A U.S. Air Force MQ-1 Predator, unmanned aerial vehicle, armed with AGM-114 Hellfire missiles, performs a low altitude pass during the Aviation Nation 2005 air show at Nellis Air Force Base, Nevada in this November 13, 2005 USAF handout photo obtained by Reuters February 6, 2013.

WASHINGTON | Fri Mar 15, 2013 4:36pm EDT

WASHINGTON (Reuters) - A federal judge twice considered by President Barack Obama for the Supreme Court has rebuked the administration over the secrecy surrounding aerial drone strikes abroad, adding to pressure Obama already faces from fellow Democrats.

A ruling on Friday from Judge Merrick Garland in Washington capped a week of mounting calls for the release of more information and follows a drawn-out confirmation process for the new director of the Central Intelligence agency, John Brennan.

The Obama administration defends the attacks as essential to the fight against al Qaeda and other militants in countries such as Pakistan and Yemen. The strikes have at times killed civilians who were not targets, ignited local anger and frayed diplomatic ties.

A Democratic senator confronted Obama about the drone program at a closed-door meeting on Tuesday, the Politico newspaper reported, and on Wednesday a lawyer who led Obama's 2008 presidential transition, John Podesta, wrote an opinion piece accusing the administration of wrongly withholding drone-related legal opinions.

Garland, writing for himself and two other judges on the Court of Appeals for the District of Columbia Circuit, criticized the Central Intelligence Agency for refusing in a lawsuit even to acknowledge the existence of its drone program. He called the CIA's legal reasoning indefensible and a fiction.

"'There comes a point where... courts should not be ignorant as judges of what (they) know as men' and women," Garland wrote, quoting a 1949 Supreme Court opinion.

"We are at that point with respect to the question of whether the CIA has any documents regarding the subject of drone strikes," he wrote.

The ruling effectively revives a lawsuit in which the American Civil Liberties Union is asking for records from the CIA. Obama administration lawyers have opposed the suit.

TRANSPARENCY DEBATE

In response to the ruling, a National Security Council spokeswoman said the administration had been more transparent than any of its predecessors on the conduct of sensitive counterterrorism operations but would not discuss details of specific operations.

Caitlin Hayden, the spokeswoman, said in a statement: "We will continue to disclose as much as we can - as soon as we can - regarding the framework, the standards, and the process through which we approve such operations."

Justice Department spokeswoman Nanda Chitre said the department was reviewing the decision, while CIA spokesman Todd Ebitz said: "The CIA does not, as a rule, comment on matters before the courts."

Attorney General Eric Holder said in congressional testimony on March 6 that Obama would soon reveal more about the legal rationale for drone strikes.

"We have talked about a need for greater transparency," said Holder, the chief U.S. law enforcement official.

Democrats outside the administration have shown growing impatience with the secrecy. West Virginia Senator Jay Rockefeller, a former Senate Intelligence Committee chairman, urged Obama to be more open during the president's meeting with Senate Democrats on Tuesday, Politico reported.

Podesta, a Democratic insider who oversaw Obama's 2008 transition, wrote in The Washington Post on Wednesday that Obama "is ignoring the system of checks and balances that has governed our country from its earliest days."

Last week, two Democratic senators voiced similar ideas in voting against confirming John Brennan as Obama's CIA director. Brennan was confirmed to the post on March 7, but the confirmation process was delayed for weeks by concerns about the administration's use of drones.

HIGH COURT CANDIDATE

Garland, 60, was a high-level Justice Department official when President Bill Clinton appointed him a judge.

He was on Obama's list of candidates for the Supreme Court when vacancies arose in 2009 and 2010. Obama chose others, but Garland remains a frequently cited judge on the influential appeals court in Washington.

In its efforts to quash the ACLU's records suit, the CIA said it could neither confirm nor deny whether it had drone records because of security concerns.

The ACLU, which sued under the 1966 Freedom of Information Act, countered that government officials had already acknowledged the drone program in public statements from 2009 to 2012.

The question became whether the statements by Obama, former CIA Director Leon Panetta and former counterterrorism adviser Brennan amounted to an official acknowledgment.

Garland ruled that they did, writing, "The president of the United States has himself publicly acknowledged that the United States uses drone strikes against al Qaeda."

However, if the case follows the pattern of similar suits, the ACLU is likely a long way from getting any records. Its suit now heads back to a trial court, where the CIA could invoke other defenses against the records request.

Jameel Jaffer, deputy legal director of the ACLU, said the ruling would make it more difficult for the government to deflect questions about drones.

"The public surely has a right to know who the government is killing, and why, and in which countries, and on whose orders," Jaffer said in a statement.

(Additional reporting by Mark Felsenthal and Tabassum Zakaria; Editing by Howard Goller and David Brunnstrom)

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WASHINGTON | Wed Mar 13, 2013 1:15am EDT

WASHINGTON (Reuters) - A defense contractor better known for building jet fighters and lethal missiles says it has found a way to slash the amount of energy needed to remove salt from seawater, potentially making it vastly cheaper to produce clean water at a time when scarcity has become a global security issue.

The process, officials and engineers at Lockheed Martin Corp say, would enable filter manufacturers to produce thin carbon membranes with regular holes about a nanometer in size that are large enough to allow water to pass through but small enough to block the molecules of salt in seawater. A nanometer is a billionth of a meter.

Because the sheets of pure carbon known as graphene are so thin - just one atom in thickness - it takes much less energy to push the seawater through the filter with the force required to separate the salt from the water, they said.

The development could spare underdeveloped countries from having to build exotic, expensive pumping stations needed in plants that use a desalination process called reverse osmosis.

"It's 500 times thinner than the best filter on the market today and a thousand times stronger," said John Stetson, the engineer who has been working on the idea. "The energy that's required and the pressure that's required to filter salt is approximately 100 times less."

Access to clean drinking water is increasingly seen as a major global security issue. Competition for water is likely to lead to instability and potential state failure in countries important to the United States, according to a U.S. intelligence community report last year.

"Between now and 2040, fresh water availability will not keep up with demand absent more effective management of water resources," the report said. "Water problems will hinder the ability of key countries to produce food and generate electricity."

About 780 million people around the world do not have access to clean drinking water, the United Nations reported last year.

"One of the areas that we're very concerned about in terms of global security is the access to clean and affordable drinking water," said Tom Notaro, Lockheed business manager for advanced materials. "As more and more countries become more developed ... access to that water for their daily lives is becoming more and more critical."

PRODUCTION CHALLENGE

Lockheed still faces a number of challenges in moving to production of filters made of graphene, a substance similar to the lead in pencils. Working with the thin material without tearing it is difficult, as is ramping up production to the size and scale needed. Engineers are still refining the process for making the holes.

It is not known whether Lockheed faces commercial competition in this area. But it is not the only one working on the technology.

Jeffrey Grossman, an associate professor at the Massachusetts Institute of Technology who has done research on graphene membranes for filtration, said he was not familiar with details of Lockheed's work. But he said finding a way to produce graphene sheets with nanometer-sized holes could produce a major advancement in desalination efficiency.

"If you can design a membrane that's completely different than what we use today, then there's a chance for more than two orders of magnitude (100 times) increase in the permeability of the membrane," Grossman said.

Stetson, who began working on the issue in 2007, said if the new filter material, known as Perforene, was compared to the thickness of a piece of paper, the nearest comparable filter for extracting salt from seawater would be the thickness of three reams of paper - more than half a foot thick.

"It looks like chicken wire under a microscope, if you could get an electron microscope picture of it," he said. "It's all little carbon atoms tied together in a diaphanous, smooth film that's beautiful and continuous. But it's one atom thick and it's a thousand time stronger than steel."

Thickness is one of the main factors that determines how much energy has to be used to force saltwater through a filter in the reverse osmosis process used for desalination today.

"The amount of work it takes to squeeze that water through the torturous path of today's best membranes is gone for Perforene," Stetson said. "It just literally pops right through because the membrane is thinner than the atoms it's filtering."

Notaro said Lockheed expects to have a prototype by the end of the year for a filter that could be used as a drop-in replacement for filters now used in reverse osmosis plants.

The company is looking for partners in the filter manufacturing arena to help it commercialize Perforene as a filter in the 2014-2015 time frame, he said.

Lockheed officials see other applications for Perforene as well, from dialysis in healthcare to cleaning chemicals from the water used in hydraulic fracturing, or "fracking," of oil and gas wells.

(Editing by Warren Strobel and Jackie Frank)

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1 of 4. U.S. President Barack Obama delivers remarks on energy at the Argonne National Lab near Chicago, March 15, 2013.

LEMONT, Ill./WASHINGTON | Fri Mar 15, 2013 6:39pm EDT

LEMONT, Ill./WASHINGTON (Reuters) - President Barack Obama tried to move past partisan fights over energy policy on Friday with a modest proposal to fund research into cars that run on anything but gasoline.

Obama toured the Argonne National Laboratory outside of Chicago, known for its research into advanced batteries used in electric cars, then delivered a speech highlighting the need to find more ways to wean vehicles off oil.

The United States has a newfound wealth of oil and natural gas resources made possible by hydraulic fracturing and other drilling advancements, but consumers still face high prices at the pumps because gasoline prices are tied to world markets.

"The only way to break this cycle of spiking gas prices for good is to shift our car and trucks entirely off oil," Obama said in Argonne's advanced photon facility, which says it produces the brightest source of X-rays in the Western Hemisphere, used for an array of research projects.

The Democratic president proposed a fund that will draw $2 billion over 10 years from royalties the government receives from offshore drilling in the Outer Continental Shelf.

The research would be aimed at new ways to lower the cost of vehicles that run on electricity, biofuels, natural gas or other non-oil fuel sources.

Obama first mentioned the Energy Security Trust fund in his State of the Union address last month.

The White House touted the idea as bipartisan, saying it came from retired military and business leaders, including some Republicans, who belong to a policy group called Securing America's Future Energy.

"This is not a Democratic idea or a Republican idea," Obama said, standing in front of three cars designed to run on alternative fuels. "This is just a smart idea."

But Republican approval was far from assured.

"For this proposal to even be plausible, oil and gas leasing on federal land would need to increase dramatically," said Brendan Buck, a spokesman for Republican House of Representatives Speaker John Boehner. "Unfortunately, this administration has consistently slowed, delayed, and blocked American energy production."

By choosing to focus his first energy speech on research - an issue that appeals equally to Republicans and Democrats, industry and environmental groups - Obama is seeking to build common ground on energy, which has been a divisive policy issue.

"In order for something like this to pass the Hill, it will need votes from both sides," said Michael Levi, an energy fellow at the Council on Foreign Relations. "That makes it wise for the president to start with something that Congress can work from."

IS CONGRESS WILLING?

The research trust fund will require consent from Congress, which is grappling with federal budget cuts. Senator Lisa Murkowski of Alaska, the top Republican on the Senate Energy Committee, had proposed a similar idea. But her version called for expanded drilling, which Obama's proposal does not include.

Murkowski's spokesman Robert Dillon said the president's plan relied on royalties that have already been factored into the budget, "which could mean either deficit spending or less funding for the Land and Water Conservation Fund."

"There's a better way that not only funds investment in research, but also addresses our need for affordable and abundant energy," Dillon said, referring to expanded drilling.

White House officials said the president's plan would not add to the deficit because they expect leasing revenues to grow in coming years for several reasons, including changes the administration plans to make to leasing policy.

White House spokesman Josh Earnest said the administration is willing to work with Congress on the research fund plan.

"If there are different ideas people want to offer up, we'll certainly have a conversation with them about that," he said.

Mark Kennedy, the director of George Washington University's Graduate School of Political Management, said despite the misgivings expressed by some Republicans, the White House may be able to negotiate a deal that pleases both sides.

"I think this is the opening bid," Kennedy said. "This is the beginning of the conversation."

In his first term, Obama pushed for laws that would use market forces to reduce climate-changing carbon pollution, but the "cap and trade" bill was opposed by industry and failed in Congress.

His administration pumped $90 billion in economic stimulus funds into clean energy and "green jobs" projects, helping to dramatically expand renewable energy production in America.

But some projects failed, including a California solar panel maker called Solyndra that had received a $527 million government loan. Critics excoriated his administration for that failure, as well as for delaying approval of the Keystone XL crude oil pipeline from Canada.

The energy trust fund "is a more pragmatic approach to try to continue investments in green energy given the degree to which the (clean energy) brand has been damaged," said Kennedy, a former Republican congressman from Minnesota.

(Editing by Doina Chiacu and Mohammad Zargham)

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Google CEO Eric Schmidt gestures during the Web 2.0 Summit in San Francisco, California November 15, 2010.

YANGON | Fri Mar 15, 2013 6:36pm EDT

YANGON (Reuters) - Google Inc Executive Chairman Eric Schmidt, who visited North Korea in January, will become the first high-profile tech company executive to visit Myanmar in the wake of reforms that prompted Western nations to ease sanctions following decades of military dictatorship.

The visit next week to Myanmar, where Schmidt will speak at a technology and communications park and meet with government officials, is just one stop in a multi-country Asian tour to promote Internet access, according to Google.

Since Myanmar's military stepped aside and a quasi-civilian government was installed in 2011, setting off a wave of political and economic reforms, the country has enjoyed a surge of interest from overseas businesses.

The former Burma is the last virgin territory for businesses in Asia, with untapped markets including the telecoms sector: mobile penetration in the country of 60 million is estimated to be a meager 5-10 percent.

Unlike Schmidt's controversial visit to Pyongyang, in which Google described as a "personal" trip, the visit to Myanmar falls within his mandate as executive chairman, which involves government outreach, thought leadership and building partnerships and business relationships, the company said.

But Schmidt, who was Google's chief executive from 2001 to 2011, is becoming more visible on issues involving technology and world affairs.

His book, "The New Digital Age", due to hit bookshelves in April, was co-authored with Google Ideas chief Jared Cohen, who had previously worked at the U.S. State Department.

According to an early review in The Wall Street Journal, the authors criticize China for being an enthusiastic "filterer of information" and a "prolific" hacker of foreign companies. During Schmidt's tenure as Google's chief, the company famously pulled out of China after a dispute over censorship and hacking.

"Eric (Schmidt) is visiting several countries in Asia to connect with local partners and Googlers who are working to improve the lives of many millions of people across the region by helping them get online and access the world's information for the first time in the next few years," Google said in a statement. His trip also includes India.

In November, Schmidt visited Seoul, Taipei and Beijing.

WHISTLE-STOP

The Myanmar trip will be Schmidt's second visit this year to a country off the beaten track. In January he went to North Korea, saying it was a personal trip to talk about a free and open Internet.

Schmidt is due to give a speech at the Myanmar Information and Communication Technology Park in Yangon on March 22, before making his way to the capital, Naypyitaw, to meet senior government officials, said Zaw Min Oo, secretary general of the Myanmar Computer Society.

"There will be an audience of about 400, comprising entrepreneurs, executive committee members of the computer association and young leaders," Zaw Min Oo told Reuters, referring to the speech.

Myanmar's planned modernization of telecoms infrastructure and expected boom in mobile phone usage will pave the way for the entry of companies such as Google, which could profit greatly through sales of cheap smartphones built around its Android platform.

In February the U.S. Treasury Department issued a general license for four of Myanmar's biggest banks, two of which are owned by tycoons associated with the former junta, before a visit by 50 U.S. executives that month to explore opportunities.

The delegation, led by the U.S. Agency for International Development (USAID) and including Cisco Systems Inc, Google, Hewlett-Packard Co, Intel Corp, and Microsoft Corp, visited Myanmar to look into projects to boost access to the Internet, strengthen transparent government and expand digital literacy, according to a USAID statement.

Many leading firms in Myanmar are still largely controlled by businessmen subject to sanctions, but Western companies are starting to move in after the implementation of a new foreign investment law.

Myanmar is offering two operating licenses for companies to build new telecoms infrastructure.

MTN Group, Africa's largest mobile phone company, which is bidding for a license, has said around 90 companies have expressed interest.

(Additional reporting by Jeremy Wagstaff in Singapore and Alexei Oreskovic in San Francisco; Writing by Paul Carsten in Bangkok; Editing by Alan Raybould, Pravin Char and Richard Chang)

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Matthew Keys, deputy social media editor for Reuters.com, is seen in his online profile in this undated photo.

SAN FRANCISCO | Fri Mar 15, 2013 9:58pm EDT

SAN FRANCISCO (Reuters) - A Reuters.com editor maintained his innocence after being suspended with pay on Friday following a federal indictment on charges he aided members of the Anonymous hacking collective.

Matthew Keys, 26, a deputy social media editor, was indicted on Thursday by a federal grand jury in Sacramento, California, on three criminal counts. The alleged events occurred before he joined Thomson Reuters, the indictment indicated.

New York attorney Tor Ekeland said he had been hired by Keys to represent him and that his client "maintains his innocence."

Ekeland told Reuters he was assembling a legal team and that Keys "looks forward to contesting these baseless charges."

On Friday, Keys exchanged tweets with some well-wishers on Twitter, telling one of them, "I'm okay."

Thomson Reuters Corp computer systems in December 2010. A story on the Tribune's Los Angeles Times website was soon altered by one of those hackers, the indictment said.

Court filings said Keys had worked for a Tribune-owned television station in Sacramento, operating its Twitter and Facebook feeds. An FBI agent said in a search warrant application that a former colleague told the agency that Keys had been terminated in October 2010.

Keys joined Reuters in New York in January 2012. As deputy social media editor, he promoted stories through Twitter and other means. He lives in Secaucus, New Jersey, the Justice Department said.

Ekeland and a California lawyer working for Keys, Jay Leiderman, laid out a number of defenses, starting with the argument that Keys was acting as a freelance journalist when he was invited to join the Internet Relay Chat channel with elite hackers.

"He was in the chat room interviewing," Leiderman said.

Ekeland said in a video interview with the Huffington Post that while he understood that Keys used the screen name AESCracked at times during the chats recovered by authorities, someone else might have been using that name when AESCracked promised to provide Tribune logon credentials.

Ekeland also said the damage Keys was accused of causing was minor. "It's just sort of a juvenile defacement of a minor story on the L.A. Times website—which he didn't do," Ekeland told the Huffington Post. The maximum for conviction on all three counts would be 25 years in prison, although actual sentences handed down by judges are often far less than the maximum.

Keys wrote on a personal blog and on a Reuters blog that he had previously obtained access to an elite group of hackers, including one known as Sabu.

Sabu, later identified as Hector Xavier Monsegur, became an FBI informant, court records show. Monsegur was publicly identified last year and has pleaded guilty to participating in multiple hacking conspiracies. He is awaiting sentencing.

Ekeland represented alleged AT&T iPad email hacker Andrew Auernheimer, aka "Weev," who was convicted last November on hacking conspiracy and identity fraud charges.

Leiderman's clients include Anonymous member Christopher Doyon, who calls himself Commander X. Doyon was charged with hacking Santa Cruz County, California, computers, but jumped bail and has told Leiderman he is in Canada, Leiderman said.

Keys is scheduled to be arraigned on April 12 in Sacramento, according to the court docket.

The case in U.S. District Court, Eastern District of California, is United States of America v. Matthew Keys, 13-82.

(Editing by Ciro Scotti and Peter Cooney)

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1 of 4. The U.S. Marine Corps version of Lockheed Martin's F35 Joint Strike Fighter, F-35B test aircraft BF-2 flies with external weapons for the first time over the Atlantic test range at Patuxent River Naval Air Systems Command in Maryland in a February 22, 2012 file photo.

WASHINGTON (Reuters) - It's called the "death spiral," and America's newest warplane, the F-35 Joint Strike Fighter, is in danger of falling into it before the plane has even gone into service.

The term - recently invoked by top brass involved in the F-35 program - refers to a budgeting Catch-22 that plagues the defense industry. To keep the cost per airplane low, you need to build and sell a lot of planes. But in tough economic times, governments cut orders to save money. That pushes up the cost per plane, leading to more cancellations, pushing up the cost, leading to more cancellations. And so on.

The U.S. military is in the process of making tough decisions due to mandatory budget cuts from sequestration which went into effect March 1 and could lop off $46 billion of Pentagon spending this fiscal year.

Earlier this year, Pentagon budgeteers crunched the numbers on Lockheed Martin Corp's F-35 in an exercise that spoke volumes about the troubles facing the world's most expensive weapons system and the Navy's uncertain commitment to it.

Postponing orders for about 40 of the 260 Navy models of the plane, which will take off from and land on aircraft carriers, would save money in the short-term, according to several defense officials familiar with the analysis, which has not been made public.

But it would also add from $1 billion to $4 billion to the eventual price of the F-35 program, already at a record-setting $396 billion.

Seven years behind schedule and 70 percent over early cost estimates, the stealthy F-35 "Lightning II" appears to have overcome myriad early technical problems only to face a daunting new question: is it affordable in an era of shrinking defense budgets?

According to a congressional watchdog agency, the average price per plane has already almost doubled from $69 million to as much as $137 million since the F-35 program began in 2001. Any further price rise could scare off potential buyers -including vital foreign customers.

"It's a house of cards," said one senior defense official who is familiar with the F-35 program, but was not authorized to speak publicly. "We have finally started improving performance on the program and efficiency in testing, and bang, we get this budget challenge."

Steve O'Bryan, one of Lockheed's top F-35 executives, says the company has already cut F-35 production costs by 50 percent, and is making progress on flight tests and software development.

"While there are still challenges and room for improvement, the program is heading in the right direction and we see no insurmountable obstacles to delivering the F-35 and its unprecedented 5th generation capability to our three U.S. service and international customers," he said.

BULLET PROOF?

Built by Lockheed and designed to be the next-generation fighter jet for decades to come for the U.S. Air Force, Navy and Marines, as well as key U.S. allies in Asia and Europe, the F-35 appears bullet-proofed against cancellation.

There are no other new fighter jets in the pipeline; the U.S. military's fleet of warplanes is aging; and 10 allies including Britain, Japan and Israel are deeply invested.

Manufacturing - and jobs - spread across 46 states ensure a vital layer of political protection as well.

With 10 million lines of software code onboard, and another 10 million lines in its logistics and ground systems, the F-35 is a flying computer with radars and other sensors that can see enemy threats 200 miles away in any direction.

In what was meant to be a money-saving move, U.S. officials designed the F-35 as one basic fighter (with three variants) to replace a dozen warplanes flown by the U.S. Air Force, Navy and Marine Corps, as well as U.S. allies worldwide.

The U.S. armed forces currently plan to buy 2,443 F-35s in total, comprising 1,763 A-models for the Air Force, 420 B- and C-models for the Marines, and 260 C-models for the Navy. Foreign orders are now slated to total 721.

The Marine Corps, under pressure to replace its aging fleet of Harrier AV-8B "jump jets", Boeing Co F/A-18 Hornets, and EA-6B Prowlers, is scheduled to be the first U.S. military service to use the jet, by late 2015.

Given the tight schedule and huge cost of keeping its aging current fleet flying, top Marine Corps officials are vigilant about the program and the budgetary risks it faces.

"Any delay in fielding the F-35 brings added risk to the Marine Corps' ability to execute our mission as the nation's crisis response force and it affects our ability to augment U.S. Navy carrier air wings," Lieutenant General Robert Schmidle, Deputy Commandant of Aviation, said in a statement to Reuters.

Schmidle and other planners at the Pentagon are desperate to avert the "death spiral" that gutted the Air Force's plan to buy 750 F-22 Raptor stealth fighters down to just 187 jets.

Behind closed doors, some U.S. officials fret that sequestration budget cuts could trigger a similar dynamic on the F-35, which has already seen 410 orders pushed back beyond 2017.

Depending on how the cuts are implemented, the purchase of up to nine F-35s could be deferred in fiscal 2013 alone, Navy and Air Force officials have said. That might not seem like much out of more than 3,100 destined for U.S. and foreign clients.

But initial calculations show that while cutting nine jets would save about $1.3 billion, it would also raise the cost of the remaining aircraft by nearly $800 million, said one defense official, who was not authorized to speak publicly.

The Pentagon budget analysis, which Reuters is reporting for the first time, found that postponing the 40 Navy C-model jets would raise the cost of the Navy version by about $4.5 million per plane, and add between $1.5 million to $2.6 million to the per-plane cost of the Air Force and Marine Corps versions, according to several defense officials familiar with the study.

"Cutting tails to pay bills is inefficient. Whether it's nine planes in one year, or 40 across the (future years defense plan), you're going to pay later," said one of the officials. This official and others cautioned that the studies were hypothetical for now.

Air Force Lieutenant General Christopher Bogdan, the often blunt F-35 program chief, invoked the dreaded "death spiral" this week as he pounded on the need to cut costs and keep foreign orders - which will account for half of all F-35s produced through 2017 - on track.

"The one thing that our partners care most about is how much this airplane is going to cost," he said. "If ... we want to sell the 600-plus airplanes to our partners and a couple hundred more projected to our (foreign military) customers, we better be darned sure we keep reducing the price on this airplane."

Even a two-year delay in Turkey's initial order of two jets had added $1 million to the cost of each of the remaining planes in the original order year, Bogdan told a defense conference.

No one knows exactly how much of a price tag will be too much to bear for countries like Australia and Canada, whose F-35 orders are already on shaky ground. "The tipping point will be different for each country," said one U.S. official.

In Australia, defense contractors involved in building the new jets are worried that $5.5 billion in expected orders will be in jeopardy if Canberra cuts its plans to buy 100 jets by 30 to 50 jets, as many experts expect.

Lockheed remains optimistic that international orders will hold up and even grow. South Korea is expected to choose the F-35 as the winner of a 60-jet competition to be decided this summer, and U.S. officials this week said Singapore may order more than a dozen F-35s in coming weeks.

Other allies, like Japan, see no going back on the fighter.

A senior official at Japan's Defense Ministry said it was keeping a close eye on cost and schedule risks, but there were no plans to change Tokyo's order for 42 planes: "If we don't buy until all the glitches are eliminated, it would be too late."

NAVY IS WARY

The Air Force is considering a slightly less capable version of the plane for its initial use, but the Navy is reconsidering the size of its order.

Chief of Naval Operations Admiral Jonathan Greenert this week ruled out scrapping the Navy's entire F-35C order, but said the Navy was thinking about how many jets it really needs.

Greenert last year ordered a study on equipping each aircraft carrier air wing with just one squadron of F-35s instead of two, according to defense analyst Loren Thompson. The Navy is also developing several unmanned planes, although military officials insist they will never completely replace manned fighters on carriers.

Bogdan said cutting the Navy's order too far would have serious consequences. "There is actually a 'do not go below' type of calculation, which says, if you get below the minimum production quantity on one of these variants, the price starts shooting up tremendously," he told the conference.

The Pentagon's Cost Analysis and Program Evaluation office recently forecast that the F-35's cost would rise by 9 percent if Washington only bought 1,500 jets and foreign partners stuck to their orders, according to a Government Accountability Office study, first reported by Reuters. The cost would surge 19 percent if Washington bought 1,500 jets and the partners none.

"If you cut any of these aircraft, the cost of each remaining one goes up," consultant Thompson said. "At some point soon, you're at risk of undermining the whole business case for the F-35 as an affordable new fighter."

The F-35's worsening fiscal challenges come just as advocates, and some independent analysts, say the often-troubled fighter development project is getting back on track after years of setbacks - which included two engine-related groundings this year - and expensive retrofits.

The F-35 "is now moving in the right direction after a long, expensive and arduous learning process," the GAO study concluded, although it said long-term affordability remained a big concern.

Top Pentagon officials are vowing to shelter the F-35 from the latest budget crisis, if they can.

"We'll try to protect the F-35," the Pentagon's chief weapons buyer, Frank Kendall, said this week. "There's no question about its priority.

(Additional reporting by Kiyoshi Takenaka in Tokyo and John O'Callaghan in Singapore; Editing By Warren Strobel, Claudia Parsons and Leslie Gevirtz)

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Israel's Prime Minister Benjamin Netanyahu points to a red line he has drawn on the graphic of a bomb as he addresses the 67th United Nations General Assembly at the U.N. Headquarters in New York, September 27, 2012.

JERUSALEM | Fri Mar 15, 2013 6:20pm EDT

JERUSALEM (Reuters) - U.S. President Barack Obama visits Israel next week at the onset of spring - the "red line" previously drawn by his host, Prime Minister Benjamin Netanyahu, to trigger an attack on Iran's nuclear sites.

But an Israeli-Iranian war, Washington's nightmare as it tries to scale back defense commitments abroad and avoid a draining Gulf oil crisis, does not appear trip-wire imminent.

Officials and analysts say Iran warded off Israel's threat by calibrating mid-level uranium enrichment so it does not accrue enough fuel for a potential first bomb - the threshold Netanyahu warned about in a United Nations speech in September.

He was presenting a worst-case extrapolation from U.N. nuclear inspector reports. The most recent of those, however, found a slowdown in the stockpiling of the 20 percent fissile uranium that Iran, in the face of mounting Western suspicions, says is part of an entirely peaceful program. [ID:nL6N0BLD2Y]

Netanyahu has not publicly revised the spring-to-summer 2013 dating for his "red line". But several Israeli officials privately acknowledged it had been deferred, maybe indefinitely.

"The red line was never a deadline," one told Reuters.

The chief U.S. military officer, General Martin Dempsey, has questioned Israel's ability to deliver lasting damage to Iran's distant, defended facilities. Netanyahu, meanwhile, makes little secret of preferring that Washington take the lead in any war.

Yet while mobilizing Gulf forces and saying it was open to military force as a last resort, the Obama administration has resisted Israeli calls to present Tehran with a clear ultimatum.

CLOCKS AND KILOS

Interviewed by Israel's top-rated television news program on Thursday, Obama voiced cautious hope that negotiations, re-launched last month between the United States, five other world powers and Iran, could still curb its disputed nuclear drive.

"There's a window - not an infinite period of time - but a window of time where we can resolve this diplomatically, and that it is in all of our interests," he told Channel Two TV.

The U.S. "red line" was Iran reaching the verge of acquiring a nuclear bomb, Obama said, adding: "That would take over a year or so ... But obviously we don't want to cut it too close."

Confidence in Obama is not unanimous among Netanyahu's circle. While one Israeli official, speaking to Reuters on condition of anonymity, said "American presidents don't bluff" and that therefore Obama should be trusted, others worried Iran might elude scrutiny and dash to nuclear arms capability.

"The key question is not when Iran will have a bomb, but only when we can no longer prevent Iran from having a bomb," Michael Oren, Israel's ambassador to Washington, told reporters.

He accused Iran of planning to run an accelerated, "shorter track" toward nuclear weaponry "that is invisible because it is underground".

A February 21 U.N. report said Iran had 167 kg (367 lb) of mid-level enriched uranium, in gas form, after converting some of the stockpile to solid reactor fuel. Experts say it would need 240-250 kg (530-550 lb) of the gaseous material for a bomb, though the fuel would have to be further enriched to 90 percent purity.

Yet Iran has also been expanding centrifuges so it could rapidly ramp up mid-level enrichment if it chose, diplomats say.

Netanyahu alluded to those developments on March 4 when he reiterated his "red line" in a speech to a pro-Israel lobby in Washington, saying Iran was "putting itself in a position to cross that line very quickly once it decides to do so".

An Israeli official posited Iran could gather 230 kg to 240 kg of mid-level uranium - just short of a bomb's worth - and then, between inspectors' weekly visits to the enrichment plants, churn out the few kilograms required to close the gap.

Next, it could move all the material to a secret location for prospective later processing into weapons fuel, making the Islamic Republic a "latent nuclear power", the official argued.

"For now, we know what sites would have to be targeted in a military strike," the official said. "Can any of us, even the Americans, be sure of having such full knowledge in the future?"

The United States sounds more secure about nuclear inspections and intelligence monitoring of the Iranians, as well as in its ability to intervene militarily at short notice.

"We assess Iran could not divert safeguarded material and produce a weapon-worth of WGU (weapons-grade uranium) before this activity is discovered," U.S. National Intelligence Director James Clapper said on Tuesday.

STRATEGIC AMBIGUITY

Gary Samore, Obama's former nuclear non-proliferation adviser, disputed the idea that Iran would break out of the U.N. inspections regime with just one bomb's worth of fuel, or that it would be capable of making a quick switch to the highest level of uranium enrichment, given its technical lags.

"Nobody knows, including the Iranians, how much 20 percent (enriched uranium) they need to have a bomb's worth. They have never done it. They have never converted," Samore, who is now executive director at Harvard Kennedy School's Belfer Center for Science and International Affairs, said in a phone interview.

That made threshold questions "inherently ambiguous", said Samore, who referred to Netanyahu's "red line" alternatively as a "red zone".

Mark Fitzpatrick, a former U.S. State Department official who heads the non-proliferation and disarmament program at London's International Institute for Strategic Studies, had similar doubts about whether Iran would try to sneak past Netanyahu's "red line" and, if so, whether Israel would respond with strikes.

"Nobody's going to make a war-or-peace decision based on a few kilograms of 20 percent enriched uranium," he said. "Nobody knows what Israel's real 'red line' is. I don't think Israel knows either."

Fitzpatrick faulted Netanyahu for fixating on Iran's 20 percent enrichment, arguing that this risked distracting from ongoing progress in other risky aspects of its nuclear program like centrifuge improvements and tonnes of low-purity uranium.

"That may not have been a clever way of putting it, because Iran is able to make tactical adjustments and can push back the so-called 'red line' as long as it wants," he said.

But Fitzpatrick also saw a tactical gain for Netanyahu "in reminding the world that there was a concrete threat here, after the world has heard so much saber-rattling from Israel".

Israel, which is reputed to have the region's sole atomic arsenal, has spoken about being ready to attack Iran for close to a decade - rhetoric some Israeli officials say was designed, at least in part, to stiffen the determination of war-wary world powers to find a diplomatic alternative through sanctions.

Samore said the international coalition had been "deeply energized for years" in confronting Tehran. "I think we still have a reasonable prospect of stopping them, and that if the Iranians misstep, the U.S. will act," he said.

(Writing by Dan Williams; Additional reporting by Matt Spetalnick in Washington; Editing by Jeffrey Heller, Will Waterman and Roger Atwood)

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A technician looks at collision at the CMS experiment in the control room of the Large Hadron Collider (LHC) at the European Organisation for Nuclear Research (CERN) near Geneva April 5, 2012.

GENEVA | Wed Mar 13, 2013 5:33pm EDT

GENEVA (Reuters) - Physicists who found a new elementary particle last year said on Wednesday it looked like a basic Higgs boson rather than any "super-Higgs" that some cosmologists had hoped might open up more exotic secrets of the universe.

"It does look like the SM (Standard Model) Higgs boson," said physicist Brian Petersen of Atlas, one of two research teams working in parallel on the Higgs project at CERN in Switzerland.

His assertion, on a slide presentation to a conference at CERN and posted on the Internet, was echoed by the other group. "So far, it is looking like an SM Higgs boson," said slides from Colin Bernet of CMS.

The two groups work separately and without comparing findings to ensure their conclusions are reached independently.

It has been assumed since the triumphant announcement last June that a new particle spotted at CERNS's Large Hadron Collider (LHC) was the Higgs, named after British theoretical physicist Peter Higgs, that, theories say, gave mass to matter after the Big Bang 13.7 billion years ago.

But CERN has yet to confirm that. CMS may issue more information on Thursday at an expert gathering in the Italian Alps. A confirmed discovery of the Higgs boson, which could happen this year, would likely win a Nobel prize.

Meeting at CERN, near Geneva, the scientists said on Wednesday that the particle looked very much like it fit into the 30-year-old Standard Model of the makeup of the universe.

If confirmed on Thursday, it would mean LHC scientists will have to wait until late in this decade for any sign of "new worlds of physics".

Until the last few days there had been some faint signs that the discovery might prove to be something more than the particle that would fill the last gap in the Standard Model, a comprehensive explanation of the basic composition of the universe.

Rumors flew of a "super-Higgs" that might - as recently predicted by U.S. physicist Sean Carroll in a book on the particle - "be the link between our world and most of the matter in the universe."

Many scientists and cosmologists will be disappointed that the LHC's preliminary 3-year run from March 2010 to last month has not produced evidence of the two grails of "new physics" - dark matter and supersymmetry.

Dark matter is the mysterious substance that makes up some 25 percent of the stuff of the universe, against the tiny 4 percent - galaxies, stars and planets - which is visible. The remainder is a still unexplained "dark energy."

The theory of supersymmetry predicts that all elementary particles have heavier counterparts, also yet to be seen. It links in with more exotica like string theory, extra dimensions, and even parallel universes.

"I think everyone had hoped for something that would take us beyond the Standard Model, but that was probably not realistic at this stage," said one researcher, who asked not to be named.

The LHC closed down last month for two years of work that will double its power, and, it is hoped, the reach of its detectors.

(Editing by Robin Pomeroy)

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ALMATY | Sat Mar 16, 2013 12:48am EDT

ALMATY (Reuters) - A Russian Soyuz capsule made a "bull's eye" landing in the steppes of Kazakhstan on Saturday, delivering a Russian-American trio from the International Space Station, a day after its originally scheduled touchdown was delayed by foul weather.

NASA's Kevin Ford and Russian cosmonauts Oleg Novitskiy and Evgeny Tarelkin, who had manned the $100 billion orbital outpost since October as Expedition 34, landed in cloudy weather at 7:06 a.m. Moscow time (0306 GMT) northeast of the town of Arkalyk.

They had spent 144 days aboard the multinational ISS on their space journey of almost 61 million miles (98 million km).

"The landing was energetic and exciting," Russian TV showed Novitskiy as saying.

NASA television said the deorbit burn and other events during the descent had gone flawlessly. It said the capsule had landed upright, almost hitting its bull's eye target in thick fog.

"Oleg Novitskiy reported to search and recovery teams that the crew is feeling good," NASA television said. "Everything seems to be in order."

Due to hampered visibility, it took a few minutes before helicopters with Russian search and recovery teams could locate the Soyuz capsule after its landing.

The first images shown by Russia's Vesti-24 television featured rescue workers standing in a snow-covered steppe opening the hatch of the capsule.

The three smiling astronauts were seated on semi-reclined chairs and covered with blue thermal blankets. They were then carried to a nearby inflatable medical tent.

On Friday, fog and freezing rain at the landing site in Kazakhstan prevented helicopters from setting up for the crew's return to Earth.

In preparation for their departure, Canadian astronaut Chris Hadfield took the helm of the space station on Wednesday, becoming the first Canadian to take command of the outpost.

It is only the second time in the 12-year history of the station, a project of 15 nations that has been permanently staffed since November 2000, that command has been turned over to someone who is not American or Russian.

Hadfield will be part of a three-man skeleton crew until NASA astronaut Chris Cassidy and cosmonauts Pavel Vinogradov and Alexander Misurkin arrive later this month.

(Reporting by Dmitry Solovyov; Editing by Lisa Shumaker)

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Fri Mar 15, 2013 3:49pm EDT

n">(Reuters) - U.S. options exchanges on Monday will introduce new mini-options on five popular higher-priced securities, including Apple and Google, a development expected to boost interest among retail investors.

The minis, which are 1/10th the size of a standard option, will be available on Apple Inc, Amazon.com Inc, Google Inc, the SPDR Gold Trust exchange-traded fund and the SPDR S&P 500 ETF Trust. If interest in the products is strong, more offerings are expected.

The new breed of option offers the opportunity for a small investor who holds less than 100 shares of high-profile securities to implement the same options strategies that exist for the traditional contract with much less capital.

Google and Apple, with prices north of $800 and $400 per share, respectively, also carry high option premiums. Previously, a retail trader may have found these options too costly because they would be committed to buy 100 shares of the security.

"Anytime you can expand investment products to retail investors who are qualified and excited to trade them, it is a win to all parties involved," said TD Ameritrade's chief derivatives strategist, J.J. Kinahan.

The mini-option has similar terms and contract features as the traditional product, but with certain key differences. Each contract represents only 10 shares of the underlying stock, versus the regular-sized options that represent 100 shares of a security.

"The product was designed with the retail trader in mind who may not have the capital to purchase 100 shares of those underlying securities and therefore could not hedge with a standard options contract," said Kinahan. "They now can do so with the minis."

The entry cost for trading these options is lower. A mini contract trading at $11.50 would cost $115 versus the cost of that standard "big" 100-share contract of $1,150 with the same quote, said Brian Overby, senior options analyst at online brokerage TradeKing in Charlotte, North Carolina.

The options industry has already seen explosive growth with the addition of weekly single-stock options since their introduction in June 2010. More than 4 million options contracts were traded in 2011 and 2012, the industry's two biggest years.

The new mini-option opens the door for retail investors to utilize option strategies like the "covered call," which helps protect against losses. Investors have the flexibility to sell a call on as little as a 10 share position on these expensive stocks, Overby said.

Investors previously had to own at least 100 shares of a stock to sell a call option against their stock position for it to be considered covered, Overby said. That carries a big cost for a stock like Google.

"Many investors often hold a relatively small number of shares in these stocks, and minis provide them with the ability to both hedge and write options on their holdings," said Andy Nybo, head of derivatives at research firm TABB Group.

The options will carry the symbols AAPL7, AMZN7, GOOG7, GLD7 and SPY7.

(Reporting by Doris Frankel; Editing by Leslie Adler)

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