SEATTLE, Jan 21 — Young people wearing hoodies and chunky glasses are sipping microbrew beers and espressos, nibbling on cheese and baguettes made at a local bakery and listening to a guitarist strum and sing.

The scene could be at any independent coffeehouse around the United States. Instead, it is at a Starbucks-owned shop called 15th Avenue Coffee and Tea.

The new store, one of two in Seattle1s trendy Capitol Hill neighbourhood, grew out of a series of brainstorming sessions by a group of Starbucks employees after Howard D. Schultz, Starbucks1 chief executive, told them to “break the rules and do things for yourself.”

The directive was part of his effort, since he returned as chief executive two years ago, to turn the struggling company around by injecting the multinational chain with a dose of the urgency, nimbleness and risk-taking of a start-up company.

“We lost our way,” he said. “We went back to start-up mode, hand-to-hand combat every day” to find it. “And with the kind of discussion and focus that probably we had not had as a company since the early days — the fear of failure, the hunger to win.”

There are indications that Starbucks1 turnaround efforts are working. Yesterday, the company reported that in the first quarter, which included the important holiday season, net income was US$241.5 million (RM821 million), up from US$64.3 million in the year-ago quarter.

Revenue climbed 4 per cent, to US$2.7 billion. Same-store sales were up 4 per cent, reversing steady declines. In the last year, the company1s stock has nearly tripled to US$23.29, though that is still significantly below the record high of nearly US$40 in 2006.

But even if Schultz, who bought the first six Starbucks stores in 1987, still sees the company through an entrepreneur1s eyes, it is no longer a start-up and its stores are not local coffeehouses. Some analysts wonder whether Starbucks is refusing to accept its new identity.

“That kind of resonance it had at one point is going to be hard to recapture,” said Bryant Simon, a history professor at Temple University and author of a book about Starbucks titled “Everything but the Coffee.” “It1s his own sense of the brand overtaking what1s doable right now.”

When Schultz returned in January 2008, Starbucks had just posted its first quarterly decline in the number of transactions at stores in the United States. As the chain opened a record 2,571 stores in 2007, the onetime growth stock lost 42 per cent of its value.

Then, in a one-two punch, consumer spending plummeted, and Starbucks, selling a luxury rather than a necessity, was one of the first to feel the pinch. Meanwhile, competition emerged from a new corner of the market when McDonald1s began serving espresso.

When Schultz, standing at the bar in one of the new Seattle shops and sampling espressos with whole milk, talks about Starbucks, he uses phrases like “the authenticity of the coffee experience” and “the romance, the theatre of bringing that to life.”

But that does not match the reality of many Starbucks customers, who rush through each morning on their way to work, or many of its former customers, who have rejected the chain1s cookie-cutter shops in favour of small local shops that serve more carefully made coffee.

Schultz1s first job upon returning was to halt the marathon store openings, lay off 1,500 United States store employees and 1,700 global corporate employees and figure out how to get the remaining 150,000 to think like employees of a scrappy little company that just wants to serve a good cup of coffee. Starbucks1 coffee buyers, for example, had chosen only varieties of beans that were produced in large enough quantities to supply all Starbucks stores. They rejected coffees made in small batches, which artisanal coffeehouses specialise in. Schultz changed that. “We1re not one size fits all.”

Even as Schultz tries to manage more like a start-up founder, he has given in to traditional big-company ideas that he had previously resisted. Last year, Starbucks embraced customer research surveys and ran its first major advertising campaign.

Entrepreneurs, more than traditional chief executives, “keep shaking things up and pulling the stakes out of the tent because they like the mud and the chaos of reinventing, and Howard has a bit of that in him,” said Warren Bennis, founder of the Leadership Institute at the University of Southern California, who has known Schultz since the mid-1990s.

But he has also noticed that Schultz has developed “more gravitas, more depth.”

Bennis added: “I don1t think he1s going to become the classic entrepreneur who can invent but doesn1t manage.”

Schultz brought Cliff Burrows, who was managing stores abroad, back to Seattle to run American operations. One of the first discoveries he made talking to customers seemed basic, but had been lost in Starbucks1 push to open stores.

Coffee drinkers in the Sun Belt, it turns out, prefer cold drinks, while those in the Northeast generally like drip coffee and those in the Pacific Northwest drink more espresso. Yet the executives in charge of regions of the country were divided along time zones and out of touch with what different customers wanted.

Burrows shifted the geographic divisions. “All of a sudden you start to see it1s not a numbers game — it1s about consumers influenced by where they live,” he said.

Schultz also recruited Arthur Rubinfeld, who had left the company in 2002, to return as president of global development in charge of choosing sites and designing stores. To shed the sameness, Rubinfeld is trying to give each store a feeling of “local-ness,” he said, reflecting the neighbourhood and its architectural history.

At the University Village store in Seattle, for example, there is a long communal table hewn from an ash tree that fell in the Wallingford neighbourhood of Seattle, and it is lined with electrical outlets because at night it is filled with students studying.

At the Starbucks stores in the Capitol Hill neighbourhood, bunches of wildflowers sit in mismatched jugs on tables found in antique shops. Beans are ground to order and poured through a cone like those used in artisanal coffeehouses. On the outdoor patio, coffee grounds are piled in a bucket with a handwritten sign encouraging neighbours to take them for composting in their gardens.

One customer, Joshua Covell, was visiting from San Francisco, where he said he never went to Starbucks. “All the Starbucks have that cookie-cutter feel,” he said. “It1s natural not to like corporate giants, but you can see they1re trying.”

But Sylvia Lee, a doctor who lives in the neighbourhood, said she was excited when she saw the shop was opening — until she discovered it was owned by Starbucks. “No one wants to be the duped customers won over,” she said.

For Starbucks, the stores are partly learning laboratories. Some of the things they sell, like small-batch beans and brewed-to-order cups of coffee, will appear in other stores.

But they are also venues for Schultz to scratch his start-up founder1s itch. He said he planned to open similar stores in other cities, complete with local artists1 work and salvaged furniture. “I think we1ll be able to scale this in a similar fashion at a lower cost.” — NYT

BAGHDAD: Iraq gave final approval Sunday to a deal by a Shell-Petronas led consortium to develop one of its largest oil fields, marking a crucial step toward the nation's postwar rebuilding by boosting the production of its most lucrative resource.

Royal Dutch Shell PLC and its partner, Malaysia's state-run Petronas, won the right to develop the 12.5 billion barrel Majnoon field last month during Iraq's second postwar bidding round.

As part of the deal, Shell and Petronas will pay the Iraqi government a $150 million signing bonus.

At a Baghdad signing ceremony, Oil Minister Hussain al-Shahristani hailed the deal as a "major step that will transform the region from an area of misery and deprivation into a prosperous one."

Shell Chief Executive Peter Voser said his company looks "forward to a good cooperation with the government," but he refused to say how much money will be spent on the project.

The oil deal for Majnoon, located in Basra province near the Iranian border, was one of seven that the Iraqi government awarded last month.

The 20-year contract calls for the companies to be paid $1.39 per barrel produced above current output levels.

The businesses have said they hope to raise production from the current 45,900 barrels per day to 1.8 million barrels per day by 2020.

The Majnoon field was discovered in 1976 and was partially developed until the Iran-Iraq war halted work there in the early 1980s.

Oil production resumed in 2002.

For Iraq, the oil deals mark a crucial step forward in the country's so-far faltering bid to raise oil output.

Although it sits atop the world's third-largest proven reserves of conventional crude oil, Iraq produces a comparatively modest 2.5 million barrels per day, of which about 1.9 million barrels a day are exported.

Decades of neglect of the fields have been compounded by the effects of the fighting and sabotage after the 2003 U.S.-led invasion to oust Saddam Hussein.

That violence has meant that Iraq has been unable to even reach its prewar output levels of oil.

Crude oil sales account for roughly 90 percent of the government's budget.

Of the seven deals awarded in December, Iraq's Cabinet has approved four, including Majnoon.

The Cabinet has asked for changes to proposals for the remaining three - awarded to consortiums led by Russia's private oil giant Lukoil, China's CNPC and Russia's Gazprom _ before signing off on them as expected by the end of the month.

On Monday, the Iraqi government will give final approval to a contract to develop the Gharraf field in the southern Nasiriyah province, which is believed to hold 863 million barrels of oil.

That deal, won by a partnership between Petronas and Japan's Japex, seeks to pump 230,000 barrels from Gharraf daily by 2023, for $1.49 per barrel.

On Jan. 26, the government is scheduled to sign off on contracts to let Angola's Sonangol develop two oil fields in the northern province of Ninevah, about 225 miles (360 kilometers) northwest of Baghdad.

Sonangol will be paid $6 per barrel produced from the Nejma field, which holds an estimated 858 barrels, and it plans to raise output to 110,000 barrels per day by 2019.

The company also is seeking to develop the nearby Qayara field for $5 per barrel.

There are an estimated 807 million barrels in Qayara, and Sonangol plans to produce 120,000 a day within nine years.

Last June, Iraq awarded only one oil deal, to BP PLC and its partner CNPC of China, for the 17.8 billion-barrel Rumaila field in Basra.

The field is the nation's largest, and two other foreign business consortiums have since revised their bids to develop two other prized oil fields nearby.

Al-Shahristani said one of those deals - a partnership among Italy's Eni, U.S.'s Occidental Petroleum Corp. and South Korea's KOGAS - will be approved next Friday.

He said oil production from those fields could boost output to 12 million barrels per day within by 2017, although some analysts call that an overly optimistic target. - AP

BRUSSELS: The euro is in a rough spot. And it could be there for years.

The economic and financial crisis has ballooned budget deficits in Greece, Ireland and several other member countries - exposing one of the underlying vulnerabilities of Europe's decade-old experiment in a multinational currency.

While few think the 16-country currency zone will actually break up, holding it together through the unfolding debt crisis will mean painful, unpopular measures such as budget cutbacks and higher taxes.

German Chancellor Angela Merkel said in a speech Wednesday that "the euro is in a very difficult phase for the coming years."

And Daniel Gros, director of the Centre for European Policy Studies in Brussels, foresees "lean years ahead and there is very little that European leaders can do about it."

Jean-Claude Trichet, the head of the European Central Bank, faced several questions at his monthly press conference last week about the possible breakup of the euro.

He brusquely dismissed them: "I do not comment myself on absurd hyptheses."

The problem: The eurozone has one currency and one central bank, the Frankfurt-based ECB - but 16 governments.

Before the euro, the governments went their own way on spending.

But since big budget gaps can undermine a currency, the euro members agreed deficits should stay below 3 percent of a country's economic output every year.

So forecasts that Greece's 2009 deficit was set to hit at least 12.5 percent of gross domestic product, and Ireland's 11.7 percent have spread shock waves.

Both countries have announce plans to cut spending and raise taxes.

More trouble is ahead as the euro's states suffer very differently from the crisis, with Spain's jobless rate hitting 19.4 percent in November - the most recent figures available - far ahead of 3.9 percent in the Netherlands.

It will be a challenge for the European Central Bank to find one interest rate to stimulate laggards and, at the same time, prevent inflation in growing economies.

The pain level is already high enough that a few voices are asking whether it's worth it.

Irish economist David McWilliams is advocating the end of his country's "loveless marriage" with the currency.

That would let Dublin instantly devalue its currency to make exports more competitive.

It could also attract jobs to Ireland through comparatively cheaper wages.

"We need a break. We can't keep cutting expenditure when there is no offsetting stimulus coming from a cheaper exchange rate, which allows the trading sector to grow," McWilliams wrote in Ireland's Sunday Business Post newspaper on Jan. 10

But the Irish government is adamant that it won't leave - winning praise from EU officials for massive cutbacks to public spending, cutting government wages 10 percent and demanding every worker pay at least 1 percent last year to plug the budget gap.

Not all is negative.

The euro weathered the first months of the crisis well.

Membership spared Greece and Ireland the currency devaluations that savaged nonmembers Hungary, Iceland, and Ukraine.

Indeed, the euro's exchange rate has remained strong, at times rising in value as investors turned to it when the dollar tumbled. It traded around $1.44 on Friday.

Russia's reserve holdings of euro outweighed dollars for the first time last year.

Ukraine even asked Russia to pay recent gas transit fees in euros, not dollars.

And quitting would not be pretty, according to Barry Eichengreen, an economics professor at the University of California, Berkeley.

In a September 2009 paper for the International Monetary Fund he describes a currency devaluation that would scare investors and devastate savings.

"A systemwide bank run would certainly follow," he wrote.

"This would be the mother of all financial crises. And what sensible government would willingly court this danger?"

Gros at the Centre for European Policy Studies says the current course of making cuts to bend to the EU rules is "the lesser evil."

He sets little store on frantic plans by EU officials to draw up a recovery strategy that promises to generate jobs by making labor markets more flexible, knocking down barriers to business between European countries and focusing on a green, innovation-based economy.

Down the road, the medicine offered by the EU's executive commission may work - but the immediate costs may be hard to bear.

Denmark is touted as a model for Europe with a "flexicurity" system that allows businesses dismiss workers at short notice, gives generous welfare benefits to the unemployed and encourages them to retrain for other jobs.

Following that example and scrapping some labor market rules that make it expensive for companies to hire and fire workers - will likely raise hackles among trade unions in Spain, Italy and France.

Gros sees these only as solutions for the long term.

"There's nothing that can really give a boost in the short run to overcome the effects of this crisis, but that is something that policy makers cannot accept publicly," he said.

"This is very painful process which will take a long time." - AP