Russia called 'nice ally' but no NATO recruit

PRAGUE, Czech Republic -- First lady Laura Bush met Monday with Czech President Vaclav Havel at Prague Castle and agreed that Russia can be a "nice ally" to NATO but shouldn't be a member.

Mrs. Bush and Havel, in 30 minutes of talks at a candlelit table in his presidential office, discussed the November NATO summit here in Prague. The alliance is to decide then which countries, if any, to invite in as members.

Havel opined in The Washington Post over the weekend that Russia "for various historical and geographic reasons ... is such a clearly independent part of today's world, that its only relationship with NATO can and will be that of a separate entity."

East Timor begins work of building a new nation

DILI, East Timor -- In its first day as an independent nation Monday, East Timor swore in a new Cabinet and signed a key oil treaty with Australia. The people danced in the streets and staged a jubilant parade in a euphoric celebration of their nation's birth.

The United States swiftly established full diplomatic relations with the new nation on Monday and said an ambassador would be named to head the U.S. Embassy.

"The United States looks forward to working with the people and government of the Democratic Republic of East Timor to foster the growth of democracy and prosperity in the first nation of the new millennium," Richard Boucher, the State Department spokesman, said in Washington.

Former President Clinton raised the American flag at the new U.S. Embassy in the seaside capital of Dili -- and while doing so acknowledged that the United States' record in East Timor has been less than sterling.

Iraq plans to resume talks with U.N. in July

BAGHDAD, Iraq -- Iraq and the United Nations will resume talks in July on the possible return of U.N. weapons inspectors who were barred from the country for more than three years.

Vice President Taha Yassin Ramadan, in comments aired by Iraqi satellite television late Sunday, announced the date for the third round of talks between U.N. Secretary-General Kofi Annan and Iraq's Foreign Minister Naji Sabri.

"Early July it is," U.N. spokesman Fred Eckhard said in New York on Monday. "It's probably going to be coordinated with one of the secretary-general's trips."

There has been speculation the talks will be held in Vienna, but Eckhard refused to disclose the location.

British Airways posts biggest loss in years

LONDON -- Despite posting its biggest annual loss before taxes in 15 years, British Airways PLC said Monday its fourth-quarter operating profit is evidence its effort to slash costs is finally paying off.

The airline's full-year figures offered stark evidence of the slump in long-haul air travel after the Sept. 11 terror attacks.

Its business was also depressed by a cattle disease that hurt Britain's tourism trade, and intense competition from budget airlines such as Ryanair and easyJet.

The airline reported a net loss of $188 million for the year ended March 31, compared to a net profit of $118 million a year earlier. Before taxes, the carrier lost $292 million -- its biggest yearly deficit since it was privatized in 1987.

--From wire reports