Friday, April 24, 2009

Taliban militants edge closer to Pakistan capital

Emboldened Taliban fighters imposed control over towns and villages closer to Islamabad on Thursday, raising alarm among foreign governments and many in Pakistan that authorities are ceding swaths of the country's heart to Islamic hard-liners.

Authorities dispatched a small paramilitary force from the North-West Frontier Constabulary to the district of Buner, just 60 miles from the capital, where Taliban forces took control of much of the area this week.




But Pakistani news media said the Taliban repulsed the deployment, with unconfirmed reports saying at least one policeman had been killed.

Taliban fighters from the nearby Swat Valley have infiltrated the area, emboldened by a government-sanctioned peace deal allowing them to enforce Sharia, or Islamic law, in the onetime tourist paradise. Since entering Buner, the Taliban has reportedly set up checkpoints, begun patrolling roads and ordered barbershops to stop shaving beards.

In a meeting with tribal elders, Taliban militants agreed to lower their armed presence and not seek vengeance against residents who had resisted their arrival. But the militants said they would not withdraw from Buner.


"We will not leave the area," a Taliban commander, Mufti Bashir, told local journalists.

The moves have prompted some of the roughly 1 million Buner residents to flee, and unsettled observers in Pakistan and abroad who fear the government lacks the will to impose its authority.

The government has tried to downplay the threat to its sovereignty. Prime Minister Yusaf Raza Gillani told reporters in Islamabad that the government would see to it that the peace agreement isn't violated. "The government will not allow anyone to challenge the government," he said in a statement.

But it was uncertain how much force the government was prepared to use. Thursday's limited dispatch of frontier guards, not the army, suggested that Islamabad was still not primed for a fight.

The Obama administration for a second straight day expressed deep concern over the advances by militants and Islamabad's failure to stop them.

"The news over the past several days is very disturbing," White House Press Secretary Robert Gibbs said.

Defense Secretary Robert M. Gates called on Islamabad to take "appropriate actions" to stop the insurgents.

"We want to be helpful in any way we can," he said. "But it is important that they recognize the real threats to their country."

Supporters of the Swat deal, hammered out in February after two years of a bloody Islamist insurrection and signed into law by President Zardari just last week, had contended that it would secure peace and even divide militant factions. But any breathing room or disunity was apparently short-lived, if it ever existed.

The militants are "very organized," said Ahmed Rashid, author of "Taliban: Militant Islam, Oil and Fundamentalism in Central Asia." "They're a faction of the main Taliban and they're spreading out from Swat to different valleys."

The Taliban's rule in Swat has been characterized by the burning of girls' schools, the killing and beating of officials who opposed its power, and punishment for unrelated men and women seen together in public.

On Thursday, militants attacked a truck terminal in the city of Peshawar, also in the northwest, and burned five tankers that were transporting fuel to North Atlantic Treaty Organization forces in Afghanistan.

A local police official said dozens of attackers set fire to the trucks with gasoline bombs and that security guards fled. The attackers escaped.

Analysts said they didn't expect an immediate push by Taliban forces into Islamabad, saying it was more likely the militants would work to strengthen their grip in surrounding valleys.

In Pakistan's parliament Thursday, many lawmakers blasted the Taliban for its brand of Islam and fretted over its growing clout.
They are in Buner and coming toward the town of Haripur," lawmaker Haider Abbas Rizvi told reporters outside parliament.

"The government needs to take urgent steps and counOpposition lawmakers said Taliban militants were trying to impose their version of Sharia and divide the country along sectarian lines.

But Ilyas Bilour, a senator from North-West Frontier Province, where Swat and Buner are located, blamed inadequate security forces.

"The government should do something, as we have police that are weak and unable to stop the Taliban," he said.


Pakistan has long focused much of its energy and resources on national security, with India traditionally seen as its main threat.

"Everyone and his dog knows this is not a military trained for counterinsurgency," said Mosharraf Zaidi, a political analyst.

Nor is it clear that a political consensus will emerge any time soon on the need to wage a full-on fight against the militants, some of whom reportedly got started with the help of Pakistan's security services.

"People have been waiting for Pakistan's 9/11 moment," Zaidi added. "But this isn't America."

The country is extremely diverse, with a huge range of dialects, languages and traditions, analysts said, making a unified view on something as emotive as fighting Islamic fundamentalism very difficult.

"There's blame at India, Afghanistan, Russia -- basically everyone else," author Rashid said. "The government has its head in the sand. It's very bleak."

Still, trying to win over urban areas filled with cosmopolitan middle-class residents presents a tougher prospect for the Taliban than grabbing and intimidating rural areas.

"You can't possibly think the rest of the country, particularly the urban areas, is going to fall like a house of cards," Zaidi said. "Ultimately I think the country will overcome this. But it's going to get worse first."

The U.S. State Department called for "very decisive and aggressive action" by Islamabad. Secretary of State Hillary Rodham Clinton, who a day earlier described the situation as an "existential threat," said the administration was "deeply concerned by the increasing insurgency that is destabilizing Pakistan."

Also Thursday, Richard C. Holbrooke, U.S. special envoy to Afghanistan and Pakistan, telephoned Pakistani President Asif Ali Zardari. A vague statement issued a few hours later said only that the two had discussed security issues and Zardari's upcoming trip to the United States.

Blast carnage at shrine in Iraq

Aftermath of suicide bombing in Baghdad

Two female suicide bombers have attacked Baghdad's main Shia shrine, killing at least 60 people and injuring 125 others, officials in Iraq say.

The attack happened at the Imam Moussa al-Kadhim shrine in the Kadhimiya area as people gathered for Friday prayers.

It comes a day after 84 people were killed in two separate suicide attacks in Baghdad and Baquba.

Many victims in Baquba and in Baghdad on Friday were Iranian pilgrims and the violence was condemned in Tehran.

Violence fell sharply in the last year and the latest bombing does not change this trend, but it is a worrying development, says the BBC's Jim Muir in Baghdad.

'Explosion and fire'

Early reports suggested the attackers had detonated explosives belts near two gates of the revered shrine, which was crowded with worshippers.







The shrine is the Shias' most revered location in the city. Carrying out the attack on a Friday, when the shrine would be crowded with worshippers, was clearly aimed at maximising both the number of casualties and the degree of sectarian provocation involved.

It was attacks like this that helped fuel the cycle of sectarian violence that took many thousands of lives in 2006 and 2007. The past year or more has seen a huge improvement in the security situation.

But deadly suicide attacks seem now to be intensifying once again, raising fears of a return to the bad old days.

Many Iraqis will however be worried that it could be a sign of worse to come when the American troops complete their withdrawal, as they're supposed to do by 2011.

However, a senior Iraqi bomb disposal officer later told Reuters news agency that the suicide attackers had used two leather bags packed with explosives, which they set down among the crowds at two of the gates to the shrine.

"They used sidestreets to get there and this enabled them to avoid checkpoints," said Major-General Jihad al-Jabiri.

The howling of the wounded echoed through a nearby hospital where the victims were admitted, the hallways packed with security forces and anxious family members looking for loved ones, an AFP correspondent reports.

Sabiha Kadhim, 50, had come up from the southern Iraqi town of Diwaniya with her family, four of whom were killed in the blast.

Lying on a stretcher, her head and hand bandaged, she said: "I was near the shrine and suddenly there was a huge explosion and a fire broke out.

"I saw human body parts everywhere."

Qassim Zada, a 62-year-old Iranian pilgrim from Tehran, had come to the shrine with his wife. He now lay in hospital, his clothes soaked in blood.

"I was only a few metres [yards] away from the explosion and I don't know what happened," he said.

The shrine, in a predominantly Shia neighbourhood of the capital, has been a target for insurgents in the past.

'Hateful' attack

Around 25 of those killed on Friday were Iranian pilgrims, Iraqi police said.


WEEK OF SUICIDE BOMBINGS

Friday: Baghdad shrine attack kills 60
Thursday: Baquba restaurant attack kills 56, Baghdad street bomber kills 28
Wednesday: Bomber kills five in Dhuluiya
Monday: Bomber kills three policemen in Baquba



Most of the 56 people now known to have been killed when a suicide bomber blew up a restaurant in Baquba, Diyala Province, on Thursday were also Iranian pilgrims.

On the same day, a suicide bomber infiltrated a crowd of displaced families in Baghdad as they received supplies from police, detonating an explosives belt and killing 28 people.

At Friday prayers in Tehran, Ali Akbar Rafsanjani - the influential Iranian cleric and former president - condemned Thursday's attack on pilgrims.

"The incident yesterday was a very, very hateful example of those who harm religion in the name of religion," he said in a sermon broadcast live by Iranian radio.

"We feel sorry for the Iraqi people because such corrupt groups have penetrated into Iraq. We also criticise America for not having the serious will to preserve Iraq's security."

Meanwhile, new statistics from Iraq's health ministry say that since 2005 when violence worsened more than 87,000 Iraqis have been killed.

The figures are based on hospital and mortuary records and are seen as significant given the heated and highly politicised debate over the human cost of the war in Iraq, our correspondent says.

Thursday, April 23, 2009

India sending two emissaries to Sri Lanka

With the killings of Tamil civilians continuing in Sri Lanka, India on Thursday underlined the need for "an immediate cessation of all hostilities" and announced that it will send two special emissaries to Colombo.

"We are very unhappy at the continued killing in Sri Lanka. All killing must stop. There must be an immediate cessation of all hostilities," External Affairs Minister Pranab Mukherjee said in a statement here.

The strongly-worded message from the Indian government came on a day the DMK-sponsored shutdown called by Tamil Nadu Chief Minister M. Karunanidhi crippled normal life in the state. "(The) government of India has been monitoring with deep concern and anxiety the evolving situation in Sri Lanka, in particular the conditions of the Tamil civilians in the conflict zones," he said.

"We understand that over 100,000 civilians have emerged from the no-fire zone into areas under government control in the past three days but the lives of several thousands of innocent civilians remain threatened," Mukherjee said.

"In order to convey these concerns to the government of Sri Lanka, the government of India has decided to send two special emissaries to Sri Lanka," he said.

India Wednesday sent 40,000 family packs of food, clothes and toiletries for civilians who have emerged from the war zone. The relief materials are expected to reach Sri Lanka on Saturday

Zuma cheered as ANC heads for win

Mr Zuma - set to be the next president - said the ANC had put across its policies and people had understood.

With about half of all ballots in, the ANC had about 66% of the vote.

But it is still not clear whether the party will retain the two-thirds parliamentary majority needed to push through constitutional changes.

The opposition Democratic Alliance (DA) has about 16% and the Congress of the People - formed as a direct challenge to the ANC - is trailing with about 8%.

The DA was ahead in Western Cape province, which is currently controlled by the ANC, with almost 50% of the vote.

Wednesday's poll was the country's fourth, and most competitive, general election since the end of apartheid 15 years ago.

Election officials put turn-out at about 77%. Formal election results are not expected until much later on Thursday or on Friday.

'Voters understood'

In Johannesburg, crowds of ANC supporters dressed in the party's black, yellow and green attended a celebration rally.

RESULTS SO FAR

ANC: 66.5%
Democratic Alliance: 16%
Cope: 8%
Votes counted: 53%
Turnout: 77%
Source: IEC


In pictures: ANC celebrations
The shape of a Zuma presidency
"I would like to thank you for tonight," Jacob Zuma told the crowd, after dancing on stage.

"We went to the voters of this country, talked to them and put across our polices - and they have understood what we are saying," he said.

Parliament will elect South Africa's next president by a simple majority, putting Mr Zuma in line for the post when the new assembly votes in May.

Mr Zuma, a populist who spent 10 years in prison during the apartheid era for ANC membership, faces challenges including a struggling economy and soaring violent crime.

Charges of corruption against the 67-year-old were dropped just two weeks before the poll after state prosecutors said there had been political interference in the case.

'Doubled our numbers'

The election commission said it was pleased with the peaceful way in which the poll was conducted.

Leaders of the rival parties said that the early results brought some positive news.

DA leader Helen Zille said her party was pleased. "We are just above 50% in the Western Cape, that is what we were hoping for because it means we have doubled our numbers since last time," she said.

The Cope leader, former Bishop Mvume Dandala, told the BBC that the party did not see the result as a rejection. "We are saying that we have been given a critical mass upon which to build," he said.

Cope was formed by ANC dissidents who supported former President Thabo Mbeki, who resigned last year after losing a power struggle with Mr Zuma.

Analysts say Cope's emergence energised the early stages of the election campaign but the party's popularity seems to have diminished in recent weeks.

It is thought that Cope and the DA could enter into a coalition after the election, presenting a real threat to the ANC's continued dominance of South Africa

Wells Fargo accused of securities fraud by state lawsuit

California today sued investment subsidiaries of Wells Fargo & Co. for securities fraud, alleging that the San Francisco financial services company misled investors by selling $1.5 billion worth of risky securities that it peddled as being as safe as cash.

The securities "were sold to customers on the basis that they were like cash and people could get their money back in eight days," Atty. Gen. Jerry Brown said in an interview. "Now, it turns out they were not like cash and people can't get their money back even after many, many months, and they're mad as hell."



The lawsuit, filed in state court in San Francisco, seeks to recover money invested in what are known as auction-rate securities, which Wells Fargo subsidiaries sold to Californians. As the name implies, interest rates on auction-rate securities are reset in periodic auctions. Billions of dollars worth of the securities were sold to investors nationwide in recent years.

Regulators have charged that many investors were misled into believing the securities were safe and the equivalent of cash. But when the $330-billion market for auction-rate securities collapsed early last year, many investors couldn't sell the securities, or could only sell them at a loss.

About 2,400 Californians bought auction-rate securities from Wells Fargo, according to the attorney general's office.


Brown's lawsuit names Wells Fargo Investments, Wells Fargo Brokerage Services and Wells Fargo Institutional Services as defendants.

Wells Fargo disputed the state's allegations, saying that it had taken steps to help customers hit by the collapse of the auction-rate securities market, including offering loans to tide them over.

"We fully understand and deeply regret the effects this prolonged liquidity crisis has had on our clients," Charles W. Daggs, chief executive of Wells Fargo Investments, said in a statement.

"Wells Fargo could not have predicted these extraordinary circumstances, and even with the benefit of hindsight is not responsible for them."

Several financial services companies that marketed auction rate debt to investors have agreed to repurchase billions of dollars worth of the devalued securities.

Last month, Wachovia Corp., the bank acquired by Wells Fargo last year, agreed to repurchase $1.5 billion of the securities from California investors in a settlement with regulators. Brown said that case didn't involve the securities at issue in the lawsuit he filed today.

Last June, the attorney general sued Countrywide Financial Corp., accusing the mortgage lender of causing thousands of home foreclosures by deceptively marketing risky loans to borrowers. That suit, which sought restitution for borrowers who were deceived by Countrywide, was settled in October when the lender agreed to reduce loan payments and provide other benefits that could total as much as $8.7 billion nationally.

Alarm Grows Over Pakistan’s Failure to Halt Militant Gains

With 400 to 500 Taliban fighters newly in control of a strategically important district just 70 miles from here, Pakistani authorities have deployed only a poorly paid and equipped constabulary force — numbering just several hundred — to the area.

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The Taliban appeared to be consolidating control in the district, Buner, on Thursday after moving in and establishing checkpoints on Wednesday. Residents said Taliban militants held a meeting, or jirga, with local elders and the local administration on Thursday. The residents said the meeting yielded a truce similar to the one reached with local leaders in the Swat Valley, which resulted in the agreement by the government of President Asif Ali Zardari to allow the imposition of Islamic law there 10 days ago.

“This concession represents a serious development and reflects both the growing strength of the Pakistani Taliban and the inability of the Pakistani army to conduct successful counterinsurgency operations,” said Senator Jack Reed, a Rhode Island Democrat on the Armed Services Committee who just returned from his fifth visit to Pakistan.

The fall of Buner has raised new international alarm about the ability of the Pakistani government to fend off an unrelenting Taliban advance from the Swat Valley, where as part of the truce agreement, the Pakistani Army remains in its barracks. The Taliban have moved to within a few hours’ drive of Islamabad, the capital of this country, and the neighboring garrison city of Rawalpindi.

The Pakistani military does not have a presence in Buner, Pakistani and Western officials said. From the hills of the district, the Taliban have access to the flatlands of the district of Swabi, which lead directly to the four-lane highway that connects Islamabad and Peshawar, the capital of North-West Frontier Province, where much of the Pakistani Taliban operate.

On Thursday, four platoons of the paramilitary police constabulary force moved into Buner (pronounced boon-AIR), which is home to about a million people and is a gateway to another major Pakistani city, Mardan. Four platoons had arrived Wednesday.

Each platoon has about 40 officers. They face Taliban militants armed with assault rifles and rocket-propelled grenade launchers. Intimidated by the militants, the local police have retreated into their stations, residents said. At least one constabulary officer had been killed and another seriously wounded already, the police said Thursday.

"The news over the past several days is very disturbing," Robert Gibbs, the White House press secretary, told reporters. "The administration is extremely concerned."

Reflecting the deep concerns of the Obama administration, the chairman of the United States Joint Chiefs of Staff, Adm. Mike Mullen, was in Islamabad for the second time in two weeks to meet with Pakistan’s top military and intelligence commanders.

Secretary of State Hillary Rodham Clinton has been underlining the alarm over the security of Pakistan’s nuclear weapons. On Wednesday she told the Senate Foreign Relations Committee that the deterioration of security in nuclear-armed Pakistan “poses a mortal threat to the security and safety of our country and the world.”

On Thursday, she said referring to the country’s nuclear arsenal: “You know, we spend a lot of time worrying about Iran — Pakistan already has them. And they are widely dispersed in the country.”

On Thursday morning, the administration’s special representative for Afghanistan and Pakistan, Richard C. Holbrooke, called Mr. Zardari, “to get his personal judgment and hear what his strategy is,” Mr. Holbrooke said. He did not disclose what the answer was.

Defense Secretary Robert M. Gates, visiting Marines at Camp Lejeune, N.C., who are preparing to deploy to Afghanistan, also urged Pakistan’s leaders to act swiftly to a profound danger.

“My hope is that there will be an increasing recognition on the part of the Pakistani government that the Taliban in Pakistan are in fact an existential threat to the democratic government of that country,” Mr. Gates said. “I think that some of the leaders certainly understand that. But it is important that they not only recognize it, but take the appropriate actions to deal with it.”

At the Pentagon, several senior uniformed and civilian officials also expressed worry.

One senior Defense Department official, who was not authorized to speak publicly on policy matters, called the deployment of the constabulary force “a cosmetic effort.”

A senior counter-terrorism official called the fast-moving Taliban operations "frightening."

The Taliban told the local Buner leaders that they would not interfere with nongovernmental organizations or government installations, nor openly display their weapons. Negotiations would be used to sort out friction with local residents, and there would be forgiveness for those who killed Taliban fighters in earlier combat
Representatives of Mualana Sufi Mohammed, the Taliban leader who brokered the peace deal in Swat, were present at the meeting, the results of which will be announced at a public rally on Sunday, according to a resident in Daggar, Buner’s main city.

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The Lede: The Roots of Pakistan's Taliban Problem (April 23, 2009)
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Post a Comment »Read All Comments (322) »Last year when the militants encroached into Buner, killing policemen, the local people fought back and forced the militants out. But now, with a beachhead in neighboring Swat and a number of training camps for fresh recruits, the Taliban was able to carry out what amounted to an invasion. A local politician, Jamsher Khan, said by telephone: “We felt stronger as long as we thought the government was with us, but when the government showed weakness, we too stopped offering resistance to the Taliban.”

The advance had been building for weeks, with the assistance of sympathizers and even a local government official who was appointed on the recommendation of the militants, a senior law enforcement official said. But Buner’s final capitulation was rapid.

On Wednesday, officials and residents said that heavily armed Taliban militants had begun patrolling villages and that the local police had retreated to their station houses in much of the district. Staff members of local nongovernmental organizations had been ordered to leave, and their offices were looted, residents said. Pakistani television news channels showed Taliban fighters triumphantly carrying office equipment out of the offices of the organizations.

The militants were patrolling the bazaar in Daggar, residents said. Women, who used to move freely around the bazaars, were scarcely to be seen, they said. Those who did venture out were totally covered.

“They are everywhere,” one resident of Daggar said by telephone. “There is no resistance.”

A Western official who was familiar with the Pakistani military said that, on Wednesday, one of the highest-ranking Pakistani army officers traveled from Islamabad to Peshawar and met with the officers of the 11th Corps, the army division based in Peshawar, to discuss the “overall situation in Buner.”

One of the big attractions of Buner for people from all over Pakistan, the shrine of the Sufi saint Pir Baba, was now in the control of the militants, the senior law enforcement official said.

Last year, the villagers around the shrine kept the Taliban at bay when the militants threatened to take it over.

But in the last 10 days, the Taliban closed the shrine and said it was strictly off limits to women, the senior official said. The militants are now patrolling it.

Taliban control in Buner came swiftly in the last few days, officials said.

The militants were helped by the actions of the commissioner of Malakand, Javed Mohammad, who is also the senior official in Swat and who was appointed on the recommendation of the Taliban, the senior law enforcement official said.

The Taliban began their assault on Buner in early April, when a battalion of the Taliban militia with heavy weaponry crossed over the hills from Swat to Buner, according to an account in the newspaper Dawn that appeared on Saturday.

The Taliban then captured three policemen and two civilians, and killed them, the newspaper said.

Infuriated by the killings, people in lower Buner and Sultanwas assembled a volunteer force and killed 17 Taliban fighters, the account said.

But soon after that, Mr. Mohammad tried to persuade the local elders to allow the Taliban to enter Buner, the newspaper said.

Soon afterward, Mr. Mohammad ordered the local armies to dissolve, the senior law enforcement official said. The order led many of those who had been willing to stand up to the Taliban to either flee or give up, the official said. Among those who are reported to have fled is Fateh Khan, a wealthy Buner businessman. Mr. Khan had been one of the main organizers and financiers of the private armies in Buner.

In a show of strength, the militants held a feast in the home of a local Taliban sympathizer two weeks ago, and since then have fanned out into the district, the senior official said. Pakistani television news reports indicated Thursday that Taliban militants were also crossing into Shandla, another district bordering Buner and Swat.

U.S. Is Said to Push Chrysler to Prepare for Chapter 11

The Treasury Department is directing Chrysler to prepare a Chapter 11 bankruptcy filing that could come as soon as next week, people with direct knowledge of the action said Thursday.

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Chrysler's Lenders Prepare a Counteroffer (April 23, 2009) The Treasury has an agreement in principle with the United Automobile Workers union, whose members’ pensions and retiree health care benefits would be protected as a condition of the bankruptcy filing, said these people, who asked for anonymity because they were not authorized to discuss the case.

Moreover, Fiat of Italy would complete its alliance with Chrysler while the company is under bankruptcy protection.

The only major question that remains unresolved is what happens to Chrysler’s lenders, who hold $6.9 billion in company debt. The government’s most recent offer, presented Wednesday, would give the company’s lenders about 22 cents on the dollar, or $1.5 billion, and a 5 percent equity stake in a reorganized Chrysler. Earlier this week, a steering committee of the lenders proposed that they receive 65 cents on the dollar, or $4.5 billion, and a 40 percent equity stake.

If no agreement is reached between the government and Chrysler’s lenders, a nasty legal fight could emerge in bankruptcy. The creditors’ claims are backed by most of the company’s collateral, including plants, brands and equipment, and the senior lenders will argue that they have first claim on those assets — even over and above the government’s debt.

"In a negotiation like this, everything is speculation until there’s a deal,” said an administration official who did not want to be named because the talks are private. “It should surprise no one that the administration is planning on contingencies, but we remain focused on the goal and engaged with all stakeholders to bring Chrysler and Fiat to a working partnership.”

A Treasury spokeswoman declined to comment.

A bankruptcy filing by Chrysler would be the first among Detroit’s troubled automakers, who have been mired in a devastating sales slump since last fall. Treasury is also working with General Motors to prepare a possible bankruptcy case, and the terms of a Chrysler filing might offer a glimpse into the shape of G.M.’s own filing.

Some analysts questioned whether the Treasury’s steps to prepare a bankruptcy case were an effort to put more pressure on lenders, with which it has exchanged proposals meant to reduce Chrysler’s debt. Chrysler faces an April 30 deadline from the Treasury, while G.M. faces a June 1 deadline in its own efforts to draft a new restructuring plan.

Under the most likely assumptions, Treasury will provide the financing that Chrysler needs to operate while under bankruptcy protection. The Canadian government is also expected to participate in backing the company.

The Globe and Mail of Toronto reported the Canadian government’s role on Thursday.

Last month, the Obama administration told Chrysler it would provide up to $6 billion in financing if Chrysler and Fiat could complete a deal by the end of this month. Fiat originally agreed to take 35 percent of Chrysler, but the stake was subsequently reduced to 20 percent. The administration said it would provide up to $6 billion in financing if the two companies agreed, on top of $4 billion in federal assistance that Chrysler has already received.

Although the two companies have been holding discussions on an out-of-court agreement, a bankruptcy case would allow Fiat to more easily select the assets of Chrysler that it wants to preserve, such as dealerships, factories and the company’s product development operations, these people said. The approach, which relies upon Section 363 of the federal bankruptcy code, is somewhat similar to what the government is planning in the case of G,M..

Then, Chrysler could sell or jettison any assets it does not want to keep, and cancel franchise agreements with superfluous car dealers.

“Chrysler has consistently said that its viability will be enhanced through an alliance with Fiat, as it represents a change in the company’s business model that expands its global competitiveness,” said Lori McTavish, Chrysler’s vice president of communications. “As we move forward in this process, we believe it’s important to keep all options open.”

Ms. McTavish said Chrysler would continue to work through the end of the month, based on direction given by the President’s auto task force, “to secure the support of the necessary stakeholders and reach a successful conclusion that the administration and U.S. Treasury deems appropriate.”

The U.A.W., Chrysler and Treasury have reached agreements in principle that would protect workers’ benefits, people with knowledge of the negotiations said, and a similar agreement is expected to be reached as soon as this weekend with the Canadian Auto Workers union.

Once Chrysler emerges from bankruptcy protection, it would largely be owned by Fiat, the U.A.W., the Treasury and its lenders, these people said. A bankruptcy filing would likely wipe out existing equity stakeholders, notably Cerberus Capital Management, which took over the carmaker from Daimler in 2007.

Ron Gettelfinger, the U.A.W.’s president, issued a statement on Wednesday saying that the union was “continuing to work toward an agreement that will be in the best interest of Chrysler workers, retirees and the communities where the company does business.”

People close to the talks said Wednesday that the U.A.W. had tentatively agreed to accept Chrysler stock to finance half of the company’s $10.6 billion obligation to the health care trust. The balance would be paid in cash over the next decade. That money presumably could come from either the Treasury, or from Chrysler’s profits, once it emerges from bankruptcy protection.

Chrysler has a $9.3 billion pension shortfall, or 34 percent of its total liability, according to the Pension Benefit Guaranty Corporation. The agency said earlier this month that it would assume $2 billion of the shortfall in the event Chrysler terminates its pension plans.

If that happened, retirees would receive sharply lower benefits than they normally would expect. But Chrysler is not obligated to terminate its pension plans while in bankruptcy, particularly if it received federal assistance to fund them.

It was not clear Thursday where Chrysler would file its bankruptcy case. On Wednesday, Mike Cox, the attorney general of Michigan, urged General Motors and Chrysler to consider filing in the state, rather than Delaware or New York. He said a locally administered case would be more convenient for creditors in Michigan