The mother of parliamentary rows
Mar 9th 2004
From The Economist Global Agenda
In Britain's biggest constitutional tussle for decades, the unelected House of Lords has sabotaged Tony Blair's bill to give Britain a proper supreme court and an independent body to select judges
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BRITAIN has long been an anomaly among the developed nations. It is one of the world's oldest and most exemplary democracies, yet it has no formal constitution and has an unelected head of state who simply inherited the job from her dad. Britain's courts are widely admired around the world, yet the country lacks the separation of powers evident in most countries with a rule of law. The head of the judiciary, the Lord Chancellor, also serves in the executive as a cabinet minister while moonlighting in the legislature as speaker of its upper chamber, the House of Lords (the majority of whose members, until recently, inherited their seats). In the Lords, a committee of legislators, known as the "law lords", doubles up as Britain's court of final appeal.
Since becoming prime minister in 1997, Tony Blair has been making mostly well-intentioned but usually ham-fisted attempts to modernise Britain's creaking constitutional arrangements. His latest proposal--a Constitutional Reform Bill, to abolish the Lord Chancellor's job and create a separate supreme court and an independent body to recruit judges--resulted in another fiasco on Monday March 8th. The Lords voted to delay the bill by sending it to a committee for detailed consideration, making it unlikely to pass before the next election. A furious Mr Blair, who had warned that he would not be held "hostage" by the unelected upper house, may now ram the measure through using the Parliament Act. This law was passed during a constitutional tussle almost a century ago, to stop the Lords frustrating the will of the elected House of Commons. It has only been used three times in the past 50 years. If he invokes it now, Mr Blair could simply pass his bill in the Commons (where his Labour Party currently has a big majority) and it would become law without the Lords' consent.
To try to get the bill through, the current (and probably the last) Lord Chancellor, Lord Falconer, offered some last-minute concessions to allay worries about how genuinely independent the new body to select judges would be--though it can hardly be less independent than the current system, in which they are chosen by either the Lord Chancellor or the prime minister. However, the opposition Conservatives argued that it was an unnecessary extravagance to set up a separate supreme court, and won the support of enough Lords to force a delay in Mr Blair's proposals. If the prime minister does use the Parliament Act to ram through his reforms, he risks a running battle with the upper house, which could retaliate by delaying much of the government's legislative programme until the next election.
The seeds of the current confusion were sown last June when Mr Blair was forced, by the unexpected resignation of a senior minister, to reshuffle his cabinet. He combined this with an attempt to abolish the Lord Chancellor's job and make other constitutional changes. This caused ructions because he had failed to consult other political parties--or, in fact, anyone outside his close circle. On finding that he could not get rid of the Lord Chancellor without passing a law, he backtracked.
Britons seem to have a congenital fear of any changes to their ramshackle constitutional arrangements. But many observers say Mr Blair has made things worse for himself by failing to think through the consequences of the changes he has proposed. Among his earliest ones were the restoration of a parliament in Scotland (after almost three centuries' absence) and a quasi-parliament for Wales. Though these have been modestly successful, the transfer of powers to them, without the creation of an equivalent assembly for England, has led to the undemocratic spectacle of Scottish and Welsh parliamentarians voting at Westminster on matters that only concern England, while English parliamentarians have little say in Scottish and Welsh affairs.
The prime minister's efforts to reform the House of Lords itself have also been erratic. Before taking power, Labour had promised to democratise the Lords, and in 1999 most of the upper house's 750 hereditary peers were expelled. The government then set up a commission to consider the next stage of reform. The commission suggested that the Lords' members be mainly chosen by an independent committee. This proved unpopular, so Mr Blair asked a parliamentary committee to suggest another plan. Last year, no fewer than seven options were put before the House of Commons, which rejected all of them. Mr Blair is now threatening a bill to expel the remaining 92 hereditary peers. Critics say this would leave the upper chamber as predominantly an appointed House of Cronies (though opposition parties get to install some of their cronies too).
One criticism of Mr Blair's proposed supreme court is that, unlike those elsewhere, it will be unable to strike down legislation that offends basic constitutional principles (though the courts already can do so where a law offends the European Convention on Human Rights). Not having a written constitution in the first place makes this tricky. Despite his reforming zeal, Mr Blair is not proposing to end this aberration and give Britain a formal constitution. But many feel that his government's current proposals to limit asylum seekers' rights show why a written constitution, and a supreme court to enforce it, are needed. The government wants to restrict the courts' ability to hear appeals from asylum seekers rejected by the new tribunals that will consider their cases. Seeking to restrict the judiciary's oversight of legal process in this way would be unthinkable if Britain had a supreme court with constitutional backing, like America's.
Iraq's rival factions have now agreed a constitution. Even the quarrelsome Afghans have done so. Surely, say Mr Blair's critics, the time has come for Britain to follow suit. A written guarantee of basic rights, enforced by a truly independent judiciary, and a properly democratic (ie, elected) upper house are, they say, all needed to make Britain the "modern" country that the prime minister promised on coming to power.

Copyright ? 2004 The Economist Newspaper and The Economist Group. All rights reserved.


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>>

Roh goes, for now
Mar 12th 2004
From The Economist Global Agenda
South Korea's President Roh Moo-hyun has been forced to step down after being impeached by parliament, ostensibly for breaking election rules ahead of next month's general election. The move has proven extremely divisive and will increase political instability
AP
Parliamentary democracy, Korean-style
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ROH MOO-HYUN has never commanded the support of South Korea's political establishment. Even after his surprising nomination by the Millennium Democratic Party (MDP) for the presidency in 2002, conservative elements in the party itself tried to undermine the former human-rights lawyer. The split in the MDP last September--between a small band of Roh supporters and the majority--left the president without a party. Worse, the opposition, helped by the country's conservative newspapers, has been trying to bring down the president for months. Even so, there was widespread surprise that the opposition managed to secure the required two-thirds majority for an impeachment bill on Friday March 12th. The vote, which Mr Roh's supporters had tried to block by occupying the speaker's podium for two days, produced scenes of chaos in the chamber, with the speaker having to be escorted out under a hail of shoes, nameplates and other improvised missiles. The bill has bitterly divided the country. At worst, it could lead to years of political turmoil.
In the short term, it is not clear if Mr Roh's impeachment will stand. The bill must go to the constitutional court, whose judges must approve it by a two-thirds majority. The court will probably take at least a month, and possibly up to six months, to deliver its verdict--so this may not come until well after the election, due on April 15th. In the meantime, the country will be run by the prime minister, Goh Kun, who is normally a ceremonial figure. The nightmare scenario, in terms of policy paralysis, is that Mr Roh is reinstated to serve the remaining four years of his term but his new party, Uri, fails to make big gains in the election. It currently has 47 seats in the 273-seat parliament.
The transgression that led to the impeachment vote was surprisingly minor. Mr Roh is not accused of Nixonesque lying or Clintonesque sexual peccadilloes. He is guilty simply of pledging to do his utmost to secure votes for Uri in the general election. In South Korea, where the president, even when he has a party, is a public official deemed to be above grubby party politics, this is against the rules. Nevertheless, Mr Roh refused to apologise. He finally relented on Friday morning, just before the vote, but his opponents said it was too late.
Although the opposition has focused on the election-rules violation for the purposes of impeachment, there are bigger worries, particularly corruption. A recent scandal has touched Mr Roh's closest aides, a number of whom are either behind bars or under investigation for accepting illegal donations. But the opposition Grand National Party (GNP) has also been caught out. In December, Lee Hoi-chang, the GNP's leader, admitted that the party had accepted 50 billion won ($42m) in illegal funds from big companies, and turned himself in to state prosecutors. The scale of illegal donations may be much greater for the GNP than for Mr Roh's lot, but it is the president who has suffered most from this scandal.
Campaigning on a platform of rooting out endemic political corruption and infighting, Mr Roh was elected on a wave of optimism. However, he has struggled to build on the goodwill. Some problems, like North Korea's nuclear shenanigans, were outside his control. South Korea's economic troubles, too, were evident before Mr Roh's inauguration in February 2003. The country's growth was already slowing before the SARS virus dampened business activity throughout Asia. The government's economic pump-priming in response to the outbreak has helped to stimulate a recovery, but this has not been entirely painless. The previous government's policy was to underpin economic growth by encouraging consumer spending. But that has left many South Koreans struggling with huge credit-card bills.
What happens next? Some of those protesting outside the parliament on Friday night welcomed the impeachment; others accused the opposition of pre-election opportunism and bemoaned the move as the death of South Korea's youngish democracy. When Mr Roh offered to hold a national referendum on his presidency last autumn, admitting that he himself had lost confidence in his ability to govern, polls showed that more than half of voters would support him. But his popularity rating has since slipped to less than 30%. Whatever effect the current crisis has on the public's view of Mr Roh, he seems to have succeeded in widening, rather than eliminating, the divisions in South Korea's politics.
Copyright ? 2004 The Economist Newspaper and The Economist Group. All rights reserved.

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It's Korea's Economy, Debt, Stupid: William Pesek Jr. (Update1)
March 12 (Bloomberg) -- Few world leaders would relish running South Korea. Asia's No. 4 economy is grappling with a debt crisis, a tough job market and threats from the North.
And what are elected officials doing to reassure investors? Trying to remove the president.
Lawmakers today voted to impeach President Roh Moo Hyun for alleged election law violations. Roh is suspended for as long as six months as Korea's Constitutional Court considers the case. Prime Minister Goh Kun will be acting president.
It's highly uncertain whether Roh will be removed from office permanently. This is, after all, Korea's first impeachment process. Roh's alleged misdeed is so minor that election officials can't agree on whether he did anything wrong. It's anyone's guess if the court will validate the impeachment vote.
Yet whether Roh survives isn't the point. Such political shenanigans -- and television images of lawmakers scuffling -- sent troublesome signals to investors about the volatile state of Korea's democracy. They also showed the government is too distracted to fix the economy or calm tensions with North Korea.
`Turmoil'
``The impeachment will throw not only the economy but South Korea as a whole into turmoil,'' says Jang Hasung, professor at Korea University and the nation's best-known shareholder activist.
Roh gets some blame, too. Forces trying to remove him say an apology would've cleared up his alleged violation. Roh refused to back down, claiming he did nothing wrong in January when he voiced support for the campaign of a political party. As a civil servant, Roh is supposed to appear neutral.
The lessons from former U.S. President Bill Clinton, another leader who faced removal from office, come to mind. Clinton's 1992 election campaign slogan was ``It's the economy, stupid.'' For Korea, it's not only the economy, but debt, too.
To boost growth after the 1997-1998 Asian crisis, Korea encouraged banks to lend less to companies and more to households. The dark side was that individuals, most with little experience with debt, got in well over their heads.
One in 13 of South Korea's 48 million people is three months or more behind on debt payments. Fast-rising delinquencies are crimping consumer spending, which makes up more than half of Korea's $477 billion economy. Companies borrowing too much caused Korea's meltdown in the late 1990s; now it's consumers imperiling things.
Saving some Borrowers
Among the more striking side effects, bad loans at 19 banks, including Kookmin Bank and Shinhan Financial Group Ltd., owed by households and corporations rose by 3.5 trillion won to 18.6 trillion won in 2003, according to the Financial Supervisory Service.
Now, the government is bailing out at least 400,000 individuals who can't pay their debts to boost an economic growth rate that fell by half last year to about 3 percent. The plan applies to people who borrowed less than 50 million won from at least two lenders. About 1.5 million Koreans meet that criteria.
At a time when Korea needs to hone its global image, it's bizarre to see lawmakers try to impeach Roh. It's also bizarre that Roh wouldn't just apologize.
``Politicians are acting stupid, businessmen are just waiting and seeking which side will be in their own interests and the public is just sick to death about what's going on,'' Jang says.
Politicians need to keep their eyes on the big picture. China's dynamic economy is hogging most of the foreign investment flowing to and around Asia. Korea needs to convince a skeptical world that its economy shouldn't be ignored. It also must reassure investors it's on top of the North Korea issue.
Hostage Economy
While this may be domestic politics gone awry, there's a serious risk of it filtering into Korean markets, which, let's face it, aren't exactly booming. You also have to wonder how all this is playing in Pyongyang. Can North Korea still take the South's government seriously?
``This whole impeachment threat shows how politicians are willing to take the economy hostage for their own survival in the election,'' said Lee Phil Sang, an economics professor at Korea University in Seoul. ``The Korean people don't want to impeach the president they elected one year ago. They want stability and economic prosperity.''
While challenges remain, things are looking up in the economy. Exports grew 46 percent from a year earlier in February, their fastest pace in 15 years. Business confidence reached a 17- month high in February, suggesting companies are becoming more willing to invest.
That Roh's detractors said they wouldn't try to impeach him if he showed remorse makes the whole thing a joke. An action egregious enough to warrant impeachment shouldn't be something the words ``I'm sorry'' can clear up. And it's quite a coincidence that all this comes a month before parliamentary elections.
Voters know that and polls show a majority of them are against impeachment. The average Korean would prefer that the government focus on raising living standards and keeping North Korea's nuclear missiles in their silos.
The same is true of investors, many of whom may now have yet another reason to avoid Korea.
To contact the writer of this column:
William Pesek Jr. in Seoul, or wpesek@bloomberg.net.
To contact the editor of this column:
Bill Ahearn in New York, or bahaearn@bloomberg.net.
Last Updated: March 12, 2004 01:20 EST
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North Korea

Through a glass, darkly

Mar 11th 2004 | PYONGYANG AND PUKCHANG
From The Economist print edition
So far as a visitor can tell in this secretive land, North Korea's economic reforms are starting to bite. But real progress will require better relations with the outside
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COMMUNIST North Korea has started to experiment with economic reform, and opened its door a crack to the outside world. Though its culture of secrecy and suspicion stubbornly persists, it was deemed acceptable for your correspondent to visit Pyongyang's Tongil market last week. Here, stalls are bursting with plump vegetables and groaning with stacks of fresh meat. You can even buy imported pineapples and bananas from enthusiastic private traders.
But how about a photograph? Most foreigners think of North Korea as a famished nation, and the authorities are evidently keen these days to tell the world about the great strides their economy has made since reforms were introduced in July 2002. Logic might seem to suggest that a snap showing the palpable result of the reforms would be acceptable too. But it is not. The officials were friendly but firm: no pictures of fat carrots.
The July 2002 reforms were ground-breaking for North Korea: the first real step away from central planning since the dawn of communism there in 1945. The government announced that subsidies to state-owned enterprises were to be withdrawn, workers would be paid according to how much they produced, farmers' markets, hitherto tolerated, would become legal and state enterprises would be allowed to sell manufactured products in markets. Most of these enterprises, unless they produced "strategic items", were to get real autonomy from state control.
Almost two years on, how to assess the success or failure of these reforms? That climate of secrecy makes it deeply frustrating. Even the simplest of statistics is unavailable. Li Gi Song, a senior economist at Pyongyang's Academy of Sciences, says he does not know the rate of inflation. Or maybe he is not telling. After all, he says, "We can't publish all the figures because we don't want to appear bare before the United States. If we are bare then they will attack us, like Afghanistan or Iraq." So what follows can be little more than a series of impressions.
The indications are that the reforms are having a big impact. For a start, North Korea has recently acquired its first advertisement (pictured above)--for foreign cars, assembled locally by a South Korean majority-owned company. Or, to be more basic, take the price of rice, North Korea's staple. Before the reforms, the state bought rice from state farms and co-operatives at 82 chon per kilo (100 chon make one won, worth less than a cent at the official exchange rate). It then resold it to the public through the country's rationing system at eight chon. Now, explains Mr Li, the state buys at 42 won and resells at 46 won.
North Korea's rationing system is called the Public Distribution System (PDS). Every month people are entitled to buy a certain amount of rice or other available staples at the protected price. Thus most North Koreans get 300g (9oz) of rice a day, at 46 won a kilo. According to the UN's World Food Programme (WFP), that is not nearly enough. Anything extra has to be bought in the market.
In theory, even in the market the price of staples is limited. Last week, the maximum permitted rice price was marked on a board at the entrance to Tongil as 240 won per kilo. In fact, it was selling for 250. WFP officials say that in January it was selling for 145 won, which points to significant inflation, for rice at least. This is not necessarily a bad thing, since it means that the price is coming into line with the market.
The won's international value is also adjusting. Since December 2002, the euro has been North Korea's official currency for all foreign transactions. In North Korean banks, one euro buys 171 won. In fact, this rate is purely nominal. A semi-official rate now exists and the price of imports in shops is calculated using this.
Last October, according to foreign diplomats, a euro bought 1,030 won at the semi-official rate. Last week it was 1,400. A black market also exists, in which the euro is reported to be fetching 1,600 won--which implies that the won is approaching its market level. It also means, however, that imported goods have seen a big price-hike. For domestically-produced goods, like rice, prices may well go on rising for a good while longer.
What about earnings? Before the 2002 reforms, most salaries lay in the range of 150-200 won per month. Rent and utilities, though, were virtually free, as were (and are) education and health care. Food, via the PDS, was virtually given away. Now, pay is supposed to be linked to output, though becoming more productive is not easy for desk-bound civil servants or workers in factories that have no power, raw materials or markets.
Rents and utilities have gone up, though not by crippling amounts. A two-bedroom flat in Pyongyang including electricity, water and heat costs just 150 won a month--that is, about a tenth of a euro.
Earnings have gone up much more: a waitress in a Pyongyang restaurant earns about 2,200 won a month. A mid-ranking government official earns 2,700. A worker at a state farm earns in the region of 1,700, a kindergarten teacher the same, and a pensioner gets between 700 and 1,500. A seamstress in a successful factory with export contracts can earn as much as 5,000 won a month. Since that seamstress's pay equates to barely three euros a month, wages still have a long way to adjust.
The prices of food and other necessities, to say nothing of luxuries, has gone up much more than rent has. According to the WFP, some 70% of the households it has interviewed are dependent on their 300 gram PDS ration, and the WFP itself is targeting 6.5m vulnerable people out of a total population of some 23m. Not all suffer equally: civil servants in Pyongyang get double food rations from the PDS.
There are some encouraging stories. In Pukchang, a small industrial town 70km (40 miles) north-east of Pyongyang, Concern, an Irish aid group, has been replacing ancient, leaking and broken-down water pipes and pumps, and modernising the purification system. This has pushed the amount of clean water available per person per day from 80 to 300 litres. Kim Chae Sun is a manager at the filtration plant, which is now more efficient. Before July 2002 she earned 80 won a month. Afterwards she earned 3,000 won. Now she earns 3,500.
As Mrs Kim speaks, three giant chimneys belch smoke from the power station that dominates the town. All workers have been told they can earn more if they work harder, but certain groups have been told they will get even more money than everyone else. In energy-starved North Korea these include miners and power workers. Mrs Kim says her husband, who works in the power plant, earns an average of 12,000 won a month. Her rent has gone up from eight to 102 won a month, and in a year, she thinks, she will be able to buy a television or a fridge.
A lot of people, in fact, are buying televisions. The women who sell the sets from crowded Tongil market-stalls get them from trading companies which they pay after making a sale. The company price for an average set is 72,000 won, the profit just 1,000 won. After they have paid for their pitch, the traders can expect an income of 10,000-12,000 won a month.
Mystery sales
Which makes for a puzzle. Who can afford a good month's salary for a locally made jacket in Tongil, costing 4,500 won? How come so many people are buying televisions, which cost more than two years of a civil-servant's pay? How come the number of cars on the streets of the capital has shot up in the past year? Pyongyang still has vastly less traffic than any other capital city on earth, but there are far more cars around than a year ago. Restaurants, of which there are many, serve good food--but a meal costs the equivalent of at least a white-collar worker's monthly salary. Many of these restaurants are packed.
Foreign money is part of it. Diplomats and aid workers say many new enterprises seem to have opened over the last year. Nominally they are state-owned, but sometimes they have a foreign partner, often an ethnic Korean from Japan. The majority are in the import-export business. Some have invested in restaurants and hotels and some in light industry. Thanks to the 2002 reforms, these firms have a degree of autonomy they could not have dreamed of before. An unknown number of people also receive money from family abroad, but there are still no North Korean-owned private companies.
Oh for a tractor
Farmers are among the other winners: they can sell any surpluses on the open market. But two out of three North Koreans live in towns and cities, and only 18% of the country is suitable for agriculture. The losers include civil servants, especially those outside Pyongyang who do not get double food rations and have no way to increase their productivity.
Factory workers have it the hardest. A large proportion of industry is obsolete. Though Pyongyang has electricity most of the day, much of the rest of the country does not. Despite wild talk of a high-tech revolution, the country is not connected to the internet, though some high-ups do have access to e-mail service. In the east of the country lies a vast rustbelt of collapsing manufacturing plants.
Huge but unknown numbers of workers have been moved into farming, even though every scrap of available land is already being cultivated. The extra workers are needed because there is virtually no power for threshing and harvesting and no diesel for farm vehicles. This requires more work to be done by hand. Ox-carts are a common sight.
The innocent suffer
Markets are everywhere. But this does not mean that there is enough food everywhere. In Pyongyang, where there are better-off people to pay for it, there is an ever-increasing supply. Outside the capital, shortages are widespread.
No one knows how many died during the famine years of 1995-99; estimates range from 200,000 to 3m. In Pukchang, officials say that 5% of children are still weak and malnourished. In Hoichang, east of Pyongyang, schools and institutions tell the WFP that about 10% of children are malnourished. Masood Hyder, the senior UN official in North Korea, says that vulnerable households now spend up to 80% of their income on food.
And yet some things are improving. Two surveys carried out in 1998 and 2002 by the North Korean government together with the WFP and Unicef showed a dramatic improvement in children's health between those years. The proportion of children who fail to reach their proper height because of malnutrition fell from 62% to 39%, and the figures are thought to be still better now. However, Unicef says that though children may no longer die of hunger, they are still dying from diarrhoea and respiratory diseases--which are often a side-effect of malnutrition.
North Korea's 11-year-old victims
To a westerner's eye, a class of 11-year-olds in Hoichang is a shocking sight. At first, your correspondent thought they were seven; the worst-affected look to be only five. Ri Gwan Sun, their teacher, says that apart from being stunted some of them still suffer from the long-term effects of malnutrition. They struggle to keep up in sports and are prone to flu and pneumonia. They are also slower learners.
Pierrette Vu Thi of Unicef says that North Korea's poor international image makes it hard for her agency, the WFP and others to raise all the money they need. The country is in a chronic state of emergency, she says, and to get it back on its feet it would need a reconstruction effort on the scale of Afghanistan and Iraq.
Such bleak talk is echoed by Eigil Sorensen of the World Health Organisation. He says that health services are extremely limited outside the capital. Medicines and equipment are in short supply, large numbers of hospitals no longer have running water or heating and the country has no capacity to handle a major health crisis.
None of this is likely to change very fast. With no end yet to the nuclear stand-off between North Korea and the United States, American and Japanese sanctions will remain in place. And nukes are only part of it. Last week the American State Department said it was likely that North Korea produced and sold heroin and other narcotics abroad as a matter of state policy. North Koreans who have fled claim that up to 200,000 compatriots are in labour camps. North Korea denies it all.
Reform, such as it is, has plainly made life easier for many. But rescuing the North would take large amounts of foreign money, as well as measures more far-reaching than have yet been attempted. At present, there is no way for the government to get what it needs from international financial institutions like the World Bank. Such aid as comes will be strictly humanitarian, and investment in so opaque a country will never be more than tentative. Domestic reform on its own cannot fix an economy wrecked by decades of mismanagement and the collapse of communism almost everywhere else.
Copyright ? 2004 The Economist Newspaper and The Economist Group. All rights reserved.



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>> ORGANIZED CRIME? WHERE?
Between the Lines / Pyramid dealings

By Hannah Kim
Denials of the existence of organized crime in Israel set a record this week. No, there is no organized crime, but only crime that goes on in the ghetto of "the underworld." Extortion of protection money and illegal gambling - yes. Sending tentacles into politics, the economy and other establishment areas - no.
There is no organized crime in Israel, but the explosive that, according to the police, was set to go off in Ezra (Shuni) Gavrieli's car was discovered after Gavrieli went to Grigori Lerner's office in the Azrieli Towers in Tel Aviv, where he met with Sofa Landver, formerly a Labor Party member of Knesset.
If we are looking for a story that characterizes the attempt to infiltrate organized crime into Israel, the story of Grigori Lerner is a fine example. He was convicted and sentenced to five years in prison in a plea bargain on three attempts to bribe elected officials and civil servants, fraud, five acts of forgery, three false statements on corporate documents, bribing two Bank Hapoalim employees and currency violations.
His arrest by the police in 1997 dragged a parade of politicians to the National Unit for Serious and International Crimes Investigations. Among them were Natan Sharansky (currently Likud Minister without Portfolio) to whose now defunct Yisrael b'Aliyah Party Lerner contributed $100,000; Labor Party MK Shimon Peres, who had promoted the career of Sofa Landver, from being his Russian teacher to being a Knesset member, during which time she knew Lerner; Yuri Stern, who moved from Sharansky's party to (now Transportation Minister) Avigdor Lieberman's party; and Nissim Zvilli of the Labor Party.
Then too, Landver and Stern protested that Lerner was being persecuted because he was an immigrant from Russia; then too, Lieberman attacked the police and the head of the Serious and International Crimes Unit, Moshe Mizrahi.
Lerner tried to make use of his political connections in order to establish a bank in Israel. He tried to set himself up as a candidate for the Knesset, registered at the Ashkelon branch of the Likud and possibly might have succeeded in getting elected to the Knesset had the police not embarked on an open investigation of him.
After the Bank of Israel refused to approve his plan to open a bank in Israel, Lerner opened a bank in Cyprus, a kind of proxy bank, which he ran from a branch of Bank Hapoalim in Israel. In 1997, in a police raid of his offices, a letter was confiscated that Lerner had sent by fax to one of the heads of the Solntsevo syndicate, one of the biggest crime organizations in Russia. In this letter, which was included in the police evidentiary material, the word "pyramid" is used:
"(...) and the main thing, the pyramid, which will start at the Tuku Bank, is stable. Although it will not be easy. It is necessary to work hard and toughly. But I know how to do this. With respect to your decision, report to me successfully because without your cover I will not hold out. My aim is simple: to settle accounts with you for $15 million, to keep $15 million for myself, to enter politics, the Parliament (Knesset), to get my profit from the newspaper and the television channel. All the transactions will be signed by Smolniasky and Haimovitch and also Cypriots. And my hands are clean, and there are no proofs, and if they want to talk nonsense, let them. In Israel everybody talks nonsense about everyone else, and there is no consciousness. Everything is fine; Chernoy [Lerner is referring to Mikhail Chernoy, whom the Prosecutor's Office decided to try on charges of fraud in aggravated circumstances in the Bezeq shares acquisition affair - H.K.] and Luchinsky [Grigori Luchinsky, whose Israeli passport the High Court of Justice and the Interior Ministry refused to renew, and who according to police information is involved in international arms dealing and crime syndicate money laundering - H.K.] and so on. This is the truth; I need the month's delay and your cover."
There you have it, written by the man himself: Lerner's aim was to enter the Knesset and from there to promote and legitimize his businesses. To this man came Shuni Gavrieli, in whose car an explosive charge was found before it blew up.
Lerner, in an interview with the mass circulation daily Yedioth Ahronoth, said that he had been told that "Shuni Gavrieli is a kind of godfather." Gavrieli has denied any connection to illegal activity and Sofa Landver has again said that there is persecution, this time of Gavrieli and not just the immigrants from Russia.
There is no organized crime in Israel. Of course there isn't. It is true that David Appel is accused of bribing the foreign minister at the time, Ariel Sharon (now prime minister), the mayor of Jerusalem at the time, Ehud Olmert (now minister of industry and trade), the mayor of Lod, Benny Regev, and the mayor of Givat Shmuel, Zamir Ben-Ari. It is true that the latter goes around closely accompanied by bodyguards. It is true that Knesset Speaker Reuven Rivlin and former (Herut) Knesset member Michael Kleiner were employed as legal consultants in one of Appel's companies, and it is true that Likud MK Michael Eitan did business with that same Appel (organizing group tours abroad). And it is also true that in the state prosecutor's report on the Hebron/Bar-On affair Appel was called a "switchboard," for having held conversations with Ronny Bar-On (now Likud MK) and Aryeh Deri about the appointment of the attorney general.
All this is true, but there is no organized crime, there is only "organized criminal activity" by all kinds of Rosensteins.
Zohar Argov's patron
Shuni Gavrieli is an authoritative figure whom everyone obeys. Like Mantsch - Mordechai Tsarfati - the big mediator from the 1960s and '70s, who all in all was responsible for arranging the chairs at Mapai conventions. A kind of conference organizer, whom everyone knew had the final word in the gang wars.
Shuni Gavrieli is not responsible for arranging the chairs at Likud meetings. He organizes meetings of his own, in his club, the former Ariana, today Hatzerot Yaffo. Gavrieli was always the silent brother of the family, whom everyone respected and admired. His name has never been linked to illegal activity. In contrast to his older brother, Reuven, his connections with politicians have been extremely limited - up until about a year ago. Then he decided to run his daughter, Inbal, for Knesset.
Gavrieli was the patron of many Mizrahi (Jews originating in Muslim countries) singers. He tried to wean Zohar Argov from heroin, and frequenters of the Ariana remember well how Argov collapsed during a performance. Gavrieli tended him personally, with devotion. At the Halleluyah club he established near the Ariana, Shimi Tavori, Eli Louson, Aviva Avidan and Boaz Sharabi appeared. This was the period when Mizrahi singers had not yet burst the bounds of the ghetto. Eli Louzon sang "What a Country" in his wonderful tenor voice at a time when Gavrieli was conducting a struggle with the mayor of Tel Aviv at the time, Shlomo Lahat, and the municipal engineering authority.
Those were the days of polarization between North and South Tel Aviv. Shimon Yehoshua was shot dead by a policeman after he tried to stop a municipal bulldozer that was trying to demolish the balcony his family had enclosed, illegally, in its Kfar Shalem home. At the same time, businessman Rafi Unger added one and a half stories without a license to his Pyramid House on Hamasger Street, former Knesset member Avraham Shapira (Agudat Yisrael) converted the car-park at his villa into an office and ritual bath without a permit and Rehavam Ze'evi erected seven illegal buildings at the Land of Israel Museum, with the help of contractor Bezalel Mizrahi. These things were published at the time in the now defunct newspaper Al Hamishmar.
The municipal engineering authority wanted to apply the law in Kfar Shalem and Jaffa and ignored these three cases, which were a representative sample of building violations in the northern part of the city. At the time Gavrieli wanted from the city what Unger and Shapira were given - the opportunity to pay for the building violation and legitimize it. He was answered with an absolute no.
Gavrieli's first encounter with politics was in this context. The patron of Mizrahi singers sought a political patron of his own. He formed an alliance with Rehavam Ze'evi, who was very close to Lahat. Ze'evi mediated between Lahat and Gavrieli and the Ariana was made legitimate and legal. After that Gavrieli helped Ze'evi set up his political party, Moledet, and after Ze'evi was murdered, he turned openly to the area where his brother Reuven had been playing behind the scenes.
Instead of forming ties with politicians, he sent his daughter Inbal, who lacked any background in public activity, to the Knesset. His other daughter, Maya, studied law. Maya became a close legal advisor, Inbal a Knesset member and Gavrieli a real estate entrepreneur.
Gavrieli's position as the proprietor of a leading Mizrahi music club has been taken over by Shlomi Oz, who, in contrast to Shuni Gavrieli, does have a criminal past. Oz began to run the Plaka Club, behind Hamasger Street in Tel Aviv, in proximity to the illegal casino and bingo clubs, which are continuing to operate today as if there were no police. Oz, who maintained silence during his investigation by the police in the Greek island affair, hosted Likud MK Omri Sharon on the evening when David Spector gave his interview to Nissim Mishal's program on Channel 2 television. Omri and Shlomi are good friends. Inbal and Omri are also good friends.
Between the days of the Ariana and the days of the Plaka, the ghetto burst its bounds. It is worthwhile being the friend of a politician, it is worthwhile for the politician to be a friend of the club owner, and it is very worthwhile to be a Knesset member.
At Etti Alon's house
A short while before it became clear how Etti Alon had transferred about a quarter of a billion shekels from the Trade Bank to her brother, the chronic gambler Ofer Maximov, a great deal of material about illegal soccer gambling came into the hands of the Central Unit of the police. Among the other evidence that was gathered by a private investigator who was hired by the Council for Betting Arrangements in Sport there was also testimony by a woman called Etti, who ran a soccer betting station in her home from the beginning of the 1990s until 1995.
Meretz MK Avshalom Vilan, who gave the material to the police, says that only after the affair of the embezzlement at the Trade Bank was made public did he discover that this was Etti Alon, who according to the evidence did what quite a few enterprising citizens of Israel do who run betting shops from their apartments or stores. The prizes are paid by the "bank" which is of course an illegal bank, run by innocuous shell companies that were registered at the end of the 1980s.
Only in recent months have the police also begun to take an interest in illegal soccer betting, which is another flourishing branch of illegal gambling in Israel, turning over about NIS 2 billion annually, according to MK Vilan. "Today there are people sitting in the Knesset who got there thanks to gambling money," he says.
About a year and a half ago, when the police commissioner and the head of Police Intelligence appeared before one of the Knesset committees, they declared that they were certain of one thing: There is no organized crime in Israel, because there has been no infiltration of such crime into politics. This was a strange declaration, in light of what had been discovered in the Grigori Lerner case. Today, there is already recognition of the existence of "organized crime" in Israel, but the existence of crime that sends tentacles into politics, the economy and the law is denied.
This denial creates scenes that never occurred in the past, such as Ariel Sharon's attack on the police, on the day that police investigators raided the office of accountants Goldman and Co., and confiscated papers connected to the offshore Charington, Ltd. company in the Virgin Islands, which according to the suspicions was a straw company that Gilad Sharon and Cyril Kern used at the beginning of 2002 for turning around funds that were supposed to be used to pay back the fine that the State Controller had imposed on Sharon.
If the police have succeeded, on a miserable budget, in capturing the quartet of mercenaries who were brought to Israel from Russia, it is interesting what they would have succeeded in capturing if they had a realistic budget and a focused target. A few months ago Public Security Minister Tzachi Hanegbi was still talking about a budget of approximately a quarter of a billion shekels for this purpose. In the latest budget it turned out that not only had the police not received a single shekel of this, but its budget had been cruelly cut.
--------------------------------------------------------------------------------


Sharon postpones meeting of Likud ministers
By Aluf Benn, Haaretz Correspondent
Prime Minister Ariel Sharon postponed on Saturday a meeting planned for Monday, in which the Likud ministers were to discuss the prime minister's disengagement plan.
The official reason for the postponement was the absence of several of the ministers who are overseas, including Defense Minister Shaul Mofaz.
According to Friday media reports, Sharon was worried of growing opposition to the plan which entails a unilateral withdrawal from the Gaza Strip and the evacuation of several West Bank settlements.
Sharon, in recent days, has been considering the possibility of reducing the scope of the plan withdrawing only from the Gaza Strip, and at most from a small number of West Bank settlement. The United States and Egypt both insist on a significant withdrawal from the West Bank, so that the move does not appear as a "Gaza only" plan.
Sharon met representatives of the U.S. administration on Thursday, and discussed the details of the disengagement plan and what Israel would receive in exchange. The three envoys also met Foreign Minister Shalom, the prime minister's bureau chief Dov Weisglass, and National Security Advisor Giora Eiland.
Israel is seeking U.S. recognition of West Bank settlement blocs as well as an "exemption" from holding negotiations with the Palestinian leadership until it cracks down on terrorism.
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Syrian police said to have killed dozens in clashes
By Yossi Melman, Haaretz Correspondent
Syrian security forces killed dozens of people and injured hundred during violent clashes over the weekend, in the north of the country, according to reports that reached Haaretz on Saturday. According to the reports, by relatives of witnesses, the violence started during a soccer game and later spread to demonstrations throughout the Kurdish regions in the country.
Associated Press reports claim at least nine people were killed, although Kurdish sources state the death toll reaches 80. Kurdish sources also claim their forces killed six Syrian officers and three Syrian police officers in the exchange of fire.
According to the Kurdish sources, on Saturday Kurdish insurgents took over most of the Syrian administration buildings in the northern city of Qamishli, on the Turkish border.
The Kurdish sources added that 29 victims were buried on Saturday at a Qamishli cemetery.
According to the reports, on Friday security forces at the soccer game in Qamishli fired live ammunition at the crowd, killing some 30 people.
Shots were also fired from within the crowd, injuring several Syrian officers, including a colonel.
The protests continued on Saturday, with tens of thousands of people demonstrating in Qamishli, populated mainly by Kurds.
Two local hospitals, one private and one governmental, reported hundreds of injuries. The report also claims protestors burned pictures of Syrian President Bashar Assad. Another report claimed demonstrators in the nearby town of Amuda burned an installation of the Syrian security services.
The local Jihad soccer team, comprised of mostly Arab and Kurd players, was playing the Fituwya group from the city of Dar el-Zur, near the Syrian border with Iraq, when Fituwya fans began calling out "long live Saddam Hussein." The Jihad team responded with "long live Barazani" shouts, referring to one of the Kurdish leaders in Iraq.
Clashes ensued between the two camps inside the stadium, which contained some 5,000 people at the time, and three children were trampled to death during the ruckus.
Following the stadium incident, violent demonstrations spread on Friday to other cities in Syria's Kurdish regions. During the protests, signs and slogans slamming Assad's regime as well as the ruling Ba'ath Party were displayed. A demand was also raised for an international investigation into human rights violations during the incident.
Syrian loyalist forces, accompanied by tanks, were sent to the region, and a curfew was imposed in some areas. Efforts were also being made to calm the situation on Saturday. Syrian opposition groups, especially Kurdish ones operating outside the country, were attempting to raise public awareness to the incident, and were planning to hold demonstrations in various European cities.
Friday's incident represents the most violent wave of protests in Syria in recent memory. They follow U.S. threats to take sanctions against Damascus for its support of terror organizations, coupled with American suspicions that Syria is not do all it can to prevent Saddam loyalists from entering Iraq through its border.
Television images of smoke billowing from buildings in the Syrian town of Qamishli. (Al-Arabiya)


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U.N. Nuclear Watchdog Condemns Iran
1 hour, 35 minutes ago
By Louis Charbonneau
VIENNA (Reuters) - The U.N. atomic watchdog condemned Iran on Saturday for withholding sensitive nuclear information, in a resolution that diplomats said left open the option of U.N. sanctions if Tehran did not cooperate.
Reuters Photo
AP Photo
Slideshow: Iran Nuclear Issues
Iran hit back, saying the reason it had suspended U.N. nuclear inspections on Friday was to show its displeasure at the resolution, then in draft form. The inspectors were barred "for the time being," chief nuclear negotiator Hassan Rohani said.
"The reason for postponing the inspectors' visit was the approval of this resolution and we wanted to show that we are not satisfied," said Rohani, who had earlier said the document was "like an ugly demon with dangerous horns and sharp teeth."
The resolution by the International Atomic Energy Agency (IAEA) "deplores" Iran's omissions of key atomic technology from an October declaration, including undeclared research on advanced "P2" centrifuges that can make bomb-grade uranium.
It said the board of governors would decide in June how to respond to the omissions -- a clause that several diplomats said keeps the door open for a possible report to the U.N. Security Council and economic sanctions.
The resolution passed after a week of haggling over a tough text drafted by Australia and Canada and backed by Washington, which says Iran is trying to build atomic weapons. European and non-aligned states, Russia and China wanted milder wording.
A compromise was struck after the U.S.-led camp agreed to soften some language, although U.S. ambassador Kenneth Brill said it remained a strong warning to Tehran.
"This information calls for Iran to provide proactive cooperation instead of having information dragged out of it," he told reporters after the meeting.
Iran says its program is for peaceful purposes only.
"DECEPTION AND DELAY"
In remarks prepared for delivery in the closed-door meeting of the IAEA governing board, Brill said: "Iran...is continuing to pursue a policy of denial, deception and delay."
"Is it possible that, even as we meet, squads of Iranian technicians are working at still undeclared sites to tile over, paint over, bury, burn or cart away incriminating evidence so that those sanitized locations can finally be identified to the agency as new evidence of Iran's full cooperation and transparency?" he asked.
The head of Iran's delegation dismissed the resolution as a result of U.S. "diplomacy of force" and pressure on the IAEA.
"A resolution is being imposed...on the board by a single country," Amir Zamaninia, a senior foreign ministry official, said in remarks prepared for the board meeting that approved the resolution.
Zamaninia told reporters the halt to inspections was partly due to Iran's New Year's holiday beginning next week. "Another part is that this resolution was a bad one, a bad resolution," he said. "We need to work in Tehran to try to digest this."
On a more conciliatory note, Foreign Minister Kamal Kharrazi said Washington had been forced to compromise. "We hope that the remaining ambiguities are resolved and the situation becomes normal so that Iran can use this technology for peaceful purposes," he said.
One of the points the U.S.-led camp had insisted on in the resolution was a paragraph detailing the military connection to Iran's nuclear, but the final version left this out -- a victory for the NAM, Russian and Chinese negotiators.
IAEA chief Mohamed ElBaradei also voiced cautious optimism.
"I am pretty confident that Iran will understand that we need to go within (our) time schedule and that the decision to delay the inspections will be reviewed and reversed in the next few days," he said.
But Brill called the suspension "very troubling" and said he was concerned this could undermine the effectiveness of the checks once the IAEA returned to Iran.
"That speaks volumes about the intentions of this government in Tehran which says it has pledged full cooperation," he said.
(Additional reporting by Francois Murphy in Vienna and Parinoosh Arami in Tehran)





Iran fury over 'US resolution'
VIENNA: In a clear reference to the US, Iran blasted the UN nuclear watchdog yesterday for letting "a single country" impose a resolution against Tehran's nuclear programme.
The International Atomic Energy Agency (IAEA) ended a week-long deadlock yesterday by adopting a US-backed resolution condemning Iran for hiding nuclear activities.
"A resolution is being imposed, and I think I am using the expression with true definition of the word, on the board by a single country," senior foreign ministry official Amir Zamaninia told an IAEA meeting in Vienna, according to a copy of his speech.
Iran imposed yesterday an indefinite freeze on international inspections of its nuclear facilities in protest against a critical resolution passed by the IAEA.
Iran's top nuclear negotiator, Hasan Rowhani, described the IAEA resolution as "unfair and deceitful." Hours earlier, a meeting of the UN agency in Vienna had censured Iran for hiding suspect activities, but praised it for increased nuclear openness.
A senior Western diplomat said the compromise text worked out after non-aligned states sought to soften the resolution was "still an important signal for the Iranians to continue and intensify cooperation" with the IAEA. But Zamaninia said the resolution was "a serious setback" as it portrayed" a rather benign progressive situation as a condition of high alert." He said IAEA chief Mohamed ElBaradei has already reported "the positive trend of active co-operation by Iran and also a process of resolving issues that is gaining pace exponentially".
The resolution that was adopted came a day after Iran had put off a UN inspection mission until the end of April in what one diplomat close to the IAEA described as "potentially a large problem in the verification process."
But Iranian ambassador to the IAEA Pirooz Hosseini said yesterday that IAEA inspectors could in fact visit Iran earlier than the end of next month.
Hosseini said his country had put back the inspection mission, scheduled to start this week, "due to the approach of the Iranian New Year" but that if people were back in their offices soon after the holiday, which starts next week, then IAEA inspectors could come.
The IAEA, which verifies the nuclear Non-Proliferation Treaty (NPT), has since February 2003 been working to determine whether Iran's nuclear programme is peaceful, or devoted to secretly developing atomic weapons, as the United States has charged.
"Today IAEA inspectors were expected to arrive in Iran," Rowhani said. "We will not allow them to come until Iran sets a new date for their visit. This is a protest by Iran in reaction to the resolution."
Asked whether the freeze was indefinite, Rowhani said "yes."
ElBaradei said he was confident Iran would reverse a decision to temporarily suspend inspections of its suspect nuclear facilities.




Iran freezes int'l inspections of nuclear facilities
By The Agencies
TEHRAN - Iran imposed Saturday an indefinite freeze on international inspections of its nuclear facilities in protest against a critical resolution passed by the International Atomic Energy Agency.
Iran's top nuclear negotiator, Hasan Rowhani, described the IAEA resolution as "unfair and deceitful."
Hours earlier, a meeting of the UN agency in Vienna had censured Iran for hiding suspect activities, but praised it for increased nuclear openness.
The head of the UN nuclear watchdog agency said on Saturday he believed Iran would reverse its decision to halt UN inspections of its atomic sites
"I am pretty confident that Iran will understand that we need to go within [our] time schedule and that the decision to delay the inspections will be reviewed and reversed in the next few days," International Atomic Energy Agency [IAEA] chief Mohamed ElBaradei said.
The resolution welcomed Iran's agree to open its facilities to pervasive inspection, but said it "deplores" recent discoveries of uranium enrichment equipment and other suspicious activities that Iran had failed to reveal.
"Today IAEA inspectors were expected to arrive in Iran," Rowhani told a press conference in Tehran. "We will not allow them to come until Iran sets a new date for their visit. This is a protest by Iran in reaction to the passage of the resolution."
Asked whether the freeze was indefinite, Rowhani said "yes."
Under an agreement that Iran signed last year, and which the IAEA resolution welcomed, IAEA inspectors are empowered to inspect Iran's all nuclear facilities at any time and without notice.
Rowhani, who chairs the Supreme National Security Council, made clear this dispensation had been suspended. Asked when IAEA inspectors might visit again, he replied: "It could be less than six weeks. It could be more than six weeks. we have not set a date."
He accused the IAEA board of governors of passing a resolution that failed to take account of Iran's behavior toward the UN agency.
"Iran's comprehensive cooperation with the IAEA has not been properly reflected in the resolution, and there is a big gap between realities on the ground and what is said in the resolution. Unfortunately, the views of nonaligned countries, as well as China and Russia, have not been taken into consideration," Rowhani said.
Nonaligned members of the IAEA are known to have tried to tone down the language of the resolution. Western powers, foremost the United States, wanted to send a strong warning to Iran.
The United States suspects Iran is undertaking a secret program to build nuclear weapons. Iran denies this, argues that its nuclear program is only for the generation of electricity.


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>> QUOTE "The investigation is ongoing and politically sensitive."


For sale: nulcear expertise
Emerging details about a Pakistani scientist's network raise questions about how far it spread sensitive technology - and why authorities didn't stop it sooner
BY DOUGLAS FRANTZ AND JOSH MEYER
Los Angeles Times Service
VIENNA, Austria -- Pakistani scientist Abdul Qadeer Khan presided over a nuclear smuggling operation so brazen that the government weapons laboratory he ran distributed a glossy sales brochure offering sophisticated technology and shipped some of its most sensitive equipment directly from Pakistan to rogue countries such as Libya and North Korea.
The brochure, with photos of Khan and an array of weapons on the cover, listed a complete range of equipment for separating nuclear fuel from uranium. Also for sale were Khan's ''consultancy and advisory services,'' and conventional weapons such as missiles, according to a recently obtained copy of the brochure.
Although Pakistan has stopped Khan, the brochure is among the emerging details of the scope of his enterprise. They raise new questions about how far Khan's network spread nuclear know-how and why authorities didn't move against it sooner.
The extent of the ring remains unknown, and even some of Khan's suppliers might not have known they were involved. Inspectors from the Vienna-based International Atomic Energy Agency and intelligence and law enforcement authorities on three continents are trying to reconstruct what they consider the worst nuclear proliferation network in history, and to dismantle it.
Top diplomats in Vienna and senior U.S. officials say they are urgently trying to determine whether blueprints for a nuclear warhead and designs to build the device, which were sold to Libya, and highly sensitive data and equipment shipped to Iran and North Korea, might have spread beyond those countries. In addition, investigators have not been able to account for much of the equipment the network bought.
''Who knows where it has gone?'' said a senior U.S. intelligence official, who described the Bush administration as deeply worried. ``How many other people are there? How widespread was it, and how much information has spread?''
Questions also are being asked about whether the United States missed opportunities to stop Khan. The Pakistani scientist's full-service nuclear trafficking network operated for nearly two decades, often under the cover of his government lab, even as Western intelligence agencies grew more suspicious of him and senior U.S. officials repeatedly protested to Pakistan.
CIA director George J. Tenet said last month that the agency penetrated elements of the smuggling ring in recent years but needed proof to stop it. Other administration officials and outside experts suggest, however, that at least parts of the enterprise could have been shut down.
''If you have penetrated the system, why not stop it before Libya got the weapons design?'' a senior European diplomat based in Vienna asked. ``There is no limitation on a copying machine.''
The investigation is ongoing and politically sensitive. Among the new details that have emerged:
* Sensitive equipment discovered at nuclear-related sites in Libya carried the name of Khan Research Laboratories, adding to what authorities describe as irrefutable evidence that his center illicitly shared its technology with a country under United Nations sanctions for supporting terrorism.
* Evidence indicates that Khan provided Pakistan's state-of-the-art centrifuge machines to North Korea in the late 1990s. Two Western diplomats described the information as preliminary, but they said it deepens concerns about North Korea's progress in enriching uranium for atomic weapons.
* Authorities at the IAEA last month reopened an investigation of an alleged offer by Khan to sell nuclear technology and a weapons design to Saddam Hussein in 1990. The inquiry started in 1995 with the discovery of memos in Iraq, but it hit a roadblock when Pakistan called the offer a hoax.
CONCERNS WERE RAISED
U.S. intelligence officials and diplomats say they have known the broad outlines of Khan's activities since at least 1995.
Three times from 1998 to 2000, President Clinton raised concerns about nuclear technology leaking from Pakistan to North Korea during private meetings with Prime Minister Nawaz Sharif and President Pervez Musharraf, the general who replaced him in a 1999 coup.
In each case, President Clinton was assured that these concerns would be looked into and would be dealt with appropriately, recalls Karl Inderfurth, who as assistant secretary of State was Clinton's chief South Asia troubleshooter.
''To my knowledge, we did not receive any satisfactory responses to our concerns. It is now clear the smoke we saw at the time was indeed the fires being set by A.Q. Khan,'' Inderfurth said.
The U.S. concerns were inherited by the Bush administration, and fears escalated after disclosures in late 2001 that two Pakistani nuclear scientists had met twice that year with Osama bin Laden in Afghanistan.
In response to U.S. pressure, Musharraf removed Khan in March 2001 as head of Pakistan's main nuclear weapons laboratory, where he had developed fissile material for atomic weapons as well as long-range missiles. Musharraf continued to deny that nuclear secrets had leaked, and Khan continued to hold international nuclear conferences and to travel widely.
The denials finally collapsed late last year after Iran was forced to open portions of its nuclear program to IAEA inspectors and Libya voluntarily renounced its weapons program.
Although the Iranian disclosures provided strong hints, reams of documents and nuclear hardware turned over to the United States and IAEA by Libya pointed the finger squarely at Khan.
The most alarming documents were blueprints for the nuclear warhead, say diplomats and U.S. officials involved in the process.
The plans were for a warhead developed in the 1960s by China, which provided early help to Pakistan's nuclear program. Two diplomats in Vienna said Khan sold the blueprints to Libya in late 2001 or early 2002 for as much as $20 million.
Inspectors in Libya also found the equipment from Khan's laboratory and components for two generations of Pakistani centrifuges. Diplomats in Vienna said complete versions of the earliest type of centrifuge, known as the P1, were obtained directly from Pakistan and components for the next generation P2, which was faster and more efficient, were manufactured for the network at a Malaysian plant.
CENTRIFUGES' USE
Centrifuges are used to purify uranium for use as fuel for nuclear power plants or to enrich it to high levels for use in bombs. Experts say obtaining highly enriched uranium or other fissile material is the most crucial step in building an atomic weapon.
Weeks before Libya gave up its secrets, Iran had made a more limited disclosure to the IAEA of how it obtained drawings and components for 500 P1 machines through middlemen associated with Khan's network.
Iran acknowledged in January that it also had received plans for the more advanced P2 from Pakistan. Diplomats said Tehran had taken halting steps to develop those machines.
''What the Iranian and Libyan cases did was produce actual items so that you can't deny them,'' said another diplomat in Vienna. ``Until this breakthrough, I don't think anyone had real hard evidence.''
By the time Pakistan was forced to move against Khan, however, Iran had used his technology to develop its own uranium enrichment cycle, moving closer to what the United States says is an effort to build a nuclear bomb. And Libya had the warhead designs for more than a year.
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Poverty and inequality
A question of justice?
Mar 11th 2004
From The Economist print edition
The toll of global poverty is a scandal. But deploring economic "injustice" is no answer
Corbis
HUNDREDS of millions of people in the world are forced to endure lives of abject poverty--poverty so acute that those fortunate enough to live in the United States, or Europe or the rich industrialised parts of Asia can scarcely comprehend its meaning. Surely there is no more commanding moral imperative for people in the West than to urge each other, and their governments, to bring relief to the world's poorest. And what a tragedy it is, therefore, that many of the kind souls who respond most eagerly to this imperative bring to the issue an analytical mindset that is almost wholly counterproductive. They are quite right, these champions of the world's poor, that poverty in an age of plenty is shameful and disgusting. But they are quite wrong to suppose, as so many of them do, that the rich enjoy their privileges at the expense of the poor--that poverty, in other words, is inseparable from a system, capitalism, that thrives on injustice. This way of thinking is not just false. It entrenches the very problem it purports to address.
Symptomatic of this mindset is the widespread and debilitating preoccupation with "global inequality". Whenever the United Nations and its plethora of associated agencies opine about the scandal of world poverty, figures on inequality always pour forth. (Such figures, though, are always higher than the likely reality: see article) It is not bad enough, apparently, that enormous numbers of people have to subsist on less than a dollar a day. The claim that this makes in its own right on the compassion of the West for its fellow men is deemed, apparently, too puny. The real scandal, it seems, is that much of the world is vastly richer than that. The implication, and often enough the explicit claim, is that the one follows from the other: if only we in the West weren't so rich, so greedy for resources, so driven by material ambition--such purblind delinquent capitalists--the problem of global poverty would be half-way to being solved.
Equity at a price
Certain ideas about equality are woven into the fabric of the liberal state, and quite inseparable from it: first and foremost, equality before the law. But equality before the law, and some other kinds of liberal equality, can be universally granted without infringing anybody's rights. Economic equality cannot. A concern to level economic outcomes must express itself as policies that advance one group's interests at the expense of another's. This puts political and ethical limits on how far the drive for economic equality ought to go. (Strictly practical limits, as well, since too noble a determination to take from the rich to give to the poor will end up impoverishing everyone.) It also means that perfect economic equality should never be embraced, even implicitly, as an ideal. Perfect economic equality is a nightmare: nothing short of a totalitarian tyranny could ever hope to achieve it.
The preoccupation bordering on obsession with economic equality that one so often encounters at gatherings of anti-globalists, in the corridors of aid agencies and in socialist redoubts in backward parts of the world reflects a "lump of income" fallacy. This remarkably tenacious misconception is that there is only so much global income to go around. If the United States is consuming $10 trillion worth of goods and services each year, that is $10 trillion worth of goods and services that Africa cannot consume.
But goods and services are not just lying around waiting to be grabbed by the greediest or most muscular countries. Market economics is not a zero-sum game. America consumes $10 trillion worth of goods and services each year because it produces (not counting the current-account deficit of 5% or so of the total) $10 trillion of goods and services each year. Africa could produce and consume a lot more without America producing and consuming one jot less. It so happens that the case for more aid, provided of course that it is well spent, is strong--but the industrialised countries do not need to become any less rich before Africa can become a lot less poor. The wealth of the wealthy is not part of the problem.
To believe otherwise, however, is very much part of the problem. For much of the 20th century the developing countries were held back by an adapted socialist ideology that put global injustice, inequality and victimhood front and centre. Guided by this ideology, governments relied on planning, state monopolies, punitive taxes, grandiose programmes of public spending, and all the other apparatus of applied economic justice. They also repudiated liberal international trade, because the terms of global commerce were deemed exploitative and unfair. Concessions (that is, permission to retain trade barriers) were sought and granted in successive negotiating rounds of the General Agreement on Tariffs and Trade. A kind of equity was thus deemed to have been achieved. The only drawback was that the countries stayed poor.
Towards the end of the century, many developing countries--China and India among them--finally threw off this victim's mantle and began to embrace wicked capitalism, both in the way they organised their domestic economies and in their approach to international trade. All of a sudden, they are a lot less poor, and it hasn't cost the West a cent. In Africa, too, minds are now changing, but far more slowly. Perhaps that has something to do with the chorus that goes up from Africa's supposed friends in the West, telling the region that its plight is all the fault of global inequality, "unfair trade" and an intrinsically unjust market system.
Heed the call
People and their governments in the West should heed the call of compassion, and respond with policies to help the world's poor, and indeed to advance the opportunities of the (much less desperately) poor in their own countries. Expressed that way, the egalitarian impulse is a good thing, worth nurturing. But a compassionate regard for the poor, as any good Marxist will tell you, is a very different thing from a zeal for economic "justice". That zeal, despite the exemplary fate of the socialist experiment at the end of the 20th century, guides a great deal of thinking still. And it continues to do nothing but harm.
Copyright ? 2004 The Economist Newspaper and The Economist Group. All rights reserved.