Soybeans Hit by China's Bird-Flu Outbreak, US Supplies - Wall Street Journal

By IAN BERRY

CHICAGO—U.S. soybean prices slumped to a fresh 10-month low amid fears that export demand for the oilseed will slow due to a bird-flu outbreak in China.

Traders worry the outbreak will lead to reduced poultry consumption in China and prompt producers to cull their flocks to prevent the spread of the new bird-flu strain.

A cutback in chicken production would result in lower demand for soybean meal, a widely used ingredient in chicken feed. Chinese state media reported Friday that six people have died after being infected with the H7N9 virus.

The outbreak comes as Chinese soybean imports already have been slowing and trail forecasts by the U.S. Department of Agriculture, analysts said. China is the world's largest soybean importer, accounting for about 60% of imports, and its purchases have a significant impact on prices.

Soybean futures for May delivery fell 10.25 cents, or 0.8% to $13.6175 a bushel Friday at the Chicago Board of Trade. That marked the lowest closing price for the front-month contract since June 5, 2012.

Soybean prices have dropped 6% since the USDA reported March 28 that U.S. supplies of soybeans, corn and wheat as of March 1 were all significantly higher than analysts had expected.

The USDA report, along with sharp declines in corn futures and the emergence of the bird-flu outbreak, have led speculators such as hedge funds to exit from bets on rising soybean prices as they brace for more losses, analysts said Friday. Corn and soybean prices often move in tandem, as the crops are planted on the same ground across the U.S. Midwest and both are used in animal feed.

Analysts said the soybean market may remain under pressure as long as weather is favorable for farmers, who are preparing to plant their crops in coming weeks.

"This is a liquidating market until we run into a crop problem," said Rich Feltes, vice president of research for R.J. O'Brien & Associates LLC, a Chicago futures-brokerage firm.

Traders expect U.S. farmers to dedicate more acreage to soybeans this year, and some say a chilly start to the spring may lead to even more plantings as farmers who had intended to grow corn switch over to soybeans, which have a later growing season.

A large U.S. crop would add to the record South American crop currently being harvested, expanding global supplies and pressuring futures prices. Brazil is expected to overtake the U.S. as the world's largest soybean producer this year.

In the near-term, however, domestic supplies of soybeans remain historically tight. Mr. Feltes noted that Bunge Ltd., one of the world's largest soybean processors, said this past week that it would shut down a Kansas facility until the fall harvest because of scarce supplies.

"I expect more of that, as more areas simply run out of soybeans," Mr. Feltes said.

Corn futures declined one cent, or 0.2%, on Friday to $6.29 a bushel, a fresh nine-month low. Corn has fallen 14% since last month's USDA report showed greater-than-expected supplies of the grain.

Write to Ian Berry at ian.berry@dowjones.com

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Seoul Seeks Ability to Make Nuclear Fuel - Wall Street Journal

By JAY SOLOMON

Yonhap/Reuters

An F-16 fighter jet lands at a U.S. base in Osan, South Korea, in an image provided by Yonhap.

WASHINGTON—South Korea is pressing the Obama administration for U.S. permission to produce its own nuclear fuel, a move that nonproliferation experts said could trigger a wider nuclear-arms race in North Asia and the Middle East.

The negotiation between Seoul and Washington, though part of a broader, long-term civilian nuclear cooperation agreement, is taking place as nuclear pressures swell on both sides of the Korean peninsula.

North Korea has expanded its atomic-weapons capability in recent months. It announced Tuesday that it was reopening a reactor complex used to harvest weapons-grade plutonium. Those actions have fueled calls in South Korea for the government in Seoul to respond by developing its own atomic-weapons capability.

South Korea's government has reassured Washington during the negotiations that it isn't seeking to develop the ability to build nuclear weapons. "This government has no intention of all of pursuing nuclear capabilities in terms of weapons," said a senior government official in Seoul.

But American lawmakers and proliferation experts are concerned that the technologies Seoul is seeking—the ability to enrich uranium and reprocess spent nuclear-reactor fuel—would provide it with the key technologies to produce the fissile materials for a bomb.

That capacity could further inflame tensions between the Koreas and risk sparking a broader arms race in Northeast Asia, potentially including Japan and Taiwan.

"Mutual animosities are feeding off each other on the Korean peninsula," said Tom Moore, who served for the past decade as the senior adviser on proliferation issues at the Senate Foreign Relations Committee. "South Korea has no economic or practical reasons to engage in these activities at this time."

U.S. negotiators fear that allowing South Korea to develop any of the requested technologies would have knock-on effects across the Middle East and Asia, where the U.S. has sought in recent years to seal deals that forbid countries from producing their own nuclear fuel. Jordan, Vietnam and Saudi Arabia could demand the same terms, and it would reinforce Iran's desire to continue with its nuclear program, these people worry.

"It could get to the point where you could no longer rely" on the current nonproliferation framework, said Mr. Moore, who is now with the Center for Strategic and International Studies in Washington.

By as early as next month, according to officials briefed on the diplomacy, South Korea and the U.S. are seeking to conclude the renegotiation of a 1972 nuclear-cooperation pact under which the U.S. provides Seoul with nuclear fuel and technology.

South Korea, however, is seeking to significantly increase its own technological capabilities as part of the agreement, according to these officials, so it can enrich uranium and reprocess the spent fuel discharged from the country's fleet of 22 nuclear-power reactors.

South Korea said it needs to be able to enrich uranium on its own to provide a steady supply of nuclear fuel for these reactors. It also said it needs the ability to reprocess the spent fuel in order to better store the waste, which is expected to reach 10,000 tons by 2016.

"They are pushing hard for this reprocessing ability," said Sen. Bob Corker (R., Tenn.), who met with senior South Korean officials last week in Seoul, including President Park Geun-hye, who is planning a visit to Washington in May. "There is a lot of national pride in this."

Mr. Corker, the ranking Republican on the Senate Foreign Relations Committee, stressed that Ms. Park and other senior South Korean officials said their government has no desire to pursue atomic weapons.

But he said he was struck by how many other South Korean politicians, including ruling party member Chung Mong-joon, said Seoul now needs to reconsider its long-standing pledge not to pursue an atomic bomb.

"For what it's worth, two-thirds of the population have said they'd like the country to have nuclear weapons," Mr. Corker said, referring to a recent South Korean poll.

Two opinion polls taken in the immediate aftermath of North Korea's third nuclear test, on Feb. 12 found over 60% support for nuclear weapons to be based in South Korea. Support levels are lower when the consequences of such a move are accounted for, including a potentially weakened alliance with the U.S.

The Obama administration has staunchly opposed allowing countries seeking nuclear-cooperation with the U.S. to engage in enrichment or reprocessing, because either path could be used to create the fissile material required to create an atomic weapon.

North Korea has mastered both technologies, according to the United Nations nuclear watchdog, the International Atomic Energy Agency.

Both the Obama and George W. Bush administrations pressed the United Arab Emirates to agree to a nuclear-cooperation agreement in 2009 that explicitly forbids the Arab country to produce any of its own nuclear fuel.

President Barack Obama called the successful completion of the U.A.E. deal the "gold standard" for future U.S. nuclear-cooperation agreements. Washington has been seeking to replicate these same terms in negotiations it is currently engaged in with Seoul, Amman, Hanoi and Riyadh.

All of these capitals, however, have balked at agreeing to similarly rigorous terms, citing both economic and security reasons, according to U.S. officials who have taken part in the negotiations.

South Korea has argued that it shouldn't be wholly reliant on outside counties for the nuclear fuel that powers much of its electrical supply. South Korea has stressed that the reprocessing technology it is seeking to master, called pyro processing, is crucial to managing its growing nuclear waste, which could potentially pose an environmental threat.

South Korea says it will agree to extensive monitoring by the IAEA of all its nuclear sites to guard against any proliferation fears. Japan has a nuclear cooperation agreement with the U.S. dating back to the 1980s that allows Tokyo to reprocess the spent fuel from its nuclear reactors.

South Korea politicians are also striking a nationalist tone, arguing that the U.S. shouldn't deny Seoul the same technologies that North Korea has acquired. Pyongyang kicked out IAEA inspectors in 2002 and pulled out of the U.N.'s nuclear Nonproliferation Treaty, which seeks to halt the spread of nuclear weapons.

On Tuesday, U.S. Secretary of State John Kerry met in Washington with his South Korean counterpart, Yun Byung Se, and discussed the nuclear-cooperation agreement.

But the top American diplomat and other U.S. officials have remained silent about the state of the negotiations.

South Korea's current nuclear pact with Washington expires in 2014, but U.S. and South Korean officials said the terms of a new deal would need to be agreed upon by June in order to gain congressional approval by year-end. South Korea is currently totally reliant on uranium imports to fuel its reactors, and between 20% and 30% comes from the U.S.

The U.S. has had a checkered history with South Korea on the issue of nuclear weapons.

Seoul formally renounced in 1992 the pursuit of atomic explosives in a declaration that called for the "denuclearization of the Korean Peninsula."

Just two years later, the Clinton administration threatened military strikes on the North when the U.S. and IAEA discovered that Pyongyang was diverting plutonium from its Yongbyon nuclear reactor for a secret atomic weapons program.

Seoul was caught by the U.S. pursuing a secret nuclear weapons program in the 1970s, under the leadership of Park Chung Hee, a general and the father of South Korea's current leader. Mr. Park was concerned about the calls by then-President Jimmy Carter for the U.S. to pull its remaining troops out of the Korean peninsula.

Similarly, Sen. Corker said he heard concerns from Ms. Park and other South Korean leaders about the long-term commitment of the U.S. to maintain a military presence in Asia, in part, because of Washington's fiscal issues. The lawmaker said this explained why some South Korean politicians believed Seoul needed to play a greater role in the country's defense.

"I assured her we will be there for them," Mr. Corker said of his meeting with South Korea's president.

—Alastair Gale in Seoul contributed to this article.

Write to Jay Solomon at jay.solomon@wsj.com

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Bailout Strains European Ties - Wall Street Journal

By GABRIELE STEINHAUSER in Brussels, MARCUS WALKER in Berlin and MATINA STEVIS in Nicosia

A deal reached Monday in Brussels may have saved Cyprus from becoming the first country to crash out of the euro, but it came at the cost of widening the political mistrust between the strong economies of Europe's north and the weaklings of the south.

Several officials familiar with talks in Nicosia and Brussels over the €10 billion ($13 billion) rescue for the island described more than a week of chaotic negotiations. European officials cited Cypriot foot-dragging, reversals and dropped communications, a situation one European Union official called "terrifying." Cypriot officials described their European opposites as demanding and inflexible.

Cyprus secured a bailout from its international creditors early Monday in a deal which, according to European officials, closes Cyprus's second-largest bank, Cyprus Popular Bank, and imposes steep losses on depositors with more than approximately $130,000. Gabriele Steinhauser reports. Photo: Reuters

The fresh bitterness over the Cyprus mess—which appears deeper than at similar points during Greece's extended financial turmoil—could hamper future attempts to fix the bloc's flaws. Germany, the euro zone's biggest economy, prevailed as it typically has in the negotiations, but at the price of growing resentment over what some Europeans saw as its bullying of a tiny nation.

The accord will see big depositors and other creditors lose large sums following the radical downsizing of the country's biggest bank and the shuttering of its second largest—the first time such a "bail-in" has been seen in the three-year euro-zone crisis.

On Monday, Cypriots waited nervously for banks to reopen after their March 15 closure, wondering whether there would be further deposit flight. The country's central bank said late in the day that all of the country's lenders would remain closed until Thursday, after saying earlier that all but the two largest would reopen Tuesday.

Markets greeted the deal with an optimism that quickly faded when Dutch finance minister Jeroen Dijsselbloem suggested in an interview that big bank depositors and senior creditors may be expected to contribute to future euro-zone bailout packages. Later, after bank shares and other euro-based assets fell on the remarks, he appeared to backtrack in a message from his Twitter account: "Cyprus [is a] specific case. Programmes tailor-made to situation, no models or templates used."

The Dow Jones Industrial Average also fell after the remarks, closing down 64.28 points to 14447.75 on Monday.

Monday's agreement capped a 10-day psychological drama. Cyprus's president struck an initial deal that would have seen the country raise its share of the bailout funds by requiring all account-holders in Cypriot banks to pay a tax on their deposits, only to see the plan struck down by parliament. Cyprus went hat-in-hand to Moscow for help, to no avail. Cyprus also raised eyebrows in euro-zone central banks by allowing several hundred million euros to be wired out of the country in the past week, despite an official freeze on outflows on all but a few exempt categories, such as funds for humanitarian purposes.

Bloomberg

Cyprus's finance minister Michael Sarris, right, helped negotiate the plan to restructure the Cypriot banks.

On Thursday morning, the European Central Bank threatened to cut off liquidity to Cypriot banks—condemning them to instant bankruptcy—if no deal was reached by Monday.

By Sunday, officials said negotiations were close to breaking down on several occasions. "Nobody wanted to take the decision that could have led to the first exit of a euro member," said one official following the negotiations. "But it could have been the consequence."

The final accord will see depositors with less than €100,000 in their accounts at Cyprus's two largest banks keep all their money. Bigger depositors in the banks are set to pay a sharply higher price. Large account-holders at Cyprus Popular Bank, the second-largest bank, will have deposits converted into shares in a "bad bank" to contain poor-quality assets, and will likely be repaid only a fraction of their savings over time.

In the end, this deal ended up looking like a more severe version of an early proposal floated by Germany and the International Monetary Fund to close the country's two biggest banks—a plan that had been rejected by Cypriot president Nicos Anastasiades 10 days earlier.

At that time, Mr. Anastasiades instead agreed to a plan to levy a tax on all account holders in Cypriot banks—a proposal that was quickly perceived as a mistake by German Chancellor Angela Merkel and others because it penalized small savers.

After Cyprus's parliament rejected a version of the levy on Tuesday, officials from Germany and other creditor countries grew irritated as they waited to hear Cyprus's promised "Plan B."

Cypriot finance minister Michael Sarris—in Moscow for what turned out to be a fruitless request for funding—wasn't returning calls from his euro-zone peers. Meanwhile, in Nicosia, negotiators from the IMF, European Central Bank and European Commission spent up to 16 hours a day holed up in the glass-front Central Bank building. Seldom did Cypriot officials show up to join them, according to European officials.

Struggling to collect information from the ground, Brussels-based officials relied on media reports to get a sense of what the Cypriot government was planning.

"It's difficult to disentangle from the Cypriots who is proposing what," said a senior euro-zone official. "I have never, ever witnessed anything like this. It's a disaster."

A Cypriot official countered that Nicosia had put several proposals on the table in an attempt to contain the fallout on the economy and society. "The troika were the ones coming with more and more demands," this official said. "They had a clear mandate not to move from their positions. The issue was political, beyond economic rationale."

The fight over the future of Bank of Cyprus, the country's largest lender, became heated by Thursday. Officials in Brussels and in Cyprus noted that many Cypriot parliamentarians keep their savings there.

Mr. Anastasiades tried to sway Ms. Merkel, asking her by phone for a more lenient deal, said people familiar with the call. The chancellor told him that she wouldn't haggle over specifics and that Cyprus needed to talk to the troika.

On Friday morning, Ms. Merkel's patience was running out. She angrily briefed lawmakers from her ruling center-right coalition and told them Cyprus was trying to face Europe down, according to people present. Cypriot leaders haven't understood yet that their "business model" of outsized offshore banking has failed, she said. Europe had to stick to its principles, she added: Aid is only for countries that were prepared to reform, she said.

Ms. Merkel told her advisers and lawmakers she didn't want to see Cyprus leave the euro zone. But the chancellor and her finance minister prepared to let Cyprus fail if it wouldn't agree to terms, German officials say.

Tensions were running high Sunday in Brussels as key officials—including IMF chief Christine Lagarde, ECB head Mario Draghi, EU President Herman Van Rompuy and other top EU officials—met Mr. Anastasiades over a lunch of lamb and baby potatoes.

Mr. Anastasiades complained that his country was being treated more harshly than any of the euro zone's other bailout victims. He backtracked on an earlier agreement to wind down Cyprus Popular Bank.

According to a senior Cypriot official, Mr. Anastasiades was appalled by the way he was spoken to at the lunch. The president threatened to resign. Mr. Dijsselbloem told him he didn't care about the president's political future, only the future of the euro zone, the senior official said.

The lunch ended two or three hours later "and not in a good mood," said a second official.

Meanwhile, troika technical experts went to work in the European Council's headquarters in Brussels on a new proposal for Cyprus: Wind down Cyprus Popular Bank and fold its good assets into Bank of Cyprus. But most euro-zone finance ministers summoned to the building to sign off on the deal were forced to wait in their national delegation rooms on the seventh floor.

The new debt deal may only be only the start for Cyprus, according to Heard on the Street’s Simon Nixon. He explains that the bailout is a move in the right direction but leaves the country exposed to a prolonged recession. Photo: AP

Germany's Finance Minister Wolfgang Schäuble grew particularly irascible, officials said. At one point Ms. Lagarde went to calm him down. She also tried to raise spirits in Mr. Van Rompuy's fifth-floor suite, where top EU officials were meeting with Mr. Anastasiades. The IMF chief handed out M&Ms, as officials say she often does at late-night European negotiations.

As EU leaders tried to calm Mr. Anastasiades and convince him to accept the need for radical surgery to Cypriot banks, his finance minister, Mr. Sarris, was negotiating an eight-point action list in another room with EU Commissioner Olli Rehn, ECB executive-board member Jörg Asmussen and Austrian official Thomas Wieser, who chairs the euro zone's regular consultations among finance officials, according to people familiar with the meeting. The "annex" that the four men drafted outlined the specifics of dealing with the top two Cypriot banks.

As the evening dragged on, Mr. Schäuble and French Finance Minister Pierre Moscovici consulted their respective leaders by phone. Then they conveyed a Franco-German message to the Cypriot leader: Mr. Anastasiades should give up hope that a summit of euro-zone leaders would lead to an easier deal. Even if a summit were to be called, the deal facing Cyprus would be the same one as now.

Shortly before midnight, the Cypriot president came back with a new proposal, which officials said backtracked on the closure of Cyprus Popular. At that point, the EU leaders calmly told Mr. Anastasiades "to pack up and leave" if he wasn't ready to cooperate, one official present at the meeting said.

The president signed off on the broad deal—one more costly than the one its parliamentarians rejected last week.

"There is no doubt in the government that the first deal was far better," said a senior Cypriot official. "We bluffed and we lost. The whole thing was a fiasco."

—Matthew Jarzemsky in New York contributed to this article.

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Suspected al Qaeda Fighter to Face Charges - Wall Street Journal

By DEVLIN BARRETT

A suspected al Qaeda fighter who spent years in Libyan custody before being released in 2011 has been brought to the U.S. to face charges he plotted to attack American personnel in Afghanistan and Africa, officials said Wednesday.

Ibrahim Harun, 43 years old, was indicted in federal court in New York City, accused of conspiring to murder U.S. troops in Afghanistan and plotting to bomb U.S. diplomatic facilities in Nigeria. A lawyer for Mr. Harun declined to comment. He is expected to make a court appearance on Friday.

The Federal Bureau of Investigation said Mr. Harun, who was born in Saudi Arabia and now says he is a citizen of Niger, is believed to have a long history of working for al Qaeda. He allegedly traveled to Afghanistan just before the 2001 terrorist attacks on the U.S., received training from al Qaeda and fought against U.S. and coalition forces as part of a group based in Pakistan.

U.S. officials say he traveled to Africa in 2003 with plans to attack U.S. facilities in Nigeria. When an alleged co-conspirator was arrested, Mr. Harun traveled to Libya, where he was arrested in 2005. The Libyan government released him in 2011, and he was arrested by Italian authorities on a refugee ship. He was extradited from Italy to the U.S. in October 2012, according to U.S. authorities.

U.S. Attorney Loretta Lynch called Mr. Harun "a prototype al Qaeda operative, trained by al Qaeda in terrorist tradecraft, deployed to fight American servicemen, and dispatched to commit terrorist attacks throughout the world."

George Venizelos, the head of the New York FBI office, said Mr. Harun "not only intended to, but did commit acts of terrorism against Americans.''

The case marks the second time in recent days the government has announced plans to put a significant terror suspect on trial in federal court in New York.

Charges were announced earlier this month against Sulaiman Abu Ghaith, a son-in-law of Osama bin Laden's and alleged former spokesman for al Qaeda.

Write to Devlin Barrett at devlin.barrett@wsj.com

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Clearer Picture of Art Heist - Wall Street Journal

By JENNIFER LEVITZ

BOSTON—It has endured as one of the most perplexing mysteries in Boston and the wider art world: Who pulled off the Isabella Stewart Gardner Museum heist, stealing 13 artworks worth an estimated $500 million, including rare paintings by Rembrandt, just after 1 a.m. on March 18, 1990.

On Monday, the 23rd anniversary of the crime, the Federal Bureau of Investigation for the first time said it believes the thieves belonged to a criminal organization based in the mid-Atlantic and New England states. The agency declined to provide further details about the suspects, citing a continuing investigation, but it said it now believes that after the theft, the stolen haul was taken to Philadelphia and Connecticut and then offered for sale in Philadelphia about 10 years ago.

Although it doesn't know the current whereabouts of the art, the FBI believes it might still be in the Philadelphia area. So the agency will launch a publicity campaign, soliciting tips using social media and, within a few weeks, putting up digital roadside billboards in and around Philadelphia, where it believes someone may have glimpsed—or even bought—the art without knowing of the tainted origin. The museum is offering a $5 million reward for a tip leading to the recovery. The theft represents the largest property crime in U.S. history, according to the FBI.

"It's likely over the years that someone, a friend, neighbor or relative, has seen the art hanging on a wall, placed up on the mantle, or stored in the attic. We want that person to call us," Richard DesLauriers, special agent in charge of the FBI's Boston office, said at a news conference.

The new effort resembles the government's successful 2011 publicity blitz that cracked Boston's other famous unsolved mystery. That campaign quickly led authorities to alleged mob boss James "Whitey" Bulger after a 16-year manhunt. Mr. DesLauriers said the FBI is using social media and similar tools more often to enlist the public's help.

Officials made clear that their first goal is recovering the stolen paintings, rather than prosecution. U.S. Attorney Carmen M. Ortiz said the statute of limitations for the actual theft at the Gardner museum had run out. Charges could still be brought for concealing or possessing stolen art, but she said her office would consider immunity in exchange for return of the art.

The Gardner museum, founded by a Boston art patron in 1903, is housed in a 15th century-style Venetian mansion with a lush courtyard and three floors of galleries. In the early-morning heist, two men dressed as police officers bluffed their way in by claiming to be on a legitimate call, the FBI said. The thieves tied up the guards and then spent 81 minutes removing the 13 works of art, authorities said. Among the stolen items: Dutch painter Johannes Vermeer's "The Concert," one of only 36 Vermeers in existence; two large Rembrandt oil paintings, including the artist's only known seascape; and sketches by French artist Edgar Degas.

Today, visitors to the Gardner see a vivid reminder of the heist: Several empty frames still hang on the wall in the Dutch Room.

"Whenever a significant piece of art goes missing, we lose an important part of civilization," Anthony Amore, the Gardner's chief of security, said Monday. "As [our museum directors say], imagine never hearing Beethoven's Fifth Symphony again."

The Gardner theft is believed to be the world's largest unresolved art heist, said Ulrich Boser, author of "The Gardner Heist," a book about the crime. The theft exposed the vulnerability of smaller museums, he said. The art market had pressed values of art to "sky high" levels, and after the Gardner heist, many had to rethink security, he said.

Mr. Boser said high-value art attracts criminals but that the loot is difficult to sell without getting caught, and often thieves wind up stashing it. Stolen art does sometimes turn up decades later. Boston FBI authorities recalled Monday that a painting by French artist Paul Cezanne was stolen from Stockbridge, Mass., in 1978—and recovered 21 years later.

Write to Jennifer Levitz at jennifer.levitz@wsj.com

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US Boosts Defense From North Korea - Wall Street Journal

By DON NISSENBAUM And JULIAN E. BARNES

WASHINGTON—The Pentagon is preparing to strengthen its missile defense systems on the West Coast in response to increased threats from North Korea and rising tensions on the Korean peninsula.

Getty Images

U.S. Secretary of Defense Chuck Hagel Friday said the U.S. plans to boost its missile defense system due to concerns about the possible nuclear capabilities of North Korea.

The U.S. plans to boost its ground-based missile interceptors in Alaska and California by one-third, adding 14 additional systems to the 30 already in place on the West Coast, a senior defense official said Friday. Interceptors are vehicles that are launched to intercept intercontinental missiles in flight.

The expansion in the system was due to be announced by Defense Secretary Chuck Hagel at a news conference Friday.

The decision comes as North Korea has issued a series of threats to attack the U.S. and South Korea over new international sanctions and joint military exercises in the region.

Earlier this month, North Korea threatened to launch a pre-emptive nuclear strike on the U.S. and South Korea. While American officials don't believe North Korea is capable of launching a long-range attack, the threat is seen as a concerning sign of the nation's state of mind.

Pentagon officials signaled the possible expansion days earlier. "North Korea's shrill public pronouncements underscore the need for the U.S. to continue to take prudent steps to defeat any future North Korean ICBM," James Miller, undersecretary of defense for policy, said in a speech last week at the Atlantic Council.

The administration decision comes four years after President Barack Obama put a hold on the deployment plan soon after he took office. Republican lawmakers said Friday they agreed with the enhancement, but said the administration was wrong to freeze the system in 2009.

"Four years ago, the Obama administration began to unilaterally disarm our defenses and deterrent in the hope our enemies would follow suit," said Rep. Mike Rogers (R., Ala.), chairman of the House Armed Services Subcommittee on Strategic Forces.

"President Obama is finally realizing what President Reagan taught us 30 years ago: The best way to keep the peace is through strength," Mr. Rogers said.

Pentagon officials responded to the criticism, saying the danger from North Korean has evolved over the past four years.

"We use the resources to the best of our ability to prepare for threats that exist currently," said the senior defense official. "Look where North Korea was four years ago compared to where North Korea is today. It is a different threat."

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US Catholics Express High Hopes for New Pope - Wall Street Journal

By ARIAN CAMPO-FLORES, TAMARA AUDI and JENNIFER LEVITZ

After two days of voting, Cardinal Jorge Mario Bergoglio, ArchBishop of Buenos Aires, was elected as the 266th Pope of the Roman Catholica Church. He has selected the name of Pope Francis for his Papacy. Photo: Getty Images.

Pope Francis has a unique opportunity to modernize the church, reach its areas of growth more effectively and take a tougher stance on the sexual-abuse scandals that have tarnished its reputation, U.S. Catholics said Wednesday.

From Los Angeles to Miami to Boston, archbishops and parishioners alike praised the election of the former Cardinal Jorge Mario Bergoglio of Buenos Aires, the first pope from the Americas. His ascent is "a great thing for the United States and for Latin America," said Thomas Wenski, the archbishop of Miami, at a news conference. "All of us that live in the Americas, we have a greater freedom a lot of times than people in Europe or more traditional societies."

Jose Gomez, the archbishop of Los Angeles, the largest Catholic diocese in the U.S., put it more bluntly. "It's kind of about time," he said, speaking at a news conference from the altar of the Cathedral of Our Lady of the Angels, in downtown Los Angeles.

Archbishop Gomez, who worked with the new pope briefly, described him as humble, a "defender of the poor" and "a strong teacher."

Though the new pontiff was born to Italian-immigrant parents, Pope Francis's Argentine heritage could help strengthen the Catholic church's connection to U.S. Hispanics, who increasingly have turned to evangelical Protestant churches—a trend the Catholic church has sought to stem.

"The present and future of Catholicism in America and the U.S. is pretty much linked to Hispanics," said Hosffman Ospino, a religion professor at Boston College.

While some polling shows American Catholics overall feel the church is out of touch with their views, Hispanics tend to have strong ties to it, Mr. Ospino said.

Juan Sosa, pastor of St. Joseph Catholic church in Miami Beach, which has many Hispanic parishioners, said it is important that Pope Francis is "able to identify with the poor and marginalized and undocumented that are here."

Others called on Pope Francis to prioritize child-abuse prevention. "Erase all the bad karma that has taken place because of the improper behavior of some Catholic priests," said Tom Norden, 60, another parishioner at the St. Joseph church.

"For the safety of kids and the healing of victims, we hope he starts by exposing the names of predator priests—current and former, living and deceased—in his home archdiocese," David Clohessy, director of the Survivors Network of those Abused by Priests, said in an emailed statement.

Archbishop Gomez said he expected to discuss the sex-abuse issue that has roiled the church in Los Angeles when he meets with the pope in Rome.

American Catholics are looking for some change, said Greg Smith, a senior researcher at the Pew Research Center. A February survey by the group found that 58% of American Catholics polled thought the next pope should allow priests to marry and 60% thought it would be good if the next pope hailed from a developing region like South America.

Donald Tallarico, 67, said he hoped Pope Francis would tackle church positions on marriage and abortion, though the new pontiff is known to hold traditionalist views. "I'm certainly looking for modernization," he said after a special mass in downtown Los Angeles for the new pope.

Many American Catholics had been rooting for the American Cardinal Sean O'Malley, the shy, mild-mannered Boston archbishop who openly played down the idea that he could ever be pope. Some said Wednesday they saw some of his qualities in Pope Francis.

Glued to her television in Marshfield, Mass., retiree and lifelong Catholic Anne Southwood said she liked that the new pope was described as a humble man who lives simply.

"He has Cardinal O'Malley's interest in the poor and I like that," said Ms. Southwood, who is an officer for the national group Voice of the Faithful, a lay group that organized after the clergy-abuse scandal, and advocates for ordinary Catholics to have a stronger role in dioceses.

The church's tradition of a focus on the poor, she said, "has not exactly been in the forefront lately, and I'm glad it's being rediscovered."

—Erica Phillips contributed to this article.

Write to Arian Campo-Flores at arian.campo-flores@wsj.com, Tamara Audi at tammy.audi@wsj.com and Jennifer Levitz at jennifer.levitz@wsj.com

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Jockeying Stalls Deal on Cuts - Wall Street Journal

By JARED A. FAVOLE

WASHINGTON—President Barack Obama and congressional leaders plan to meet at the White House on Friday to discuss the $85 billion in automatic spending cuts set to start the same day, according to a White House official.

The meeting follows weeks of disagreement over how to avert the cuts, known as the sequester, and comes after both political parties have spent the last few days blaming each other for the lack of progress on a replacement plan.

The sequester officially kicks in on Friday, and the scheduling of the meeting for that day is effectively an acknowledgment that the start of the sequester won't be averted.

Mr. Obama will be meeting with House Speaker John Boehner (R., Ohio), Senate Minority Leader Mitch McConnell (R., Ky.), House Minority Leader Nancy Pelosi (D., Calif.) and Senate Majority Leader Harry Reid (D., Nev.). Mr. Obama and his administration have spent the last few days detailing the consequences of the sequester.

"The sequester will weaken America's economic recovery," the president said Tuesday at Newport News Shipbuilding in Virginia, where workers could lose their jobs if the sequester kicks in.

Republicans have accused the president of staging a public-relations campaign and scaring Americans about the sequester's consequences rather than taking steps to avert it. The White House says Mr. Obama has already detailed his approach to solving the sequester, but Republicans don't like it because it includes new tax revenue.

The meeting will represent Mr. Obama's first face-to-face discussion with congressional leaders over the sequester, though he has called them to discuss the issue.

With the cuts set to take effect in just a few days, Republicans have been devising plans that would give the Obama administration more flexibility to minimize the damage. But the president dismissed such efforts as futile. Cutting $85 billion before the fiscal year ends in seven months will create inescapable harm, the president said.

"There's no smart way to do that," he said. "You don't want to have to choose between, 'Do I close funding for the disabled kid or the poor kid? Do I close this Navy shipyard or some other one?' When you're doing things in a way that's not smart, you can't gloss over the pain and the impact it's going to have on the economy."

—Peter Nicholas and Janet Hook contributed to this article.

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Voting Act Under Scrutiny - Wall Street Journal

By JESS BRAVIN

WASHINGTON—Conservative Supreme Court justices criticized Voting Rights Act provisions that extend federal supervision over election practices in Alabama and other states that historically discriminated against minorities, suggesting trouble for a pillar of civil-rights law.

Chief Justice John Roberts on Wednesday asked Solicitor General Donald Verrilli, who was defending the law, whether the government was contending that citizens in the South were more racist than those in Northern states. The chief justice was ready with statistics intended to rebut such images, telling Mr. Verrilli that Massachusetts clocked the nation's lowest ratio of black turnout to that of whites, while Mississippi had the highest.

Justice Anthony Kennedy focused on what he considered the demeaning nature of the Voting Rights Act's preclearance requirement, under which some localities must get approval in advance from Washington for changes to their voting laws. Justice Kennedy said preclearance effectively put some states under the "trusteeship of the United States government."

The preclearance requirement, created by Section 5 of the law, applies to nine states and portions of 13 others. The 1965 act also gives the federal government and individual voters the right to sue any local or state government for infringing voting rights after the alleged violations have occurred.

Many consider the Voting Rights Act the most effective legislation of the civil-rights era, and even conservative justices on Wednesday acknowledged its utility in breaking Jim Crow segregation laws.

In 2006, President George W. Bush signed a 25-year reauthorization of the Voting Rights Act that Congress passed with near-unanimity. But while past Supreme Court rulings rejected challenges to Section 5, in a 2009 decision the justices signaled that the formula for selecting jurisdictions covered by Section 5, last updated with the 1972 election results, may not reflect subsequent progress in race relations and therefore may become an unconstitutional burden on state prerogatives to decide their own ballot regulations.

Although the 2009 decision was adopted 8-1, it was widely seen as a temporary compromise between the court's conservative and liberal wings, allowing Congress breathing room to amend the act before another challenge was filed. Congress took no action, and on Wednesday the façade of agreement in 2009 fell away to reveal sharp divisions between conservative and liberal justices.

Mr. Verrilli, representing the Obama administration, rejected claims that Section 5 was burdensome, saying the Justice Department has approved nearly all applications from jurisdictions seeking to "bail out" of the requirement. The act allows covered jurisdictions to seek exemption from preclearance requirements if they maintain a record free of discrimination for 10 years.

Moreover, Mr. Verrilli contended that there was no constitutional problem in selecting certain states for extra scrutiny. The 15th Amendment, ratified in 1870, gives Congress the power to protect the right to vote from racial discrimination by states. The amendment's framers clearly figured that enforcement would focus on the former Confederate states, Mr. Verrilli said.

The lawyer challenging Section 5, Bert Rein, ran into hostile fire from the court's liberal justices, who cited the high number of voting problems found in Shelby County, Ala., Mr. Rein's client.

While "some portions of the South have changed," Shelby County represents "the epitome" of the wrongs Section 5 was designed to address, said Justice Sonia Sotomayor.

Justice Elena Kagan agreed, adding that while covered jurisdictions hold 25% of the U.S. population, they account for 56% of voting-rights lawsuits. The "formula seems to be working pretty well" in finding the "most violations on the ground," she said.

Mr. Rein said Shelby County didn't do anything to bring itself under Section 5 but was swept into the provision by being located in Alabama, which is covered in its entirety.

He said the Alabama state Legislature has a proportionate number of black members and black voter registration today is far higher than it was half a century ago. Forcing states such as Alabama, Mississippi and Texas to comply with Section 5 today because of a formula using 1972 voter data demeans their right to "equal dignity" with states whose election laws are presumptively valid, Mr. Rein said.

"Remove the stigma of prior restraint and preclearance," Mr. Rein urged.

A decision in the case, Shelby County v. Holder, is expected before July.

Write to Jess Bravin at jess.bravin@wsj.com

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US Ups Ante for Spying On Firms - Wall Street Journal

By SIOBHAN GORMAN

WASHINGTON—The White House unveiled a new strategy to exert pressure on China and other countries that engage in corporate espionage against the U.S. as part of a new administration push to counter cyberattacks and commercial spying.

The strategy, released Wednesday in a report that was the subject of a White House meeting, raised the prospect of stepped-up U.S. trade restrictions on products and services derived from stolen trade secrets. Officials also outlined a series of diplomatic actions to reinforce the administration's commitment to curbing such thefts.

The new push comes on the heels of fresh revelations of Chinese cyber spying and represents an effort by Washington to respond to growing complaints about the constant theft of military and corporate secrets, especially by China.

Incidents linked to China in recent years include cyberinfiltrations of Google, the computer security firm RSA, Lockheed Martin, and Nortel Networks, as well as the New York Times and The Wall Street Journal.

The White House on Wednesday didn't specify actions toward China, but the strategy document is peppered with examples of Chinese theft of corporate secrets.

The Obama administration is casting trade-secret theft as a major threat to both economic and national security.

"Trade secret theft threatens American businesses, undermines national security, and places the security of the U.S. economy in jeopardy," the document outlining the strategy says. "These acts also diminish U.S. export prospects around the globe and put American jobs at risk."

Wednesday's move follows an executive order President Barack Obama signed last week to create voluntary cybersecurity standards for companies running critical infrastructure like the electric grid.

Both initiatives were under development for several months and coincided with a spike in recent disclosures about cyberinfiltrations of the U.S. news media and critical infrastructure by cyberspies believed to be linked to the Chinese government. The new strategy largely expands upon efforts already underway and is aimed at producing a change in Beijing, which bitterly denies it sponsors such incursions.

"This is what you have to do to get the Chinese to behave differently," said James Lewis, a former top State Department official who is now a cybersecurity specialist at the Center for Strategic and International Studies. "You've got to keep pushing on them; you've got to keep grinding."

But, he cautioned, it will likely take several years to show results.

The U.S. successfully employed a similar strategy of diplomatic and trade pressure in the 1990s to curb Chinese proliferation of weapons of mass destruction and related military equipment, Mr. Lewis said.

In addition to denying it condones computer hacking, China also has said that it is itself a victim of cyberattacks and that Chinese law forbids such attacks.

But U.S. intelligence agencies issued a rare public report in 2011 that fingered Chinese hackers as the "most active and persistent perpetrators of economic espionage." Senior intelligence officials said the Chinese government and sympathetic hackers are behind the cyberspying.

A House intelligence committee report last year concluded the Chinese telecom giant Huawei's presence in the U.S. poses a national security threat.

As one component of the new strategy, U.S. law enforcement and intelligence agencies will work more closely with the private sector to school them in counterspy tradecraft and provide warnings about emerging corporate espionage threats.

The spy agencies will provide reports to the private sector on key aspects of the threat, including the number and identity of foreign governments involved, the industry sectors most targeted, and how the espionage is being conducted.

The new U.S. strategy also calls for a more aggressive diplomatic response to the theft of trade secrets, much of which is now done by infiltrating computer networks of target companies but some is also still done by recruiting human spies.

The State Department will ensure that a consistent and "appropriate" message is delivered to foreign governments to communicate the administration's commitment to reducing the theft of intellectual property and the importance it places on more effective legal penalties and enforcement for trade-secret theft.

Wednesday's report said Washington would work with its allies to coordinate on ways to pressure countries like China that the U.S. government says are engaged in rampant theft of intellectual property. That effort will be led by the State and Commerce Departments and the U.S. Trade representative.

The U.S. also will use trade arrangements such as the Trans-Pacific Partnership to seek new provisions on trade secret protections that include penalties similar to those in U.S. law.

Mr. Lewis said that over time, the government will probably need to up pressure with such actions as denying visas to Chinese researchers or denying certain Chinese companies access to U.S. banks.

The strategy also directs agencies to evaluate current laws and determine if additional legislation is needed to protect trade secrets.

—Jared A. Favole contributed to this article.

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Apple Hit By Hackers Who Struck Facebook - Wall Street Journal

By JESSICA E. LESSIN And GEOFFREY A. FOWLER

Apple Inc. said Tuesday that it has been attacked by hackers who infected a small number of the company's Mac computers. WSJ's Jessica Lessin reports. (Photo: Getty Images)

Apple Inc. said Tuesday that some of its employees' Mac computers were attacked by hackers, a rare admission for a company that has long touted its security over PCs running Windows software.

Apple said a "small number" of computers became infected after employees visited a website for software developers that transmitted the malicious computer code. The company didn't disclose further details.

Apple said Tuesday it would release a software update to protect Mac users, and is working with law enforcement to find the source of the so-called malware.

The disclosure is unusual for Apple, which generally doesn't detail particular attacks. In the past, the company has generally issued notices on its support page of possible vulnerabilities and issued software updates to fix them.

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Apple had for years boasted that its computers were resistant to malicious software, a key selling point over computers running Microsoft Corp.'s software. Hackers have increasingly targeted Macs in recent years, reflecting the growing popularity of the Apple brand and the rising number of Macs being used in companies.

The attack worked when people visited a website for mobile developers that was compromised with code that infected their computers.

That code is believed to have been the same used to target Facebook Inc., which on Friday said affected an undisclosed number of other companies.

The companies played down the impact of the attacks on their operations, and Apple and Facebook said no data appeared to have been stolen. But the events underscore the vulnerability of some of the world's most sophisticated technology companies to an ever-changing array of attacks, with outside experts increasingly tracing the break-ins in the U.S. to foreign countries.

Twitter Inc., the popular microblogging site, earlier this month said it had been the victim of an attack that may have granted hackers access to information including usernames and email addresses for about 250,000 of its users.

Motivations of the attackers seem to proliferating. In the case of technology companies, people rummaging through their computer networks seem to be searching for product-development plans and other intellectual property.

At government institutions, reported targets include information about intelligence-gathering and weapons systems. In other cases, intruders have looked for information about critical pieces of U.S. infrastructure, such as electricity and energy distribution networks.

A report on Tuesday by security research firm Mandiant Corp. pointed to cyberespionage efforts by a group in China it linked to the military.

"From our visibility, it is massive and it is growing exponentially over the years," said Dan McWhorter, Mandiant's managing director of threat intelligence.

Chinese government officials rejected the allegations.

The attacks show how the range of targets for cyberattacks are broadening beyond organized criminals, many based in Eastern Europe, seeking customer data like credit card numbers.

A report to be published Wednesday by a U.S. research firm, Trustwave Holdings Inc., says of the 450 data breaches that Trustwave investigated in 2012 for its own clients around the world, more than 33% originated from Romania, and 29% from the U.S.

China was the fifth-most-common source, Trustwave said, accounting for nearly 4% of the attacks, while nearly 15% have unknown origins.

Many highly publicized attacks have been based on a tactic called "spear-phishing," where email users are tricked into opening a legitimate-sounding message that contains code called malware that lets attackers penetrate corporate networks.

Apple and Facebook appeared to be affected by another exploit, called a "watering hole" attack.

Employees of the companies visited a website for mobile developers that was compromised with code that infected their computers. Facebook, in a blog post, on Friday said it discovered the attack last month after finding a suspicious Internet domain in its computer logs that it traced to a single employee laptop.

The social network then launched what it called a "significant" investigation, working with other companies it believed to have been affected, as well as with law enforcement authorities.

Some security researchers said they believed the attack may have originated in China, but Facebook hasn't commented on where it may have originated.

Apple, for its part, said Tuesday, "The malware was employed in an attack against Apple and other companies, and was spread through a website for software developers."

Last year, hundreds of thousands of Macs were hit by a massive attack from a malware program known as "Flashback." Apple released a security update for its software at the time.

Chester Wisniewski, senior security adviser at Sophos Canada, said he's recently noticed an increase in more sophisticated "data stealing" software designed for Apple's Mac computers.

Mr. Wisniewski suggested this might be due to the type of decision maker within a company liable to have an Apple computer rather than a PC: "Executives and VPs are more likely to have Macs," he said.

Twitter, meanwhile, responded to its attack by resetting passwords for infected accounts. "This attack was not the work of amateurs, and we do not believe it was an isolated incident," Twitter said, but didn't elaborate.

Reuters

Apple and Facebook said no data appeared to have been stolen. Above, a man looks at his Apple iPad.

Mandiant said it found evidence linking the attacks to the Chinese military, including IP addresses of intruders registered in Shanghai.

It also said the size of the infrastructure of the attacker it researcher suggests a large organization with at least dozens and possibly hundreds of people at work.

Mr. McWhorter said that unlike hacking attacks that seek credit card numbers and other personal information that can be easily sold, the Chinese attacks it followed often ignored sensitive financial data to instead focus on stealing intellectual property.

"Anyone that has intellectual property that makes their business work and makes them run and makes them more profitable" is at risk, he said.

Trustwave's data meanwhile, show that hacking attacks by organized criminals seeking valuable customer data still dominate the cyberattacks on big and small businesses, at least in total numbers.

"The vast majority of what we see is financially motivated—going after financial data and trying to make money off it," said Nicholas Percoco, a senior vice president at Trustwave.

A report published last year by a unit of Verizon Communications Inc. that also investigates cybercrime found a similar geographic distribution of hackers. In the 855 intrusions from 2011 it studied from its own clients and in conjunction with the U.S. Secret Service and other international police groups, Verizon found that 67% of attacks originated from Eastern Europe, 20% from the U.S., and 2% from East Asia.

But the numbers don't paint a complete picture, said security experts. While companies are now more aware of attacks that lead to financial crimes—and hiring companies such as Trustwave and Verizon to investigate them—espionage-focused hacks have been typically harder to identify and track.

When intellectual property or trade secrets get stolen "there is no fraud algorithm to let you know," said Chris Porter, a managing principal at Verizon. It takes companies longer to realize they've been the victim of an espionage attacks, he said, and when American companies do they often deal directly with the Federal Bureau of Investigation, which doesn't release data on the topic.

"We are finally shining a light on this a little bit," said Mr. Porter.

—John Letzing contributed to this article.

Write to Jessica E. Lessin at jessica.lessin@wsj.com and Geoffrey A. Fowler at geoffrey.fowler@wsj.com

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