russia, EU agree to natural gas supply deal

By Alastair Macdonald and Philip Blenkinsop

BRUSSELS (Reuters) - Ukraine, Russia and the European Union signed a deal on Thursday that will see Moscow resume vital supplies of gas to its ex-Soviet neighbor over the winter in return for payments funded in part by Kiev's Western creditors.

After several failed rounds of talks in recent weeks as conflict rumbles on despite a ceasefire with pro-Russian rebels in eastern Ukraine, the accord also eases concerns that a new "gas war" could disrupt winter supplies if energy to EU states, notably through pipelines shut down across Ukraine since June.

With overnight temperatures already nudging below freezing in Ukraine, European Commission President Jose Manuel Barroso hailed an accord clinched in Brussels barely 24 hours before he and the rest of his team make way for a new EU executive.

"There is now no reason for people in Europe to stay cold this winter," he told a news conference after witnessing the signing of documents by the Russian and Ukrainian energy ministers and EU energy commissioner Guenther Oettinger.

Oettinger said he saw in the agreement a "first glimmer" of detente between Moscow and Kiev in a conflict that has plunged East-West relations into a chill not seen since the Cold War.

Worth $4.6 billion in total, the package calls for Ukraine to pay $3.1 billion in two tranches by the end of the year to cover debts for previous supplies from Russia's Gazprom, and Kiev will have $1.5 billion, some from existing accords with the EU and IMF, to pay for about 4 billion cubic meters of new gas until March, for which Russia is insisting on cash up front.

"Unprecedented levels of EU aid will be disbursed in a timely manner, and the International Monetary Fund has reassured Ukraine that it can use all financial means at its disposal to pay for gas," the European Commission said in a statement.

"Further work with the international financial institutions on financial assistance to Ukraine, also in relation to gas supplies, will still continue. But all three sides are reassured that Ukraine will have the necessary financial means."

Russian Energy Minister Alexander Novak had left Brussels early on Thursday, disappointing hopes of a deal then, saying he wanted firmer commitments from the EU on Ukraine's finances.

Asked at the joint news conference where Ukraine would get the money to buy new gas for its 45 million people, Oettinger noted that Kiev had already set the money aside to pay the agreed debt to Gazprom and that discussions with the Washington-based International Monetary Fund had clarified that Ukraine would be able to draw down more cash for pre-payments.

Ukraine's gas company Naftogaz also had revenues of its own that it would use to pay for some of the new Russian supplies.

Oettinger said the new, pro-Western Ukrainian government being formed after a parliamentary election last Sunday should work quickly with the incoming European Commission and the IMF to implement reforms that would enable it to secure further international financing, not just this winter but after next March.

Ukrainian Energy Minister Yuri Prodan noted that Kiev hoped for a favorable outcome from an arbitration court in Stockholm in a dispute with Gazprom about prices and the size of bills run up before pro-EU street protests overthrew the pro-Moscow president in February, triggering Russia's annexation of Crimea.

In any case, he said, Ukraine had the means to buy gas for the rest of this year at $378 per 1,000 cubic meters, and at $365 in the first quarter of next year. Novak noted that these prices represented a discount of $100 according to a formula contained in the gas supply agreement dating back several years.

While Russian President Vladimir Putin's administration, which cut off supplies in June as relations worsened, was keen for the European Union to commit itself to financing Ukraine, officials from Kiev also underlined their view that having the EU as a co-signatory would "guarantee" Moscow did not renege.

Both Novak and Prodan highlighted the role that pipelines across Ukraine play in delivering gas from Russia's Siberian and Arctic fields to the major economies of Western Europe. Novak said Russia would remain a reliable energy supplier to Europe.

Oettinger said: "We can say to the citizens of Europe that we can guarantee security of supply over the winter."

While the gains for Ukraine are evident - without Russian gas many of its people would face death over the winter - Russia also gains from a deal that brings in cash at a time when its economy is suffering from a slide in world oil prices and from Western trade sanctions imposed over the Ukraine crisis.

(Writing by Alastair Macdonald; Editing by Ken Wills)

• Politics & Government
• Russia
• Ukraine
• European Union
• eastern Ukraine

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Iraqi peshmerga fighters head for Syria to fight Islamic State

By Isabel Coles and Dasha Afanasieva

ARBIL Iraq/MURSITPINAR Turkey (Reuters) - Iraqi peshmerga fighters headed for the Syrian town of Kobani on Tuesday to help fellow Kurds repel an Islamic State advance that has defied U.S.-led air strikes and become an important test of the coalition's ability to combat the Sunni insurgents.

Kobani, nestled on the border with Turkey, has been besieged by Islamic State for more than a month. Weeks of air strikes on the insurgents' positions and the deaths of hundreds of their fighters have failed to break the siege.

Islamic State has caused international alarm by capturing large expanses of Iraq and Syria, declaring an Islamic "caliphate" erasing borders between the two and slaughtering or driving away Shi'ite Muslims, Christians and other communities who do not share their ultra-radical brand of Sunni Islam.

The Islamic State (IS) has threatened to massacre Kobani's defenders in an assault which has sent almost 200,000 Syrian Kurds fleeing to Turkey, and triggered a call to arms from Kurds across the region.

Hemin Hawrami, a senior official in the Kurdistan Democratic Party in Iraq, wrote on his Twitter feed that peshmerga combatants were flying from Arbil airport in northern Iraq to Turkey, from where they would travel overland to Kobani.

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A convoy of Kurdish peshmerga fighters drive through Arbil after leaving a base in northern Iraq, on …

Saleh Moslem, co-chair of the Syrian Kurdish Democratic Union Party (PYD), said later that around 150 peshmerga had entered Turkey from Iraq and were expected to reach the area of Kobani later on Tuesday night.

A Kurdish television channel showed footage of what it said was a convoy of peshmerga vehicles in northern Iraq loaded with weapons and on their way to the besieged town.

"We welcome the deployment of peshmerga fighters and weapons from the Kurdistan Region to Kobani, which began this evening," Brett McGurk, a deputy envoy tasked by U.S. President Barack Obama with building a coalition against IS, said on Twitter.

The Iraqi Kurdish region's parliament voted last week to deploy some peshmerga to Syria although a Kurdish government spokesman later said they would not engage in direct combat in Kobani but rather provide artillery support.

Kurdistan's Minister of Peshmerga, Mustafa Sayyid Qader, told local media on Tuesday that no limits had been set to how long the forces would remain in Kobani.

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A convoy of Kurdish peshmerga fighters drive through Arbil after leaving a base in northern Iraq, on …

The fighting around Kobani has exacerbated the flow of refugees from Syria's 3 1/2-year civil war, with more than three million people already sheltering in neighboring countries including Jordan, Lebanon and Turkey.

Jordan's foreign minister warned on Tuesday the huge demand for housing, schools, jobs and health care generated by the refugees meant Syria's neighbors were reaching the limits of their ability to cope.

GROUND TROOPS

Turkish Prime Minister Ahmet Davutoglu said earlier that air strikes alone would not be enough to push back the insurgents and that only the peshmerga and moderate Syrian rebel forces could oust Islamic State from Kobani.

"Saving Kobani, retaking Kobani and some area around Kobani from ISIS, there's a need for a military operation," he said in an interview with the BBC broadcast on Tuesday. But he made clear neither Turkey nor Western allies would commit troops.

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A convoy of Kurdish peshmerga fighters drive through Arbil after leaving a base in northern Iraq, on …

"If they (international coalition) don't want to send their ground troops, how can they expect Turkey to send Turkish ground troops with the same risks on our border?" Davutoglu said.

Turkish officials have rebuffed international criticism over their reluctance to do more to help Kobani's beleaguered Kurdish defenders, whom they accuse of being linked to the militant Kurdistan Workers' Party (PKK), which has fought a decades-long insurgency against the Turkish state.

That stance has enraged Turkey's own Kurdish minority – about a fifth of the population and half of all Kurds across the region. Kurds suspect Ankara would rather see Islamic State jihadists extend their territorial gains than allow Kurdish insurgents to consolidate local power.

Turkey has repeatedly called for a long-term strategic plan for Syria involving the removal of President Bashar al-Assad from power, fearing that Assad's forces or Kurdish militants will fill the void if Islamic State is neutralized.

Iran accused Turkey on Tuesday of prolonging the three-year armed conflict in Syria by insisting on Assad's overthrow and supporting "terrorist groups" in Syria.

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A convoy of Kurdish peshmerga fighters drive through Arbil after leaving a base in northern Iraq, on …

After pressure from Western allies, Turkey last week agreed to let peshmerga forces from Iraq traverse its territory to reach Kobani as its preferred alternative to U.S. planes air-dropping weapons to Kurdish fighters in the town.

"The only way to help Kobani, since other countries don't want to use ground troops, is sending some peace-oriented or moderate troops to Kobani. What are they? Peshmerga ... and Free Syrian Army (Syrian opposition forces)," Davutoglu said.

Davutoglu renewed calls for the United States to train and arm fighters from the Free Syrian Army (FSA), a loose, disorganized coalition of groups who have been battling Assad and who have long been supported by Turkey.

Washington has committed to arming the Syrian opposition to fight Islamic State, but U.S. officials remain concerned about identifying effective, moderate groups in the increasingly sectarian Syrian conflagration.

(Additional reporting by Stephen Brown in Berlin, Ece Toksabay in Istanbul, Jonny Hogg in Ankara; Writing by Nick Tattersall; Editing by Mark Heinrich)

• Politics & Government
• Unrest, Conflicts & War
• Islamic State
• Syria
• Turkey

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Hopes dim for 18 workers trapped in Turkish mine

ISTANBUL (Reuters) - Hopes were fading on Tuesday that 18 miners who were trapped in a flooded coal mine in southern Turkey would be rescued.

Rescue teams, including divers, continued their work at the mine outside of the town of Ermenek in Karaman province, about 110 km (70 miles) north of Turkey's Mediterranean coastline.

It was the second major industrial accident at a Turkish mine in six months. Turkey's deadliest disaster occurred in May in the western town of Soma, where 301 miners were killed, sparking a national outcry over the country's shoddy worker safety record. Hundreds of laborers die every year.

Energy Minister Taner Yildiz told reporters in comments broadcast live that the level of the water that had flooded the mine had now surpassed the area were the miners were situated.

"Water is rising one meter every two hours ... Time is working against us," said Yildiz, adding 34 people were working below ground at the time of the flood.

The source of the water was unclear and could be from collected rainwater or another deposit, Yildiz said.

Turkish media reported huge volumes of water had rushed into mine shafts. Hundreds of rescue workers were working to pump the water out but it continued to flow into the mine.

The flood occurred around 3 p.m. local time (0900 ET) when workers were eating their lunch and the trapped miners were about 350 meters below ground, Kerim Pinarli, one of 16 miners who was able to escape, told NTV news channel.

"We smelled gas and heard our friends below shout, 'There's gas, don't come!' We escaped by seconds," Pinarli said.

Family members of trapped miners lit fires to keep warm while keeping vigil outside of the mine's entrance, NTV said.

(Reporting by Ayla Jean Yackley and Humeyra Pamuk)

• Society & Culture
• Disasters & Accidents

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Clashes at Burkina Faso protest against leader's plan to extend rule

By Joe Penney and Mathieu Bonkoungou

OUAGADOUGOU (Reuters) - Police fired teargas at rock-throwing protesters after tens of thousands marched through Burkina Faso's capital on Tuesday calling for President Blaise Compaore to scrap plans to change term limits to stay in power.

An early morning march through the heart of Ouagadougou was peaceful but clashes erupted later as protesters tried to advance towards the National Assembly.

Tuesday marked the start of a civil disobedience campaign by opposition parties after the government asked the National Assembly to order a referendum on changing the constitution to let Compaore seek re-election next year rather than step down.

Former colonial power France, which uses Burkina Faso as a base for Special Forces soldiers operating across West Africa, urged Compaore to abide by an African Union charter stipulating that leaders should not change the law to try to stay in power.

"The people have decided to start a general popular resistance. The first grievance is to get the withdrawal, pure and simple, of this legal project," Zephirin Diabre, head of the opposition delegation, told the crowd of demonstrators.

Protesters chanted "Step aside!" and "Don't touch Article 37", referring to the clause in the constitution that now bars Compaore, in power for 27 years, from running again next year.

Others carried banners comparing Compaore to Ebola, the virus that has killed nearly 5,000 people in the nearby states of Liberia, Guinea and Sierra Leone.

"We must disinfect ourselves," one read.

There was no immediate figure for arrests or casualties, though Red Cross workers and emergency personnel took charge of some protesters injured during the demonstration.

In a statement issued late on Tuesday, the government congratulated the opposition leadership for what it said were largely peaceful demonstrations across the country. It said marchers in some towns had deviated from planned routes, however, leading to misbehavior.

"The government calls upon the sense of responsibility and restraint in order to avoid any act that might compromise the peace and stability our country holds so dear," the statement said.

Protesters in Ouagadougou who marched towards the National Assembly, where the law will be debated on Thursday, were blocked by security forces who fired volleys of teargas and used water cannons.

They responded by burning tires and throwing rocks. A pocket of demonstrators gathered in a downtown square pledging to hold out until Compaore shelved his plan, but were peacefully dispersed by police in the early evening.

"It's provocation. They (the authorities) want to set the country on fire," said a young protester. "Even if Blaise Compaore burns the country down, he will depart all the same."

Demonstrators in Bobo Dioulasso, Burkina Faso's second biggest town, 330 km (205 miles) to the southwest of the capital, pulled down a statue of Compaore, a witness said.

They left intact an adjacent statue of Libya's late leader Muammar Gaddafi, who was a popular figure in some poor African countries because of his generous cash donations.

AU RULES

The French government said on Tuesday it expected Compaore to adhere to laws drawn up by his peers.

"The African Union charter on democracy and good governance article 23 ... specifies clearly that constitutional revisions aiming to prevent political change are banned," Foreign ministry spokesman Romain Nadal told reporters.

Nadal said breaking the charter could lead to sanctions. President Francois Hollande had sent a letter to Compaore on Oct. 7 outlining this position, he added.

French troops based in Ouagadougou are a key part of French counter-terrorism operations across West Africa.

Compaore has positioned himself as a key mediator in regional conflicts and is also an important ally of the United States in the regional fight against al Qaeda-linked Islamists.

Having seized power in a 1987 coup, Compaore has won a series of elections, the last of which was in 2010.

But he faced unprecedented protests in 2011 from a usually loyal army. The referendum plan has split his nation, one of the world's poorest despite being a top regional cotton producer and home to a fledgling gold industry.

(Additional reporting by John Irish in Paris; Writing by David Lewis and Joe Bavier; Editing by Catherine Evans)

• Politics & Government
• Unrest, Conflicts & War
• Blaise Compaore
• Burkina Faso

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Thousands mourn at funeral of Canadian soldier slain in Ottawa

By Scott Malone

HAMILTON Ontario (Reuters) - Thousands of mourners packed a church and lined adjacent streets in industrial Hamilton, Ontario, on Tuesday for the funeral of the soldier shot dead in last week's attack on the nation's seat of government.

Corporal Nathan Cirillo, 24, was one of two soldiers killed in a pair of attacks last week that police said were carried out independently by radical recent converts to Islam. The assaults took place as Canada's military was stepping up its involvement in air strikes against Islamic State militants in Iraq.

Canadian Prime Minister Stephen Harper told mourners at the church that Cirillo had inspired and united Canadians. He choked back tears in a rare public display of emotion when addressing Cirillo's five-year-old son.

"May time ease the searing pain of today. And may his son, young Marcus Daniel Cirillo, some day find comfort in the fact that our entire country looks up to his dad with pride, with gratitude with deep abiding respect," Harper said.

Major the Reverend Canon Rob Fead opened the ceremony calling Cirillo "Canada's son". Cirillo's cousin, Jenny Holland, and Lieutenant-Colonel Lawrence Hatfield, who had been his commanding officer, also spoke.

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Marus Cirillo, 5, attends the funeral procession for his father, Cpl. Nathan Cirillo in Hamilton, On …

Dressed in ceremonial kilts, white boots and garters, members of Cirillo's Argyll and Sutherland Highlanders unit took a prominent place in the ceremony, having marched alongside his flag-draped casket through the streets of Hamilton, and then carrying it into the 138-year-old gothic Christ's Church Anglican Cathedral.

The killings shook Canadians and prompted a debate on how the nation's open culture, and particularly the low-key security in its capital city of Ottawa, may need to change. Security services have warned that citizens who adopt extremist views and take up arms against the state pose a "serious" threat.

Cirillo was standing an unarmed, ceremonial watch at the nation's war memorial in Ottawa on Oct. 22 when he was shot dead by a man described as troubled and drug addicted. His attacker then charged into the Parliament building and exchanged fire with security officers not far from a room where Harper was meeting with fellow Conservative lawmakers.

The aftermath of the attack has been felt as far away as London, where officials have deployed armed troops at the Horse Guards Parade, a popular attraction with tourists, according to a military source.

'CANADA LOVES THEM'

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The coffin of Cpl. Nathan Cirillo is towed on a gun carriage during his funeral procession in Hamilt …

Cirillo's was the first of two funerals for soldiers slain on Canadian soil, to be followed by a service on Saturday in Longueuil, Quebec, for Patrice Vincent, a 53-year-old warrant officer who was killed on Oct. 20 near Montreal, when a man ran over him and a fellow soldier with his car.

Nadia Grandoni, a 35-year-old administrative assistant and native of Hamilton, stood outside the church where Cirillo's funeral was being held with a red poppy, the symbol of veterans' remembrance, pinned to her vest.

"I was born here and even though I didn't know Nathan, I feel like he was my brother," Grandoni said. "He has done us proud. We love him, as a community and as a country. Both him and Patrice Vincent. Canada loves them both."

Cirillo was buried in the Field of Honor at Woodland Cemetery in Hamilton.

A group of Canadians launched a fund for the families of Cirillo and Vincent, StandOnGuardFund.com, that has so far raised C$550,000 ($495,000).

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Soldiers march in formation during the funeral procession for Cpl. Nathan Cirillo in Hamilton, Ontar …

The Royal Canadian Mounted Police (RCMP) said Cirillo's killer, Michael Zehaf-Bibeau, 32, made a video of himself before his attack saying he was motivated by his opposition to Canadian foreign policy. The RCMP said the video also showed he had religious motives.

Officials have also described Vincent's killer, 25-year-old Martin Rouleau, as a man motivated by radical beliefs.

Both assailants were shot dead by security services.

Following Cirillo's funeral, Harper was to meet with U.S. Secretary of State John Kerry, who traveled to Ottawa to express his condolences.

Kerry, who was on his first visit to Canada since becoming secretary of state last year, laid a wreath at the Ottawa memorial where Cirillo was killed, before meeting with Canadian Foreign Affairs Minister John Baird.

At a press conference, Kerry said the attack in Ottawa was clearly a terrorist attack: "Anybody who walks up in a premeditated way with a loaded rifle and attacks someone in uniform, then purposely goes to a parliament, is committing, by common sense standards, a terrorist act," he said.

($1=$1.12 Canadian)

(Writing by Richard Valdmanis and Scott Malone; Additional reporting by Richard Valdmanis, Randall Palmer and David Brunstromm; Editing by Dan Grebler; and Peter Galloway)

• Politics & Government
• Unrest, Conflicts & War

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Around 100,000 Hungarians rally for democracy as internet tax hits nerve

By Marton Dunai

BUDAPEST (Reuters) - About 100,000 Hungarians rallied on Tuesday night to protest at a planned tax on data traffic and the broader course of Prime Minister Viktor Orban's government they saw as undermining democracy and relations with European Union peers.

It was by far the largest protest since his center-right government took power in 2010 and pursued moves to redefine many walks of life, drawing accusations of creeping authoritarianism, although it was re-elected by a landslide this year.

Orban's government has imposed special taxes on the banking, retail, energy and telecommunications sectors to keep the budget deficit in check, jeopardizing profits in some parts of the economy and unnerving international investors.

The Internet data levy idea was first floated in the 2015 tax code submitted to the Central European country's parliament last week, triggering objections from Internet service providers and users who felt it was anti-democratic.

The crowd, which was organized by a Facebook-based social network and appeared to draw mostly well-heeled professionals, marched through central Budapest demanding the repeal of the planned tax and the ouster of Orban.

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Tens of thousands of Hungarians march across the Elisabeth Bridge during a protest against new tax o …

Many protesters held up makeshift signs that read "ERROR!" and "How many times do you want to skin us?"

Zsolt Varady, an internet entrepreneur and founder of a now-defunct Hungarian social network iwiw.hu, told the crowd that the tax threatened to undermine Internet freedoms.

"Between 2006 and 2006 iwiw motivated many people to get an internet subscription," Varady said. "People were willing to pay for the service because they knew, saw and felt that their lives were becoming better... The Internet tax threatens the further growth of the Internet as well as freedom of information."

TAX REDUCED AFTER FIRST PROTEST

The government had planned to tax internet data transfers at a rate of 150 forints per gigabyte. After analysts calculated this would total more than the sector's annual revenue and an initial protest drew thousands on Sunday, Fidesz submitted a bill that capped the tax at 700 forints per month for individuals and 5,000 forints for companies.

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Tens of thousands of Hungarians hold up their mobile phones as they march across the Elisabeth Bridg …

That did not placate Tuesday's protesters.

"I am a student, my parents are not well off, neither am I, so I work hard," said Ildiko Pirk, a 22-year-old studying nursing. "I doubt the internet companies won't build this tax into their prices. And I have a computer, a smartphone, as does my mother and my four siblings... That adds up."

She said the internet was vital for her to get the books she needs for her studies but also to read unbiased news that is not under the control of Hungary's ruling political elite.

She and other protesters said the government's other moves also bothered them, such as a perceived mismanagement of the economy and a recent dispute with the United States over alleged corruption of Hungarian public officials.

The Orban government denied any anti-democratic agenda, saying it aimed only to get all economic sectors to share the tax burden and was tapping into a trend of telecommunications shifting away from already-taxed telephony and text messages.

The European Commission also criticized the proposed tax.

"It's part of a pattern... of actions which have limited freedoms or sought to take rents without achieving a wider economic or social interest," said Ryan Heath, spokesman for outgoing Commission Vice President Neelie Kroes.

Heath said the tax was economically misguided because it was based on data traffic now growing rapidly around the world.

(Reporting by Marton Dunai; Editing by Mark Heinrich)

• Politics & Government
• Budget, Tax & Economy
• Viktor Orban

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Canada must do more to thwart radical threat, security officials say

By Randall Palmer, David Ljunggren and Richard Valdmanis

OTTAWA (Reuters) - The head of Canada's national police told a parliamentary committee on Monday the government must do more to stop homegrown radicals, such as those who killed two soldiers on home soil last week, from going overseas for militant training.

Royal Canadian Mounted Police Commissioner Bob Paulson said last week's killings in Ottawa and outside Montreal, which he said appeared to be carried out with minimal planning or preparation, show the nation faces a "serious" threat.

"While we are facing this threat at home, we must focus our efforts on preventing individuals traveling abroad to commit acts of terrorism," Paulson said. "Preventing the individuals from traveling is critical. If these individuals return with training and/or battle experience, they pose an even greater threat to Canada and our allies."

Paulson's remarks followed the fatal shooting on Wednesday of a Canadian soldier standing guard at an Ottawa war memorial by a man who then charged into the Parliament building. Two days earlier, another man rammed two soldiers with his car near Montreal, killing one.

"The magnitude of the threat is perhaps best characterized as serious," Paulson told a Senate committee.

The attacks in Ottawa and outside Montreal came during a week in which Canada sent warplanes to the Middle East to take part in air strikes against Islamic State militants in Iraq. Canadian officials vowed their involvement would not be influenced by the attacks.

Paulson spoke a day after the RCMP said the Ottawa gunman, Michael Zehaf-Bibeau, 32, had made a video of himself just before the Wednesday attack, and that it contained evidence that he was driven by ideological and political motives.

"He was quite lucid and was quite purposeful in articulating the basis for his actions," Paulson told reporters after testifying. "They were in respect broadly to Canada's foreign policy, and also in respect to his religious beliefs."

Lawmakers could help security agencies track suspected militants by making it easier for courts to limit suspects' right to travel, Paulson said. Lawmakers could also make it easier for investigators to get hold of suspects' Internet and phone records to allow monitoring of their communications, he added.

CONCERNS ON EXTREME IDEOLOGIES

The government introduced a bill on Monday to broaden the powers of the Canadian Security Intelligence Service (CSIS). The bill would confirm the agency's ability to conduct investigations outside the country and allow for earlier implementation of a program to revoke the citizenship of dual nationals who are convicted of terrorism.

The bill had been due to come to Parliament last Wednesday, but was derailed by Zehaf-Bibeau's attack.

CSIS Assistant Director for Intelligence Michael Peirce told the committee that people in Canada who become radicalized tend to educated and not to have lived in poverty, which can make it easier for them to plan and carry out attacks

"We are concerned about the emergence of more violent and radical groups such ISIL," Peirce said, using an alternate name for the Islamic State militants. "Their violent and extremist ideologies are resonating with some individuals in Canada."

Both the attack launched in Ottawa by Zehaf-Bibeau and the one near Montreal by Martin Rouleau, 25, ended when the men were shot dead by security officers.

The incidents sparked questions about Canada's culture of openness, which, for example, allows free access into the Parliament building in Ottawa.

But civil liberties advocates urged lawmakers not to overreach.

"There is talk of a need for a fundamental shift in the way in which Canada engages in the task of dealing with criminality and violent individuals in our society," Sukanya Pillay, executive director of the Canadian Civil Liberties Association, wrote in an open letter to members of Parliament. "These comments have been made as if they represent simply minor modifications to our moral fiber as a country ... We could not disagree more."

Public tours of Parliament resumed on Monday and galleries, where visitors can watch lawmakers in action, also reopened for the first time since Wednesday's attack.

WATCH LIST

Canadian officials are tracking 93 people they consider high-risk travelers, who they fear could try to leave the country to join militant groups or mount attacks in Canada. The bulk of those people are Canadian citizens, Paulson said.

Zehaf-Bibeau had traveled to Ottawa from Vancouver in an unsuccessful attempt to obtain a passport, police said. Rouleau's passport had been seized in July as he tried to leave for Turkey.

Zehaf-Bibeau was not among the high-risk travelers officials were tracking, but the RCMP said it met with Rouleau "multiple times" before dropping their surveillance of him early this month.

Prime Minister Stephen Harper is due to travel to Hamilton, Ontario, on Tuesday for the funeral of Corporal Nathan Cirillo, 24, the soldier who was killed in Ottawa.

The funeral for 53-year-old Warrant Officer Patrice Vincent, who police said was run down by Rouleau near Montreal, will be on Saturday, Nov. 1.

(Additional reporting by Jeffrey Hodgson in Toronto; Writing by Scott Malone; Editing by Jeffrey Benkoe, Alden Bentley, James Dalgleish and Peter Galloway)

• Politics & Government
• Unrest, Conflicts & War
• Canada
• Montreal

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Mexico arrests four gang members in students' disappearance

MEXICO CITY (Reuters) - Mexican authorities on Monday said they had arrested four drug gang members involved in the kidnapping of dozens of student teachers who disappeared last month and are feared massacred.

The announcement came as local media reported that a mass grave has been discovered in a trash dump outside mountain town of Cocula, near Iguala in the southwestern state of Guerrero, where 43 students disappeared after they clashed with police and masked men on Sept 26.

Mexico's Attorney General Jesus Murillo said the four members of the Guerreros Unidos gang had been involved in the kidnapping of the students, which has sparked nationwide protests and undermined President Enrique Pena Nieto's claims that Mexico is becoming safer under his watch.

"Today we now have those who organized the disappearance of these youths," Murillo said.

He did not elaborate on the media reports of another mass grave site, but he said that the suspects had identified a crime scene where reporters would be taken on Tuesday.

The attorney general has said Iguala's mayor and his wife were the probable masterminds of the disappearance and ordered local police forces to stop the students from disrupting a political event to launch a campaign for his wife to succeed him as mayor.

Forensic anthropologists are still checking the remains of dozens of corpses found buried on a hillside outside Iguala, but so far none of the students' have been found.

Federal authorities have arrested more than 50 people in connection with the incident, including dozens of police who have links to the Guerreros Unidos gang, which translates as United Warriors.

The disappearance of the students has triggered massive protests from Mexico City to the Pacific seaside resort of Acapulco, overshadowing Pena Nieto's bid to restore order in Mexico and shift the focus away from endemic gang violence and onto economic growth in Latin America's No. 2 economy.

Around 100,000 people have been killed in gang-related violence since the start of 2007.

(Reporting by Lizbeth Diaz and Gabriel Stargardter; Writing by Michael O'Boyle; Editing by Simon Gardner and Cynthia Osterman)

• Society & Culture
• Crime & Justice
• Enrique Pena Nieto
• Mexico

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U.S. and EU hail pro-West election outcome in Ukraine, Russia guarded

By Richard Balmforth and Timothy Heritage

KIEV (Reuters) - Pro-Western parties will dominate Ukraine's parliament after an election handed President Petro Poroshenko a mandate to end a separatist conflict and to steer the country further away from Russia's orbit towards mainstream Europe.

U.S. President Barack Obama hailed Sunday's election as "an important milestone in Ukraine's democratic development" while top European Union officials said on Monday it represented a "victory of the people of Ukraine and of democracy".

But, reflecting the geopolitical struggle between Moscow and the West over Ukraine's future, Russia's foreign minister reacted cautiously, saying Moscow expected Poroshenko to form a government that would heal the "split" in Ukrainian society.

Poroshenko began power-sharing talks with Prime Minister Arseny Yatseniuk after their political groups led other pro-Western forces committed to democratic reforms in sweeping pro-Russian forces out of parliament.

"The main task is to quickly form a pro-European coalition for carrying out agreements with the EU," Yatseniuk said at a meeting with election observers.

International observers from the Organization for Security and Cooperation in Europe gave a further lift to the pro-Western Kiev leadership, saying Sunday's election had "largely upheld democratic commitments" despite the conflict in the east.

It was "an amply contested election that offered voters real choice and (had) a general respect for fundamental freedoms," Kent Harstedt, OSCE special coordinator, told a news conference.

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A woman holds her passport with a copy of an icon at a polling station during parliamentary election …

After months of conflict and turmoil there was no euphoria from Poroshenko's allies. He faces huge problems: Russia opposes his plans to one day join the European Union, a ceasefire is barely holding between government forces and pro-Russian separatists in the east, and the economy is in dire straits.

Russian President Vladimir Putin can also still influence events, as the main backer of the rebels in the east and through Moscow's role as natural gas supplier to Ukraine and the EU. He could also remove trade concessions from Kiev if it looks West.

But Poroshenko's immediate task is to cement an alliance with Yatseniuk's People's Front, running neck and neck with his bloc on about 21 percent support after more than two-thirds of the votes on party lists were counted.

To secure a majority they are likely to turn to Samopomich (Selfhelp), a like-minded party with 11 percent of votes, whose leader Poroshenko also met on Monday. Final results for party list voting and in single constituency seats are due on Oct. 30.

The tandem between the 49-year-old confectionery magnate Poroshenko and the professorial Yatseniuk, who has gone out ahead as an anti-Russian hawk in recent weeks, was emerging as a relationship likely to dominate the new political scene.

Yatseniuk once called the prime minister's job "political suicide" but, a favorite in the West, he could now keep the job to oversee deep and possibly unpopular reforms.

RETURN OF NORMALCY

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Ukrainians read newspapers on a metro train, in Kiev, Ukraine, Monday, Oct. 27, 2014. With more than …

Poroshenko and his allies are trying to restore normalcy to the sprawling country of 46 million and draw a line under a year of upheaval that began with street demonstrations against Poroshenko's pro-Russian predecessor, Viktor Yanukovich.

Yanukovich was overthrown in February in what Russia called a "fascist coup" after he spurned a deal that would have deepened ties with the EU. Moscow responded by swiftly seizing and annexing the Crimea peninsula and backing the separatist rebellions in which more than 3,700 people have been killed.

Moscow has also halted gas supplies to Ukraine in a row over the price and unpaid bills, causing alarm in the EU which gets a third of its gas needs from Russia, half of this via Ukraine.

Obama, in a statement, said the United States looked forward to the quick formation "of a strong, inclusive government" in Kiev and expressed support for Ukraine's territorial integrity including the return of Crimea.

European Commission President Jose Manuel Barroso and European Council chief Herman Van Rompuy, in a joint statement, said they expected the Kiev leadership now to seek a "broad national consensus" to intensify much-needed reforms.

Russian Foreign Minister Sergei Lavrov, in a more downbeat reaction, said Moscow hoped for the formation of a "constructive government" to would solve social-economic problems, fulfill the terms of peace talks and "not preserve the split in society".

The Kiev government says it is hoping for modest economic growth next year after a 6 percent decline in 2014, but the World Bank expects the economy to continue shrinking.

In line with measures agreed with the IMF, Yatseniuk's government has cut budget expenditure and let the Ukrainian hryvnia float. The currency has lost about 40 percent of its value against the dollar since the start of the year.

The economic decline has been aggravated by the fighting in the east, where two more Ukrainian soldiers were killed on Sunday and shelling resumed on the edge of the rebel stronghold of Donetsk on Monday despite a ceasefire. Despite the violence, Poroshenko insists on a negotiated settlement.

Some allies of Yanukovich will be in parliament in the new Opposition Bloc but communists will not be represented for the first time since independence from the Soviet Union in 1991.

After months of beating back the separatists, Ukraine's troops suffered setbacks in August, which Kiev and its Western backers say was caused by Moscow sending armored columns with hundreds of troops to aid the rebels. Russia denied this.

Voting did not take place in areas held by the rebels or in Crimea. Separatists in the east plan a rival vote on Nov. 2.

(Additional reporting by Pavel Polityuk and Natalia Zinets,; and Thomas Grove in Donetsk; Editing by Giles Elgood)

• Politics & Government
• Foreign Policy
• President Barack Obama
• Ukraine
• Russia
• European Union
• Moscow

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Suicide bomber kills 27 militiamen south of Iraqi capital

By Michael Georgy

BAGHDAD (Reuters) - A suicide bomber killed at least 27 Shi'ite militiamen outside the Iraqi town of Jurf al-Sakhar on Monday after security forces pushed Islamic State militants out of the area over the weekend, army and police sources said.

The attacker, driving a Humvee vehicle packed with explosives and likely stolen from defeated government troops, also wounded 60 Shi'ite Muslim militiamen, who had helped government forces retake the town just south of the capital.

Iraqis are bracing for more sectarian attacks on Shi'ites, who are preparing for the religious festival of Ashura, an event that defines Shi'ism and its rift with Sunni Islam.

At mosques and shrines across Iraq, millions of Shi'ites are expected to commemorate the slaying of Prophet Mohammad's grandson Hussein at the battle of Kerbala in AD 680.

Violence has in the past marred the run up to the event, which will take place next week, and the festival itself.

On Monday night, a car bomb killed at least 15 people in central Baghdad, police and medical sources said. The attack took place on a street with shops and restaurants in Karrada district, home to both Sunni and Shi'ite Muslims as well as other sects and ethnic groups.

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Shi'ite fighters participate in an intensive security deployment against Islamic State militants …

Islamic State sees Shi'ites as infidels who deserve to die and their attacks on them have brought violence back to levels seen in 2006 and 2007 at the height of a civil war.

Holding Jurf al-Sakhar is critical for Iraqi security forces, who finally managed to drive out the Sunni insurgents after months of fighting and need to capitalize on their victory to keep the militants away from Baghdad.

It could also allow Iraqi forces to sever Islamic State connections to their strongholds in western Anbar province and stop them infiltrating the mainly Shi'ite Muslim south.

PRESSURE ON BAGHDAD

The group has threatened to march on Baghdad, home to special forces and thousands of Shi'ite militias expected to put up fierce resistance if the capital comes under threat.

Gains against Islamic State, an al Qaeda offshoot made up of Arab and foreign fighters, are often fragile even with the support of U.S. air strikes on militant targets in Iraq and neighboring Syria.

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Militants hang the Islamic State flag at a fort on the Syrian-Iraqi border in June, 2014. Two men ha …

The United States led nearly a dozen air strikes against Islamic State militants in Syria and Iraq on Sunday and Monday, including the besieged Syrian Kurdish border town of Kobani, according to the U.S. military.

As Iraqi government soldiers and militias savored their victory and were taking photographs of Islamic State corpses on Sunday, mortar rounds fired by Islamic State fighters who had fled to orchards to the west rained down on Jurf al-Sakhar.

The rounds hit the militiamen, killing dozens and scattering body parts, according to a Reuters witness.

The next significant fighting near Baghdad is expected to take place in the Sunni heartland Anbar province.

The town of Amriyat al-Falluja has been surrounded by Islamic State militants on three sides for weeks. Security officials say government forces are gearing up for an operation designed to break the siege.

Gains in the Islamic State stronghold of Anbar could raise the morale of Iraqi troops after they collapsed in the face of a lighting advance by the insurgents in the north in June.

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Birds fly as smoke rises over the town of Kobani following airstrikes by the US led coalition seen f …

In a meeting with Sunni tribal leaders from Anbar broadcast on state television, Prime Minister Haider al-Abadi said:

"We need soldiers to sign up for the army to stay and defend the country, not to come to the army for livelihoods.

"We should focus on one front when we attack instead of fighting on more than one front because terrorists can switch the battle to another area. We should defeat them in one place and then move to the other front."

In order to stabilize Iraq, Abadi, a Shi'ite, must win over Sunnis, especially from Anbar, who have long believed Shi'ite leaders have a sectarian agenda. Some support Islamic State.

NO LETUP TO THE VIOLENCE

Islamic State kept up the pressure on security forces, attacking soldiers, policemen and Shi'ite militiamen in the town of al-Mansuriyah, northeast of Baghdad. Six members of the Iraqi security forces were killed, police said.

Kurdish peshmerga fighters also made advances over the weekend against Islamic State, which has declared a caliphate in the heart of the Middle East and is determined to redraw the map of the oil-producing region.

Much attention is focused on the planned deployment of peshmerga to Kobani, where fellow Kurds have been fending off an attack by Islamic State for 40 days.

Iraqi Kurdish officials and a member of the Kurdish administration in Syria said the peshmerga had been due to head to Kobani via Turkey on Sunday but their departure had been postponed.

Iraqi Kurdish forces will not engage in ground fighting in the Syrian town of Kobani but provide artillery support for fellow Kurds there, a Kurdish spokesman has said.

Islamic State fighters have been trying to capture Kobani for over a month, pressing on despite U.S.-led air strikes on their positions and the deaths of hundreds of their fighters.

(Additional reporting by Dasha Afanasieva in Mursitpinar and Isabel Coles in Arbil, Oliver Holmes in Beirut and Jonny Hogg in Ankara; Editing by Tom Heneghan)

• Unrest, Conflicts & War
• Politics & Government
• Iraqi security forces

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