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BULLETIN
Friday, 5 March 2004

>> THE "FLYING CARPET" SCANDAL CONTINUED...


FIRST WHIFF OF SCANDAL HITS IRAQ GOVERNMENT
AN INVESTIGATION IS LAUNCHED OVER MYSTERY PLANE FULL OF CASH
1.5 TONS OF NEW IRAQI DINARS, WORTH $20 MILLION
By Eli Lake
New York Sun

BAGHDAD, Iraq - Authorities here are investigating how a plane loaded with almost $20 million worth of the new Iraqi dinars managed to take off from Baghdad International Airport and land in Beirut.
The mysterious aircraft and the 1.5 tons of cash landed on January 15 in Lebanon. There, Lebanese customs agents seized the plane and the money and arrested three Lebanese citizens who were aboard the plane.
Now, Treasury agents attached to the Iraq Survey Group, the umbrella American intelligence organization that has its headquarters here, are trying to get the money back and determine if someone was trrying to steal it. The Iraqi Governing Council is wondering if all that money made its way from Iraq to Lebanon without at least some American involvement.
The affair has the potential to balloon into a scandal that could damage the acting Iraqi interior minister, who was involved. It also could feed complaints pushed by congressional Democrats in America, including Senator Kerry, that President Bush and his Coalition Provisional Authority have mishandled the postwar situation in Iraq.
One person asking questions is Iraqi Governing Council Member Muwaffek al-Rubai, who sits on the council's legal and financial committees investigating the contract. "The question to the CPA is, who has the 19.5 billion Iraqi dinars?" he told The New York Sun. "If you transfer such a container of cash, the transport company and security company has to know what is inside it. They transported the money from Baghdad International Airport to Beirut. They are in charge of the security of the airport."
"People are very mad about this," Mr. al-Rubai said. "I see poor, miserable people with no Mr. food to live on, who have no salary and no job, who have nothing, who are barefoot, in the south. And these people are playing with billions."
After the plane was seized, Iraq's interior minister, Nuri Badran, sent an urgent fax to his counterpart in Beirut asking for the release of the men and the cash.
One issue in the investigation is whether a contract from Iraq's new Interior Ministry to purchase electronic anti-jamming equipment and automobiles from a Cyprus-based concern called Laru Ltd. was in fact an intricate scheme to launder money. The contract has never been shown to the Iraqi Governing Council, nor have the goods been delivered to the Interior Ministry.
Depending on what the Treasury agents and the Iraqi Governing Council conclude, the position of Mr. Badran could be in jeopardy.
Mr. Badran sent an envoy on January 11 to a branch of the Rafidan Bank in northern Baghdad to make sure that a check for 19.836 billion dinars would be cashed when a Lebanese man presented it to the teller the next day, according to the manager of the bank, who spoke to The New York Sun on the condition that he not be named. This source said the money, which was paid in 25,000- and 10,000-dinar notes, was loaded at 10 a.m. on January 12 into three pick-up trucks guarded by American mercenaries armed with machine guns. On January 14, the Lebanese man, who the bank manager identified only as Akil, returned and cashed another check for 164 million dinars.
On the evening of January 15, all of cash was loaded onto a cargo plane flown by Flying Carpet Airlines at Baghdad International Airport, two Baghdad sources with knowledge of the affair told the Sun.
Unlike Royal Jordanian, which handles regular flights in and out of Baghdad, Flying Carpet's routes are notregularly scheduled. According to one American official who works on on logistics at the airport, "they call us when they are coming in and we don't ask any questions."
Shepherding the cash on the flight were a Lebanese businessman, Muhammad Issam abu Darwish; a former member of Lebanon's security services, Richard Jreisati, and Michael Mukattaf, a Lebanese currency exchanger whose father in law is the former president of Lebanon, Amin Gemayel.
The three men were detained when they arrived in Beirut by two Lebanese customs officials, Major Ibrahim Shams Eddin and his supervisor Ahmand Sulli, according to a legal statement from the office of the Lebanese Prosecutor General summarizing the incident. On that evening, Mr. Badran faxed a letter to the Lebanese Interior Ministrysaying the men were on official Iraqi business and that the money was part of a contract for security equipment. Two days later, a photograph of the fax including Mr. Badran's personal cell phone number, showed up in Lebanon's leading newspaper, An-Nahar.
The security contractor in charge of the airport, which is also an American military base, is Custer Battles LLC, a Virginia based security company whose executive board boasts former members of the American special forces and the CIA. When the Sun asked Don Ritchie, the chief of security for the airport and an employee of Custer Battles, what he knew about the January 15 flight to Beirut, he said,"According to corporate counsel, we should not talk about this at all." Indeed, the contract between Custer Battles and the Coalition Provision Authoritypledges that the contractor not to talk to the press.
One reason why Mr. Ritchie might not be talking is because after a hasty investigation by the Coalition Provision Authority's inspector general, Robert Dawes, that concluded there was no wrongdoing, a financial task force attached to the Iraq Survey Group is still asking questions. As on senior American official said," We are looking to make sure the funds were not absconded with; the funds are fleeing in essence. We don't want funds being used by insurgents to kill our soldiers or coalition soldiers. It's worth a second look."
The first look from the Coalition Provision Authority was quite cursory. According to two members of the Iraqi Governing Council who asked not to be named, less than two days after the Lebanese authorities seized the aircraft, the chief of the authority, L. Paul Bremer, told the Iraqi Governing Council in closed session that his staff had looked into the transaction and found nothing wrong. When Mr. Dawes did get around to investigating the matter, he only looked into whether CPA officials were in any way involved. But that investigation did not ask whether contractors like Custer Battles or other government agencies, like the CIA,may have played a role in helping transfer the money to Lebanon. Nor did this investigation examine whether Mr. Badran was engaged in legitinate business with Laru.
Mr. Badran is the son-in-law and close associate of an Iraqi Governing Council member, Ayad Alawi. Mr. Alawi's Iraqi National Accord has received CIA funding since the early 1990s. After the liberation of Baghdad, the INA offices were briefly in the same building as the CIA station in Baghdad. Since then the INA offices have moved to the building that once housed the national Baath Party headquarters, where Mr. Badran's main offices are in his duties as interior minister. Mr. Badawi declined repeated requests to be interviewd for this story.
An American spokesman for the Interior Ministry, Shane Wolfe, said there appeared to be nothing wrong. He said, "In this case the contract called for the payment in new Iraqi dinars. Since the contractor needed to pay most of his suppliers in dollars he needed a way to convert the money. The difficulties in transfering money and opening bank accountsplayed a role in this."
Despite an agreement from Lebanese authorities to return the money, the dinars have not yet made their way back to Baghdad.
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>> CHARTS
http://www.heritage.org/Research/MiddleEast/bg1730.cfm

Models and Policies for Oil Production, Revenue Collection, and Public Expenditure: Lessons in Iraq
by Ariel Cohen, Ph.D.
Backgrounder #1730


March 4, 2004 | Executive Summary | |



Countries in both the developed and the developing worlds rely on a stable and secure supply of oil. However, abuses and misallocations of oil revenues often lead to social and political instability and, at times, armed conflict. The broader the political cooperation and public consensus, and the greater the transparency in the management of oil revenues, the greater the chance that the supplier will remain stable.

The challenge of devising optimal models and policies for oil production in developing or transitional economies is formidable. Resource-rich countries tend to fall behind non-oil economies in economic development, rate of growth in gross domestic product (GDP), GDP per capita, and human development.1 Oil often derails democratic development and causes civil strife and civil war. Other problems such as graft and "rent-seeking behavior" regularly accompany oil exploration and exploitation.

Many have noted that lagging institutional development, democratic deficiencies, and rampant corruption are the downside of the windfall profits from large-scale oil production. Political control of those natural resources makes political power paramount. Thus, politics becomes a competition for a near total control of wealth, resulting in a zero-sum game with devastating results for democratization and civil society.2

Simply put, unstable countries make poor oil suppliers. The examples abound, from Iraq to Iran to Venezuela.

Moreover, experience and research demonstrate that private ownership of any industry increases production and reduces costs anywhere in the world.3 Thus, consumers of energy should advocate privatization of the oil and gas sector worldwide. However, because of the industrial economies' thirst for oil, it is likely that Western governments and international institutions will remain quiet on privatization while denouncing the excesses of producers and abuses of natural resource property rights and revenue.

This paper analyzes current models of ownership and revenue management in the hydrocarbon sector, as well as their political implications, and suggests policies on property rights, tax collection, and public expenditure. The achievements in making the rule of law and transparency a paramount public policy and business value in the oil and gas industry have been limited at best.

Finally, this paper addresses some challenges that the Coalition Provisional Authority (CPA) and the Iraqi Governing Council (IGC) face in restoring and managing Iraqi oil production. It also offers recommendations for the Iraqi oil industry and public sector.



Production Mode: Privatization Versus State Management
The Iraqi oil industry is a case in point. Saddam's predatory dictatorship succeeded in bankrupting the country with the world's second largest oil reserves (after Saudi Arabia). The oil sector formerly provided more than 60 percent of Iraq's GDP and 95 percent of its hard currency earnings. Yet Iraq's GDP for 2001 was estimated at only about one-third its 1989 level. Iraq is also hobbled by $200 billion in foreign debt and reparation claims. This fiscal devastation is the result of a number of factors, including nationalization of the country's oil sector in the 1970s, extensive central planning of industry and trade, the 1982-1988 war with Iran, the 1990 invasion of Kuwait and subsequent Gulf War, and the U.S.-led war in 2003.

According to senior Iraqi Oil Ministry officials, Saddam ran the oil industry as his private kitty--with devastating results for the infrastructure and the treasury.4 Moreover, Saddam's disastrous policies led to Iraq's OPEC quota being taken over by other producers, primarily Saudi Arabia and Venezuela.

Importance of Privatization
Critics point out that centralized, state-owned industrial capacity in the oil sector is less successful than wholly owned private industry or public-private partnerships in attracting investment, integrating new technology, introducing international accounting standards and practices, boosting productivity, and observing environmental standards.5

Moreover, as many of the OPEC members exceed their production quotas, leading to a greater supply of oil and lower prices, it is not clear whether the countries that follow the centralized planning model are indeed maximizing their oil revenue.



Political Factors
Political underpinnings are crucial in forging a workable political model for oil exploration and exploitation. In the Iraqi case, the future model will probably need both to be popularly accepted and to be incorporated into the new constitution. Otherwise, civil strife may develop.

Oil disputes played a large part in the Biafra war in Nigeria in the 1960s, in which 1 million-3 million civilians were starved to death or bombed.6 Recently, tribal unrest in Nigeria resulted in Western and local oil workers being taken hostage.7 Secession movements in Indonesia parallel the distribution of oil, as the country's smaller and potentially oil-rich islands attempt to secede from overpopulated Java.8 Such conflicts should be avoided in Iraq, which is a relatively new political entity created by the British Empire after the defeat of the Ottoman Empire in World War I.

Since the creation of Iraq, relationships between the Kurds, the Sunni Arabs, and the Shi'a Arabs have been uneasy at best and murderous at worst. The Sunni Arabs have dominated Iraq since the Ottoman and British eras.

Beyond ethno-religious strife, clans and families are the smallest political units, and their interests may need to be taken into account in devising a stable political solution that allows equitable and sustainable sharing of oil revenues. Thus far, the process involved in drafting an Iraqi constitution has been a painful one, and there is no date certain by which agreement will be reached and the document will be ready.9 As Iraq develops its own constitution, principles of protection of private property must be extended to the oil industry and oil reserves.

Property Rights in Iraq
The launch of the Iraqi oil industry in 1925 was undertaken by a private consortium, the Iraq Petroleum Corporation, owned in equal shares (23.75 percent) by British Petroleum and Shell, Companie Francaise de Petroles, and two constituent parts of Exxon Mobil. Nubar Gulbenkian, the famous "Mr. Five Percent," owned the remaining 5 percent. The consortium was expropriated in 1964 and fully nationalized in 1972.10

Theoretically, if the property rights of the original consortium were restored, new companies would participate in bids for new field projects and the rehabilitation of existing oil infrastructure. In addition, the future government of Iraq might recognize some of the contracts concluded by the Saddam Hussein regime, such as the Russian Lukoil West Qurna concession, as valid. The Iraqi government could also examine other production-sharing agreements that Saddam's regime signed with China, France, and other countries.



Economic Efficiency
Partial privatization, which the CPA and the Provisional Council are pursuing, and low taxation are the right policies to follow. However, more needs to be done to achieve eventual privatization of reserves and extraction. As Iraqi needs for reconstruction are high, one way to increase the cash flow up-front is to sell off the reserves and tax the future oil revenues. This would better address the immediate needs of the Iraqi people without giving up natural resource royalties and rents.

The United States--through its senior representatives of the Departments of State and Defense in the CPA and its advisers on the ground, with the assistance of the International Monetary Fund (IMF), World Bank, and other international and non-governmental organizations (NGOs)--should begin advising the leaders of Iraq's three primary ethnic groups to establish policies that would lead to a thriving modern economy. These policies should be based on "best practices" developed around the world during the largest government privatizations in history, during the 1980s and 1990s.

Institutional Development and Controls
One of the greatest challenges in privatizing Iraqi oil and attracting foreign investment (in addition to building political consensus and building the institutions to implement it) will be ensuring equity, transparency, and the rule of law. To accomplish these goals, Iraqi political and government institutions, donor representatives, and international agencies should coordinate their activities while each plays its distinct role.

Courts, parliamentary committees, commissions, government accounting offices, ombudsmen, and chief prosecutors' offices may have competing jurisdictions on privatization. (Regrettably, this was often not the case in the great 1990s privatization in post-communist countries.) Legal and administrative challenges may increase public control while simultaneously miring the process in numerous court hearings and investigations. While such involvement, especially of Iraqi institutions, may increase transparency and public "buy-in," it may also slow down the process and open it to frivolous challenges. Indigenous NGOs and media also have a role. However, it is all too easy for politicians and unprofessional journalists to denounce and undermine privatization through demagoguery.

The Eastern European experience demonstrates that a strong executive branch with political commitment and a public mandate for privatization, combined with meticulous insistence on open and competitive bidding, can carry the day. In that respect, the process could be facilitated by inviting private foreign companies and officials with experience in the German Privatization Agency (Treuhandanstaldt), Estonian Privatization Agency, and similar organizations to serve as advisers to the Iraqi government.

Revenue Collection and Distribution Mode
Best management practices and financial controls in the taxation and expenditure stages of oil revenue accrual and disbursement are essential. The history of oil-rich states, from Saudi Arabia to Nigeria, provides ample evidence of a cycle of high revenue/high expectations/high expenditure followed by an oil market slump, a decline in revenue, and social unrest caused by fiscal and budgetary adjustments.11

These states, however, failed to use centrally managed oil revenues to jump-start development and prevent precipitous declines in their GDP per capita. Saudi GDP per capita peaked in 1981, when both the U.S. and Saudi Arabia had a per capita GDP of about $28,600. In 2001, U.S. GDP per capita was $36,000, while Saudi Arabia's was less than $7,500. According to the U.S. Embassy, "Per capita income [in Saudi Arabia] will continue to decline unless economic growth increases significantly and/or the birth rate drops."12

Political Factors
Iraqi policymakers should be aware of a "dual hazard" in politics of revenue taxation and expenditure. On the one hand, Iraq has a large, growing, and impoverished population whose basic needs are still unmet. Their representatives are likely to press for higher tax rates and deficit budgets and to lobby for borrowing against future oil receipts. Even with projected increases in oil production and revenue growth, Iraq will still be in the poor category or in the low end of the medium-income developing countries. However, if the Iraqi poor, especially the Shi'a, are excluded from budgetary decisions, such factions as Islamist Shi'a radicals (often connected to Iran), Sunni Islamists connected to al-Qaeda, and Ba'athists can be expected to use this exclusion as a pretext for agitation against the Iraqi Government Council and its pro-American successor.13

Iraq's challenge is to educate the political and technocrat classes, and the elites in general, on the dangers of high taxation and unbridled expenditure. Macroeconomic instability and a negative investment climate can be as damaging in the long term to a national economy as corruption.

Institutional Development and Controls
As Terry Lynn Karl wrote:

When states do not have to depend on domestic taxation to finance development, governments are not forced to formulate their goals and objectives and the scrutiny of citizens who pay the bills.... Excessive centralization, remoteness from local conditions, and lack of accountability stem from this financial independence.14
Under Saddam, Iraq was a good case in point. The dictator and the Ba'ath elites in Baghdad made all the economic decisions, such as nationalizing oil assets and using revenues to pay for the military, including programs to build weapons of mass destruction.

In post-Saddam Iraq, institutional controls on the revenue stream are vital. These should include creation of competent and independent central fiscal and budgetary bodies; a strong police force, including organized and white-collar crime divisions to prevent oil smuggling; and a tax collection agency sophisticated enough to prevent and investigate tax evasion. Such services need to be strong enough to stand up to the Iraqi national oil company and the international oil companies, which will handle an increasing number of exploration and extraction projects.

Since the Iraqi state most likely will remain weak and fractious after the U.S. transfers sovereignty on July 1, 2004, it should divest itself from providing most nonessential services, which can be delivered by the privatized non-government sector. Market demand, not government programs, is more likely to reflect the needs of the Iraqi people. Since government revenues can be generated up-front from privatization, keeping tax rates low (around the current 15 percent) is advisable.

The government can shift provision of services to the private sector while building a constitutional barrier to keep budget deficit spending below a certain level, such as 3 percent of GDP. Such a safeguard would keep the budget within reasonable limits, make the Iraqi dinar more stable, and instill both fiscal and budgetary discipline among the elite. Without such discipline, the state will attempt to use expenditures to buy its legitimacy.

Given the fragility of the Iraqi state--the combined result of Saddam's regime, the current conflict, and deep ethno-religious fissures--state dependence on oil revenues should be avoided. As in many other countries that have experienced cyclical oil wealth, windfall oil revenues can be stored in non-dinar, off-shore accounts--an Iraqi oil fund.

What Should Be Done
The Coalition Provisional Authority and the Iraqi Governing Council should:

Initiate a broad public debate about development of the rule of law and property rights, including mineral rights. This debate should include Western economists, Iraqi officials, and the public and should cover the future of oil production, taxation, and the distribution of income. As part of the debate, the CPA and IGC should conduct a comprehensive public campaign aimed at privatization of oil and gas industry assets and reserves, as well as broad institutional reform. Many Iraqi officials and other members of police and media elites are not aware of the macroeconomic factors that support privatization, keeping the oil revenue out of government's hands, and instituting publicly accountable and transparent decision-making processes on oil production.
Bolster property rights and the rule of law, including enabling legislation and regulations on oil and gas production that allow private ownership of all productive assets and minerals. This includes fostering an independent judiciary, training judges to handle complicated civil litigation such as energy law, and allowing international arbitration, including enforcement of arbitral awards.
Conduct a comprehensive audit of state-of-the art techniques of oil privatization, revenue generation, and management. This information should then be disseminated to the Iraqi political leadership, management of the oil and financial sectors, and broader elites. U.S. institutions (e.g., the CPA and U.S. Agency for International Development), major oil companies, nonprofit organizations, the IMF, and the World Bank should all be involved in this undertaking.
Ensure that the privatization process is transparent and perceived as being conducted in the interests of the Iraqi people.
Develop safeguards to prevent smuggling and diversion of oil and refined products from "well to wheel" and create a law enforcement climate in which the diversion for private use and theft of crude oil, refined products, or revenue is reported, prosecuted, and punished.
Improve revenue collection, such as taxation of oil sales, by establishing independent audit procedures, supporting public supervision by bona fide NGOs, and developing an independent media.
Assist in creation of a national, private, professionally and independently managed oil fund. A modified version of the Alaska arrangement, allowing for direct deposits of revenues into the private bank accounts of the Iraqi people, would go a long way toward legitimizing the future Iraqi government and privatization of oil assets.
Develop political legitimacy and transparency of oil revenue expenditure through open budgetary and legislative processes. As part of the open budgetary process, budgetary drafts prepared by legislative and governmental budgetary offices should be publicly available and discussed openly in the legislature before the final vote. Budget-watching indigenous NGOs should be allowed to participate in such discussions, thus enhancing the development of civil society in Iraq. Once the security situation improves, both the government and non-government sectors should be provided international technical assistance on budgetary issues.
Oil Revenue Management and International Energy Security
A private and transparently managed oil and gas sector is vital to global energy security and thus in the national interest of the United States. Returning Iraq to the international oil markets is important for the Iraqi people, the United States and other Western countries, and the global economy. This would provide locally generated revenue to finance post-war reconstruction, provide an additional 2 million-4 million barrels per day to the oil market, and relieve the U.S. of the financial burden of Iraqi reconstruction.

Iraq's output prior to the Gulf War was 3.5 million barrels per day, while the oil discovery rates (50 percent to 75 percent) on new projects in the 1990s were among the highest in the world. Given Iraq's own output projections, it may be capable of pumping as much as 6 million barrels (by 2010) to 7 million barrels (by 2020) per day--more than double current production levels. In view of demand projections, especially increased demand from the large Asian economies such as India and China, the global market can easily absorb such an increase. The U.S. Energy Information Administration forecasts that oil consumption in Asia will grow by 55 percent from 2003 to 2025 and that natural gas consumption will increase by 100 percent.15

Generating, accounting for, managing, and expending this revenue for the Iraqi people is a huge responsibility that is complicated by the state-owned and state-managed infrastructure, poorly defined property rights, absence of a functioning legal system, a shattered public service, lack of consensus on how to own and exploit the oil reserves, and the large number of Iraqi poor with pressing needs.

Privatization should be undertaken only after a public education campaign and a good-faith effort to build a consensus among the Iraqis that private ownership of industrial assets, including commodities, is economically more efficient than a government-owned system.

Oil revenue from Iraqi oil should be transparently managed, adequately taxed, and protected from government abuse and corruption. To facilitate this process, creating a professionally managed oil fund should be seriously considered. Such a fund would protect oil revenues from the long hands of the Iraqi politicians. As in the Alaska model, part of the revenue should be distributed directly to the bank accounts of every Iraqi.

These are only some of the answers and challenges facing state oil revenue management. Those tasked with solving these problems owe the people of Iraq their best efforts not to repeat the abuses of the past.

Ariel Cohen, Ph.D., is Research Fellow in Russian and Eurasian Studies and International Energy Security in the Kathryn and Shelby Cullom Davis Institute for International Studies at The Heritage Foundation. This paper is based in part on a paper presented by the author at the Seminar on Public Policy of Oil Finance and Revenues Management, CSIS/Baker Institute, in Washington, D.C., on November 20, 2003. The author would like to thank Heritage Foundation research assistant Will Schirano for his asssistance in preparing this paper. He is also grateful to his colleagues Marc A. Miles and James Phillips for their helpful comments.


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1. Svetlana Tsalik, "The Hazards of Petroleum Wealth," in Caspian Oil Windfalls: Who Will Benefit? (New York: Open Society Institute, 2003), p. 1.

2. Benn Eifert, Alan Gelb, and Nils Borje Tallroth, "Managing Oil Wealth," Finance and Development, Vol. 40, No. 1 (March 2003), at www.imf.org/external/pubs/ft/fandd/2003/03/eife.htm (November 11, 2003). According to the authors, "Work on the theory of rent-seeking behavior illustrates how rent reorients economic incentives toward competition for access to oil revenues and away from productive activities, especially in nontransparent environments characterized by political discretion and unclear property rights."

3. World Bank, "Privatization: Eight Lessons of Experience," Policy Views from the Country Economics Department, July 1992.

4. Interviews with Mutasam Akram Hasan and Dr. Mussab H. Al-Dujayli, Istanbul, Turkey, January 29, 2004. Thus, for example, forcing high production levels without investment in modern technology and maintenance has resulted in massive penetration of water into the Kirkuk oil fields.

5. Ariel Cohen and Gerald P. O'Driscoll, Jr., "The Road to Economic Prosperity for Post-Saddam Iraq," Heritage Foundation Backgrounder No. 1633, March 5, 2003, at www.heritage.org/Research/MiddleEast/bg1633.cfm.

6. Federation of American Scientists, "The Biafra War," at www.fas.org/man/dod-101/ops/war/biafra.htm (November 11, 2003).

7. Oronto Douglas, Von Kemedi, Ike Okonta, and Michael Watts, "Alienation and Militancy in the Niger Delta: A Response to CSIS on Petroleum, Politics, and Democracy in Nigeria," FPIF Special Report, July 2003, at www.fpif.org/papers/nigeria2003.html (November 16, 2003). See also "Hostages from 4 Countries Head Home from Nigerian Oil Rigs," CNN.com, August 5, 2000, at www.cnn.com/2000/WORLD/africa/08/05/nigeria.hostages.reut (November 11, 2003), and "Nigeria: Forces Head for Oil Rigs," Africa Online, May 1, 2003, at www.africaonline.com/site/Articles/1%2C3%2C52870.jsp (November 11, 2003).

8. "Aceh's Rebel Chief Demands Full Independence from Indonesia," CNN.com, November 10, 1999, at 216.239.41.104/search?q=cache:G-37xS6574wJ:www.cnn.com/ASIANOW/southeast/9911/09/indonesia.aceh.03/
+aceh+independence+oil&hl=en&ie=UTF-8 (November 11, 2003). See also Embassy of Indonesia (Ottawa), "Rebels Urge Mobil Oil to Leave Aceh Province for Safety Reasons," January 4, 2001, at www.indonesia-ottawa.org/news/Issue/Aceh/010401_IO_01.htm.

9. "Iraqi Constitution Delayed," BBC World, October 1, 2003, at newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/2/hi/middle_east/
3153732.stm (November 12, 2003).

10. Martin Hutchinson, "What to Do with the Oil," United Press International, March 24, 2003.

11. Tsalik, "The Hazards of Petroleum Wealth," p. 7.

12. Embassy of the United States (Riyadh), "Saudi Arabia 2002 Economic Trends," May 2002, at riyadh.usembassy.gov/wwwhet02.html (November 16, 2003).

13. Herbert Docena, " No Money, No Play: US on the Brink in Iraq," Asia Times, October 10, 2003, at www.atimes.com/atimes/Middle_East/EJ10Ak01.html (November 16, 2003).

14. Terry Lynn Karl, The Paradox of Plenty: Oil Booms and Petro-States (Berkeley: University of California Press, 1997), p. 190, quoted in Tsalik, "The Hazards of Petroleum Wealth," p. 7.

15. Indo-Asian News Service, "India, China Will Drive Global Energy Use Increase," Asian Tribune, May 2, 2003, at www.asiantribune.com/show_news.php?id=4059 (November 16, 2003).

? 1995 - 2004 The Heritage Foundation
All Rights Reserved.
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Restarting the Flow: Restoring Iraqi Oil Production
by Ariel Cohen, Ph.D.
Backgrounder #1693

October 1, 2003 | |





The Iraqi people desperately need to have their oil flowing again to the global market. Restarting the flow of Iraqi oil would be a win-win proposition, as not only the Iraqis, but also consumers around the world would benefit from bringing the Iraqi oil supply back on line.

The main impediment to increasing Iraqi oil production at this point is lack of security--terrorist sabotage and looting. The recent attacks on pipelines and power stations are disrupting the flow of Iraqi oil and are clearly aimed at further impoverishing the Iraqis and even further disrupting their lives.

Since the end of major hostilities, saboteurs have bombed Iraqi pipelines more than eight times, causing $7 million per day in lost revenue.1 The culprits, including the remnants of Saddam Hussein's Ba'ath party and Islamic radicals, are following the old Leninist adage, "the worse, the better." They are betting on an upsurge in resistance to the U.S. presence in Iraq if they can severely disrupt the country's gasoline, electricity, and cooking gas supply. Saddam loyalists, local Islamist militants, and foreign jihadis who come to Iraq to fight the "infidels" believe that by escalating Iraq's suffering they can drive the Americans back across the ocean.

It is also true that the lack of security, the scarcity of gasoline and other fuels, and the intermittent supply of electricity are impeding the post-war reconstruction. Today, Iraq is producing less than half as much oil as it pumped before the war.

Saving Iraqi Oil Production
The attacks on the oil infrastructure are part of a premeditated campaign by the remnants of Saddam's regime and radical Islamist mujahideen organizations to stop the flow of Iraqi oil, harm the people of Iraq, and disrupt global oil markets. A secret memo dated January 23, 2003, reportedly issued by Saddam's security services, found in Iraq after the war, and published in the London-based Saudi daily Al-Hayat, directs pro-regime elements to destroy power generating stations and the water supply.2 It is likely that Saddam supporters and other terrorists are applying the same tactics to the oil industry.

Iraq is pumping 900,000 barrels per day--considerably less than the pre-war production level of 2.2 million-2.4 million barrels per day. The target of achieving pre-war production by the end of 2003 is in jeopardy, with further increases also in question. While Halliburton subsidiary Kellog, Brown and Root (KBR) and the U.S. Army Corps of Engineers are rehabilitating the Iraqi oil infrastructure, their mandate does not include providing pipeline security.3

The Iraqi oil ministry has begun paying tribal leaders in the south to keep saboteurs and thieves away from the pipelines.4 However, in at least one case, Sheikh Hatem Al Obeidi, an influential tribal leader who was on the government payroll to prevent attacks, instead abetted sabotage and was arrested by U.S. troops.5 Without security, neither the U.S. nor the Iraqis can repair the damage caused to Iraq's oil industry by the war or rehabilitate Iraq's infrastructure, which had fallen into a state of grave disrepair under Saddam.6

Meanwhile, the continued attacks are hurting both the Iraqi and Western economies. The West is still suffering from relatively high oil prices, as the economic recovery remains tenuous, and the Organization of Petroleum Exporting Countries has cut production by 900,000 barrels a day.7 As a result of the drop in Iraqi oil production and the Iraqi fiscal shortfall, U.S. taxpayers will need to subsidize 50 percent of the $6 billion Iraqi budget for fiscal year (FY) 2004.

On September 7, President Bush announced that he would request $87 billion for assistance to Iraq and Afghanistan for FY 2004, with the lion's share going to Iraq.8 A boost in oil production would remedy the Iraqi economic crisis, give the Iraqi people hope, and decrease levels of needed U.S. assistance funding.

Sabotage and Looting
The key impediments to reconstructing the Iraqi oil industry and raising its oil revenues are attacks on the 4,350-mile-long pipeline system and the 11,184-mile-long electric grid.9 The northern pipeline, which runs from Kirkuk to the Turkish port of Ceyhan, was attacked twice in June,10 twice in August, and twice again in September. After an attack on August 16, the pipeline burned for more than 48 hours. The pipeline from the giant Rumeila field in the south has also been bombed twice.

Security analysts divide these attacks into two distinct categories. The first is looting and plunder of the oil infrastructure, including fields, pumping stations, pipelines, and refineries. Organized crime is also raising its head, as demonstrated by the recent interception of a barge with 1,000 tons of stolen Iraqi oil.11 Smugglers usually ship oil to Iran, which reflags and re-exports it.

A much more serious threat, however, comes from groups opposing the U.S. and coalition presence, U.N. involvement, and the elements of Iraqi society participating in the Governing Council.

Thus far, senior U.S. officials, the Coalition Provisional Authority (CPA), and the the U.S. military have not publicly identified the main culprits in the pipeline attacks, which suggests that intelligence is insufficient.12 The ferocious terrorist bombings against personnel and the infrastructure continue.

The main threat comes from three types of groups:

Networks of the old regime operating underground, such as Ba'ath party officials, Iraqi intelligence officers, and Fedayeen Saddam militia.
Radical Sunni groups, such as the predominantly Kurdish Ansar al-Islam; Vanguard of Muhammad's Army; and others whom President Bush has characterized as "Al-Qaeda type fighters" and who are part of the international jihad movement.13 In his September 7 address to the nation, President Bush called Iraq "the central front of the war against terrorism."14 Anti-Western fighters are crossing into Iraq from Syria and the adjacent Gulf states, including Saudi Arabia.15 Funding for their movements comes from rich individuals and foundations in these same Gulf states and from the global radical Islamic community.
Extremist Shi'a groups, affiliated with Mullah Muqtada Sadr, suspected of attacks on leading Shi'a clerics.16 As the result of the assassinations, a militia called the Badr Brigade--the armed wing of the Supreme Council for the Islamic Revolution in Iraq--was allowed to operate after attempts to ban it by the coalition. Elements of the Lebanon-based Hizballah, an organization on the U.S. terrorism list, and other radical pro-Iranian groups and agents are also present in Iraq.


Key Iraqi pipelines have been paralyzed repeatedly by terrorism. On August 13, the day Iraq started pumping oil to the Turkish port of Ceyhan, terrorists attacked the Northern Kirkuk-Ceyhan pipeline. The same pipeline was attacked again on August 30.17 The pipeline, with a throughput capacity of 1 million barrels of crude per day, was attacked four times between May and September.18 Attacks occurred near the towns of Haditha and Hawja, which are close to the largest Iraqi oil refinery at Bayji.

Iraqi oil production is also suffering from years of centralized, state-run management of the oil sector, long-term lack of investment, and inadequate technical maintenance of the oil fields under Saddam. The absence of hard currency reserves to repair and restart the oil industry is slowing production. However, no investment and expansion are possible unless the physical security of the vast Iraqi oil infrastructure can be assured.

Pipeline Security: Planning and Execution
The military component of seizing Iraq's oil infrastructure during the war was brilliantly planned and executed. Unlike during the Gulf War, when Saddam succeeded in setting hundreds of Kuwaiti oil wells on fire, fewer than 10 wells were ignited in Iraq. U.S. and British troops seized and secured the oil fields, refineries, and pipeline infrastructure with minimal casualties and material damage. The final draft of an internal post-war report for the Joint Chiefs of Staff gave high marks for pre-war gaming and combined operations during the time of combat.

However, the post-war planning received the lowest grade, with "capabilities that fell short of expectations or needs, and need to be readdressed through new initiatives."19 CPA Administrator Paul Bremer has admitted that the U.S. forces are "stretched thin."20 Securing the oil infrastructure was an important part of post-war objectives, but the plans for post-war occupation of Iraq were not ready when the war started, and the Pentagon was forced to alter its original plan as the post-war violence escalated.21 Thus, it is not surprising that 80 percent of the damage to Iraq's oil infrastructure occurred after the war ended.22

Five months after the war, the U.S.-led coalition force in Iraq consists of 140,000 American troops and 20,000 international troops, including one British division and one Polish-led division. They are aided by over 54,000 Iraqi security personnel, including 37,000 police, 12,000 facility guards, and 5,000 border police and civil defense corps.

On September 4, in Baghdad, Secretary of Defense Donald Rumsfeld called for putting up to 75,000-100,000 former Iraqi officers and soldiers back in uniform to protect their country and fight its enemies. He also criticized Saudi Arabia and Syria for not doing enough to seal Iraq's borders.23

Faced with attacks on oil pipelines, the CPA is working to expand the Iraqi force charged with infrastructure protection. During this past summer, it discussed the provision of training to this security force with Kroll Associates and other private U.S. companies.24 With more international troops coming to Iraq, they can also assume responsibility for guarding the pipelines and infrastructure and training the Iraqi security forces, which will be tasked with protecting the pipelines in the future. As long as security is not restored, however, the American taxpayer will pay for this security force.

Criticism on the Hill and Beyond
Senators and Representatives, including prominent Republicans, as well as retired senior military officers have criticized the planning, numbers, and troop deployments in Iraq. Senator Richard Lugar (R-IN), chairman of the Senate Foreign Relations Committee, stressed his criticism of the planning done for post-war deployment but called on his colleagues to "rejoice" that the plan has been corrected. Representative Curt Weldon (R-PA), vice chairman of the House Armed Services Committee, expressed reservations about the planning for the war last winter.25

Senator Kay Bailey Hutchison (R-TX), Senator John McCain (R-AZ), columnist George Will, and Weekly Standard editor William Kristol--all outspoken proponents of Saddam's removal--have criticized the Administration for post-war mishaps.26 It is less surprising that Democrats, including Senators Joseph Biden (D-DE), ranking Democrat on the Senate Foreign Relations Committee, and Jack Reed (D-RI), a West Point graduate who served with the 82nd Airborne, are also criticizing the Administration for mistakes in post-war planning and deployment.

Among senior generals critical of the post-war performance in Iraq is General Anthony Zinni, the former head of the U.S. Central Command who has extensive experience in the Middle East and serves as a consultant to the U.S. State Department.27 The most prominent proponent of a bigger Army and a greater deployment in Iraq is General Eric Shinseki, the recently retired Army Chief of Staff, who called for "several hundreds of thousands of soldiers on the ground" and warned against a "twelve division strategy for the ten division army."28

Even if the actual size of the U.S. Iraqi deployment is not increased, it has to be refocused on intelligence and training of the Iraqi forces, while the number of coalition troops from other countries must go up, according to General John Abizaid, the current head of Central Command.29 This is also the opinion of the pre-eminent British military historian, John Keegan.30 Increased intelligence collection, anti-terrorist operations, and training should become the focus of the U.S.-led force in Iraq.

Protecting Iraqi Oil Revenue
The Bush Administration has issued an executive order barring claims in U.S. courts against Iraqi oil or proceeds from it.31 It has also coordinated with other permanent U.S. Security Council members--the United Kingdom, France, China, and Russia--on the imposition of a moratorium on Iraq's national debt.

The U.S. should further coordinate its actions with companies and sovereign claimants (states) to delay reparations for Gulf War damages and other claims. Iraq needs breathing space in order to restart its cash flow and get its oil industry up and running again.

Providing Security for the
Iraqi Oil Infrastructure
Iraq's oil reserves are the third largest in the world after Russia and Saudi Arabia. However, only 15 of its 73 discovered giant and large fields have been developed.32 Vast parts of the country remain unexplored.

According to current estimates, the investment needed to bring Iraqi production to about 3 million barrels a day will exceed $3 billion over the next two to three years. Over the next 10 years, $35 billion-$40 billion will be needed to boost production from the current 1.2 million-1.4 million barrels per day (MBD) to the pre-1979 production level of 5-6 MBD.

Before serious reconstruction work can begin, however, the physical security of the infrastructure needs to be achieved. To this end, the Bush Administration, including the CPA, and the Iraqi Cabinet should:

Conduct an assessment of security needs to provide for infrastructure protection in conjunction with the Iraqi oil ministry. Before serious reconstruction of the oil industry can begin, the coalition and the Iraqi cabinet must be able to assure physical security of Iraqi energy infrastructure.
Increase the number of Iraqi guards as needed to provide security. However, the rank-and-file and all officers must be adequately screened to root out Saddam's hard-core supporters and Islamic radicals.
Utilize coalition forces, especially the British, to train Iraqi security forces, including pipeline security units. British instructors have earned high marks the world over providing security and military training.
Hire an international security company to administer pipeline security and train the Iraqi security forces tasked with protecting the pipelines to complement military training.
Train the guards for the task at hand; deployment without training is self-defeating. The CPA has cut the training time for Iraqi police from 12 weeks to eight, and the quality of this force leaves much to be desired.33 Similar shortcuts in training for pipeline protection forces could lead to undesirable results.
Develop and conduct a public information campaign explaining to the Iraqis the importance of pipeline security and the resultant oil revenue. Such a campaign should emphasize the direct link between oil revenue and the provision of basic services and the growth in living standards.
Design a technological package to enhance infrastructure security, using satellite imaging, unmanned aerial vehicles/drones, video cameras, and sensors. This package would be integrated with the security provider (state or private).
Provide additional funding to repair the oil infrastructure. The rundown state of the oil infrastructure will require significant investment: up to $3 billion per year to get it up and running again. These funds can be provided on credit to the Iraqi Governing Council or the oil ministry, to be repaid from future oil revenues.
Work with the Iraqi oil ministry leadership appointed by the Coalition Provisional Authority and the Council to intensify the purge of former Ba'ath officials from the oil ministry and the oil industry.
Conclusion
Without adequate security, Iraqi oil will not reach global markets. Rebuilding the Iraqi oil sector through Western investment will not work as long as terrorists and looters are able to target technical personnel, pipelines, power lines, and other assets necessary for restarting oil production.

By liberating Iraq, the U.S. undertook an immense responsibility. Without Iraqi oil, the U.S. taxpayer will have to foot the bill for the occupation and reconstruction of Iraq. U.S. consumers will pay higher prices at the pump, and the U.S. and global economies will endure an indirect tax by paying higher energy prices. The alternative to restoring Iraqi oil production--misery for the Iraqi people and victory for the terrorists--is not an option.

Ariel Cohen, Ph.D., is Research Fellow in Russian and Eurasian Studies in the Kathryn and Shelby Cullom Davis Institute for International Studies at The Heritage Foundation.34


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1. Radio Free Europe/Radio Liberty, "Iraq: Pipeline Fire Costing $7 Million a Day," August 18, 2003, at www.rferl.org/nca/features/2003/08/18082003075830.asp. See also Walter Rodgers, Nic Robertson, and Jason Bellini, "3 U.S. soldiers killed in ambush near Tikrit," CNN.com, September 18, 2003, at www.cnn.com/2003/WORLD/meast/09/18/sprj.irq.main. The most recent explosions occurred on September 8 and 18.

2. This document was translated by the Middle East Media Research Institute in its Special Dispatch Series No. 538, July 17, 2003. Available at http://memri.org/bin/articles.cgi?Page=archives&Area=sd&ID=SP53803

3. Energy Intelligence Group, "Oil Flows at Kirkuk as KBR Begins Damage Assessment," Eye on Iraq, May 1, 2003, at www.energyintel.com/EyeOnIraq.asp (subscription required).

4. Bassem Mroue, "Oil Ministry and U.S. Troops Take Measures to Protect Iraq's Main Pipeline from Thieves and Saboteurs," Associated Press, July 4, 2003, at www.enn.com/news/2003-07-04/s_6207.asp.

5. "Iraq Tribal Sheikh Arrested Over Oil Blasts," Agence France-Presse, August 31, 2003, at www.ptd.net/webnews/wed/cs/Qiraq-oil-blast-sheikh.RMbd_DaU.html.

6. Energy Intelligence Group, "Oil Flows at Kirkuk as KBR Begins Damage Assessment." War damage included the bombing of the K3 pumping station at Haditha and a number of pipelines that crossed the Tigris around Tikrit.

7. John W. Schoen, "OPEC Cuts May Crimp Economy," MSNBC, September 24, 2003, at www.msnbc.com/news/
971120.asp?0sl=-23.

8. George W. Bush, "President Addresses the Nation," September 7, 2003, at www.whitehouse.gov/news/releases/2003/09/
20030907-1.html.

9. Pamela Hess, "CPA Speeding Police Training in Iraq," The Washington Times, September 2, 2003, at www.washtimes.com/
upi-breaking/20030902-012831-9370r.htm.

10. Lamia Radi, "Fires Blaze on Iraq Oil Pipeline After Twin Bomb Attacks: Residents," Agence France-Presse, June 13, 2003, at iafrica.com/news/worldnews/244870.htm.

11. Pacific Disaster Management Information Network, "Iraq Humanitarian Assistance Report," August 11, 2003, p. 3, at www.who.int/disasters/repo/10470.pdf.

12. Douglas Jehl and Dexter Filkins, "Rumsfeld Eager for More Iraqis to Keep Peace," The New York Times, September 5, 2003, at www.nytimes.com/2003/09/05/international/middleeast/05RUMS.html.

13. See also Genaro C. Armas, "Troops Called Not an Answer," Associated Press, August 25, 2003.

14. George W. Bush, "President Addresses the Nation."

15. Secretary Donald H. Rumsfeld and General John Abizaid, "DoD News Briefing," August 21, 2003, at www.defenselink.mil/
transcripts/2003, /tr20030821-secdef0604.html. See also Stephen Schwartz, "Reading Najaf," The Weekly Standard, September 3, 2003.

16. Aparisim Ghosh, "Terror at a Shrine," Time, September 8, 2003, p. 30. See also Tarek Al-Issawi, "Previously Banned Militia Patrols Iraqi Holy City, with Coalition's Blessing," Canadian Press, September 6, 2003, at www.canada.com/news/world/story.asp?id=517B3E75-E27D-42A2-BD33-E47782C941A6. The Badr Brigade was previously disbanded by the coalition, but after the murder of Ayatollah Muhammad Bakr al-Hakim and an earlier attack on his uncle, it is now being allowed to function again.

17. "Iraqi Oil Pipeline Ablaze," News24, at www.news24.com/News24/World/Iraq/0,,2-10-1460_1409548,00.html, and "Iraq Council Makes Security Demands," MSNBC News, August 30, 2003, at www.msnbcnews.com/news/959639.asp?cp1=1.

18. "Iraqi Oil Pipeline Sabotaged," Agence France-Press, August 13, 2003; see also Joseph Logan, "Bomb, Tech Problems Hit Iraq Pipeline," Reuters, August 16, 2003, and Celcan Hacaoglu and Bruce Stanley, "Iraq Resumes Pumping Oil from Northern Oil Fields through Turkish Pipeline," Canadian Press, August 13, 2003, at www.canada.com.

19. Rowan Scarborough, "Joint Chiefs Report: U.S. Rushed Post-Saddam Planning," The Washington Times, September 3, 2003,
p. 1.

20. Armas, "Troops Called Not an Answer."

21. Ibid.

22. Bruce Stanley, "Security the Top Priority for Iraqi Oil Industry As Looting Continues," Oil and Gas Reporter, May 27, 2003, at www.oilandgasreporter.com/stories/052703/ind_20030527006.shtml.

23. Douglas Jehl and Dexter Filkins, "Rumsfeld Eager for More Iraqis to Keep Peace," The New York Times, September 5, 2003.

24. Douglas Jehl, "U.S. Considers Private Iraqi Force to Guard Sites," The New York Times, July 18, 2003, at query.nytimes.com/gst/abstract.html?res=F30C17FC3B580C7B8DDDAE0894DB404482.

25. Amy Fagan and Rowan Scarborough, "Post-Saddam Planning Failures `Unforgivable,' Democrats Say," The Washington Times, September 4, 2003, at washingtontimes.com/national/20030903-115853-1572r.htm.

26. Sig Chrstenson, "Some Republicans Doubt Progress on Iraq," San Antonio Express-News, August 31, 2003, at
news.mysanantonio.com/story.cfm?xla=saen&xlb=180&xlc=1048090.

27. Thomas E. Ricks, "Ex-Envoy Criticizes Bush's Postwar Policy," The Washington Post, September 4, 2003, at
www.washingtonpost.com/wp-dyn/articles/A27846-2003Sep4.html.

28. Mark Thompson and Michael Duffy, "Is the Army Stretched Too Thin?" Time, August 24, 2003, at www.time.com/time/magazine/printout/0,8816,477891,00.html.

29. Rumsfeld and Abizaid, "DoD News Briefing."

30. Jack Kelley, "Troop Strength Debate Ranging," Pittsburgh Post-Gazette, August 23, 2003, at www.post-gazette.com/pg/03235/214252.stm.

31. George W. Bush, "Executive Order Protecting the Development Fund for Iraq and Certain Other Property in Which Iraq Has an Interest," May 22, 2003, at www.whitehouse.gov/news/releases/2003/05/20030522-15.html.

32. Emma Clark, "Iraq `Needs Foreign Oil Companies,'" BBC News, July 24, 2003, at news.bbc.co.uk/2/hi/business/3075521.stm.

33. Pamela Hess, "CPA Speeding Police Training in Iraq," The Washington Times, September 3, 2003, at www.washtimes.com/
upi-breaking/20030902-012831-9370r.htm.

34. The author would like to thank William Schirano, Research Assistant in the Kathryn and Shelby Cullom Davis Institute for International Studies, and Anita Greco and Irene Gorelik, interns at The Heritage Foundation, for their assistance with researching this paper. The author also wishes to thank Heritage Foundation colleagues Peter Brookes, James Phillips, and Jack Spencer, as well as Ed Badolato, Executive Vice President of the Shaw Group, and Dr. Gal Luft, Director of the Institute for Analysis of Global Security, for discussing concepts contained herein and commenting on the paper.



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? 1995 - 2004 The Heritage Foundation
All Rights Reserved.
Bolster Freedom, Not Dependence, in Iraq
by James Phillips and Marc A. Miles, Ph.D.
Executive Memorandum #900

September 19, 2003 | |





President George W. Bush has called on Congress to approve an $87 billion supplemental appropriations request, most of which is earmarked for Iraq. Congress should approve the Administration's request, which is sorely needed to stabilize Iraq, improve security against terrorist attacks, and finance reconstruction. But in the long run, only the Iraqi people can assure the successful transition to a secure and stable Iraq. Thus, Iraqis must be liberated from the restrictive economic system imposed by Saddam Hussein's dictatorship, just as they have been liberated from Saddam's tyrannical political system. As The Heritage Foundation's Index of Economic Freedom shows, countries with free and transparent economies are the ones best able to grow and prosper.

Saddam Stifled Private Enterprise
Saddam's regime inserted a number of restrictions into the Iraqi constitution and legal statutes that stifled private enterprise and assured state domination of the economy. The result was a sluggish economy increasingly dependent on the state-owned oil sector, which served the interests of Saddam's socialist Baath Party. In fact, Article 1 of the 1990 interim constitution, Iraq's most recent constitution, proclaims that the promotion of a socialist system is one of the basic goals of the state. Article 13 prohibits private ownership of natural resources and the "basic means of production." Article 18 prohibits foreign ownership of immovable property (land, buildings, and other permanent structures). Companies Law No. 21 of 1997 requires that all founders, shareholders, and partners of Iraqi companies must be Iraqi nationals or citizens of other Arab countries.

The net effect of these legal restrictions was to suffocate private enterprise, reduce job opportunities for Iraqis, perpetuate state monopolies over many sectors of the economy and discourage private investment. These distortions hurt the interests of the Iraqi people but enabled Saddam Hussein to appropriate Iraq's huge oil wealth to maintain himself in power, reward his supporters, and fund his grandiose ambitions to claim leadership of the Arab world and dominate the Middle East. Iraqis would be far better served by shaking off the dead hand of Saddam's Baathist commissars and undertaking free market economic reforms to jumpstart their limping economy.

Removing barriers to private Iraqi and foreign investment would also lower the burden on American taxpayers for rebuilding Iraq, which is projected to cost $50 billion to $75 billion. While Ambassador L. Paul Bremer, the Administrator of the Coalition Provisional Authority, has taken some steps to move Iraq toward a free market economy, including suspending tariffs and import fees, many laws that severely restrict free enterprise remain in effect.

To energize Iraq's moribund economy and help stabilize Iraq by giving Iraqis hope for a more prosperous future, the United States should:

Immediately abrogate the Iraqi constitution and legal edicts that obstruct economic reforms. The 1990 interim constitution, which was never approved by the Iraqi people through a free vote, was designed to prop up Saddam's Baathist regime by giving it total control over the country's economy. Ambassador Bremer should void the constitution and other harmful laws and strongly encourage the Iraqi committee charged with writing a new constitution to eliminate restrictions on private ownership of property. Setting aside these economic diktats would free Iraqis to own property, engage in private enterprise, and attract foreign investment that will help accelerate economic recovery.
Encourage the development of a modern legal system that recognizes property rights and is conducive to privatization. Protection and enforcement of property rights are important for fostering economic growth and foreign investment. Such guarantees are necessary to encourage Iraqis to take the risks necessary to invest in their own future. Iraqi laws should not discriminate against foreign or non-Arab nationals.
Prepare Iraqis for comprehensive structural reforms and privatization. The United States should encourage the Iraqi Governing Council to hire Iraqi expatriates and Western-educated technocrats who understand the benefits of economic freedom. The emerging Iraqi government should then launch a public information campaign to educate and prepare the people for structural reforms and privatization, particularly in the energy sector, which dominates the Iraqi economy. Suspending tariffs, freeing capital markets, and creating and protecting property rights is not enough. As the Index indicates, the Iraqi government should also sell state-owned enterprises, permit both foreign and local banks to do business with minimal regulation, reduce bureaucratic red tape, minimize labor laws, and implement low, flat taxes. Together, these reforms will create the basis for a strong market economy in Iraq.
Prepare a comprehensive economic reform package. Once the public is educated about reforms, the government must follow through. The U.S. government should continue to work closely with the Iraqi Governing Council to implement systematic economic reforms, including price deregulation; privatization of state assets in the utility, transportation, energy, and other sectors; liberalization of trade policy and seeking entry into the World Trade Organization; and a commitment to keep taxes, tariffs, and inflation low.
Conclusion
For more than three decades, Saddam Hussein's regime imposed severe political and economic restrictions on the Iraqi people. While the Iraqis have been liberated from Saddam's political repression, they continue to be hamstrung by Baathist-inspired economic repression. The United States should void these restrictions immediately and encourage the nascent Iraqi government to advance economic freedom to reinvigorate the economy. The sooner Iraqis are free to own property, invest private capital as they see fit, freely borrow from banks, set up businesses with minimal red tape, and trade products freely across the Iraqi border, then the sooner the Iraqi economy will revive, living standards will improve, and Iraqis will take ownership of their political future.

James Phillips is Research Fellow in Middle Eastern Studies in the Kathryn and Shelby Cullom Davis Institute for International Studies and Marc A. Miles, Ph.D., is Director of the Center for International Trade and Economics at The Heritage Foundation.



--------------------------------------------------------------------------------
? 1995 - 2004 The Heritage Foundation
All Rights Reserved.



The Road to Economic Prosperity for a Post-Saddam Iraq
by Dr. Ariel Cohen and Gerald P. O'Driscoll, Jr., Ph.D.
Backgrounder #1594
http://www.heritage.org/Research/MiddleEast/bg1594.cfm

September 25, 2002 | Executive Summary | |



As the Bush Administration and Iraqi opposition groups plan the future of a post-Saddam Hussein Iraq without its menacing arsenal of weapons of mass destruction (WMD), economic issues loom large. Iraq's economy has been grossly mismanaged for 40 years, and its people desperately need an alternative strategy to supplant the failed policies of its dictator. Sound economics are needed to help them rebuild their lives and their country after two decades of wars and four decades of repression under the current regime.
Saddam Hussein's regime has succeeded in bankrupting the country even though it boasts the world's second largest oil reserves after Saudi Arabia. Gross domestic product (GDP) for 2001, at the market exchange rate, is estimated to be only about one-third the level in 1989.1 Iraq also is hobbled by its $140 billion foreign debt.2 This devastation was wrought by such policies as the nationalization of the country's chief export commodity, oil; extensive central planning of industry and trade; the 1982-1988 war against Iran; and the invasion of Kuwait, which precipitated the 1991 Gulf War. And Saddam still stubbornly refuses to meet the terms for lifting the economic sanctions that the United Nations has imposed on his regime.

Saddam also has succeeded in diverting at least $6.6 billion--primarily in revenues from smuggled oil and kickbacks--to his program to develop nuclear, chemical, and biological weapons and platforms for their delivery. He continues to support terrorist organizations, such as Hamas and the Popular Front for the Liberation of Palestine (PFLP), which the U.S. Department of State includes on its list of state sponsors of terrorism.3 Presumably, a post-war U.S. military presence in Iraq and Iraq's future security forces will ensure that the new Iraqi government does not continue to develop WMD and support terrorism.

The future of Iraq depends not only on the ouster of the repressive regime, but also on the ability of the new Iraqi leaders to reverse the damage through policies that will spur real economic growth. The sooner the threat from Saddam's WMD programs ends and the Iraqi economy recovers, the sooner the United States and the other security forces will be able to depart.

A double strategy of ensuring security and enabling economic growth will need international support. The Bush Administration should help Iraqi opposition leaders to develop an economic reform package for their country. The new post-Saddam federal government should develop a modern legal system that recognizes property rights and is conducive to privatization; create a public information campaign that prepares the people for structural reforms and privatization; hire expatriates and Western-educated Arabic speakers with financial, legal, and business expertise for key economic positions; deregulate prices, including prices in the utility and energy sectors; prepare state assets in the utility, transportation, pipeline, energy, and other sectors for privatization; keep the budget balanced and inflation, taxes, and tariffs low; liberalize and expand trade; and launch an effort to join the World Trade Organization (WTO).

The Tough economic Road Ahead
Iraq's Lifeblood: Oil
As Chart 1 and Chart 2 show, the Iraqi economy is dominated by the oil sector, which provides more than 60 percent of Iraq's GDP and 95 percent of its hard currency earnings.4 The economic sanctions imposed by the U.N. in the past decade to try to force Saddam to give up his weapons of mass destruction not only have not worked, but have helped to depress foreign trade.


According to the U.S. General Accounting Office (GAO), however, oil smuggling and illegal surcharges of 25 cents to 50 cents a barrel on legal oil purchases bolster Saddam's regime. These illegal activities during 1996-2002 have provided unaccounted revenues of at least $6.6 billion,5 which Saddam has been free to spend to develop WMD and support terrorism.6 How much Saddam is actually spending on his deadly arsenal is hard to tell. The lack of information is so pervasive that the international financial institutions (IFIs), foreign government agencies, and private businesses that provide country economic analysis and data do not publish any official economic statistics or estimates for Iraq.7

This means that no recent data on Iraqi government consumption of GDP are available. In 1993, the most recent year for which data are available, government consumption amounted to 13.9 percent of GDP. According to the Economist Intelligence Unit,

Oil revenue has been the mainstay of government income since the 1950s. In 1968 the oil-based nature of the economy was reinforced by the introduction of a centralized socialist system, with the government regulating all aspects of economic life other than peripheral agriculture, personal services and trade.... Meanwhile, the state's centrality to the economy has increased because the vast majority of imports and foreign exchange have been controlled by the government.8
The socialist Ba'ath government has demonstrated gross mismanagement of the oil sector. During the 1960s, exploration stopped and the sector was nationalized, which bred corruption and mismanagement. Oil production has barely increased since 1980. In 2001, oil production stood at approximately 2.8 million barrels a day. Today, Saddam's regime controls oil exploration, extraction, refining, pipelines, ports, and all utilities, but oil export prices are set by the U.N. sanctions regime.

Taxing Imports, But Not Smugglers
The Economist Intelligence Unit notes that direct taxation has never been a preferred means of raising revenue in Iraq.9 As the International Monetary Fund (IMF) reports, "imports are restricted by [U.N.] sanctions. All imports subject to import duty are also subject to a customs surcharge.... Imports of commodities are normally handled by the public sector."10 Although the government of Iraq inspects and regulates all imports, a small private sector is involved in considerable smuggling and black market currency exchange activities.

Tough Investment Environment
Even though Iraq has permitted some foreign investment in its oil industry and private sector, mainly to help it rebuild from the damage of the Gulf War, it discourages most capital inflows. The legal system does not guarantee contracts. Inflation in Iraq remains high. From 1994 to 2001, Iraq's weighted average annual rate of inflation was 80.4 percent; for 2001-2002, the rate has ranged from 60 percent to 70 percent.11

The government controls almost all prices, and rationing is the norm for items like food. The regime continues to distribute imported goods in what is essentially a highly centralized command economy structure, although it does retain the ability to skew the distribution of food and other items as a way to favor cronies.

There is no application of modern property rights protected by legislation and enforced through the courts. The Revolutionary Command Council (RCC) of Iraq holds all executive, legislative, and judicial authority. The RCC's chairman, Saddam Hussein, appoints a council of ministers who are theoretically vested with executive authority, but in fact they are able only to rubber-stamp the decisions of the RCC and its chairman. The judiciary is not independent; consequently, there is no check on Saddam's power to override any court decision.



AFTER Saddam: The outlook for Iraq and World Energy Markets
One thing is clear: Saddam's regime, obsessed with control and coercion, is destroying the wealth of the Iraqi people. After liberation from this regime, it will be important for the Iraqi people to rebuild their economy, especially the oil sector, increase GDP and improve the standard of living, attract foreign investment, and improve government services through privatization.

The Cost of Rebuilding

The cost of rebuilding the country will be high. If Operation Desert Storm reconstruction costs are used as the basis for estimation, the cost of rebuilding Iraq after Saddam's regime falls will be in the $50 billion to $100 billion range.12 Together with repaying the Iraqi foreign debt, the more realistic figure is $200 billion.13 However, as long as structural economic reforms are undertaken, Iraq's vast oil reserves are more than ample to provide the funds needed to rebuild and boost economic growth.

The United States, through its executive directors at such IFIs as the IMF and World Bank, and other international governmental and non-governmental organizations, should begin to advise the future leaders of Iraq's three primary ethnic groups to establish policies that will lead to a thriving modern economy. These policies should be based on "best practices" developed around the world in the 1990s, when the largest government privatizations in history occurred.

During the Iran-Iraq War and the post-Gulf War sanctions period, Iraqi petroleum production declined significantly. Saudi Arabia filled the void, generating a net profit of $100 billion. The funds it generated represent monies that should have benefited the Iraqi people.14 (See Chart 3.)



Following the demise of Saddam Hussein, it is unlikely that the Saudi kingdom would transfer a fraction of its production quota under the Organisation of Petroleum Exporting Countries (OPEC) regime to Iraq to compensate for those lost profits and facilitate its rebuilding. Iraq will need to ensure cash flow for reconstruction regardless of OPEC supply limitations. Combined with the potential privatization of the oil industry, such measures could provide incentive for Iraq to leave the OPEC cartel down the road, which would have long-term, positive implications for global oil supply.

Potential Benefits of Leaving the OPEC Regime

An Iraq outside of OPEC would find available from its oil trade an ample cash flow for the country's rehabilitation. Its reserves currently stand at 112 billion barrels, but according to the U.S. Energy Information Administration, it may have as much as 200 billion barrels in reserve.15 Iraqi officials estimate even more: According to oil minister Amir Muhammad Rashad16 and Iraqi Senior Deputy Oil Minister Taha Hmud, the reserves can be as high as 270 billion to 300 billion barrels, making them equal to Saudi Arabia's.17

Iraq's 1990 output prior to the beginning of the Gulf War stood at 3.5 million barrels a day, while oil discovery rates on a few new projects in the 1990s were among the highest in the world: between 50 percent and 75 percent. Given Iraq's own output projections, it may be capable of pumping as much as 6 million barrels (by 2010) to 7 million barrels (by 2020) a day, more than doubling current production levels.18 (See Chart 4.)



Depending on the dynamics of global economic growth and world oil output, Iraq's increase in oil production capacity could bring lower oil prices in the long term. An unencumbered flow of Iraqi oil would be likely to provide a more constant supply of oil to the global market, which would dampen price fluctuations, ensuring stable oil prices in the world market in a price range lower than the current $25 to $30 a barrel. Eventually, this will be a win-win game: Iraq will emerge with a more viable oil industry while the world will benefit from a more stable and abundant oil supply.

PRIVATIZATION:
Learning from the past
Boosting oil exports and oil industry privatization by itself still may not be sufficient for growth over the long haul. To rehabilitate and modernize its economy, a post-Saddam government will need to move simultaneously on a number of economic policy fronts, utilizing the experience of privatization campaigns and structural reforms in other countries to develop a comprehensive policy package.

Several lessons from other countries' privatization experiences are particularly relevant to Iraq's situation. Specifically:

LESSON #1: Privatization works everywhere

Between 1988 and 1993, 2,700 state-owned businesses in 95 countries were sold to private investors.19 In 1991 alone, $48 billion in state assets were privatized worldwide.20 Privatizations led to higher productivity, faster growth, increased capacity, and cheaper services for consumers.

In one study, the World Bank reviewed 41 firms privatized by public offerings in 15 countries. This review demonstrates that privatization will increase the return on sales, assets, and equity. As privatized firms grow, they often increase their workforces. In another study, the World Bank reviewed 12 privatization efforts in four countries, and its findings also demonstrate why privatization is good for the economy as a whole, no matter where it is implemented.21

LESSON #2: Privatization works best when it is part of a larger structural reform program

Privatization needs to be accompanied by reforms to open markets, removal of price and exchange rate distortions, reductions in barriers to entry, and elimination of monopoly powers. In addition to these policies, governments should enact legislation that protects consumer welfare.22 Such successful structural reform and privatization programs were implemented in the 1990s in Poland, Hungary, the Czech Republic, and the three Baltic States, particularly Estonia.

LESSON #3: Privatization of large enterprises requires preparation

Successful privatizations of large enterprises may necessitate such advance actions as breaking them into smaller competitive units, recruiting experienced private-sector managers, adopting Generally Accepted Accounting Principles (GAAPs), settling past liabilities, and shedding excess labor.23

LESSON #4: Transparency and the rule of law are critical

Opaque privatization and allegations of corruption and cronyism provide political ammunition to the opponents of market-based policies. To eliminate those problems and be successful in its privatization efforts, the government must adopt competitive bidding procedures, objective criteria for selecting bids, and protocols for hiring independent privatization management firms, and establish a privatization authority with minimal bureaucracy to monitor the overall program.24

LESSON #5: A minimal safety net is necessary to support laid-off workers and prevent social unrest

Buyouts of the state-owned enterprise's management and labor force, as well as distribution of some of the privatized firm's shares to its management and labor force, can go a long way toward alleviating social tensions that might undermine public support for privatization.

LESSON #6: Privatization is taking place in the Middle East

Privatization is no longer an affair of affluent or middle-income countries. From Margaret Thatcher's Great Britain, privatizations of state-owned assets and structural reform policies spread to many countries in Africa, Asia, and Latin America, including the Philippines, Malaysia, Jamaica, and Sri Lanka. An internal study of World Bank managers in the Middle East and North African department found that many were enthusiastic in supporting privatization efforts in their regions.25 A number of Middle Eastern states, including Iraq's neighbors Turkey26 and Kuwait,27 are pursuing privatization of their telecommunications, transportation, utilities, and oil sectors and services, while others, such as Iran and Saudi Arabia, have declared their intentions to privatize assets and are in the policy discussion stage.28

Lessons from Oil and Gas Privatizations
Oil privatization remains a politically painful issue in many countries. Economic nationalists claim oil is a "national patrimony,"29 whereas socialists and radical Islamists call private and foreign ownership of natural resources "imperialist" and other such pejoratives. Such rhetoric has one goal: to keep a precious and profitable resource in the hands of the ruling elite, be it a communist party politburo, a dictator, or a group of mullahs.

In fact, oil is a commodity and should be managed according to the laws of economics and best business practices. Even a country as fiercely nationalist as Russia recognizes this and is undertaking the largest oil sector privatization in history. The lessons from past experience in oil privatizations are also positive. Specifically:

ENERGY SECTOR LESSON #1: First "entitize," then privatize

The Conservative government of Margaret Thatcher successfully privatized some British oil assets in the 1980s. In the early 1990s, Russia carved up its state-run oil ministry into regional monopolies. It created joint stock companies, later selling stock to the Russians, first, and then to foreigners. The Ministry of Privatization distributed some stocks to managers and workers in order to smooth the path to privatization. Since privatization, many of these stocks, such as in LUKoil, Tyumen Oil Co. (TNK), and Yukos, have risen in price considerably.

The Russian government did not go all the way, however. For example, it did not privatize Transneft, a company that controls its pipeline infrastructure, or fully privatize some oil companies, such as Slavneft and Zarubezhneft and GAZPROM, the giant natural gas monopoly that boasts the world's largest natural gas reserves and controls a 90,000 km pipeline network.30 The partial privatization effort has led to friction between state-controlled entities and the privatized-publicly held companies over pipeline access.

ENERGY SECTOR LESSON #2: Oil privatization generates high economic efficiency and market capitalization

The results of Russian oil privatization are fascinating: While the privatized Russian oil companies significantly expanded their production and exports and significantly increased market capitalization, GAZPROM did not. The government-controlled pipeline operator also has had difficulty providing adequate pipeline capacity to the quickly developing oil sector.

Meanwhile, privatized Russian companies not only have attracted Western portfolio investment, but also have been more successful than GAZPROM in attracting capital for foreign direct investment. Several leading Russian publicly traded oil companies also transformed their antiquated, Soviet-era accounting practices to the GAAP standard, hired Western managers, and became centers for dissemination of Western management and accounting skills across Russia's industrial sectors. Moreover, Russia's largest oil companies, such as LUKoil and Yukos, are fast becoming major global oil players. LUKoil recently purchased 1,300 Getty gas stations in the United States, and LUKoil and Yukos are selling American Depository Receipts (ADRs) on the New York Stock Exchange.

ENERGY SECTOR LESSON #3: Keep it clean, and keep it profitable

The major problem with the Russian oil privatization effort has been its relative opacity, especially in the early 1990s. Scandals included the oil-for-shares debacle in which Boris Yeltsin's government took loans from banks in exchange for shares of the oil companies. The government never repaid the loans, and the companies became the property of politically connected banks.31 The insider dealing provoked a political row that discredited privatization in the public's eyes.

Other problems in Russia have been privatization through vouchers and the denial of access to foreigners in early privatization stages in order to assuage nationalists in the parliament. These policies resulted in much lower revenues (by as much as a factor of 10) than the government could have received for the privatized assets.



AN ECONOMIC REFORM PLAN FOR POST-SADDAM IRAQ
The Bush Administration should provide leadership and guidance for the future Iraqi government to undertake fundamental structural economic reform. This process should include a massive, orderly, and transparent privatization of state-owned enterprises, especially the restructuring and privatization of the oil sector. These steps would greatly enhance needed access to global capital markets.

U.S. political commitment will be needed to motivate international organizations to provide appropriate expertise and technical assistance. Inter alia, these organizations could include IFIs such as the International Monetary Fund and the World Bank, and would likely encompass such diverse non-governmental organizations (NGOs) as the National Endowment for Democracy, the Center for International Private Enterprise, the American Bar Association, and the AFL-CIO.

In particular, the Bush Administration should convince the future federal government of Iraq to come to an agreement on how oil revenues are taxed and proceeds are distributed to the country's three distinct ethnic regions--Shiite Arabs, the Kurds, and the Sunni Arabs. Successfully privatizing the country's oil fields, refining capacity, and pipeline infrastructure will mean higher efficiencies and higher tax revenues in the oil sector.

What a New Iraqi Government Must Do

The Administration, the IFIs, and other economic decisionmakers should prepare and provide support for a future federal Iraqi government to:

Develop a modern legal environment that recognizes property rights and is conducive to privatization. Protection and enforcement of property rights and access to successful alternative dispute resolution mechanisms are vital policies for fostering economic growth and foreign investment. Iraq also will need to build modern and well-functioning regulatory and supervisory frameworks and institutions in the oil and gas, banking, securities, and financial services areas. Such a legal and business environment should be equitable and non-discriminatory, and it should not distinguish between Iraqi-Arab nationals and foreigners.
The U.S. government, its allies, and international organizations should be ready to provide technical assistance in the legal, economic policy, and public administration areas. Working cooperatively with the United States, the European Union, and the IFIs, the post-Saddam government of Iraq will need to boost the court system and the rule of law. It will need to provide legislation to allow the use of broad alternative dispute resolution mechanisms outside of Iraq, as the local laws may change too quickly (and the local court system too slowly) for local judges to be able to follow and apply new legislation. Education for judges about the latest legal developments in the economic area will also be important. The courts will have to boost the enforcement of court rulings independent of the executive branch. The central government will need to pay judges and court employees adequate salaries to keep corruption in check.

Educate and prepare the Iraqi population for structural reform and privatization through a public information campaign.
Only when the public, including key stakeholders, elites, and the population at large, understand the goals of economic reform will they become more receptive to change and less likely to succumb to the anti-Western demagoguery that undoubtedly will emanate from the remnants of the discredited Ba'ath establishment and Islamic fundamentalists. The new Iraqi government will need to use the media and the educational system to explain the benefits of privatization and the changes to come in order to ensure broad public support.

Hire Iraqi expatriates, as well as other Western-educated Arabic speakers with financial, legal and business backgrounds, for key positions in government.
Examples of this approach in Eastern Europe demonstrate that Western-educated experts can implement economic reforms better than a former socialist bureaucracy can. Younger, well-educated technocrats have an advantage in their ability to communicate effectively with both locals and Westerners, including international providers of technical assistance. In implementing structural reform, the best results are achieved by teams of local and Western experts working together.

Deregulate prices in Iraq, including prices in the utilities and energy sector.
Quick price deregulation will be key to ensuring an adequate supply of goods for consumers and ending rationing. It will contribute to increased exports of oil and gas, which in turn will provide additional earnings and tax revenues for the government to share among the regional and local governments.32

Prepare to privatize assets in the industrial, utility, telecommunications, banking, transportation, port and airport, and pipeline and energy sectors.
The post-Saddam Iraqi government should prepare to privatize government assets by creating government-held companies instead of ministries, issuing stock for these companies, and implementing guidelines that allow for the introduction of modern management practices and GAAP standards. The central government should hire consulting firms to execute comprehensive assessments of companies it wishes to privatize in order to itemize inventory, to take stock of assets and liabilities, and possibly to settle some of their debts in preparation for privatization.
In particular, the Oil Ministry and regional oil companies should be restructured to transform them into attractive government-owned oil companies as an intermediary stage before initial public offering (IPO). For example, one company may focus its work in the southern portion of the country, another in the central region (around Baghdad) and the Western desert, and the third around Kirkuk in the North. Three more companies may be created, one to operate the pipelines, the second to operate the refineries, and the third to develop natural gas.

The stages of preparation for privatization could include:

Taking inventory of assets and liabilities;

Exercising necessary efficiency-improvement steps, such as retraining and layoffs (with compensation);

Introducing GAAP and other modern financial and management practices;

Signing international conventions against nationalization of foreign investments, such as the Convention on the Settlement of Investment Disputes between States and Nationals of other States (the Washington Convention), the World Bank's Convention on the Multilateral Investment Guarantee Agency (MIGA), and the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards (1958);

Issuing company stock;

Running the companies under new, transparent, and efficient management for at least two years; and

Taking companies on road shows and completing IPOs in major financial centers such as New York and London, and floating stock in international markets.
Given adequate implementation of each of these stages, the time frame for this privatization effort could be four to five years after the new government is installed by the people of Iraq. During this time, the U.S. government and the IFIs would have to ensure that the political will for privatization remains intact. Management and accounting consultants hired by the new Iraqi government would have to ascertain that the program is transparent and on track.

Moreover, after privatization, Iraq must demonstrate that it is not losing tax revenue and that the government's oil revenue is distributed among the regions equitably and efficiently, allocated to the worthy causes, and not wasted, looted, or abused, which could undermine the entire economic reform program.

Keep the budget balanced and inflation, taxes, and tariffs low.
International experience demonstrates that lower and flatter taxes (in the range of 20 percent or less), applied uniformly and in a non-discriminatory fashion, are an important investment magnet, especially for a country like Iraq that is rich in natural resources. Moreover, oil revenues will allow Iraq to keep the budget balanced and import tariffs low. Such a stable macroeconomic policy is likely to attract massive investment from a variety of sources, including the Middle East and Asia, not just the West, and boost income and employment.

Liberalize and expand trade, and launch an effort to join the World Trade Organization.
A study by the Council on Foreign Relations has demonstrated that a majority of Middle Eastern countries suffer from high import tariffs, red tape, and corruption--problems that depress GDP growth.33 Elimination of import taxes and tariffs and implementation of trade liberalization would provide an additional economic development engine for Iraq. The Bush Administration should provide technical assistance for trade liberalization and support Iraq's eventual membership in the WTO.
Conclusion
For the Iraqi people, structural economic reform and comprehensive privatization of government assets is necessary to stimulate recovery and provide stability after years of disastrous economic policies under Saddam Hussein. The winning strategy of structural reform and privatization also would benefit the industrial world, the United States and its allies, countries of the Middle East, and the developing world.

Iraq's return to global markets would allow for a more abundant and stable energy supply, a higher cash flow for the Iraqi people, and numerous business opportunities for the region and the world. Iraq's restructuring and privatization of its oil and gas sector could become a model for oil industry privatizations in other OPEC states as well, weakening the cartel's influence over global energy markets.

Ariel Cohen, Ph.D., is Research Fellow in Russian and Eurasian Studies in the Kathryn and Shelby Cullom Davis Institute for International Studies, and Gerald P. O'Driscoll, Jr., Ph.D., is Director of the Center for International Trade and Economics, at The Heritage Foundation.


--------------------------------------------------------------------------------

1. U.S. Department of Energy, Energy Information Administration, "Iraq: Country Overview," at http://www.eia.doe.gov/emeu/cabs/iraq.html.

2. Ibid.

3. U.S. Department of State, Office of the Coordinator for Counterterrorism, "Appendix B: Background Information on Terrorist Groups," Patterns of Global Terrorism-2000, April 30, 2001, at http://www.state.gov/s/ct/rls/pgtrpt/2000/2450.htm.

4. Energy Information Administration, "Iraq: Country Overview."

5. U.S. General Accounting Office, U.S. Confronts Significant Challenges in Implementing Sanctions Against Iraq, GAO-02-625, May 2002, at http://www.gao.gov/atext/d02625.txt.

6. Alix Freedman and Steve Stecklow, "Secret Pipeline: How Iraq Reaps Illegal Oil Profits," The Wall Street Journal, May 2, 2002.

7. Gerald P. O'Driscoll, Jr., Edwin J. Feulner, and Mary Anastasia O'Grady, "Iraq," in 2003 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc., forthcoming).

8. Ibid.

9. Economist Intelligence Unit, "Country Report, July 2002."

10. O'Driscoll et al., "Iraq," 2003 Index of Economic Freedom.

11. Ibid.

12. Bill Gertz, "Tab to Rebuild Iraq, Kuwait Estimated at $100 Billion," The Washington Times, March 4, 1991. More recent estimates confirm this range.

13. Julian Borger, "Post-Saddam Iraq Will Cost You, U.S. Warned," The Guardian, August 2, 2002, at http://www.guardian.co.uk/bush/story/0,7369,767755,00.html. Lawrence Lindsey, Director of the National Economic Council, is quoted as estimating a cost for the Iraq war of between $100 billion and $200 billion. It is unclear what is included in that figure. See Bob Davis, "Bush Economic Aide Says Cost of Iraq War May Top $100 Billion," The Wall Street Journal, September 16, 2002, p. 1.

14. "Round Table on Declining Oil Prices and Its Political Consequences in the Middle East," Middle East Studies, Vol. 6, No. 1 (Spring 1999), pp. 5-36, at http://www.netiran.com/Htdocs/Clippings/Economy/990322XXFE01.html.

15. Energy Information Administration, "Iraq: Country Overview," p. 14.

16. "Iraq's oil reserves bigger than Saudi Arabia, Minister Says," BBC Monitoring, August 6, 2001, Al-Jumhuriyah Web site in Arabic, August 4, 2001.

17. "Iraq's Oil Industry: An Overview," Platts, at http://www.platts.com/features/Iraq/oiloverview.shtml.

18. "Iraq Building E&D Project List for Post-U.N. Sanctions Period," The Oil and Gas Journal, Vol. 95, No. 15 (April 14, 1997).

19. Energy Information Administration, "Privatization and the Globalization of Energy Markets," Energy Plug, at http://www.eia.gov/emeu/plugs/plpgem.html.

20. Madsen Pirie, "Privatization," Concise Encyclopedia of Economics, at http://www.econlib.org/library/encl/privatizaiton.html.

21. World Bank, "Privatization: Eight Lessons of Experience," Policy Views from the Country Economics Department, July 1992, at http://www.worldbank.org/html/prddr/outdeach/or3.htm. For the latest annual update on global privatizations, see Reason Public Policy Institute, "Privatization 2002: Putting the Pieces Together," at www.rppi.org/apr2002.pdf.

22. World Bank, "Privatization: Eight Lessons of Experience."

23. Ibid.

24. Ibid.

25. Ibid.

26. See information at Republic of Turkey, Office of the Prime Minister, Ministry of Privatization Administration, http://www.oib.gov.tr/.

27. Dr. Shafiq Ghabra, "The View from Kuwait," The Middle East Forum, March 18, 2000. For more on Kuwait, see U.S. Department of Commerce, "Commercial Overview," at http://www.arabchamber.com/arab-coutnries/Kuwait/commercial_overview.htm. See also International Monetary Fund, "IMF Concludes Article IV Consultation with Kuwait," Public Information Notice No. 00/27, April 4, 2000, at http://www.imf.org/external/np/sec/pn/2000/pn0027.htm.

28. See Energy Information Administration, "Saudi Arabia," January 2002, at http://www.eia.doe.gov/emeu/cabs/saudi.html. On Iran, see "Round Table," Middle East Studies, at http://www.netiran.com/Htdocs/Clpppings/Feconomy/990322XXFE01.html.

29. Mary Jordan, "Drilling Stakes at Mexico's Heart," The Washington Post, January 25, 2002.

30. The Russian government retained 38 percent of GAZPROM shares.

31. Energy Information Administration, "Russia," at http://www.eia.doe.gov/emeu/pgem/ch4a.html.

32. John C. Hulsman, Ph.D., and James Phillips, "Forging a Durable Post-War Political Settlement in Iraq," Heritage Foundation Backgrounder No. 1593, September 24, 2002.

33. Bernard Hoekman and Patrick Messerlin, "Harnessing Trade for Development and Growth in the Middle East," Council on Foreign Relations, 2002.



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? 1995 - 2004 The Heritage Foundation
All Rights Reserved.

Posted by maximpost at 8:24 PM EST
Permalink

>> JOBS WATCH, PENSION REFORM...

Employment, Unemployment, and the Puzzle of Payroll Anemia
by Alison Fraser and Rea S. Hederman, Jr.
WebMemo #440

March 5, 2004 | printer-friendly format |


Today's release from the Bureau of Labor Statistics, showing job gains of 21,000, reflects stability in the labor market but came in below most economists' expectations. Though by all other measures the economy is strong, job growth has been slower than expected over recent months. But is this really a "jobless recovery?" Or is a fundamental restructuring in several sectors of the economy changing the rules of game, for the overall benefit of most workers and consumers?

The Numbers, in Perspective
Today's numbers are below consensus forecasts, which expected about 125,000 new jobs to have been created. Employment increased by 21,000, and the unemployment rate held steady at 5.6 percent, which is low by historical standards. The average rate for the first quarter of 2004 promises to be about 5.6 percent, significantly below that of the fourth quarter of 2003. Looking at the big picture, trends in unemployment continue to move in the right direction.



While the economy is strong, even booming in some sectors, employment has only slightly increased. GDP growth in the fourth quarter of 2003 was 4.1 percent, strong by any measure. Business investment and exports surged in the quarter, up by 15.8 and 21.0 percent, respectively. Even pessimistic economists agree, the economy is anything but "stagnant."



Changing Times
So why has job growth been so slow? One factor may be that certain structures of the economy are changing. The sectors that have failed to rebound are in a period of a transition. For example, despite strong growth in manufacturing output, that sector will never employ the numbers that it once did. Strong productivity growth for several quarters is evidence of this fundamental shift. Still, this news is positive for most workers in America. The increase in productivity means lower prices and greater value for consumers; in other words, workers have greater purchasing power than in the past. Higher productivity often leads to higher wages, which have already increased by almost 1 percent since December. And because inflation is low, these gains are not nominal -- workers really are better off.



Reflecting these changes, the nature of unemployment has shifted, as well. Fewer workers are unemployed due to layoffs or downsizing. Most unemployed now are new entrants to the labor force and reentrants who have been out of the workforce for some time. It is also telling that the number of workers working part-time for "economic reasons," as the BLS puts it (that is, they are unable to find full-time work), has fallen by nearly 400,000 since November. While it may be tough for the unemployed to find new work, those working are less likely than before to lose their jobs and more likely to see their wages or hours increase.



The Bottom Line
As last month's strong GDP numbers show, the President's tax cuts are doing almost exactly what economists expected: business investment is booming, consumer demand and exports are strong, and the economy has grown considerably. What has been puzzling, though, is that these gains haven't translated into similarly rapid employment growth. Worth considering is whether some industries, such as manufacturing, have changed their patterns of employment. If this transition turns out to be the case, while some workers will experience hardships many more workers will benefit in the long-term.

What the government should not do is to make it more difficult for these industries to adapt themselves to the changing business environment. In terms of regulations, economic policy, and tax policy, firms need the greatest flexibility possible to make necessary changes, boost their competitiveness, and, ultimately, grow. One piece of this would be to make the President's tax cuts permanent, so that businesses face less uncertainty when they invest in new equipment, facilities, and workers. Another would be to cut the corporate tax rate or reform international taxation, both of which have been proposed as replacements for the FSC/ETI tax system.


Alison Fraser is Director of the Thomas A. Roe Institute for Economic Policy Studies, and Rea Hederman, Jr., is Manager of Operations of the Center for Data Analysis, at The Heritage Foundation.



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? 1995 - 2004 The Heritage Foundation
All Rights Reserved.




http://www.heritage.org/Research/Labor/CDA04-03.cfm

Diverging Employment Data: A Critical View of the Payroll Survey
by Tim Kane, Ph.D.
Center for Data Analysis Report #04-03

March 4, 2004 | |

One of the most visible economic issues in this presidential primary election cycle is the apparent failure of the economy to create jobs. Even though the U.S. economy has been growing strongly for over two years, many analysts have focused on an illusion of 2.2 million "lost jobs" since President George W. Bush took office. The illusion stems from a survey of employment conducted each month by the U.S. Bureau of Labor Statistics (BLS), officially referred to as the Current Employment Statistics (CES) survey and commonly known as the payroll survey.

Like all surveys, the CES suffers from a number of problems that are well known to data analysts. However, the payroll survey contains a unique methodological problem: It systematically overcounts the jobs held by one person when that person changes employers. The existence of a potential turnover effect is not new. But worker turnover is far below its pre-war norm, with potentially large consequences for estimates of total employment.

This paper takes a critical view of the payroll survey and finds that:

The payroll survey double-counts many workers who change jobs and is now artificially deflated because job turnover is down. Decelerating turnover in 2002-2003 explains up to 1 million jobs artificially "lost" in the payroll survey since 2001.
The BLS household survey indicates record high employment. The disparity of 3 million jobs (in employment growth) between the household and payroll surveys since the recovery began is unprecedented.
The disparity between the two BLS surveys of total employment is cyclical. The disparity widens during recessions and narrows during periods of rapid growth in gross domestic product (GDP). Such variation strongly suggests a statistical bias in one of the surveys.
Payroll survey data are always preliminary. Past revisions have regularly shown the initial estimates to be off by millions of jobs. For example, initial estimates of job losses in 1992 were revised in 1993, 1994, and 1995 and now show net job creation.
The payroll survey does not count the surge in self-employment. The household survey has recorded a surge of 650,000 self-employed workers. This number may be even higher if modern workers in limited liability companies and in consulting positions with traditional firms are not identifying themselves as self-employed.
Most economic indicators suggest an improving economy since November 2001, except for the loss of payroll jobs according to the CES. Aside from the payroll survey, most labor indicators suggest an improving labor market: Real wages are rising, unemployment is low and declining, and jobless claims are down. The sharpest contrast is the record high level of total employment: 138.6 million according to the Labor Department's household survey, formally known as the Current Population Survey (CPS).

Since the recession ended in November 2001, payroll jobs are down by 716,000 as opposed to a CPS increase of 2.2 million employed Americans. This 3 million-job mystery can be resolved through a critical examination of what the two surveys measure and how those measures should be recalibrated for an economy that has evolved dramatically. Congress should not be moving to protect jobs or meddle in labor markets if, as the facts show, those markets are functioning well. This report reviews the problems with the payroll survey and highlights two new innovative data series recently introduced by the Department of Labor.

The level of total employment according to the household survey, shown in Chart 1, is different from the payroll level by definition. For example, nonfarm payrolls do not count agricultural and self-employed workers. More important, payrolls will count an individual twice if he or she works two jobs or changes jobs during the pay period. Although the two survey employment levels track closely over time, the gap between them is somewhat irregular.



Chart 2 shows the accumulated increase in employment in the months after a recession ends and compares the current recovery period to the two survey levels averaged over the last five recessions. Trends of job recovery in the different surveys after the last five recessions appear almost identical, whereas this recovery has seen unprecedented declines in payroll employment. With the other economic indicators signaling a normal recovery during 2003, Chart 2 makes a compelling case that the payroll survey--not the household survey--is behaving oddly.



Is The Bls To Blame?
The statistical and economic staff at the BLS has built a well-deserved reputation for professionalism and public service, yet the recent divergence among surveys during a sensitive political season has led some to cast doubt on the government workers who publish the data or to question their methodology. But many doubts are politically driven and are a poor substitute for objective inquiry. It is unfair to criticize the BLS for the job growth mystery, especially when the first possible explanation is that both surveys are behaving normally.



The results are puzzling because the surveys are measuring a changing economy, not because the surveys are any different or less correct in their methodology. Analysts know intuitively that today's economy is structurally different from the economy of five or 10 years ago, but the consequences of the new economy are difficult to predict. Perhaps payroll jobs are weak simply because the modern company relies less on payrolls for engaging the labor force.

If that is the case, the current pattern of declining payroll jobs alongside rising individual employment makes perfect sense. However, additional measurements are needed to prove the hypothesis.

In fact, without any additional funding or guidance, the BLS quietly unveiled an innovative data series known as Business Employment Dynamics (BED) on September 30, 2003. The BED series aspires to reveal "creative destruction" in labor markets. The BED reports gross job flows on all new jobs gained and all jobs lost, in contrast to the net result available in the CES and CPS surveys. The results are startling and may serendipitously solve the current mystery of the diverging surveys. More than 7 percent of jobs are destroyed each quarter, and another 7 percent are created. The implications of total job turnover and its effect on net payroll counts are profound.



Conventional Wisdom Prefers the Payroll Survey
It is our judgment that the payroll survey provides more reliable information on the current trend in wage and salary employment.--Kathleen P. Utgoff, Commissioner, Bureau of Labor Statistics1

Analysts of U.S. labor markets have usually preferred the payroll survey data over the household survey data. Since the two total employment series have generally moved in tandem, there was little need even to question the payroll data. In fact, the large swings from one month to the next in CPS employment estimates made them less useful for forecasting. However, the widening divergence in the two series has shaken the conventional wisdom.

On numerous occasions, the BLS has reaffirmed the reliability of the payroll survey, especially for comparisons of employment levels over time. Other respected observers, including economists at the Federal Reserve and Congressional Budget Office (CBO), have also expressed a preference for the payroll survey. A recent paper by Elise Gould of the Economic Policy Institute makes one of the strongest cases for the orthodox view and serves as a good baseline for conventional errors in the conventional wisdom.2 The rationale for favoring the CES payroll series is often repeated in the media and boils down to three seemingly clear and compelling arguments:

Rationale #1: The household survey is volatile.
This rationale is fundamentally a critique that the CPS is not designed as a time series. Gould says, "The household survey is extremely volatile, indicating its inadequacy for analyses of month-to-month employment trends," which she attributes to its "smaller sample size." But the experts at the Labor Department assert that the CPS is designed as a time series, notably ratios like the unemployment rate and the employment-population ratio.

However, level estimates like total employment and the size of the labor force reported in the CPS are extrapolated based on population estimates and are consequently subject to large annual adjustments to the Census Bureau's population estimate. Footnotes in the Joint Economic Committee's Economic Indicators warn that civilian employment levels from the household survey are "not strictly comparable with earlier data."3 Comparability is problematic because the annual fix gets lumped into the month of January for every year. Those adjustments could be smoothed over each month of the year if the goal was to make the series comparable over time. Until now, the BLS had no incentive to do so, especially because the payroll survey was already serving as the time series to watch.

The high variability on a month-to-month basis is a concern, but critics should take care to understand its real cause. High variability in the CPS, beyond the January population spikes, is not a result of a small sample size. Instead, the rotating nature of the CPS sample drives its variability. One-quarter of respondents are rotated out of the survey each month, which keeps the survey respondents fresh. The overriding advantage of the household survey is its direct interface with American workers, which makes it a higher quality measure in many ways.

While high variability might rule out relying on the household survey for short-term movements, it by no means disqualifies it for longer periods. Considering that the divergence controversy spans the three years since the recession began in March 2001, holding the short-term variability rationale against the household survey seems to be a stretch.

Rationale #2: The sample size is much larger for the payroll survey.
Payroll numbers are based on a much wider sample than the CPS, covering one-third of all U.S. workers every month. Moreover, CES survey results are confirmed and updated annually by benchmarking the data to records for all U.S. businesses that file unemployment insurance papers. The result is nearly complete coverage of the U.S. workforce, or 98 percent of all jobs. The household survey has a smaller sample of 60,000 individual households.

A brief introduction to statistics would confirm that a survey sample of 60,000 is more than adequate. Much smaller samples are used every day in media polls assessing everything from voter attitudes to consumer product ratings, and they are perfectly valid.

The danger in the "payroll survey is bigger" rationale is mistaking quantity for quality. True, the CES has a bigger sample--but of what?

The payroll survey is largely automated. Companies in the sample file their payroll figures based on computer software that simply counts up the number of unique payroll recipients each pay period, whether an employee works for one day or 30. A waiter who works at five establishments in one pay period will be counted as five jobs. Meanwhile, self-employed and agricultural workers are not on a payroll and are left uncounted by the CES. If modern companies are employing fewer workers on traditional payrolls, the CES is not currently designed to take such a trend into account.

Rationale #3: The payroll survey has a stronger relationship with GDP.
If forecasting GDP growth is the goal, then 50 years of research suggest that the payroll survey is preferable because of its proven high correlation with GDP. This rationale is not one used in public debates, but it may be more important than anything else for academic economists and Wall Street analysts. Billions of dollars ride on the accuracy of economic forecasts.

But what if the payroll-GDP correlation is an illusion of revised data? While the historical CES employment series has an indisputably strong relationship with growth rates, those historical data have undergone multiple revisions. An even bigger concern is whether the strong relationship is due to an internal statistical bias. Economists should be very careful to check for an endogenous influence of growth rates on payroll counts.4

Analysts Confounded by the Divergence
Many analysts have reviewed the survey divergence, and it remains one of the most fascinating economic mysteries of the modern recovery. However, policymakers, who rely on simplicity and certainty, have an intuitive need to select a favorite of the two surveys. The CBO weighed in with its August 2003 Economic Outlook, stating:

The establishment survey better reflects the state of labor markets, the CBO believes, not only because other indicators also imply rather weak labor-market conditions but because large revisions or misreporting appears less likely for the establishment than the household data.5
Ben Bernanke, a prominent academic economist and recently appointed Governor of the Federal Reserve, commented on the survey disparity on November 6, 2003. His views are a fair reflection of the academic economists, and he confesses, "[W]e do not fully understand the differences in employment reported by the payroll and household surveys, and the truth probably lies in between the two series." Nevertheless, Bernanke was quick to emphasize the conventional wisdom that "greater reliance should probably be placed on the payroll survey."6

Yet many serious investigations into the details have been unable to solve the mystery. The BLS reviewed the disparity in a major study for its October 2003 Advisory Committee, concluding, "To date, BLS has not been able to pinpoint a source or sources of these differing trends in employment growth."7 More recently, the February 2004 Economic Report of the President noted that "the explanation for why these two surveys' results have diverged so markedly over the last few years, and what this might indicate about the economic recovery, remains a puzzle."8

Clearly, the tide is turning, and many analysts are reconsidering the conventional wisdom. As the months go by, the payroll data are growing seriously out of step with other indicators, such as higher real earnings, booming hiring indices, and declining jobless claims. (See Table 1.)

Leading the turnaround, the CBO's January 2004 Economic Outlook modified its earlier support for the payroll survey, suggesting that "it is less clear which survey provides a more accurate picture of labor market conditions in the second half of 2003." The CBO notes that tax withholding also seems to be consistent with stronger employment growth.9

Smoothing the Household Series
As the divergence between the surveys has grown, analysts have become increasingly frustrated that the household data are not comparable over time because of the population adjustments that are lumped into the January data for every year. The Joint Economic Committee recommended a process for smoothing the adjusted population level over the entire time period and produced a comparable household employment time series in late 2003.10

In response, the BLS recently published two briefs that describe a process for making incremental population adjustments to the household series.11 The first brief, "Creating Comparability in CPS Employment Series" by Marisa Di Natale, was published in December 2003 and is the BLS's first effort to make its household series on total employment comparable across different months. The second paper was published on the BLS Web site on February 6, 2004, and offers, for the very first time, a smoothed total employment CPS series dating back to 1990.12

This innovation allows analysts to use CPS measures of employment growth in the same manner that the payroll numbers are used each month. It also eliminates the key rationale against household survey employment data.

The Divergence in Surveys Is Unprecedented
With the new, comparable household employment data, this report presents a side-by-side comparison of employment growth unclouded by population spikes. This new view confirms previous suspicions that the present divergence in job growth between surveys is unprecedented. The last five recessions experienced survey discrepancies, but nothing like the 3 million-job divergence of recent years. In fact, the household survey outpaced the payroll survey by around 500,000 jobs in three of the last five recoveries, while payrolls surged faster in the other two recoveries. But the divergence has never before reached this magnitude.

Interestingly, a historical view of the two series reveals that the total employment gap has widened and narrowed with regularity over the years, suggesting a relationship between the disparity and the business cycle.

Chart 3 shows the total level of civilian employment (from the household survey) minus the total nonfarm employment (from the payroll survey).13 The household survey count is always higher because it includes some categories of workers that the payroll survey does not. Obviously, payroll counts only nonfarm jobs on business payrolls (with corporate benefits like health care), while the household measure includes every American who says he or she has a job. The disparity makes some sense then, but a change in the survey disparity, especially a divergence that follows the business cycle, raises questions. Which survey is mis-measuring the economy?



One can see that the disparity has been trending downward since 1948, which is probably a reflection of the net decline in farmers. The curious cyclical movements are three sudden declines in the early 1950s, mid-1960s, and mid-1990s. The only sharp increase in the disparity has occurred during the past three years. Economic expansions mark the three periods when the gap declined.

The 2000-2003 spike in the survey disparity clearly coincides with the current recession and recovery. The question, then, is whether this recovery is somehow unique. First, the late-1990s stock and dot-com bubbles coincided with high worker confidence and high job turnover, and this inflated payroll counts. Second, the recovery in late 2001 began immediately in the wake of terrorist attacks on America followed by two wars. Turnover has not recovered because employees are expressing a preference for job stability over job movement, and this deflates payroll statistics.

A little noticed study published in 1999 supports this line of reasoning.14 Economists Chinhui Juhn and Simon Potter at the Federal Reserve Bank of New York were concerned about the growing divergence between the two employment surveys. It may come as a surprise from today's perspective, but the concern then was that payroll jobs were growing much faster than the number of workers in the CPS. Faced with the inverse of today's puzzle but lacking any clear solution to the divergence, they pointed to a potential error in population estimates underlying the household survey. Analysts now know that population adjustments still leave much of the survey divergence unexplained and that the jobs gap "bubble" of 1999 mirrored the stock market bubble.15 The question remains: How much was a bubble of real jobs and how much was a statistical illusion?

Problems with the Payroll Survey: Revisions
The conventional wisdom that the CES is superior for month-to-month trends has one major drawback: Monthly payroll data are preliminary. For example, the initial payroll number for December 2003 was a meager 1,000-job increase; yet it was revised up to 16,000 after one month and will be revised again. Since January 1990, 15 percent of preliminary CES reports that showed job growth were later revised to show job losses (or vice versa).

The following disclaimer accompanies every month's Employment Situation report:

[I]n the establishment survey, estimates for the most recent 2 months are based on substantially incomplete returns; for this reason, these estimates are labeled pre-liminary in the tables. It is only after two successive revisions to a monthly estimate, when nearly all sample reports have been received, that the estimate is considered final.
Thus, while the payroll survey may eventually be better for month-to-month analysis of the economy in retrospect, it is by no means appropriate for real-time analysis.

Preliminary revisions are not, in fact, the end of the story. Even after all the establishment responses are submitted for the CES, the final estimate is still based on a sample, not on the entire universe of establishments. Those estimates are significantly revised once per year when the comprehensive universe of payroll employers is incorporated into the benchmark.

The result of benchmarking is another lesson in caution, as post-benchmark CES data are usually--not rarely--quite different from the pre-benchmark series. Chart 4 shows the dramatic difference between preliminary estimates of total U.S. jobs and current estimates. During the early 1990s and 2000s, payroll jobs were overestimated, and during the mid-1990s, they were underestimated, often by 1 million jobs.




The Myth of a Jobless Recovery in 1992
The critical months of the 1992 presidential campaign coincided with a string of erroneous payroll survey reports. Although the recession was officially over as of March 1991, jobs continued to erode according to the payroll survey. In April 1991, total nonfarm employment was a preliminary 109.3 million. Today, that number is listed as 108.5 million. In October 1992, the payroll count was announced as 108.4 million, and voters went to the polls with that number in mind. It was called a jobless recovery and blamed on President George H. W. Bush. But today, the October 1992 payroll survey measure of total nonfarm employment is listed as 109.0 million.

The CES was overestimating total employment in the early months of the 1991-1992 recovery by 700,000-860,000 jobs, but underestimating in the last five months of 1992 by 235,000-522,000. Interestingly, corrections were made not just during the initial benchmarks, but also in 1993 and 1994 and even in later years.

Fair-minded observers should recognize that the payroll survey methodology is not to blame for the snafu. Rather, the problem was traced back to errors in unemployment insurance records, which have since been fixed.

On one hand, the peculiar situation is a reminder that statistics--especially survey data--are not ultimate truth and are prone to bugs. On the other hand, one would then expect 1992's situation to be unique. It is not.

A History of Large Revisions in Payrolls. The variance of 1992 payroll reports was not unique. Table 3 summarizes the differences between originally reported data and current revised data. The first column reports the average difference for the 12 months of each calendar year, where error equals the preliminary estimate of payroll jobs minus the current estimate of payroll jobs. In 1990, for example, initial payroll counts were overestimated by an average of 883,800 jobs.



Oddly, the average error for 1992 was much lower, typically an underestimation of 79,000. However, an average may be misleading: Half the months could have positive errors of 200,000, and the other half could have negative errors of 200,000.

The second column in Table 3 reports standard deviation, which is a measure of monthly error variability over a given year--not variability from one month to the next, but from the typical month's preliminary estimate to the revised current estimate. The year 1992 saw the highest standard deviation in payrolls (512,600), while 1991 data were relatively stable. However, high variability is the rule, not the exception, and is thus a concern for anyone relying on real-time payroll data.

The lessons are that preliminary data are not final, final data are subject to annual benchmark revisions, and a single year's benchmark is not the end of seasonal adjustments. And there is always the odd case like 1992, in which a statistical error corrupts the data. In its defense, the BLS has made great strides in 2003 in updating its methodology--primarily by changing to what is called a probability sample--to avoid large future revisions. This should remind any observer that current methodologies are not written in stone.

The bottom line is that either the current payroll data will be revised significantly or they will not. If they are revised, the CPS is essentially vindicated. The more intriguing possibility is that there are structural problems within the payroll survey that have only just now surfaced in the wake of the odd recovery of the "new" economy. If this is the case, then the payroll numbers will not be revised in the traditional sense. The loss of payroll jobs may be permanent as the workforce shifts to new forms.

Problems with the Payroll Survey: Self-Employment
As the debate over the survey disparity has unfolded, most observers have focused on the definitional case against the payroll survey. However, most attempts to refine the apples-to-oranges comparison into an apples-to-apples comparison miss the heart of the matter. This is not a case of a household survey that counts all workers (traditionally employed plus self-employed) versus a survey that counts only payroll jobs (traditionally employed). Instead, it is a case of a new class of workers who have consulting contracts, are not counted on payrolls, and still see themselves as traditional employees.

We can think of the payroll survey as counting all the "brown-eyed" workers at traditional firms, plus an extrapolation of the "blue-eyed" workers at start-ups who do not yet have payroll records. It does not count "green-eyed" individuals who are self-employed.

As for start-up firms, nobody knows exactly how many exist in the economy, but the BLS uses a careful process of estimating that number based on the observable fact that some portion of start-ups eventually grow into larger, traditional firms. In fact, BLS Commissioner Kathleen Utgoff addressed the issue when the major revisions were announced on February 6:

An issue often raised with regard to the establishment survey is that it might lag in recording a substantial portion of the job growth generated by new business for-mation. We do not believe that is the case.16
It seems that their effort to extrapolate the "blue-eyed" population of workers performed well during this recovery, though future benchmarks may revise the totals.

Start-ups should not be confused with self-employed workers. Economists Brian Wesbury,17 Allan Meltzer,18 and Robert Barro19 have independently suggested a rise in self-employment as the answer to the divergence mystery. Fortunately, the CPS specifically asks individuals whether they are self-employed, and indeed the ranks have swelled in the past two years. Seasonally adjusted self-employment levels are 647,000 higher than in November 2001. At a minimum, the "green-eyes" explain 20 percent of the divergence since the recession ended.

Self-Employee or Consultant? The problem with CPS counts of self-employment is that the workforce is evolving. It is by no means clear that Americans understand self-employment in the same sense that the government does. For example, a worker who leaves the IBM payroll and switches to a full-time consulting role with IBM is likely still to consider himself or herself an IBM employee. Certainly, the worker's family is likely to misidentify the worker's role as employed rather than self-employed. Likewise, partners at a limited liability company (LLC, a new company form) often consider themselves traditional employees when the government classifies them as self-employed partners.

The Internal Revenue Service first approved the limited liability company as a form of business organization in 1988. The most current data from Congress report an astounding 719,000 LLCs in 2000, with a growth rate of 34 percent per year.20 Clearly, the emergence of a "hazel-eyed" workforce is at hand--self-employees who consider themselves payroll "brown-eyes."

This is a seismic institutional shift in the structure of the economy. These kinds of changes imply that the CES levels will seem artificially low because workers will misidentify themselves as traditionally employed in the CPS, creating a wider divergence. A contract worker may no longer have benefits such as health insurance but may enjoy a higher paycheck. This "hazel-eyed" misidentification hypothesis gathered a boost from Utgoff's recent statement:

There are other differences between the two surveys that are more difficult to quantify. We know, for example, that some independent contractors are not reported as self-employed in the household survey but rather as wage and salary workers.21
One consequence of the emergence of a consultant-driven workforce is that U.S. labor markets are even more flexible--which, ironically, will improve the economy even as it makes payrolls look anemic. Sclerotic labor markets lead to higher unemployment rates, and this new economy is based on labor flexibility.

Another consequence is that statistics based on payroll counts will experience a level shift. The most obvious impact has been on productivity growth rates, which recently accelerated. Since productivity is simply a firm's output divided by the number of its payroll workers, the logical result of a reclassification of payroll workers is a boom in the productivity measure. Consultants are accounted as an expense, not a factor input.

Quantifying the consultant population is difficult given existing survey methods. The fundamental problem is psychological: If Americans have preconceived notions of what "self-employee" and "independent contractor" mean, there will be large degrees of misreporting in the CPS.

According to BLS economists, the best assessment of the new workforce comes from the biennial survey of Contingent and Alternative Employment Arrangements, most recently conducted in February 2001,22 which is regrettably right before the recession began. The relative size of the alternative workforce did not change from the 1999 survey, and no comparison to today's economy can be made because BLS did not have enough funding to conduct the survey in 2003. Even so, it is no clearer that survey respondents would identify themselves as independent contractors instead of self-employees when they maintain a self-image as traditional employees.

A rough estimate of "hazel-eyed" workers who misidentify themselves as "brown-eyed" may be useful. If new self-employed workers misidentify themselves in the household survey in 50 percent of cases, then the measured number of self-employed workers should actually be doubled. That would imply 1.3 million new self-employed workers, not 650,000. Congress and the BLS should consider rephrasing some questions on the household survey to begin tracking this emerging class of workers. In the meantime, awareness of the modern company structure and modern workforce will help policymakers to keep "anemic" payroll growth in perspective.



Problems with The Payroll Survey: Decelerating Turnover
The final problem with the payroll survey stems from the methodology that automatically counts payroll jobs, not workers. Consequently, the payroll survey indicates net job losses when the rate of worker turnover slows. This will occur even if the total level of employment is stable or slightly rising.

BLS experts Tom Nardone and co-authors proposed this intriguing theory in their October 2003 paper:

If a person leaves one job and starts another during a relatively short time span, they could appear on both employers' payrolls for the CES reference period. They would be counted twice.23
The payroll survey double-counts any individual who changes jobs during the pay period in which the worker is on two payrolls. Such turnover overcounting would normally be irrelevant if (1) the turnover rate was stable over time and (2) pay periods were stable. But if turnover rates increase or pay periods expand from weekly to monthly, overcounting will inflate the payroll count of total employment.

This is especially interesting because job turnover skyrocketed during the fast-paced labor markets of the 1990s, when labor demand was very high. In fact, Nardone and his team cite statistics from the Bureau of National Affairs showing that "in 1999 employee turnover reached its highest level in nearly two decades." Economic theory suggests that both hiring and quits, and maybe even layoffs, are pro-cyclical. Nevertheless, the BLS researchers did not attempt to quantify the inflationary effect of turnover on the CES.

The critical challenge facing any attempt to quantify the effect of turnover on payroll jobs is a dearth of data. Labor statistics for decades focused on whether a person was employed, in what sector, at what pay, and so on. It is much harder to keep track of a worker between jobs and over any length of time. Workers who have plentiful job opportunities were less interesting than the dilemma of those without. A 2001 paper by Federal Reserve economists Bruce Fallick and Charles Fleischman noted, "One important flow that has been poorly measured is the movement of workers from one employer to another without any significant intervening period of nonemployment."24

Deflating the Payroll Survey
The payroll survey systematically overestimates the level of jobs due to turnover, and it likely does so in a manner that varies with the business cycle. The following equation is a rough sketch of the process:



where Payrollrecorded is the level of total nonfarm employment published by the BLS, Payrolltrue is the actual number of payroll jobs held by individuals, and T is the amount of job turnover during the month. If turnover has a baseline minimum level as well as a variable component, the equation becomes:



Taking the process one step further, the variable amount of turnover could be influenced by employer confidence, worker confidence, GDP growth, and the increased use of monthly pay periods (as opposed to weekly or biweekly). The result can be described with:



where the coefficients (?1, ?2, and ?3) represent the size of each variable's effect on inflating the recorded payroll level over the true payroll level at a moment in time. When workers are hesitant to change jobs in the early part of a recovery, that effect can be partially captured by measures of GDP growth rates and lower levels of consumer-business confidence.

New Data on Gross Job Gains and Losses
Innovative new data from the BLS on gross job flows can illuminate the amount of turnover. Interestingly, the BLS has introduced not one, but two new data series on the gross numbers of jobs created and lost. These broader views of gross job flows, as opposed to the more limited data on net job changes in the CES and CPS, offer a potential confirmation of the turnover hypothesis.

The Labor Department recently started reporting a monthly data series on Job Openings and Labor Turnover (JOLTS) with data starting in December 2000. JOLTS measures ES-202 establishment data on "hires, quits, layoffs, discharges, and other separations for the entire month."25 In late 2003, the BLS unveiled another new series--Business Employment Dynamics (BED)--with quarterly data starting in the third quarter of 1992. Both series confirm that the rate of gross job flows has decreased during the past five years.

Job creation actually peaked in mid-1999 at 9 million jobs in one quarter, declining to 7.5 million in the second quarter of 2003, as shown in Chart 5. Gross job losses peaked in 2001 and have dropped back to normal levels. It seems that the problem with labor market payrolls is not high rates of job loss, but slower rates of job creation.



This report accepts the traditional assumption that job turnover equals the sum of gross job losses and gross job gains.26 The JOLTS turnover rate presented in this report equals the sum of the hires rate and separations rate. The BED turnover rate presented here is likewise a sum of the rate of job gains and rate of job losses.

Table 4 presents a summary of data on gross turnover from two different surveys. There are many caveats to using either JOLTS or BED as measures of turnover, and readers should realize that these are proxy measures. Gross job flows are not equivalent to turnover, because flows include departures (due to retirement, pregnancy, and injury) and new entrants (e.g., college graduates and immigrants). But the focus is on changes in gross flows, which logically are driven by changing turnover rates.



JOLTS and BED data concur that turnover rates have declined over the past two years, and the BED data show a peak in 1998 and 1999. JOLTS data show 0.8 percent fewer gross payroll jobs turned over per month in 2003 than in 2001. The BED series is quarterly but shows the same decline on a quarterly basis over the past two years. The BED data go even further back and show a large decline (1.7 percent) from 1999 turnover rates.27

A more complex concern with this paper's model of overcounting is that most pay periods are weekly, implying that the impact of these turnover rates is overstated by a factor of four or 12 because they are monthly and quarterly measures, respectively. If this were the case, one might think that the monthly JOLTS turnover would be one-third of BED turnover and that the change in rates would also be one-third as large. Instead, the decline in turnover rates is identical in both series in 2002 and in 2003. This implies a similar decline in turnover rates over any period. Nevertheless, the impact on payroll counts is muddled because the CES asks establishments to consider only the payroll period that includes the 12th day of the month. Hence, the decline in turnover would only potentially overcount a quarter of turnover cases per month, assuming (1) no response error by establishments and (2) no overlaps beyond the day of job change.

Common sense suggests that workers prefer no break in employment, especially if employment carries health insurance. One can even argue that the predominance of weekly pay periods mixed with payroll overlaps would heighten the degree of overcounting in the CES. This is mostly a speculative debate until researchers can help clarify the re-employment behavior of workers. The model presented below uses simple and clear assumptions in order to introduce the payroll survey's problem with overcounting.

Calculating Payroll Deflation
What is the impact of lower turnover on job counts? The answer depends on the rate at which departing workers are replaced (or, alternatively, the rate at which departing workers find new jobs) within the typical pay period. Calculating payroll deflation is a simple function:



The re-employment rate is difficult to specify. By definition, re-employed workers in the context of this model are never categorized as unemployed during their job transition, so figures on unemployment and unemployment durations are partially informative at best.

Research from the Labor Department offers some clues. One study of 1997-1998 labor turnover showed that the median duration between jobs for long-tenured displaced workers was 5.3 weeks, and only three weeks for younger workers.28 We can infer that most workers are re-employed quickly, especially if they are younger and are shorter-tenure. Another relevant study found that baby boomers held an average of 9.8 permanent jobs between the ages of 18 and 36. Common sense dictates that a majority of separations are described by workers who take up new opportunities without any gap of unemployment. The study also found that "more than two-thirds of these jobs were held in the first half of the period, from ages 18 to 27."29

These two findings imply that re-employment rates within a pay period are high for a great many workers and that an 80 percent rate is reasonable. Returning to Equation 4 and substituting in actual values for the payroll deflation since 1999 yields:



Thus, the payroll survey may have been deflated by nearly 1.77 million jobs since 1999 due to turnover alone. Considering the period since the recession ended, roughly 1 percent fewer jobs are counted per month in 2003 than during 2001, deflating the payroll survey by 1 million jobs.

Observers should keep in mind that these calculations are based on only a sketch of the turnover problem, using the best available data on gross job flows. Critics will remark that re-employment rates are inexact,30 but the fact that these rates are also pro-cyclical suggests a stronger, not weaker, deflation in payrolls. (See the Appendix.) Nevertheless, the existence of sizeable payroll deflation is the important point, because this problem in the payroll survey is simply not in the public conversation on jobs, and it should be.

Two implications of decelerating turnover are that:

A constant-turnover payroll correction would increase January's total nonfarm employment from 130.1 million to about 131.1 million, using a 2001 baseline for turnover rates. The illusion of 716,000 payroll jobs lost during the recovery becomes instead a gain of 300,000 jobs.
If worker confidence returns to its normal levels of the 1990s, more workers will be willing to change jobs and the payroll count will re-inflate.
Why are workers not changing jobs as frequently two years into the recovery? The likelihood is that many factors are reinforcing one another. First, economic studies show that turnover declines during a recession. Worker anxiety is probably heightened now more than usual by pessimism prevalent in the media. Certainly, the perception of losing jobs to workers in Mexico, India, and China is more profound than in previous eras.

It is non-economic factors, however, that make this era unique. The attacks of September 11, two wars in the Middle East, and constant terrorism alerts all generate psychological insecurity, which logically affects employment decisions. Americans are likely to place more emphasis on stability and other priorities as opposed to career opportunities during these times.

Conclusion
The payroll survey may be systematically undercounting job growth, creating an unprecedented job growth gap between its total employment measure and the household survey's. In the past six months, the BLS has approved new techniques to smooth the household survey's measure of total employment in order to make month-to-month comparisons. Analysts can now point with confidence to the employment of a record number of Americans as of January 2004 and the employment of an additional 2.2 million workers since the recession ended.

Why has the payroll survey missed so much recent job creation? The BLS is skeptical of the start-up explanation, and recent benchmarks confirm the BLS's position. Self-employment is a different matter, and the latest statement by the BLS commissioner confirms the appearance of a new class of contractors. The evolution of the workforce--specifically, the demographic emergence of consultants and contractors who do not consider themselves self-employed--is a likely wedge between the surveys. Self-employment has grown by over 600,000 in two years, and misidentification by the LLC and consulting workforce implies a much higher number.

Finally, a new hypothesis quantified in this report is that decelerating turnover is artificially deflating company payrolls, creating an illusion of 1 million jobs lost since 2001. The heightened insecurity since September 11, the Iraq war, and the specter of outsourcing are logical explanations for reduced turnover. Here again, innovative new data series on employment dynamics from the BLS allow economists to confirm this hypothesis.

Policymakers and analysts should treat payroll data with caution when making comparisons to employment levels in 2001 and earlier years. Contrary to the conventional wisdom, the best measure of job growth now comes from smoothed total employment reported in the household survey. Consequently, policies aimed at protecting illusory lost jobs are ill-advised. Employment in America is rebounding strongly, and the increasing dynamism of U.S. job markets should not be clogged by misguided and misinformed cures.

Tim Kane, Ph.D., is Research Fellow in Macroeconomics in the Center for Data Analysis at The Heritage Foundation.

Appendix: Technical Note on Calculating
Payroll Overcounts Due to Turnover
A more complex approach to payroll overcounts due to turnover would incorporate re-employment rates that vary over time. Because the aggregate re-employment rate within a pay period is pro-cyclical, it will amplify the cyclical overcount in the payroll survey.

A better model of overcounts would also divide the turnover rate in half in order to correct the double-count of job-changers rather than ignoring them altogether. This approach would use the following equation to calculate payroll inflation every year and adjust accordingly:



where T is the monthly turnover rate and R is the average re-employment rate within the pay period.

Re-Employment Rate
As utilized here, the re-employment rate is defined as the ratio of workers who are employed at a new job within the same pay period of their old job. This assumes that most employer-to-employer transfers are not interrupted by unemployment spells or departures out of the labor force, but are voluntary movements to an immediately better opportunity. In those cases, the worker will appear on two payrolls in a single pay period. There are also many cases where a transitioning worker will appear on both payrolls for multiple periods, but these considerations are excluded here. The basic re-employment rate can be described by:



where EE is the number of workers who move from employment to employment during the pay period, EU is the number moving to unemployment, and EN is the number moving to "not in the labor force" status. Thus, the denominator represents total separations. Here the simplifying assumptions are that all EE job transitions have a single payroll overcount (realistically, some will have no overcounts and some will have multiple overlapping payrolls) and that all EU and EN transitions are defined completely by a spell that outlasts the pay period.

This paper assumes a re-employment rate of 80 percent within a monthly pay period. Using CPS data from 1994-2000, Fallick and Fleischman estimate R to be around 40 percent.31 Their paper does not offer a time series for re-employment rates. While the 80 percent rate used here may seem high, it is based on assumptions derived from Labor Department research. Furthermore, this does not calibrate for multiple payroll overlaps.

A model that incorporates half turnover and changing re-employment rates yields results similar to the simple model presented in Equation 4. Calculation of the "complicated" model indicates that payroll jobs were inflated as shown in Table 5. The net effect is a 1.3 million-job deflation since the recovery began (a deflation of 2.0 million since 1999), higher than the simple model.


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1. Kathleen P. Utgoff, "Commissioner's Statement on the Employment Situation," U.S. Department of Labor, Bureau of Labor Statistics, September 5, 2003, at www.bls.gov/news.release/archives/jec_09052003.pdf.

2. Elise Gould, "Measuring Employment Since the Recovery: A Comparison of the Household and Payroll Surveys," Economic Policy Institute Briefing Paper No. 148, December 12, 2003.

3. Economic Indicators January 2004, prepared for the Joint Economic Committee by the Council of Economic Advisers, p. 11.

4. It is well-known that GDP growth is driven by increases in factor inputs such as labor and capital, implying a direction of causality: Increases in employment lead to faster GDP growth. However, estimating this relationship is problematic if growth rates also cause higher employment. Because growth and employment are jointly determined, they are known as endogenous. Subsequent forecasts of GDP growth that do not take the endogenous effect into account can be biased, overestimating the impact of employment on growth. This paper's hypothesis is not that growth causes employment per se, but that higher growth inflates the CES measure of jobs.

5. Congressional Budget Office, The Budget and Economic Outlook, An Update, August 2003, p. 34.

6. Governor Ben S. Bernanke, remarks at the Global Economic and Investment Outlook Conference, Carnegie Mellon University, Pittsburgh, November 6, 2003.

7. Tom Nardone, Mary Bowler, and Jurgen Kropf, "Examining the Discrepancy in Employment Growth Between CPS and the CES," October 17, 2003.

8. Economic Report of the President, February 2004, pp. 49-50.

9. Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2005 to 2014, January 2004.

10. Joint Economic Committee, A Tale of Two Employment Surveys, October 14, 2003.

11. Marisa L. Di Natale, "Creating Comparability in CPS Employment Series," U.S. Department of Labor, Bureau of Labor Statistics, December 2003, at www.bls.gov/cps/cpscomp.pdf.

12. U.S. Department of Labor, Bureau of Labor Statistics, "Current Population Survey 1990-2003 Employment Adjusted for Population Controls," at www.bls.gov/cps/cpspopsm.pdf (March 2, 2004).

13. The household series for this figure is a four-month moving average, based on the revised household survey measure of total employment, which is smoothed for census population adjustments of 1990-1999 and 2000-2002, using a methodology recommended by the BLS.

14. Chinhui Juhn and Simon Potter, "Explaining the Recent Divergence in Payroll and Household Employment Growth,"
Current Issues in Economics and Finance, December 1999.

15. The Census Bureau does in fact revise U.S. population estimates annually. In January 2004, for example, the population estimate since the 2000 census was revised down by 560,000. But census revisions do not explain either the "narrowing" survey convergence in 1996-1999 or the "widening" survey divergence of 2001-2003.

16. Kathleen P. Utgoff, "Commissioner's Statement on the Employment Situation," U.S. Department of Labor, Bureau of Labor Statistics, February 6, 2004, at www.bls.gov/news.release/jec.nr0.htm.

17. Brian Wesbury, "The Bush Boom," The Wall Street Journal, September 15, 2003, p. A20.

18. Allan H. Meltzer, "A Jobless Recovery?" The Wall Street Journal, September 26, 2003, p. A16.

19. Robert J. Barro, "Don't Sweat the Sickly Employment Numbers," Business Week, January 26, 2004, p. 32.

20. Joint Committee on Taxation, "Background and Proposals Relating to S Corporation," June 18, 2003 at
http://www.house.gov/jct/x-62-03.pdf .

21. Utgoff, "Commissioner's Statement on the Employment Situation," February 6, 2004.

22. "The survey found 8.6 million independent contractors (6.4 percent of total employment), 2.1 million on-call workers (1.6 percent of total employment), 1.2 million temporary help agency workers (0.9 percent of the employed), and 633,000 contract company workers (0.5 percent of total employment). The proportions of workers employed in all four alternative arrangements were about unchanged since February 1999." U.S. Department of Labor, Bureau of Labor Statistics, Contingent and Alternative Employment Arrangements, February 2001 (emphasis added).

23. Nardone et al., "Examining the Discrepancy in Employment Growth Between CPS and the CES."

24. Bruce Fallick and Charles Fleischman, The Importance of Employer-to-Employer Flows in the U.S. Labor Market, Federal Reserve Board Finance and Economics Discussion Series 2001-18, April 2001.

25. Kelly Clark and Rosemary Hyson, "New Tools for Labor Market Analysis: JOLTS," Monthly Labor Review, December 2001, p. 33.

26. "[Gross] job reallocation at time t is the sum of all plant-level employment gains and losses that occur between t--1 and t." Stephen J. Davis, John C. Haltiwanger, and Scott Schuh, Job Creation and Destruction (Cambridge, Mass.: MIT Press, 1996), p. 12. See also the discussion on the state of data on worker flows (pp. 129-133 and 149-150). The real variable of interest is, of course, worker flows, not job flows, and we use job flows as a proxy in this CDA Report.

27. After reviewing an early draft of this paper, economists at the Bureau of Labor Statistics suggested that the BED may not be appropriate for gross worker-flow turnover. The alternative suggested is an employer-to-employer worker flow from CPS surveys. These data show a decline from 2.89 percent per month in November 1999 to 2.09 percent in November 2003--half of the rate derived from the BED, and still large. The CPS number is not definitive, however, and potentially underestimates the effect by ignoring respondents who drop out of the sample. This attrition bias is likely to be made up of a large proportion of individuals who move in response to employment change.

28. Ryan T. Helwig, "Worker Displacement in a Strong Labor Market," Monthly Labor Review, June 2001, p. 18.

29. U.S. Department of Labor, Bureau of Labor Statistics, "Number of Jobs Held, Labor Market Activity, and Earnings Growth Among Younger Baby Boomers: Results from More Than Two Decades of a Longitudinal Survey," news release, August 27, 2002.

30. Using very complicated CPS calculations, Fallick and Fleischman estimate a comparable re-employment rate of 40 percent. This estimate is a lower bound, and the authors discuss an "attrition bias" that would result in an upper bound rate of 80 percent. Of course, other estimates based on other methodologies will offer different rates. All researchers in this area acknowledge that there is no definitive study of worker flows, and the one clear fact is that employer-to-employer transitions are much more prevalent than economists realized a generation ago.

31. Fallick and Fleischman, The Importance of Employer-to-Employer Flows in the U.S. Labor Market, pp. 11-12.



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The Pension Underfunding Crisis: How Effective Have Funding Reforms Been?
by David C. John
Testimony #1003

October 29, 2003 | |





I appreciate the opportunity to appear before you today to discuss the appropriate funding rule for America's defined benefit pension plans. This is an extremely important subject, and I would like to thank Chairman Boehner for scheduling this hearing. Let me begin by noting that while I am a Research Fellow in Social Security and Financial Institutions at the Heritage Foundation, the views that I express in this testimony are my own, and should not be construed as representing any official position of the Heritage Foundation. In addition, the Heritage Foundation does not endorse or oppose any legislation.

What a difference a year makes. Last year, there was a great deal of discussion about the "dangers" of 401k retirement plans and other types of defined contribution plans. Experts warned, with some justification that retirement plans where workers had to invest their money faced investment risks. Many of those same experts and legislators called for a return of the good old days when employees were part of a defined benefit retirement plan. Under those plans, rather than having a retirement benefit based on one's investments, a worker receives a company paid benefit based on his or her length of employment and salary history. In theory, defined benefit plans are paid from a separate fund managed by the company or by financial professionals chosen by them.

Those experts implied that these defined benefit plans had little or no risk. They were wrong. Since then, a number of companies have dropped their defined benefit pension plans as part of a bankruptcy proceeding. Most recently, Weirton Steel became the latest company to try to dump their pension obligations on the taxpayer. Last week, I was a guest on a radio show that originates in the Ohio Valley area, and had the opportunity to speak to several steel workers whose pensions were going to be affected by Weirton's actions. Their stories were a forceful reminder that this is not just a policy issue, it affects real people's lives in the most direct way at the time when they are likely to be least able to change their circumstances.

Now Congress is debating legislation that would allow companies just a little more time to fund their pension plans. It is also looking at ways to change the regulatory framework so that under-funded pension plans look like they have just a bit more in assets. Companies claim that without this help, jobs will be lost and the economy will suffer.

The S&L Crisis: Are We On the Same Track With Pensions?

Earlier this month, I testified at a Senate Special Committee on Aging hearing entitled "Americas Pensions: The Next S&L Crisis." That title could not be more to the point. It also brings back some painful memories. Back in the early 1980's, I worked as Legislative Director to a member of the House Banking Committee, former Rep. Doug Barnard of Georgia, as Congress considered legislation dealing with the early signs of the S&L crisis.

At the time, we were told that the industry was essential to America's economy, and that even though they were beginning to run deficits, all that was needed was a little forbearance. As a result, Congress created a regulatory form of capital called "good will" which allowed S&Ls to count an estimate of their reputations and business relationships as part of capital. At first, the gimmick worked like a wonder. S&Ls suddenly had not only enough capital to be "healthy" but to expand.

Of course, the net result was that when the industry finally collapsed the expanded S&Ls had lost even more money than they would have if they had been allowed to face economic reality several years earlier. The cost to America's taxpayers was somewhere around $500 billion. By showing forbearance, Congress had really just made the problem worse and increased the eventual cost. That example could also apply to America's pensions.

The S&L crisis has a direct parallel to what we are discussing today. The Senate Finance Committee has approved legislation that includes a three year holiday on the Deficit Reduction Contribution, a mechanism created in 1987 to require companies with chronically under-funded pension plans to increase the assets in those plans. Such a move, regardless of the problems faced by a few industries, would practically guarantee that we will be sitting here in a few years discussing a multi-hundred billion dollar bailout of the PBGC. It would be extremely irresponsible, and I would hope that the Administration would veto any bill containing such a funding holiday.

Currently, 12 percent of the labor force is covered by defined benefit pension plans, while an additional 7 percent is covered by both defined benefit and defined contribution plans. Under a defined benefit plan, a worker is promised a retirement benefit based on a percentage of salary for each year worked or similar measures. While the worker does not have the direct investment risk associated with a 401(k) plan, the benefits depend on whether or not the plan is fully funded. The risk that it is not fully funded can be as great or greater than the risk from stock and bond investments, but it is usually much harder for the worker to determine how high that risk is.

A Proper Discount Rate for Defined Benefit Pension Plans

A key question is whether the pension plan's level of funding is being measured properly. A July 8 proposal by the U.S. Department of the Treasury addresses both the proper way to measure pension plan funding and ways to make it easier for workers and others to determine whether their company's pension plan is at risk. It also proposes ways to prevent companies that are in financial trouble from making promises to their workers and then making the taxpayers pay for them.

The Treasury Department's plan is far superior to the discount rate provisions in the July 18 version of the Portman-Cardin bill passed by the House Ways and Means Committee--H.R.1776, named for the bill's two principal sponsors, Representatives Rob Portman (R-OH) and Benjamin L. Cardin (D-MD)--and Congress should consider incorporating Treasury's proposed reforms into the final bill. As a short-term alternative - with the full understanding that this is a temporary measure, Congress should consider a two year shift to a corporate bond rate, such as that contained in HR 3108.

Why an Appropriate Discount Rate Is Important

The funding of a defined benefit pension plan is measured using a "discount rate." A plan is assumed to be fully funded if the assets that it currently has can be expected to grow at a certain interest rate until the resulting level of assets then equals the total amount of pension payments that the plan promises to make in the future. For example, if a fund will owe $1,000 in 30 years and assumes that its assets will earn an average of 5 percent every year after inflation, it must have $231 today in order to be fully funded. (Invested at a 5 percent interest rate, $231 will grow to $1,000 in 30 years.)

The discount (interest) rate used to measure a plan's funding is crucial. If a plan assumes that its assets will grow at 7 percent a year instead of 5 percent, it needs only $131 today to be fully funded (rather than the $231 it would need if it used a 5 percent rate). On the other hand, if a plan uses a discount rate of only 3 percent, then it must have $412 on hand today to be fully funded.

The discount rate has no actual relationship to how much a pension plan's investments are earning. While the law requires that plans make prudent investments, these investments can change over time and are greatly affected by short-term swings in the stock, bond, and property markets. The discount rate is intended to measure whether or not the plan has sufficient assets to meet its obligations over a long period of time; thus, a defined benefit plan uses the rate for long-term government or corporate bonds instead of the rate of interest the plan is earning on its investments.

Over the years, Congress has tinkered with the appropriate discount rate in order to address specific problems as they arose. From 1987 to 2002, the law required that defined benefit pension plans use a weighted four-year average of the returns of the 30-year U.S. Treasury bond rate as their discount rate for determining funding adequacy. Under the 1987 law, plans were allowed to use any number between 90 percent and 110 percent of that rate. The spread between 90 percent and 110 percent was intended to allow the pension plan a slight amount of flexibility in its calculations. In 1994, Congress narrowed this range to between 90 percent and 105 percent of that weighted average. This discount rate is also used to determine lump-sum benefits for workers who want a one-time payment instead of a monthly check.

However, using this rate presents two problems. First, the Treasury Department announced in 2001 that it would stop issuing the 30-year Treasury bond. As a result, market prices for these bonds are distorted by the realization that they will no longer be issued. Second, interest rates in general are at a historic low, reaching levels not seen for almost 50 years. While economists expect them to rise gradually, pension plans argue that using today's low rate would make pension plans look far more underfunded than they actually are. Continued use of today's rate would force companies to assign pension plans literally billions of dollars that could be used more effectively to build the company.

Recognizing that the old discount rate was too low, in 2002, Congress allowed pension plans to use instead a number equal to 120 percent of the four-year average of the 30-year Treasury bond rate. However, this law expires after 2003. Some corporations have proposed that Congress substitute a longer-term corporate bond rate for the 30-year Treasury rate. Since corporate bonds do not have the full faith and credit of the United States behind them, they have higher interest rates. Using those higher interest rates would sharply reduce the amount of money that a pension plan must have on hand in order to avoid being underfunded while still protecting the funding status of the plan.

The changes in the discount rate between 1987 and now have had an effect. Each, along with other changes in the law including the establishment of a 90 percent minimum full funding rate in 1994, have addressed specific problems. In most cases, there has been at least a temporary improvement. For instance, the 1994 law saw a chronic under-funding of these pension plans (in the aggregate) change into a significant surplus. However, despite temporary improvements each time that the law is amended, the next change in circumstances requires yet another urgent congressional action.

Recent circumstances are forcing Congress to yet again examine the appropriate discount rate. As will be discussed below, the Treasury Department has made a proposal that would significantly improve the discount rate. However, simply looking at the discount rate for current liabilities may not be enough. For both the affected workers and for taxpayers as a whole, it may be even more important to look at the termination liability of chronically under-funded pension plans.

How the Treasury Department Proposal Would Affect the Discount Rate

On July 8, the Treasury Department proposed that a two-stage change in the pension plan discount rate be substituted for the current 30-year Treasury bond rate. For the next two years, the Treasury proposal would allow plans to use Congress's choice of either the 20-year or 30-year corporate bond rate. After that two-year period, companies would begin a three-year transition to using a corporate bond interest rate determined by the average age of an individual company's workforce.

Since companies with older workers will begin to pay out pension benefits sooner than companies with younger workers, the Treasury Department proposal would require companies with older workers to use a shorter-term corporate bond rate. Short-term bonds of all types have a lower annual interest rate than longer-term bonds do. This lower discount rate means that those companies would have to have proportionately more assets available to pay pension benefits. Companies with younger workers could use a longer corporate bond rate, which would allow them to have proportionately less cash and other assets available. This is an important reform that should be carefully considered.

The simple fact is that some industries and companies have workforces that are older on average than others. Since these companies will have to begin paying their workers' pension benefits sooner, the health of their pension plans is a significant factor in their ability to remain in business. If their pension plans are underfunded and the company has to make significant payments to them, that company is at a higher risk of bankruptcy than if the same company had a younger average workforce. Rather than using a uniform measure for all companies, it is much more prudent to use a discount rate that is customized to reflect a particular company's workers.

Using a customized discount rate as proposed by the Treasury Department would allow workers and investors to better understand a company's overall financial health. The customized discount rate also should allow earlier identification of problem companies so that changes can be required before they become critical.

Balancing the Interests of Workers, Companies, and Taxpayers

It is tempting to see the issue of discount rates as affecting only the amount that cash-strapped companies will have to divert to their pension plans. However, much more is at stake. Changing the discount rate to just a single long-term corporate rate might benefit companies by lowering the amount that they have to contribute to pension plans, but it also might hurt both workers and taxpayers in the long run. Workers who want to take a lump-sum pension distribution instead of monthly payments would receive less under such a system than they would under the current discount rate.

Lump-sum pension benefits are calculated by determining the total amount of pension benefits owed over a lifetime and calculating how much money invested today at the discount rate is needed to grow into the promised total amount. The higher the discount rate, the lower the amount of money that will be necessary to grow into that promised benefit, and the lower the lump sum benefit. At the same time, too low a discount rate may mean a lump-sum payment that is too high, thus further draining the plan of needed assets.

In determining an appropriate discount rate, Congress must balance the needs of both pension plans and retirees wishing to take a lump sum benefit. Similarly, if Congress only substitutes a higher uniform discount rate for the present one, taxpayers could find themselves required to pay higher taxes to make up for Pension Benefit Guarantee Corporation (PBGC) deficits. The PBGC is the federal insurance agency that takes over insolvent pension plans and pays benefits to retirees. Even though the PBGC limits the amount that it pays to each retiree, taxpayers can expect Congress to bail out the agency with additional tax money if the agency runs major deficits.

When Congress considers the appropriate discount rate, it must take into consideration the risk that an overly generous discount rate will result in more underfunded pension plans, and thus that more of those plans will be turned over to the PBGC for payment. This is especially true if legislation contains a holiday on the Deficit Reduction Contribution. This is not just an issue that concerns companies; taxpayers have an equal stake in its outcome.

Termination Liability

As important as the debate over the appropriate discount rate is, its use is not sufficient to protect either workers or taxpayers. As the PBGC has pointed out, many chronically underfunded plans look reasonably healthy until they are terminated. For instance, Bethlehem Steel's pension plan reported that it was 84 percent funded under current liability rules, but proved to be only 45 percent funded when the plan terminated. The US Airways pilots' plan reported that it was 94 percent funded, but proved to be less than 35 percent funded when it was terminated. Most recently, Weirton Steel's pension plan was only about 39 percent funded when it terminated. I spoke to one worker with over 20 years service who was told by both management and his union head that the pension plan was funded. They were not lying, they were just using another measure - one that proved to be meaningless when the plan went under PBGC control.

The simple fact is that while there is some value to measuring current liabilities, it is not sufficient. Pension accounting is a regulatory game that must come closer to reality. It is meaningless to the Weirton Steel worker if his plan looks relatively healthy before it is terminated. What is important is finding out that his pension will be reduced. Similarly, as a taxpayer, I could care less if Bethlehem Steel's plan met minimum funding requirement for most of the years prior to its end. What does interest me is the $4.3 billion shortfall that I or my children may have to help cover.

PBGC is a Market Distortion

PBGC, despite having an important mission, is a creation of government and would not exist in the marketplace in its current form. Just like the FDIC and the old Federal Savings and Loan Insurance Corporation, its protection is not free. Because PBGC is a distortion in the market, its politically set insurance premiums and regulatory guidelines are open to gaming by corporations and others who want to pass part of the cost of their pension plans to the taxpayer. The current debate over an appropriate discount rate is another example of this.

This is not to say that the agency does not serve a valuable purpose, but to recognize that its presence increases the risk that taxpayers will end up paying for the protection it offers. Until PBGC is either reformed to include a premium rate that includes a more effective measure of risk or changed into an agency that helps to arrange properly priced private sector insurance, debates about pension funding status are going to reoccur on a regular basis.

Two Other Important Reforms

The Treasury Department proposal includes two additional reforms that would increase the information available to workers and investors and lower the potential liability to the PBGC. Even if agreement on the discount rate cannot be reached for now, Congress should swiftly consider making the following reforms:

Improved Information
All too often, the true status of a defined benefit pension plan is unknown to the affected companies' workers and investors. The Treasury Department proposal would require pension plans that are underfunded by more than $50 million to make a more timely and accurate disclosure of their assets, liabilities, and funding ratios. In addition, while phasing in the new discount rate changes, all plans would have to make an annual disclosure of their pension liabilities using the duration matched yield curve. This reform would further improve the ability of workers and investors to judge whether a pension plan is properly funded.

Finally, pension plans would have to disclose whether they have enough assets available to pay the full amount of benefits that workers have already earned. As mentioned above, requiring disclosure of "termination basis" would ensure that if the company files for bankruptcy and seeks to terminate its pension plan, workers are not suddenly surprised to find that the plan cannot pay the pension benefits they have already earned.

Reduced Taxpayer Liability
Companies that are in severe financial trouble often try to keep their workers happy by promising them higher pension benefits. Similarly, companies in bankruptcy sometimes seek to improve pension benefits in return for salary concessions. In both cases, these higher pension promises often get passed on to the PBGC, and thus to the taxpayers, for payment when the company seeks to terminate its pension plan. The proposed reforms would prevent severely underfunded pension plans from promising higher pension benefits or allowing lump-sum payments unless the company fully pays for those improvements by making additional contributions to its pension plan. Similar restrictions would apply to companies that file for bankruptcy.
How Not to Improve the Situation

The one thing that Congress should not do is to repeat the sad experience of the 1980's. Unless there is hard evidence that a company will recover its economic health, Congress should not casually extend the amount of time that corporations have to fund their pension plans. While this may be justified on a case-by-case basis, a general rule is likely to just mean that taxpayers will have to pay more to bail out the PBGC when it runs out of money.

And that day is inevitable unless Congress takes a serious look at PBGC and the entire retirement situation. This is not a problem where individual mini-crises should be considered to be unrelated. PBGC has an investment portfolio that includes a sizeable proportion of government bonds. It is true that unlike Social Security, which simply stores the special issue treasury bonds in its trust fund, PBGC builds its portfolio by trading its special issue bonds with the Bureau of the Public Debt. However, that portfolio growth gives a false sense of assurance.

When the time comes for PBGC to liquidate its portfolio to pay benefits, we may see the "perfect storm" where both Social Security and Medicare are liquidating their government bond portfolio at the same time. Even though PBGC is the smallest of these agencies by a large margin, the only way that it will be able to raise the money that it needs for benefit payments is to either sell its bond portfolio on the open market or to return them for repayment. Neither option looks promising at this point. If the government is borrowing massive amounts of money, the prices of bonds can be expected to be unstable at best. And if Social Security and Medicare are consuming massive amounts of government resources, PBGC can expect a place behind them.

Thoughts for the Future

As an alternative, Congress should consider a close examination of the entire retirement situation ranging from Social Security to private pension plans to incentives for people to work. Among steps that could be considered are:

Reform PBGC: PBGC has done a fine job with what it has, but the structure is fundamentally flawed. Premiums are inadequate, and are not based on any measure of the risk that the employer will turn its pension plan over to the agency. Investment strategies are less than adequate. Rather than a piecemeal review, Congress should begin now a thorough review of the agency.
Encourage Small Business to Form Retirement Pools: About 50 percent of the US workforce has no private pension plan. Many of these workers are employed by smaller businesses that cannot afford to sponsor any sort of retirement plan. Current legislative efforts to remedy this situation have centered on reducing the regulatory burden that is a major part of the cost of having a pension plan. Instead, Congress should consider an alternate approach. Rather than expecting every small business to have its own retirement plan, encourage them to form pools, perhaps based around associations, chambers of commerce, or other affinity group. This would work best with defined contribution retirement plans.
Phase Out Defined Benefit Plans: Sadly, it may be time to recognize that in the future workers will have more job mobility than they even do now, and that a defined benefit plan may not be in their best interests. Congress should consider developing incentives for companies to shift their retirement plans to defined contribution plans.
Encourage Workers to Work Longer: In the future, there will be fewer younger people to take the jobs of those who retire, and a resulting demand for older workers who are willing to stay in the workforce - even if it is only on a part-time basis. Congress should examine the various workplace rules now to remove regulatory and other obstacles
Reform Social Security: Every day that Congress and the Administration delays reforming Social Security, there is one less day that the program will have surpluses. The Social Security trustees warn that the program will begin to run cash flow deficits within 15 years. There is a pool of IOUs known as the trust fund, which can be used to help pay benefits until they run out in 2042, but in order to liquidate them, Congress will have to come up with about $5 trillion (in today's dollars) from general revenue. The last thing that future retirees need is to find out that both their company pension plan and Social Security are unable to pay all of their promised benefits.
Thank you for the opportunity to testify. I look forward to your questions.


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America's Pensions: The Next Saving and Loan Crisis?
by David C. John
Testimony

October 14, 2003 | |





Before the Select Committee on Aging United States Senate



I appreciate the opportunity to appear before you today to discuss the economic future of America's pension plans. This is an extremely important subject, and I would like to thank both Chairman Craig and Ranking Member Breaux for scheduling this hearing. Let me begin by noting that while I am a Research Fellow in Social Security and Financial Institutions at the Heritage Foundation, the views that I express in this testimony are my own, and should not be construed as representing any official position of the Heritage Foundation. In addition, the Heritage Foundation does not endorse or oppose any legislation.



What a difference a year makes. Last year, there was a great deal of discussion about the "dangers" of 401k retirement plans and other types of defined contribution plans. Experts warned, with some justification that retirement plans where workers had to invest their money faced investment risks. Many of those same experts and legislators called for a return of the good old days when employees were part of a defined benefit retirement plan. Under those plans, rather than having a retirement benefit based on one's investments, a worker receives a company paid benefit based on his or her length of employment and salary history. In theory, defined benefit plans are paid from a separate fund managed by the company.



Those experts implied that these defined benefit plans had little or no risk. They were wrong. Since then, a number of companies have dropped their defined benefit pension plans as part of a bankruptcy proceeding. Just last week, Weirton Steel became the latest company to try to dump their pension obligations on the taxpayer. Today's witness list also includes both the Pension Benefit Guarantee Corporation and a steel worker whose pension was affected by corporate bankruptcy. It is critical for all of us to remember that this is not just a policy issue, it affects real people's lives in the most direct way at the time when they are likely to be least able to change their circumstances.



Now Congress is debating legislation that would allow companies just a little more time to fund their pension plans. It is also looking a ways to change the regulatory framework so that under funded pension plans look like they have just a bit more in assets. Companies claim that without this help, jobs will be lost and the economy will suffer.



The S&L Crisis: Are We On the Same Track With Pensions?


The title of today's hearing, Americas Pensions: The Next S&L Crisis, could not be more to the point. It also brings back some painful memories. Back in the early 1980's, I worked as Legislative Director to a member of the House Banking Committee, former Rep. Doug Barnard of Georgia, as Congress considered legislation dealing with the early signs of the S&L crisis.



At the time, we were told that the industry was essential to America's economy, and that even though they were beginning to run deficits, all that was needed was a little forbearance. As a result, Congress created a regulatory form of capital called "good will" which allowed S&Ls to count an estimate of their reputations and business relationships as part of capital. At first, the gimmick worked like a wonder. S&Ls suddenly had not only enough capital to be "healthy" but to expand.



Of course, the net result was that when the industry finally collapsed the expanded S&Ls had lost even more money than they would have if they had been allowed to face economic reality several years earlier. The cost to America's taxpayers was somewhere around $500 billion. By showing forbearance, Congress had really just made the problem worse and increased the eventual cost. That example could also apply to America's pensions.

Currently, 12 percent of the labor force is covered by defined benefit pension plans, while an additional 7 percent is covered by both defined benefit and defined contribution plans. Under a defined benefit plan, a worker is promised a retirement benefit based on a percentage of salary for each year worked or similar measures. While the worker does not have the direct investment risk associated with a 401(k) plan, the benefits depend on whether or not the plan is fully funded. The risk that it is not fully funded can be as great or greater than the risk from stock and bond investments, but it is usually much harder for the worker to determine how high that risk is.

A Proper Discount Rate for Defined Benefit Pension Plans.

A key question is whether the pension plan's level of funding is being measured properly. A July 8 proposal by the U.S. Department of the Treasury addresses both the proper way to measure pension plan funding and ways to make it easier for workers and others to determine whether their company's pension plan is at risk. It also proposes ways to prevent companies that are in financial trouble from making promises to their workers and then making the taxpayers pay for them.

The Treasury Department's plan is far superior to the discount rate provisions in the July 18 version of the Portman-Cardin bill passed by the House Ways and Means Committee--H.R.1776, named for the bill's two principal sponsors, Representatives Rob Portman (R-OH) and Benjamin L. Cardin (D-MD)--and Congress should consider incorporating Treasury's proposed reforms into the final bill.

Why an Appropriate Discount Rate Is Important

The funding of a defined benefit pension plan is measured using a "discount rate." A plan is assumed to be fully funded if the assets that it currently has can be expected to grow at a certain interest rate until the resulting level of assets then equals the total amount of pension payments that the plan promises to make in the future. For example, if a fund will owe $1,000 in 30 years and assumes that its assets will earn an average of 5 percent every year after inflation, it must have $231 today in order to be fully funded. (Invested at a 5 percent interest rate, $231 will grow to $1,000 in 30 years.)



The discount (interest) rate used to measure a plan's funding is crucial. If a plan assumes that its assets will grow at 7 percent a year instead of 5 percent, it needs only $131 today to be fully funded (rather than the $231 it would need if it used a 5 percent rate). On the other hand, if a plan uses a discount rate of only 3 percent, then it must have $412 on hand today to be fully funded.



The discount rate has no actual relationship to how much a pension plan's investments are earning. While the law requires that plans make prudent investments, these investments can change over time and are greatly affected by short-term swings in the stock, bond, and property markets. The discount rate is intended to measure whether or not the plan has sufficient assets to meet its obligations over a long period of time; thus, a defined benefit plan uses the rate for long-term government or corporate bonds instead of the rate of interest the plan is earning on its investments.



From 1987 to 2002, the law required that defined benefit pension plans use a weighted four-year average of the returns of the 30-year U.S. Treasury bond rate as their discount rate for determining funding adequacy. Under the 1987 law, plans were allowed to use any number between 90 percent and 105 percent of that rate. The spread between 90 percent and 105 percent was intended to allow the pension plan a slight amount of flexibility in its calculations. This discount rate is also used to determine lump-sum benefits for workers who want a one-time payment instead of a monthly check.



However, using this rate presents two problems. First, the Treasury Department announced in 2001 that it would stop issuing the 30-year Treasury bond. As a result, market prices for these bonds are distorted by the realization that they will no longer be issued. Second, interest rates in general are at a historic low, reaching levels not seen for almost 50 years. While economists expect them to rise gradually, pension plans argue that using today's low rate would make pension plans look far more underfunded than they actually are. Continued use of today's rate would force companies to assign pension plans literally billions of dollars that could be used more effectively to build the company.



Recognizing that the old discount rate was too low, in 2002, Congress allowed pension plans to use instead a number equal to 120 percent of the four-year average of the 30-year Treasury bond rate. However, this law expires after 2003. Some corporations have proposed that Congress substitute a longer-term corporate bond rate for the 30-year Treasury rate. Since corporate bonds do not have the full faith and credit of the United States behind them, they have higher interest rates. Using those higher interest rates would sharply reduce the amount of money that a pension plan must have on hand in order to avoid being underfunded while still protecting the funding status of the plan.



How the Treasury Department Proposal Would Affect the Discount Rate

On July 8, the Treasury Department proposed that a two-stage change in the pension plan discount rate be substituted for the current 30-year Treasury bond rate. For the next two years, the Treasury proposal would allow plans to use Congress's choice of either the 20-year or 30-year corporate bond rate. After that two-year period, companies would begin a three-year transition to using a corporate bond interest rate determined by the average age of an individual company's workforce.



Since companies with older workers will begin to pay out pension benefits sooner than companies with younger workers, the Treasury Department proposal would require companies with older workers to use a shorter-term corporate bond rate. Short-term bonds of all types have a lower annual interest rate than longer-term bonds do. This lower discount rate means that those companies would have to have proportionately more assets available to pay pension benefits. Companies with younger workers could use a longer corporate bond rate, which would allow them to have proportionately less cash and other assets available. This is an important reform that should be carefully considered.



The simple fact is that some industries and companies have workforces that are older on average than others. Since these companies will have to begin paying their workers' pension benefits sooner, the health of their pension plans is a significant factor in their ability to remain in business. If their pension plans are underfunded and the company has to make significant payments to them, that company is at a higher risk of bankruptcy than if the same company had a younger average workforce. Rather than using a uniform measure for all companies, it is much more prudent to use a discount rate that is customized to reflect a particular company's workers.



Using a customized discount rate as proposed by the Treasury Department would allow workers and investors to better understand a company's overall financial health. The customized discount rate also should allow earlier identification of problem companies so that changes can be required before they become critical.



Balancing the Interests of Workers, Companies, and Taxpayers

It is tempting to see the issue of discount rates as affecting only the amount that cash-strapped companies will have to divert to their pension plans. However, much more is at stake. Changing the discount rate to just a single long-term corporate rate might benefit companies by lowering the amount that they have to contribute to pension plans, but it also might hurt both workers and taxpayers in the long run. Workers who want to take a lump-sum pension distribution instead of monthly payments would receive less under such a system than they would under the current discount rate.



Lump-sum pension benefits are calculated by determining the total amount of pension benefits owed over a lifetime and calculating how much money invested today at the discount rate is needed to grow into the promised total amount. The higher the discount rate, the lower the amount of money that will be necessary to grow into that promised benefit, and the lower the lump sum benefit. At the same time, too low a discount rate may mean a lump-sum payment that is too high, thus further draining the plan of needed assets.



In determining an appropriate discount rate, Congress must balance the needs of both pension plans and retirees wishing to take a lump sum benefit. Similarly, if Congress only substitutes a higher uniform discount rate for the present one, taxpayers could find themselves required to pay higher taxes to make up for Pension Benefit Guarantee Corporation (PBGC) deficits. The PBGC is the federal insurance agency that takes over insolvent pension plans and pays benefits to retirees. Even though the PBGC limits the amount that it pays to each retiree, taxpayers can expect Congress to bail out the agency with additional tax money if the agency runs major deficits.



When Congress considers the appropriate discount rate, it must take into consideration the risk that an overly generous discount rate will result in more underfunded pension plans, and thus that more of those plans will be turned over to the PBGC for payment. This is not just an issue that concerns companies; taxpayers have an equal stake in its outcome.



Two Other Important Reforms

The Treasury Department proposal includes two additional reforms that would increase the information available to workers and investors and lower the potential liability to the PBGC. Even if agreement on the discount rate cannot be reached for now, Congress should swiftly consider making the following reforms:

Improved Information
All too often, the true status of a defined benefit pension plan is unknown to the affected companies' workers and investors. The Treasury Department proposal would require pension plans that are underfunded by more than $50 million to make a more timely and accurate disclosure of their assets, liabilities, and funding ratios. In addition, while phasing in the new discount rate changes, all plans would have to make an annual disclosure of their pension liabilities using the duration matched yield curve. This reform would further improve the ability of workers and investors to judge whether a pension plan is properly funded.
Finally, pension plans would have to disclose whether they have enough assets available to pay the full amount of benefits that workers have already earned. Known as "termination basis," this method ensures that if the company files for bankruptcy and seeks to terminate its pension plan, workers are not suddenly surprised to find that the plan cannot pay the pension benefits they have already earned.

2. Reduced Taxpayer Liability


Companies that are in severe financial trouble often try to keep their workers happy by promising them higher pension benefits. Similarly, companies in bankruptcy sometimes seek to improve pension benefits in return for salary concessions. In both cases, these higher pension promises often get passed on to the PBGC, and thus to the taxpayers, for payment when the company seeks to terminate its pension plan. The proposed reforms would prevent severely underfunded pension plans from promising higher pension benefits or allowing lump-sum payments unless the company fully pays for those improvements by making additional contributions to its pension plan. Similar restrictions would apply to companies that file for bankruptcy.



How Not to Improve the Situation.



The one thing that Congress should not do is to repeat the sad experience of the 1980's. Unless there is hard evidence that a company will recover its economic health, Congress should not casually extend the amount of time that corporations have to fund their pension plans. While this may be justified on a case-by-case basis, a general rule is likely to just mean that taxpayers will have to pay more to bail out the PBGC when it runs out of money.



And that day is inevitable unless Congress takes a serious look at PBGC and the entire retirement situation. This is not a problem where individual mini-crises should be considered to be unrelated. PBGC has an investment portfolio that includes a sizeable proportion of government bonds. It is true that unlike Social Security, which receives special issue treasury bonds that cannot be traded on the open market, PBGC can and does build its portfolio by trading its bonds on the open market. However, that activity gives a false sense of assurance.



When the time comes for PBGC to liquidate its portfolio to pay benefits, we may see the "perfect storm" where both Social Security and Medicare are liquidating their government bond portfolio at the same time. Even though PBGC is the smallest of these agencies by a large margin, the only way that it will be able to raise the money that it needs for benefit payments is to either sell its bond portfolio on the open market or to return them for repayment. Neither option looks promising at this point. If the government is borrowing massive amounts of money, the prices of bonds can be expected to be unstable at best. And if Social Security and Medicare are consuming massive amounts of government resources, PBGC can expect a place behind them.



Thoughts for the Future.



As an alternative, Congress should consider a close examination of the entire retirement situation ranging from Social Security to private pension plans to incentives for people to work. Among steps that could be considered are:



Reform PBGC: PBGC has done a fine job with what it has, but the structure is fundamentally flawed. Premiums are inadequate, and are not based on any measure of the risk that the employer will turn its pension plan over to the agency. Investment strategies are less than adequate. Rather than a piecemeal review, Congress should begin now a thorough review of the agency .
Encourage Small Business to Form Retirement Pools: About 50 percent of the US workforce has no private pension plan. Many of these workers are employed by smaller businesses that cannot afford to sponsor any sort of retirement plan. Current legislative efforts to remedy this situation have centered on reducing the regulatory burden that is a major part of the cost of having a pension plan. Instead, Congress should consider an alternate approach. Rather than expecting every small business to have its own retirement plan, encourage them to form pools, perhaps based around associations, chambers of commerce, or other affinity group. This would work best with defined contribution retirement plans.
Phase Out Defined Benefit Plans: Sadly, it may be time to recognize that in the future workers will have more job mobility than they even do now, and that a defined benefit plan may not be in their best interests. Congress should consider developing incentives for companies to shift their retirement plans to defined contribution plans.
Encourage Workers to Work Longer: In the future, there will be fewer younger people to take the jobs of those who retire, and a resulting demand for older workers who are willing to stay in the workforce - even if it is only on a part-time basis. Congress should examine the various workplace rules now to remove regulatory and other obstacles
Reform Social Security: Every day that Congress and the Administration delays reforming Social Security, there is one less day that the program will have surpluses. The Social Security trustees warn that the program will begin to run cash flow deficits within 15 years. There is a pool of IOUs known as the trust fund, which can be used to help pay benefits until they run out in 2042, but in order to liquidate them, Congress will have to come up with about $5 trillion (in today's dollars) from general revenue. The last thing that future retirees need is to find out that both their company pension plan and Social Security are unable to pay all of their promised benefits.


Thank you for the opportunity to testify. I look forward to your questions.

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Thursday, 4 March 2004

Egypt holds brother of al-Qaeda official
Confirmation follows '99 conviction for Jihad group's attacks
09:04 PM CST on Thursday, March 4, 2004
Associated Press
CAIRO, Egypt - Egypt acknowledged for the first time Thursday that it is holding Mohammed al-Zawahiri, the brother of al-Qaeda's No. 2 man.
Mr. al-Zawahiri was thought to have been in Egyptian police custody for at least three years, but the government never acknowledged it. He was sentenced to death in absentia in 1999 for his role in attacks by the militant group Islamic Jihad.
His older brother, Ayman al-Zawahiri, is the top aide to al-Qaeda leader Osama bin Laden and allegedly once led the military wing of Egypt's Jihad group. Ayman al-Zawahiri also was sentenced to death in absentia in the same 1999 trial.
Interior Minister Habib el-Adly said Mohammed al-Zawahiri would stand trial soon but did not say when.
Under Egypt's laws, a suspect can be detained without charges or trial indefinitely. Egyptian law doesn't provide for a new trial for a suspect who has been convicted in absentia in a military court and returns to the country. It only permits clemency pleas to the president.
Mr. al-Zawahiri's relatives were surprised when they read a recent newspaper report about his whereabouts.
"We didn't know if he was alive or dead," said Mahfouz Azzam, Mr. al-Zawahiri's great uncle.
-------------------------------------------
'The day after' Arafat dies - not just an IDF game
By Amos Harel, Haaretz Correspondent
The Israel Defense Forces recently conducted a simulation "war game" about what would happen the day after Palestinian Authority Chairman Yasser Arafat passes away.
The exercise examined several possible scenarios and how Arafat's death - by natural causes - would influence the domestic situation in the Palestinian Authority and its relations with Israel. The Central Command exercises involved senior officers; apparently, the General Staff will continue where the Central Command officers left off.
Security sources told Haaretz that the exercise was not the result of any new information about the state of Arafat's health.
Last fall there was speculation about the 75-year-old's health after he appeared to be fatigued and gaunt, but after medical treatment he seemed to be feeling fine.
The army regards "the day after" as a "new chapter" in PA - and Palestinian - history. The assumption is that everything that will take place - the funeral, the mass demonstrations, power struggles for the leadership - will lead to a change in the Palestinians' strategic relationship with Israel.
The exercise included issues like where the funeral would be held, the route it would travel, the possibility of violent demonstrations, loss of control by the PA, and attempts by the Hamas to forcibly grab power in Gaza.
There is also growing speculation in the PA about what happens on the day after. Channel 2 reported this week that Arafat wants a crypt for himself on the Haram al-Sharif, the Temple Mount, where there are graves of many past Palestinian leaders.

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Source: Menatep CEO Stephen Curtis killed in copter crash
By Dafna Maor
Stephen Curtis, the chief executive of Menatep, the bank that hold shares in the Russian oil firm Yukos, was killed in a helicopter accident in the United Kingdom, TheMarker has learned from a source near the company.
Official confirmation of the news could not be obtained. The BBC reported on the helicopter crash near Bournemouth airport Thursday morning, noting that two people had been killed but not revealing their names.
The British news service reported that the helicopter, an Augusta, fell near a wooded area, and that police were searching for possible additional victims.
Menatep is a holding company belonging to Mikhail Khodorkovsky, the former chairman of Yukos, who Moscow arrested in October 2003 for alleged tax evasion and fraud.
When arresting Khodorkovsky, the 44 percent stake he and his partners in Menatep held in Yukos were frozen.
Khodorkovsky claims the arrest was designed to pressure him because he had financially backed opposition parties and even considered running against Russian president Vladimir Putin in elections.
The holdings of Khodorkovsky and Menatep in Yukos are considered to be worth almost $15 billion. In February 2004, Khodorkovsky's oartners, including Leonid Nevzlin, who has moved to Israel, proposed selling the shares to the Russian government subject to Khodorkovsky's release.
Curtis, a former senior partner in the law firm of Curtis & Co, was named to lead Menatep in November 2003. The Menatep group controls assets worth some $30 billion.


Smart he is not
By Doron Rosenblum
The bizarre and puzzling episode known as the "Tennenbaum affair" is gradually turning into what Alfred Hitchcock called a "MacGuffin" - an inscrutable subplot, shrouded in mystery, that diverts attention from the main plot. In our case, the real and main mystery is the weird behavior of Ariel Sharon - not just in this affair, but throughout his three years as prime minister, if not his entire public career.
For months, everyone wondered what lay behind Sharon's unusual efforts to secure Tennenbaum's return from Lebanon - his one tenacious, consistent and accomplished action so far in his two terms as prime minister. Yet it was precisely for the sake of this certifiably dubious character that Sharon threw himself into the fray.
He did so with exceptional determination and caring, such as he has never shown for any other positive goal in the last three tears - certainly not for the security, well being and future happiness of Israel's residents.
What was the secret of the spell that Tennenbaum, of all people, cast over Sharon? Is it the fact that he was a colonel in the Israel Defense Forces? Would Sharon have shown similar empathy for an ordinary honest citizen who was innocent of any wrongdoing?
Or could it be that it was the twisting, dark morality of the man that spoke to the heart of one for whom the wink, the deceit and the "non-truth" are no strangers at any level of behavior - from the reprisal raids half a century ago to the Lebanon War, from the settlements to the police investigations?
This week, the conundrum seemed to have an answer by Ma'ariv daily's exposure of the "missing link" between Sharon and Tennenbaum. Strangely, though, these revelations don't so much shed light as deepen the dark mystery of Sharon's behavior. Indeed, the Tennenbaum affair is no more than an allegory - one more fiasco in the chain of Sharon fiascos, which share amazingly similar characteristics.
They all begin with winking, nodding and deception and false presentations of events. They are all wrapped in arrogant, self-confident manifestations of infinite cunning. They all eventually end in disgrace, bereavement and failure, if not in some historic blunder that sets in motion generations of grief.
Isn't this the way - with a spin-rich, self-defeating "shrewdness" - that the "affair of the fence" was handled? Isn't this how our whole life was run by Sharon for the past three years? And isn't this how - steeped in the cunning of personal conduct - Sharon found himself with egg on his face over and over again?
This is how the strange "deal" with Hezbollah was carried out; this was how the chance to consolidate Abu Mazen as Palestinian prime minister was missed; this was how the Palestinian Authority was smashed to smithereens, sewing terrorist chaos in the territories and strengthening Hamas.
And with the same arrogant blindness, in a kind of domino run of damage on top of damage, it was the same Sharon who, in his shrewd "war of choice" in Lebanon brought about the creation of Hezbollah on the border of Manara and Metullah.With the same "shrewdness" he drove home the wedges called settlements.
There is no reason to believe that the deceptions swirling around the "road map" or the "disengagement plan" are not another "shrewd plan" of Sharon's that is starting to unfold - a thing of shreds and patches, of caprices and improvisations. There is no sort of reasonable response to any objection or warning put forward by either right or left. Why operate without dialogue? Why a wall like this along such a route? And what will we do when the fence is bypassed by shooting and missiles? And what will happen in the chaos behind the wall?
Yet, in the very contemplation of these conundrums, the mystery of Sharon's behavior solves itself. Maybe it has nothing to do with sly interests, deep psychology born of a difficult childhood, or some brilliant conspiracy. Maybe the solution lies right in front of us, so therefore we can't see it. It may be elementary, dear Watson, it may be the reason is quite simply a lack of intelligence.
Let it be said at once that Sharon may be as sharp as a whip, as cunning and elusive as an eel, but - as the Nahal Brigade troupe used to sing - "he's not so smart." Certainly not so smart as many, himself included, may think. It's plain that the guy doesn't think things through, not at a national level, and not in personal behavior. His thinking is a bit lowbrow. Yes it's hurried, packed with tactics, lacking any sense of broad horizons or distilled knowledge, void of any real, responsible strategy.
That may be an unpleasant explanation for the mystery of the systematic, unrelenting failure of Sharon - as politician, statesman, leader, and personally - except for his skill at getting elected at the polls. But is there any other explanation?
Gloomy and bizarre as it may sound, Sharon, who is considered to be the personification of Israeli resourcefulness, is actually a feckless type - a kind of "shrewd" ne'er do well who has stepped out of all the Jewish jokes together, from Hershele to the Wise Men of Chelm.
He's the one who waits for either for the squire to leave or the dog to die; he the one who ate smelly fish and was beaten and kicked out of town; he's the one who carried out his threat and went to sleep hungry. And, as the situation of Sharon and state of the nation attest that both are trapped in the same quagmire of misery, it might even be funny - if the joke wasn't on us.

Top Articles
Op-Ed / A damaging compulsory pension law
Some of the tax benefits to high income earners should be canceled and the money used to subsidize the interest rates of the compulsory pensions.
By Avia Spivak
The Bottom Line / Nothing to gain at the High Court
Bank of Israel Governor David Klein is taking the central bank into uncharted waters - a High Court petition against the treasury wages director, and lawsuits against the bank's labor council and against the State of Israel.
By Moti Bassok


Sharon expected to survive latest scandal
March 5, 2004
Scrambling to fend off the latest scandal, Israel's Prime Minister, Ariel Sharon, has denied any wrongdoing in securing the release of an Israeli in a prisoner swap with Lebanese Hezbollah guerillas.
On Wednesday, Mr Sharon dismissed as a "wild attack " a report in the Maariv daily suggesting his push for Elhanan Tannenbaum's release in the January 29 deal had been spurred by close business ties he once had with the man's father-in-law.
Leftist politicians called for the right-wing leader, already under investigation in two corruption scandals, to resign or face an official inquiry. Opposition parties requested a no-confidence vote in parliament, which is expected on Monday.
The vote is not expected to pose any immediate threat to Mr Sharon.The Government has easily survived almost weekly no-confidence motions recently, despite a rift with far-right coalition partners angered by his plan to uproot Jewish settlements in the Gaza Strip.
Since Mr Tannenbaum's release in a deal in which the bodies of three Israeli soldiers were also returned and 400 Arab prisoners were freed, he has been grilled by security agents over allegations he was involved in illegal business deals when he was abducted in 2000.
Maariv said that Mr Tannenbaum's father-in-law, Shimon Cohen, had been a business partner of Mr Sharon's family in the 1970s at their ranch in southern Israel.
Israeli soldiers yesterday shot dead a 14-year-old Palestinian boy who was caught in crossfire during a raid on a refugee camp in the southern Gaza Strip, witnesses said.
Palestinians also accused the Israelis of killing a militant who died in an explosion at his home in the Rafah camp, but the army said it was not responsible.
The raid came a day after three Palestinians from the militant Hamas group were killed in an Israeli air strike on the car in which they were travelling south of Gaza City.
Reuters, Los Angeles Times

Posted by maximpost at 10:56 PM EST
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http://www.moretothepoint.com/
The Interim Constitution and the Future US Role in Iraq listen
Coordinated bombings in Baghdad and Karbala made Tuesday the deadliest day in Iraq since the fall of Saddam Hussein. Vice President Cheney calls it "desperation" by those opposed to the interim constitution. Others fear a decline into religious civil war. With the approach of the June deadline for transferring political power, General John Abizaid, the head of US Central Command, told Congress today that despite an expected increase in violence, the US is reducing its profile in Baghdad, although he said that the US had mot intention of abandoning the Iraqi police. As the US begins its biggest troop transfer since World War II, we look at the prospects for stability before November's election with journalists in Iraq, experts in defense and conflict prevention and resolution, and former State Department and intelligence officers.



http://www.theworld.org/latesteditions/20040304.shtml
Loose nukes interview (4:30)
A former Soviet nuclear facility in the breakaway republic of Abkhazia is missing some of its weapons-grade uranium. Host Marco Werman speaks with London Times reporter Tom Parfitt who has been following the story.

China's Internet report (5:15)
China's government keeps watch over the Internet and blocks controversial websites. But some Chinese webusers won't be deterred. They're surfing past Beijing censors with help from the outside. The World's technology correspondent Clark Boyd tells how some Chinese are hacking through the great firewall of China.

France terrorism threat report (2:30)
Ten thousand people have been searching the French rail system, looking for ten bombs which a shadowy organisation called AZF says it has planted. Paris correspondent Genevieve Oger has the story.


>> AFRICAN CONNECTIONS...

Nucl?aire: le Nigeria met Islamabad dans l'embarras puis fait volte-face
04/03/2004 - 14:49
ABUJA, 4 mars (AFP) -
Le Nigeria a mis jeudi le Pakistan dans l'embarras en annon?ant qu'Islamabad lui avait propos? son aide pour acqu?rir l'arme nucl?aire avant de faire volte-face apr?s un d?menti tr?s sec des autorit?s pakistanaises.
Cette controverse intervient alors que le r?gime militaire pakistanais du g?n?ral Pervez Musharraf, alli? de Washington en Asie du Sud, est sous fortes pressions am?ricaines apr?s des "r?v?lations" sur des "fuites" de technologie nucl?aire pakistanaise, notamment vers l'Iran, la Cor?e du Nord et la Libye.
Jeudi matin, le minist?re nig?rian de la D?fense affirmait dans un communiqu? que le chef d'?tat major pakistanais, le g?n?ral Mohammed Aziz Khan, avait d?clar? la veille ? Abuja que "son pays oeuvre ? trouver une solution pour aider les forces arm?es nig?rianes ? renforcer leur capacit? militaire et ? acqu?rir la puissance nucl?aire".
Le texte pr?cisait que ces d?clarations avait eu lieu lors d'une rencontre entre le g?n?ral Khan, en visite de lundi ? vendredi au Nigeria et le ministre nig?rian de la D?fense, Rabui Musa Kwankwaso.
Un d?menti cinglant ne tarda pas ? fuser d'Islamabad. "Nous d?mentons. C'est sans fondement. Il n'a rien dit de cela", a affirm? ? l'AFP le porte-parole des forces arm?es pakistanaises, le g?n?ral Shaukat Sultan, ? propos du g?n?ral Khan.
Peu apr?s la r?action pakistanaise, les autorit?s nig?rianes revenaient sur leur communiqu? initial en ?voquant simplement une "erreur typographique" dont elles n'ont pas pr?cis? la nature.
"La r?f?rence ? la puissance nucl?aire dans le communiqu? publi? auparavant ?tait une erreur typographique", a d?clar? ? l'AFP un porte-parole du minist?re de la D?fense, Nwachukwu Bellu.
"Il n'y a pas eu de discussions sur le nucl?aire, sur son d?veloppement et son acquisition", a affirm? M. Bellu. "Il s'agissait d'une erreur", a-t-il ajout?. "Il ne faut pas tenir compte de la partie concernant la puissance nucl?aire. Ce sujet n'a pas ?t? abord? lors de la r?union".
"Les discussions ont ?t? centr?es uniquement sur la coop?ration militaire en terme d'entrainement et d'acquisition de nouveaux ?quipements. Rien sur la puissance nucl?aire", a rench?ri un porte-parole des forces arm?es, le colonel Ganiyu Adewale.
D?tenant l'arme nucl?aire depuis 1998, le Pakistan s'est livr? en d?but d'ann?e 2004 ? un exercice p?rilleux pour ?viter les critiques croissantes des Etats-Unis, soucieux d'imposer au monde leur vision de la non-prolif?ration.
Abdul Qadeer Khan, directeur du programme nucl?aire pakistanais de 1976 ? 2001, a ainsi "avou?" ? la t?l?vision nationale ?tre responsable de "fuites" de technologies nucl?aires, au b?n?fice notamment de l'Iran, de la Cor?e du Nord et de la Libye.
Ce scientifique a assur? que l'arm?e et le gouvernement du g?n?ral Pervez Musharraf, qui a pris le pouvoir fin 1999 lors d'un coup d'Etat, n'?taient pas au courant de ces fuites. Il a re?u le "pardon" du r?gime militaire Musharraf tandis que l'opposition d?mocratique d?non?ait une mascarade destin?e ? masquer les v?ritables responsabilit?s.
Le communiqu? nig?rian initial ne pr?cisait pas la r?ponse nig?riane ? une telle offre mais soulignait que le chef d'Etat major nig?rian, le g?n?ral Alexander Ogomudia avait "salu?" le programme nucl?aire pakistanais en jugeant que "le Pakistan n'est plus un Etat en d?veloppement car il poss?de la puissance nucl?aire".
Fin janvier, des responsables nig?rians avaient d?j? indiqu? qu'ils ?taient en discussions avec le r?gime nord-cor?en pour acqu?rir une technologie de fabrication de missiles alors que les Etats-Unis cherchent ? stopper le programme nucl?aire du r?gime communiste de Pyongyang.
Le bureau du pr?sident nig?rian Olusegun Obasanjo s'?tait empress? de d?mentir un accord militaire entre la Cor?e du nord et la puissance r?gionale d'Afrique de l'Ouest qui aurait imm?diatement d?clench? l'ire de Washington.
bur-eg-il/aml


? 2004 AFP. Tous droits de reproduction et de repr?sentation r?serv?s.
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BR?SIL
Scandale dans la maison Lula
Le gouvernement de Luiz In?cio da Silva fait face au premier scandale de corruption de son mandat. Un ?v?nement qui ternit l'image de probit? et d'intransigeance du Parti des travailleurs (PT) et qui pourrait remettre en cause son succ?s annonc? aux prochaines ?lections municipales, en octobre.
Waldomiro Diniz, l'homme par qui le scandale arrive... (AFP)
Le scandale a ?clat? le 16 f?vrier dernier, avec la une de Epoca annon?ant simplement "Argent sale". Dans ses pages, l'hebdomadaire relatait par le menu le contenu d'un enregistrement vid?o datant de la campagne ?lectorale qui a vu gagner Luiz In?cio da Silva, dit "Lula", en 2002, un enregistrement o? l'on voit Waldomiro Diniz, alors patron de la Loterie de Rio de Janeiro (LOTERJ) et depuis sous-chef des affaires parlementaires de la Maison civile (l'?quivalent de Matignon), n?gocier des dessous-de-table avec Carlinhos Cachoeira, l'un des patrons des jeux de hasard clandestins de Rio, pour financer la campagne de certains membres du Parti des travailleurs (PT) de Lula. Sur l'enregistrement, Diniz r?clame ?galement une commission de 1 % et promet de favoriser Cachoeira dans un march? public de loteries.
Contrairement ? ce que donne ? croire l'ampleur du scandale, l'information n'est pas nouvelle. D?s juillet 2002, l'hebdomadaire Isto? avait fait les premi?res r?v?lations sur "les relations compromettantes entre Diniz et les exploitants de jeux l?gaux et ill?gaux". A l'?poque, ce dernier avait ni? avoir des rapports avec les "bicheiros".
Un "coup" pour affaiblir Lula
Cette fois, la r?action de Lula n'a pas tard?. Il a limog? Diniz et ordonn? l'ouverture d'une enqu?te. L'affaire frappe cependant de plein fouet Jos? Dirceu, chef de la Maison civile et num?ro deux du gouvernement, qui a pr?sent? sa d?mission. Lula l'a refus?e. Le pr?sident br?silien ne pense pas que son bras droit ait ?t? au courant de l'affaire et estime donc qu'il n'en est pas responsable. Dirceu a ?galement ?t? assur? de la "totale confiance et totale solidarit?" du pr?sident du PT, Jos? Genoino.
Dirceu, le "siamois de Lula", selon le quotidien argentin Clar?n, son "mentor politique" d'apr?s l'hebdomadaire chilien Qu? Pasa, est surtout un homme fort et respect? sans qui, de l'avis de plusieurs analystes, le pr?sident br?silien ne pourrait contr?ler la machine politique. C'est pourquoi il s'agit d'un v?ritable coup dur pour le gouvernement, d'autant plus que "le PT a toujours brandi l'?tendard de l'?thique en politique comme principale diff?rence avec les autres partis", souligne la Folha de S?o Paulo. Le m?me quotidien ?voque d'ailleurs l'hypoth?se d'un "coup" de l'opposition pour affaiblir Lula.
La fin d'une cr?dibilit? ?
Mais, pour l'hebdomadaire Veja, de plus en plus critique ? l'?gard de Lula, la cause est entendue : cette histoire Diniz ne fait que confirmer une r?alit?, "le PT utilise des m?thodes qu'il a toujours critiqu?es lorsqu'il ?tait dans l'opposition". Une opposition qui a exig? la cr?ation d'une commission parlementaire d'enqu?te (CPI) sans l'obtenir, le gouvernement arguant que les faits se sont produits alors que le PT n'?tait pas encore au pouvoir. Le Congr?s vient d'ailleurs ?galement de rejeter cette demande, faute de preuves contre Dirceu.
De toute fa?on, les d?g?ts sont faits si l'on en croit la Folha de S?o Paulo. "L'une des cons?quences les plus importantes des r?v?lations sur les activit?s de Diniz est la perception, qui se g?n?ralise au sein de la soci?t?, qu'est en train de dispara?tre de la politique br?silienne ce p?le de r?f?rence ?thique qu'a ?t? le PT tout au long de sa trajectoire dans l'opposition." Si sa mani?re d'appr?hender la politique et l'?conomie ?tait souvent na?ve, pour ne pas dire irr?aliste ou irresponsable, on pouvait ?tre s?r qu'il ?tait du bon c?t? lorsqu'il s'agissait de questions relatives ? l'?thique", poursuit la Folha.
Aujourd'hui, les sp?culations vont bon train sur la capacit? du gouvernement ? passer l'?preuve du feu des ?lections municipales du mois d'octobre. Mais aussi sur l'existence d'autres affaires de corruption qui signeraient la fin d'une cr?dibilit? si ch?rement acquise. Les march?s financiers ?galement craignent les cons?quences de l'histoire Diniz. Cela n'emp?che pas 60 % des Br?siliens, d'apr?s un sondage d'opinion de l'institut Datafolha publi? mardi 2 mars dans la Folha de S?o Paulo, de continuer ? accorder leur confiance ? Lula.
In?s Bel A?ba
? Courrier international


Malaysian Leader Denies Nuke Whitewash
By SEAN YOONG
ASSOCIATED PRESS
KUALA LUMPUR, Malaysia (AP) -
Prime Minister Abdullah Ahmad Badawi denied Thursday that his government whitewashed an investigation of Malaysia's role in a worldwide nuclear black market, and said he wasn't worried the issue would hurt him in upcoming elections.
The vote, which Abdullah called Wednesday, will be the first since former Prime Minister Mahathir Mohamad retired in October. The Islamic opposition has promised to focus on the nuclear network during its campaign for the election, expected by the end of March.
The government faces allegations that a Malaysian company owned by Abdullah's son played a key role in a nuclear black market, led the father of Pakistan's nuclear program, to traffic nuclear technology and know-how to Libya, Iran and North Korea.
A police investigation cleared Scomi Precision Engineering of knowingly making centrifuge components that were seized in October in the Mediterranean en route to Libya.
The Islamic opposition claims the government went easy on Abdullah's son, even while the prime minister wages a very public anti-corruption campaign. The opposition also says the government has detained about 70 terror suspects over the past three years without trial.
Badawi, speaking publicly for the first time since calling the elections, said he said he wasn't troubled by the Pan-Malaysian Islamic Party's allegations.
"I am not worried at all," Abdullah told reporters. "I think PAS just wants to find something to attack me and embarrass me. They are trying to resort to character assassination. They have nothing else to capitalize on."
Abdullah said police had investigated the trafficking case as "best they could" and that the results would be given to the International Atomic Energy Agency.
"They will scrutinize it," Abdullah said. "They are not fools. They cannot be misled."
A top U.S. nonproliferation envoy met Malaysian leaders this week to urge this Southeast Asian country to tighten export regulations and plug criminal loopholes to prevent trafficking.
Abdullah confirmed that he met John Stern Wolf, the assistant secretary for the State Department's non-proliferation bureau.
"He did not ask for strict controls," Abdullah said. "He is aware that we were already looking into it, even before this. Of course, we need time. It's not something that can easily be resolved."
Badawi called the elections in an apparent bid to solidify control of his 14-party coalition and reverse gains that the Islamic party made in a 1999 vote. The coalition, which has 152 of 193 seats in parliament, is almost certain to extend its 50-year grip on power. The date for the elections is to be announced Friday.

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Officials: N. Korea Denies Uranium Program
By HANS GREIMEL
ASSOCIATED PRESS
SEOUL, South Korea (AP) - Despite reported progress in recent North Korean nuclear talks, South Korean officials said Thursday that the North still denies having a secret uranium-based program and that other crucial issues - including an agenda for working-group meetings - are up in the air.
The agreement for lower-level officials to meet in working groups to nail down details of a possible deal was seen as a step forward at the six-nation talks that ended Saturday in Beijing.
Diplomats say they are crucial in striking common ground before the next round of six-way talks, expected before July.
But a South Korean diplomat familiar with the talks said the countries have yet to decide when those meetings will take place or what will be discussed.
That will require more haggling through diplomatic channels, he said.
"We don't know what the working group will really deal with," he said on condition of anonymity. "It's very difficult to predict what sort of job the working group will do."
Lee Soo-hyuck, South Korea's chief negotiator, said North Korea's stance had hardly shifted since the first round of talks last August among the United States, China, the two Koreas, Russia and Japan.
"Overall, the North Korean delegation's positions have not changed from those they expressed in the first round," Lee said this week in an interview with South Korea's CBS Radio. "They firmly denied that they have a uranium-based nuclear program, and they also did not change their position on security guarantees."
During the Beijing talks, North Korea insisted on keeping a nuclear program for medical and other peaceful purposes. But it said it would give up its weapons program in exchange for aid and U.S. security guarantees.
But Washington says North Korea must first start its nuclear dismantlement. It also insists that any deal include the North's alleged uranium-based program, in addition to a plutonium program it readily acknowledges.
The nuclear standoff flared in late 2002 when U.S. officials said North Korea admitted having a secret uranium program after being confronted with evidence.
Another diplomat familiar with the negotiations said Thursday that the latest talks allowed more "in-depth discussions on substantial matters of a North Korean nuclear freeze and related measures" but "didn't get into what to freeze and what to dismantle."
U.S. officials said earlier this week that the chief problem at the talks was North Korea's refusal to acknowledge having a uranium-based program.
James Kelly, the U.S. State Department's top official on Asia, told a U.S. Senate panel that the North Koreans "wouldn't give us any satisfaction" about the uranium claim.
But Kelly noted that North Korea was less vocal in asserting that position in Beijing than before because of what he said was growing evidence that the denials lack credibility.
Abdul Qadeer Khan, a Pakistani nuclear scientist, has admitted providing North Korea with assistance for developing a uranium bomb.


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Venezuela's U.N. Ambassador Resigns
By EDITH M. LEDERER
ASSOCIATED PRESS
UNITED NATIONS (AP) -
Venezuela's U.N. ambassador said Thursday he was resigning to protest human rights violations and threats to democracy in the South American nation.
Milos Alcalay, a career diplomat who has represented his country for 30 years, made his announcement at a news conference where copies of a letter to Venezuelan Foreign Minister Jesus Arnaldo Perez were handed out.
Alcalay said his diplomatic career has been guided by the principles of protecting human rights, operating through a transparent democratic process and supporting an open dialogue for international diplomacy.
"Sadly, Venezuela now is operating devoid of these fundamental principles, which I still remain intensely committed to. Therefore, it is with a heavy heart today that I am resigning from my position," he said in his statement.
Alcalay's resignation came amid opposition protests of the National Elections Council's decision to reject a petition for a recall vote against President Hugo Chavez.
On the issue of democracy, the ambassador said he believes the arguments set forth by the Elections Council violate "the spirit and the purpose" of Venezuela's constitution "and rob Venezuelans of the right to effect change through the democratic process."
He also denounced the Chavez government's human rights record.
"We've seen army and police repression, unacceptable loss of life, disappearance of political leaders and there have been allegations of torture," Alcalay said. "A peaceful demonstration of citizens is no longer feasible in Venezuela and brutal repression must stop."
The ambassador warned that "the increasing bipolarization and problems we are experiencing at home in Venezuela have impacted our relationships around the world."
"I cannot remain indifferent before the sad events in my country, the loss of many lives and the outcry of the Venezuelan people whose political and civil rights are under threat," he said.
The South American nation of 24 million people is torn between Venezuelans who say Chavez has become increasingly autocratic and those who say he speaks for the poor.

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Arab League Can't Agree on Reform Plan
By SALAH NASRAWI
ASSOCIATED PRESS
CAIRO, Egypt - Arab foreign ministers failed to agree Thursday on a new strategy for reform in the Middle East that was meant to be a response to a Bush administration proposal.
The ministers of the 22-member Arab League, finishing four days of meetings, will discuss the plans again when they meet in Tunisia just before a league summit March 29-30.
Officials did not explain why they couldn't agree on their response to Washington's recent initiative urging Middle East governments to adopt major political and economic reforms. The Bush administration plans to present the plan at the G8 summit of industrial nations in June.
Arab nations, led by Egypt and Saudi Arabia, have denounced the initiative as an imposition of foreign ideas and have pushed for Arabs to come up with their own reform package.
The ministers' discussions focused on an Egyptian-Saudi plan that encourages Arabs to play a larger role in running their political, economic, social and cultural affairs. The initiative, also backed by Syria, suggests Arabs coordinate their foreign and security policies through new supervision and follow-up agencies.
The Egyptian-Saudi does not address specific issues including the status of women, human rights, improving education and liberalizing political systems.

Iraqi Foreign Minister Hoshyar Zebari said he championed broad reform. "The wind of change is blowing and Arabs should be prepared," Zebari told The Associated Press.

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Iraq Scrambles for New Oil Export Routes
By BRUCE STANLEY
ASSOCIATED PRESS
LONDON (AP) -
With oil exports from northern Iraq crimped by the persistent threat of sabotage, the Iraqi Oil Ministry is pursuing several options to increase crude exports along safer routes in the Persian Gulf, including deals to ship oil to two former foes.
The ministry is considering building pipelines to export limited amounts of crude to Iran and Kuwait. Both countries suffered enormous losses in wars launched by Saddam Hussein, and their interest in the oil projects could attest to a turnaround in relations with Baghdad.
In addition, the Oil Ministry has refurbished two of the four berths at its Khor al-Amaya export terminal in the Gulf. Tankers began loading oil there Friday for the first time since before the U.S.-led invasion.
Oil is Iraq's most valuable export, and the country must sell more to pay for rebuilding an economy shattered by wars, sanctions and misrule. Confronted with political tensions and terror attacks, Iraq's Governing Council and its American backers recognize that rising oil revenues are essential to the creation of jobs and social stability.
However, some analysts argue that the Oil Ministry risks giving Iran and Kuwait unnecessary leverage over Iraq's economic lifeblood. They say the ministry should focus instead on securing and reopening Iraq's northern pipeline to Turkey and on completing repairs to the Khor al-Amaya terminal, which was destroyed during the first Gulf War.
A few critics even allege the real rationale for exporting to Iran is a corrupt deal between Shiite advisers to Iraqi Oil Minister Ibrahim Bahr al-Uloum and their religious brethren in Iran.
"Definitely there is no coherent strategy," former Iraqi oil minister Issam Al-Chalabi said.
Iraq is now pumping more than 2 million barrels of crude a day, compared to some 2.8 million barrels on the eve of war last year. It exports most of what it produces.
Iraqi officials hope that new export outlets in the Gulf will help make up for their current inability to make full use of the oil pipeline from Kirkuk in northern Iraq to the port of Ceyhan, Turkey. Insurgent attacks have forced the pipeline's closure for all but a few days since Saddam's ouster.
With help from the U.S. military, the Oil Ministry is working to improve security. The northern pipeline is important because it gives Iraq a convenient outlet to markets in Europe, whereas Iraq has typically supplied customers in Asia from its southern facilities in the Gulf.
Ministry officials have been reluctant to announce a target date for resuming full use of the pipeline.
A Turkish oil official said modest amounts of oil began flowing through the pipeline on Monday, though it wasn't clear if this week's average volume of 377,000 barrels signified a resumption of normal shipments. The pipeline can handle up to 900,000 barrels a day.
"The Iraqis seem to be resigned to the instability in the northern part of Iraq continuing for a long time," said Manouchehr Takin of the Center for Global Energy Studies in London. "Otherwise it doesn't make sense to look at these other alternatives on a short-term basis."
Iraq has the world's second biggest proven reserves after Saudi Arabia, but politics has starved it of reliable export routes. Saddam's 1990 invasion of Kuwait led Saudi Arabia to halt Iraq's exports through a pipeline to the Red Sea, and the Americans closed Iraq's pipeline to Syria after toppling the former Iraqi leader.
Iraq's first pipeline, to what was then the port of Haifa in British-controlled Palestine, ceased operating after the 1948 war that resulted in the creation of Israel. Despite the pipeline's dilapidated condition, the change of regime in Baghdad has encouraged some Israelis to dream of importing cheap Iraqi crude.
A senior Iraqi oil official confirmed this week that the Oil Ministry now wants to build a small, six-mile pipeline to export up to 250,000 barrels of oil a day to a refinery in Abadan, Iran. Despite acrimonious relations between the United States and Iran, the Coalition Provisional Authority in Iraq has raised no objections to this deal, the official said, speaking from Baghdad on condition of anonymity.
Iraq already buys Iranian gasoline and kerosene, and the proposed pipeline would be just another commercial arrangement, the official said.
Under a separate deal announced Sunday, officials from Iraq and Kuwait are evaluating the feasibility of building a pipeline to ship up to 250,000 barrels of Iraqi oil each day through Kuwait and its port facilities in the Gulf.

--

Posted by maximpost at 5:15 PM EST
Permalink
Wednesday, 3 March 2004


>> ON GERMS...USDA, CLINTON, HEIMAT...PAPERCLIP?

Germs in Our Midst
http://www.wnyc.org/shows/lopate/episodes/current
Wednesday, March 03, 2004
Plum Island lies two miles off of Long Island and 85 miles from New York City, and it houses a U.S. government biological research center where scientists study exotic diseases and viruses. New York lawyer Michael C. Carroll is on the Leonard Lopate Show today to share his concerns that the research facility is dangerously insecure. He thinks that there might even be a link between Plum Island research and outbreaks of Lyme disease and the West Nile virus.
Michael C. Carroll
Michael C. Carroll is the author of Lab 257: The Disturbing Story of the Government's Secret Plum Island Germ Laboratory. It's based on his research of declassified government files and interviews with Plum Island scientists and employees.

? Read more about the book
http://www.ars.usda.gov/plum/


Sarin Nerve Agent Leaks From Ala. Bunker
ASSOCIATED PRESS
ANNISTON, Ala. (AP) -
A trace amount of sarin nerve agent leaked from a weapons storage bunker at Anniston Army Depot, but no one was injured.
Workers were conducting routine checks for leaks Tuesday when a monitor detected the agent outside the airtight bunker where the weapons are stored.
Sarin did not escape the area, and the concentration was not enough to hurt anyone, said Cathy Coleman, a spokeswoman Anniston Chemical Activity, which oversees the stockpile.
Tons of munitions are stored in dirt-covered, concrete igloos at the depot 50 miles east of Birmingham.
Since 1982, the Army has found 897 leaking chemical weapons in storage at the depot, where the military is using an incinerator to destroy the aging weapons.

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E-Notes
The Strategic Balance in the Middle East: an Israeli Perspective
by Efraim Inbar

February 6, 2004

This essay is based on a talk to the FPRI Sponsors Forum on January 29, 2004. The Forum is regularly hosted by Pepper Hamilton LLP (www.pepperlaw.com). Efraim Inbar is Professor of Political Studies at Bar-Ilan University and Director of the Begin-Sadat (BESA) Center for Strategic Studies.

The Middle East has been divided for decades between radical forces challenging the regional status quo and Western influence, pro-Western states, and regional actors whose foreign policy fluctuated in accordance with the regional balance of power. Since September 11 2001, we witness an unprecedented American effort to enhance considerably its influence in the region. The global war on terrorism focuses on the Greater Middle East (from Libya to Afghanistan), which hosts the infrastructure (headquarters and training) of most terrorist organizations. The subsequent American invasion of Iraq was an additional effort to establish a Pax Americana in the region. The main challenges to the attempt to spread democracy and free market values in the region are taking place in Iraq, Iran, Turkey, and in Palestine. The success in meeting these regional challenges will clearly affect also Israel's security.

Iraq
In the aftermath of the American victory in Iraq the important question is whether the American military presence in Baghdad constitutes the beginning of a new period in the Middle East or will we see a quick military withdrawal and the dissipation of American influence, similar to what happened after the victory in 1991? Can the Americans westernize and democratize the Arab world, by "Hellenizing" this region in a manner reminiscent of Alexander the Great in the 4th century BCE? Will we see a really new Iraq, with a transformed political culture and with radically new attitudes? Will Baghdad become, once again, a flourishing center of sciences and of belle arte and an agent of change in the Middle East? The answer to those questions depends primarily on two uncertain factors. The first enigma surrounds the ability and the determination of the American polity to play an imperial role; the second set of uncertainties revolves around the Iraqi society and its ability to absorb change and to transform itself into a 21st century socio-political entity.

Despite the bad name acquired by imperialism, there is nothing inherently or morally wrong in bringing peace, prosperity and progress to less blessed regions. The US definitely has the military, economic and political preeminence to exercise its hegemony and export its values to every corner of the world. Its tremendous cultural influence is already omnipresent at every level, facing only quixotic resistance. The universal lingua franca is English (the American variant). American TV series, McDonalds and Cokes abound. Enrollment in the elite American universities is the entry card into the rather cosmopolitan professional and scientific elites of many states. The US is the strongest magnet for those who wish to improve their economic lot or to be freer. American political culture has the potential to reinforce the quest for implanting the American Way elsewhere. It contains a sense of universal mission rooted in biblical motifs.

Yet, America is not known for being patient enough to sustain a long-term commitment needed to this mission. Do we see nowadays a transitory reaction to 9/11 or a decidedly internationalist American outlook based on long-term popular support and a readiness to pay the price for its civilizational role? The route taken by Washington remains to be seen and will be of course affected by the configuration of indigenous forces to which we now turn.

In a limited sense, Iraq is ready for change since anything is better than the tyranny of Saddam Hussein. In a larger sense, it probably has a potential for gradual transformation, primarily because Iraq is a rich country. It has oil, arable land and water. The American presence can bring about a more equitable division of resources. Democratization in Korea or Taiwan shows that an important intervening variable in such a process is higher standards of living. Iraq also has a rather sophisticated middle class (a part of it abroad), which could become under certain circumstances a potent force for progress. Arab political culture does indeed play a negative role in this context, but it is not an insurmountable barrier for change as old traditions often contain modernizing elements. In any case, American-induced change will elicit active resistance by motley groups, such as Islamists, ex-Baathists, and disgruntled tribal leaders, Who might get support from abroad. Indeed, most of Iraq's neighbors have good reasons to fear change in Iraq and will probably meddle in its affairs. While Western democracy in Baghdad is not around the corner, a successful economic and political liberalization process in Iraq will have tremendous ripple effects in the region.

From Jerusalem's perspective, the Iraqi threat during the reign of Saddam Hussein was removed. Saddam Hussein had a record of aggressive behavior and displayed hegemonic ambitions. He was responsible for starting a long war with Iran (1980-88); for invading Kuwait in 1990; and he did not hesitate to use chemical agents in the battlefield and against his own citizens. These traits made his quest for biological and nuclear weapons extremely dangerous, particularly when it came to Israel. Saddam Hussein has never hidden his deep hostility to the Jewish state and his preference for its demise. He has repeatedly threatened Israel with destruction by using his Weapons of Mass Destruction (WMD) arsenal and did not hesitate to launch missiles to Israeli population centers in the winter of 1991.

While the future of Iraq remains unclear, Israel has benefited from the regime change in Baghdad. The new Iraq is busy with domestic problems and will find it difficult to conduct an active anti-Israeli foreign policy. The American presence and an initial dependency upon Washington would cause the new regime to avoid WMD programs. Such a posture in Iraq removes the potential for establishing an Eastern Front against Israel. Noteworthy, such a front is closer to Israel's heartland than potential attacks from the north or south. Indeed, the change in Iraq allows Israel to implement cuts in various items of its defense budget.

Iran
Since the 1979 Islamic revolution Iran has adopted a vocal anti-American foreign policy. Moreover, Iran's quest for nuclear weapons is a direct challenge to the American attempt to impose a non-proliferation regime. An American failure to convince Iran to desist from continuing in its efforts to produce fissionable material (enriching Uranium and/or separating Plutonium) will have dangerous consequences in the Middle East. The prospects of a nuclear Iran would: threaten US, and European security; increase militancy and embolden hard-liners in the region; destabilize the Gulf area; and encourage other states, such as Saudi Arabia and Libya, to follow suit.

The more assertive American position of the current Bush administration on proliferation and its military presence in Iraq do offer some hope in Jerusalem that the Americans might do something about putting an end to the Iranian nuclear program. From an Israeli perspective, Iran has increasingly become a threat to the Jewish State. Iran refuses to recognize Israel and top officials frequently call for the destruction of the Jewish state, calling it the "Small Satan." For example, in December 2001, Rafsanjani called for a jihad campaign against the Jewish State. He noted that one nuclear bomb could finish off Israel, while its nuclear response would cause only bearable damage to the Islamic word. A more recent example occurred during a major military parade on September 22, 2003 when the Islamic republic showed off six of its Shahab-3 missiles, which were decorated with anti-Israeli and anti-US slogans, including one saying Israel should be "wiped off the map." Iran has also consistently opposed the peace process between Israel and the Arab world, which was restarted in 1991, while funding the Hizballah in Southern Lebanon that attacked Israeli targets, not only in Southern Lebanon and in Israel but elsewhere in the world. Tehran has also lent support to Palestinian terrorist groups such as Hamas and Islamic Jihad that are intent to destroy the Jewish state.

Iran's bottomless enmity, coupled with its missile and WMD programs have become an existential challenge to Israel. By the 2003, Iran reached a very advanced stage in the development of the surface-to-surface Shahab-3 missile. It has a 1,300 kms range, putting Israel into its striking distance. This long-range capability made the Iranian nuclear program even more threatening. Therefore, the fruition of the Iranian nuclear program is seen in Jerusalem as an existential threat. Israel's top intelligence official has issued a stark warning regarding the threat posed by Iran's nuclear program. In a November 17, 2003 testimony before the Israeli Knesset's Foreign Affairs and Defense Committee, Meir Dagan, head of the Mossad, stressed that an Iranian atomic capability would constitute the greatest "threat to the existence of Israel" since 1948. Tehran, according to the intelligence chief, will soon reach a "point of no return" in its nuclear development, after which an Iranian offensive atomic capability would be a virtual certainty. Dagan's assessment follows a recent warning by Israeli Defense Minister Shaul Mofaz that "Israel can in no way accept the presence of a nuclear weapon in Iranian hands"-- a thinly-veiled threat that Jerusalem is prepared, if necessary, to neutralize the Iranian nuclear program by force if current international pressure fails to curb Tehran's nuclear ambitions.

Turkey
Turkey suffered in November 2003 dozens of fatalities and hundreds of wounded due to terror attacks by the extreme Islamic organizations. Terror has not spared Muslim-populated Turkey. This country, which emphasizes the secular nature of the state and its resolution to be part of the enlightened West, is a major annoyance to the radical Muslims. The enchanting, cosmopolitan city of Istanbul, encompassing both banks of the Bosphorus Straits, the waterway designed as the border between Europe and Asia, symbolizes more than anything the Turkish vision to be part of Western civilization. However, this Kemalist dream is a nightmare for al-Qaida and its ilk. Indeed, their intent is not only hitting Jews (who are associated with Israel) and British nationals, but also creating a political maelstrom that will push Turkey once again towards the fundamentalist Islamic Middle East, with its ingrained anti-modernist and anti-Western outlook from which Turkey so wishes to disconnect itself.

The government of Turkey will probably deal firmly with the phenomenon of terror on its soil. This state is one of the few, which has succeeded, through a determined and uncompromising campaign, in wiping out domestic terror, utterly crushing the Kurdish PKK underground. Turkey's military adjusted its doctrines and tactics to deal with the Kurdish threat and was successful in mobilizing domestic political support and the necessary resources to do the job well. The successful campaign against the PKK in the 1980s and 1990s was carried out, however, on the hills and countryside, as opposed to the present danger-- terrorism against civilians in big urban centers, thus rendering the present challenge by international Islamic terror a much greater one.

The Turkish army will gladly meet the challenge to prove that it is still much needed and that it remains the real guardian of the Turkish state. Turkey also has efficient and professional security services. They have been for years in the forefront of the war against Kurdish and Armenian terrorism and have also acquired much experience in combating radical Islamist elements. Hopefully, cooperation between Turkey and other states, including Israel, in the area of counter-terror, will only grow.

If Turkey fails in its fight against terror, one possible terrible consequence would be a reversal in its historic quest to be part of the West. Snatching Turkey away from the West would be a huge success for the radical Islamist elements because it is so far the only successful example of a Muslim country embracing Western values of democracy and free market. Moreover, its geostrategic location is extremely important. At stake, therefore, it is not only the internal security of Turkish citizens, but the identity of the Turkish state and its society, as well as the security of the West.

For Israel, Turkey current foreign policy orientation is extremely valuable. Since the mid-1990s, we have witnessed an upgrading of bilateral relations reaching an unprecedented degree of strategic partnership. The closer Israeli-Turkish strategic cooperation has a positive effect on the peace process, which amounts to a reluctant acceptance of Israel as a regional actor by most Arab states. It reinforces the notion that Israel is militarily strong and cannot easily be removed from the map. Moreover, this relationship has a moderating effect on Arab ambitions and revanchism, which are still nurtured in the region.

Turkey has continued to maintain good relations despite the prolonged Palestinian armed confrontation with Israel that started in September 2000, and the ascendance of the proto- Islamist party (AKP) to power in November 2002-- an indication of the resilience of Israeli-Turkish relations. Moreover, Ankara increased its diplomatic involvement in the region, a development Israel welcomed. A change of course in Ankara that the recent terrorist attacks in Istanbul served as an alarm call to such an eventuality. An Islamist takeover in Turkey will have most detrimental effect on the strategic balance in the Middle East and on Israel's security.

The Israeli-Palestinian Arena
In September 2000, the Palestinians under Yasser Arafat rejected the incredible concessions offered by Prime Minister Ehud Barak in the framework of a comprehensive peace plan. Since then, they have conducted a terror campaign against Israel. After 9/11 it became clearer than before that the Palestinian violence, despite its local motivations and characteristics, is part of a larger phenomenon-- the Muslim rage against the West. The Palestinian national movement, infused with religious motifs from the very beginning, has consistently sided with the anti-Western forces in the Middle East. It supported the Soviet Union; it attempted to topple King Hussein in Jordan; it helped destabilize pro-Western Lebanon; it provided training to most terrorist organization in its camps in Lebanon; it sided with Saddam Hussein in 1991 and 2003. Fighting Israel, a perceived western post in the Middle East, is part of the Palestinian national ethos. Moreover, the religious elements in the Palestinian national movement, Hamas and the Islamic Jihad have close links to Islamist Iran, as well as to Hizbullah and al-Qaeeda.

The September 1993 Oslo agreement seemed to herald a new era in Israeli-Palestinian relations. These hopes were shattered in September 2000. The Oslo agreements amounted to a de facto partition of the Land of Israel, something most Israelis did not object to in principle. Unfortunately, the Palestinians established an entity that is corrupt, dictatorial and worst of all: unable to meet the main test of modern state-- monopoly over the use of force. The Palestinian Authority allowed the existence of numerous armed militias. The consequence of the Oslo agreement was to give the Palestinian terrorist organizations a territorial base near the heartland of Israel making it easier for them to attack Israeli targets. Indeed, the number of Israeli casualties rose to 898 in the 9/1993-9/2003 period, in sharp contrast to the toll of the previous 15 years-- only 254 casualties.

Slowly, Israel became aware of the magnitude of the new challenge, gradually escalating its military responses. Its freedom of action has been constantly curtailed by the vagaries of the Middle East policies of Washington, and by the democratic character of the Israeli political system (the rule of law and the influence of public opinion). The interim assessment shows that Israel was successful in containing Palestinian violence. Moreover, Israel under Ariel Sharon showed considerable resilience. It was successful in nourishing a good relationship with its ally, the US. More than ever was Israel's foreign policy successful in portraying Yasser Arafat as an obstacle to peace. In contrast, the Palestinians failed to bring about the reversal of the peace treaties between Egypt and Jordan with Israel, and a military involvement of Arab states. All clearly announced their refusal to participate in a wider regional confrontation on behalf of the Palestinians. Arafat also failed to trigger an international military intervention, such as the one in Kosovo. Despite the widespread criticism of Israel's war against the Palestinian terror, particularly in Europe, and the occasional signs of weakness within Israeli society, it is worth remembering that terror is the weapon of the weak and it is not always effective.

Israel has traditionally demanded of the Palestinians peaceful coexistence with little success so far. Since the famous speech of president Bush of June 24, 2002, greater attention was given to the needed internal change within the Palestinian community to make it ripe for living peacefully next to Israel. The US, in line with the imperatives of the pro-democratic ideology, demands more than foreign policy change. The US insists on a change of leadership, democratization of the PA and dismantling the terror infrastructure. The American position suits well Israel.

Conclusion
Israel is in the frontline of the Western attempt to bring about a more stable and peaceful Middle East that is more open to Western ideas, such as democracy and free market. The main challenges for this endeavor are in Iraq, Iran, Turkey, and in the Israeli-Palestinian arena. The success of the radical forces in these focal points will affects adversely Israel's security. Israel itself can use its power to curtail some of these challenges but it needs the support of the West.

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Sharon faces scandal over released captive
By Ed O'Loughlin, Herald Correspondent in Jerusalem
March 4, 2004
The Israeli Prime Minister, Ariel Sharon, is again fighting for his political life following revelations yesterday that he had close connections to the family of an Israeli freed from Lebanese captivity in a controversial prisoner exchange in January.
According to a front-page exclusive in the daily Maariv, freed Israeli reserve officer, Elhanan Tannenbaum, is the son-in-law of Shimon Cohen, who for years was the manager of Mr Sharon's ranch in the Negev desert.
The freeing of Lieutenant-Colonel Tannenbaum in a deal with the Lebanese guerilla group Hezbollah proved controversial in Israel, with many wondering why more than 400 Arab prisoners were freed in return for only one living Israeli - Colonel Tannenbaum - and the bodies of three soldiers killed in Lebanon.
Public anger deepened in the aftermath of the exchange when it became known that Colonel Tannenbaum had been kidnapped by Hezbollah while visiting the Arab world under murky circumstances.
Interrogated by the security services immediately on his return to Israel, Colonel Tannenbaum was subsequently and controversially granted immunity from prosecution. He then confessed he left the country to pursue a drug deal, but he also claimed to have been seeking information about Israeli air force navigator Ron Arad, missing in Lebanon since 1987.
The immunity deal has fanned the flames further, especially in view of revelations that the security forces believe Colonel Tannenbaum, a lieutenant-colonel in the Israeli army reserve, may not only have revealed security secrets to Hezbollah under interrogation but could have been prepared to sell them to Israel's enemy.
According to another exclusive report in the Haaretz daily yesterday, Israeli security agents discovered that Colonel Tannenbaum had illegally gained access to masses of secret documents before he left for Dubai in 2000.
Ma'ariv's revelations were followed by calls in the media and from the political left for Mr Sharon's resignation.
His office scrambled to release a statement denying he was aware that his old partner was the father-in-law of the man he had done so much to free, often against advice from the security establishment.
This story was found at: http://www.smh.com.au/articles/2004/03/03/1078295454149.html
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M. Chirac et M. Jupp? freinent les ambitions de M. Raffarin
LE MONDE | 03.03.04 | 14h50
Alors que le premier ministre ne cache pas son intention de remanier son ?quipe minist?rielle et de prendre la pr?sidence de l'UMP apr?s les r?gionales, le chef de l'Etat lui a rappel? que la priorit? du gouvernement demeure la lutte contre la ch?mage.
Plus qu'une bourde, une faute. L'Elys?e n'a pas appr?ci? que Jean-Pierre Raffarin laisse filtrer sa strat?gie pour les mois ? venir : remaniement minist?riel d?s avril, lorsque les nouveaux pr?sidents des conseils r?gionaux, issus des ?lections, seront en place ; acc?l?ration de la candidature du premier ministre pour remplacer Alain Jupp? ? la t?te de l'UMP ; recherche d'un accord avec Nicolas Sarkozy pour ?viter l'implosion ? droite. Ces informations parues dans la presse (Le Mondedat? 29 f?vrier-1er mars) ont mis, mardi 2 mars, Jacques Chirac en fureur. Pour, l'Elys?e, la priorit? du gouvernement doit rester la lutte pour l'emploi. En laissant transpara?tre ses ambitions, le premier ministre donne, selon l'expression d'un proche du chef de l'Etat, l'impression de "faire sa petite tambouille sur son petit r?chaud". Cette col?re de l'Elys?e relayait celle du pr?sident de l'UMP.
D?s le matin, ? l'occasion du d?jeuner hebdomadaire des chefs de la majorit? ? l'H?tel Matignon, le premier ministre a d? s'expliquer sur ce premier accroc entre le chef du gouvernement, qui avait notamment ?t? choisi pour sa "jupp?o-compatibilit?" et le pr?sident du parti chiraquien. Pendant plusieurs minutes, M. Raffarin a pris la parole en premier "pour mettre les choses au point", selon un proche de M. Jupp?. Le premier ministre a tent? de rassurer son interlocuteur sur sa loyaut?, en l'assurant que ses propos avaient ?t? d?form?s. C'est le mot "coll?gialit?" qui est revenu dans la bouche de M. Raffarin ; il a contest? l'existence d'un "ticket" l'alliant ? M. Sarkozy.
En r?ponse, M. Jupp? a rappel? que le calendrier de son d?part n'avait "aucune raison" d'?tre anticip?. L'ancien premier ministre a insist? sur la n?cessit? de respecter les r?gles en vigueur ? l'UMP. Il a, en outre, soulign? qu'en tant que pr?sident du parti, il ?tait le garant des statuts, du processus d?mocratique et de l'expression des militants.
CALMER LES ESPRITS
M. Jupp? a r?it?r?, deux heures plus tard ? l'Assembl?e nationale, ses propos devant les d?put?s du groupe UMP. Enfin, dans la soir?e, il s'est ? nouveau exprim?, devant le bureau politique du parti. En pr?sence d'une trentaine de personnes, dont le principal conseiller du pr?sident de la R?publique, J?rome Monod, la ministre de la d?fense, Mich?le Alliot-Marie, le ministre de la ville, Jean-Louis Borloo, et le secr?taire d'Etat aux transports, Dominique Bussereau, ami du premier ministre, - mais en l'absence des proches de M. Sarkozy -, M. Jupp? a hauss? le ton. "La future ?quipe qui dirigera l'UMP sera ?lue par les 165 000 adh?rents et pas par les cabinets minist?riels", a-t-il proclam?. Sans citer le ministre de l'int?rieur, il a affirm? qu'il n'avait "d'exclusive contre personne". A ses yeux, dans le parti, a-t-il pr?cis? dans un souci d'apaisement, "les meilleurs doivent acc?der aux responsabilit?s auxquelles leur talent leur donne droit".
L'entourage du premier ministre, s'effor?ait, mardi dans la journ?e, de calmer les esprits. "Il n'a jamais ?t? question d'un ticket avec Nicolas Sarkozy", soulignait-on. M. Raffarin n'a jamais prononc? ce mot, dit-on ? Matignon comme au minist?re de l'int?rieur o? l'on pr?cise qu'aucun accord n'a ?t? conclu.
A l'approche des ?lections r?gionales, dont le r?sultat reste incertain, le chef du gouvernement s'applique ? b?tir une nouvelle strat?gie. Pour cela, il ne discute pas qu'avec son num?ro deux, objecte un proche. "Jean-Pierre Raffarin s'entretient tous les jours avec Alain Jupp?, fait-on remarquer dans l'entourage du premier ministre, et il a ?galement abord? les m?mes sujets avec le garde des sceaux, Dominique Perben." Le remaniement, dont "tout le monde sait qu'il aura lieu", ironise un collaborateur de M. Raffarin et la pr?sidence de l'UMP sont un enjeu majeur. "La seule question ? laquelle il faut r?pondre, dit-on ? Matignon, est la suivante : "qui est le meilleur rassembleur ?" Elle ne peut pas ?tre r?gl?e tout de suite."
La succession de M. Jupp? provoque un malaise parmi les d?put?s de la majorit?. "Il serait probablement opportun d'organiser le congr?s avant le mois de novembre", estime Fran?ois Goulard, secr?taire g?n?ral adjoint du parti et d?put? du Morbihan. Selon lui, "Raffarin est le mieux plac? pour remplacer Jupp?, mais pourquoi attendre ?", interroge-t-il. "Sans se pr?cipiter et tout en respectant les statuts, nous pourrions tenir ce congr?s d?s la rentr?e de septembre", sugg?re-t-il. Herv? Mariton, d?put? de la Dr?me partage cet avis : "Le calendrier pr?vu pour l'?lection de la future ?quipe dirigeante du parti est long. Tout en respectant les statuts, je suis pour que l'on raccourcisse ce d?lai." Lui aussi plaide pour l'organisation du congr?s en septembre.
R?LE D?TERMINANT
Mais d'autres parlementaires, ? l'instar de Marc-Philippe Daubresse, d?put? du Nord et secr?taire g?n?ral adjoint du parti chiraquien pr?f?re s'en tenir au respect des statuts. "Les militants n'accepteraient pas que l'on bouscule les choses. L'UMP doit absolument rester soud?", a-t-il estim?. En revanche, pour Christian Estrosi proche de M. Sarkozy, d?put? des Alpes-Maritimes, conseiller politique de l'UMP, "cette question n'a aucune importance. C'est un d?bat sans int?r?t. C'est aux militants qu'il appartient de d?cider".
Toutefois, M. Chirac, dont le r?le reste d?terminant, a r?affirm? clairement ? un proche que le calendrier pr?vu par les statuts de l'UMP, l'?lection du pr?sident ? l'automne par les militants, devait ?tre respect?. Une rencontre - plut?t une explication - est d'ailleurs pr?vue entre le pr?sident de la R?publique, le premier ministre et le pr?sident de l'UMP, mercredi.
L'entourage du chef de l'Etat s'efforce de minimiser l'incident. A l'Elys?e, on affirme qu'il n'"y a pas l'ombre d'un probl?me entre le pr?sident et le premier ministre" et on ne croit pas ? l'existence d'un axe Raffarin-Sarkozy dirig? contre le chef de l'Etat. M. Raffarin peut ?tre maladroit mais il est loyal. Et il sait bien que son avenir politique d?pend en grande partie de M. Chirac.
Yves Bordenave, Pascal Ceaux et B?atrice Gurrey

62 % des Fran?ais d?sapprouvent l'action du premier ministre
Selon un sondage IFOP pour Paris Match, ? para?tre jeudi 4 mars et r?alis? les 26 et 27 f?vrier aupr?s de 1 018 personnes, 51 % des personnes interrog?es approuvent l'action de Jacques Chirac, contre 57 % lors de la pr?c?dente enqu?te des 29 et 30 janvier (- 6 points), et 48 % la d?sapprouvent. L'action de Jean-Pierre Raffarin recueille les faveurs de 38 % des personnes interrog?es (contre 42 % pr?c?demment, - 4) et 62 % sont en d?saccord avec cette politique (+ 4). Plus d'un Fran?ais sur deux (55 %, - 3) consid?re que le premier ministre "dirige bien l'action du gouvernement" et 35 % (- 5) pensent qu'il "m?ne une bonne politique sociale". En cas d'?chec de la droite aux r?gionales, 68 % des sond?s souhaitent "un remaniement important du gouvernement de Jean-Pierre Raffarin" ; 31 % sont d'un avis contraire et 1 % ne se prononcent pas.

* ARTICLE PARU DANS L'EDITION DU 04.03.04

Charm el-Cheikh : la th?se d'une d?faillance du syst?me de pilotage automatique et d'une erreur humaine
LE MONDE | 03.03.04 | 14h10
D'apr?s "Le Figaro", les pilotes du Boeing 737 ne se seraient pas rendus compte que le m?canisme n'?tait pas enclench?. Les enqu?teurs ?gyptiens qualifient cette version de "pure sp?culation".
Une d?faillance du syst?me de pilotage automatique, suivie d'une erreur humaine : c'est le sc?nario d?crit, mercredi 3 mars, par Le Figaro, pour expliquer le tragique accident du Boeing 737 de Flash Airlines, ab?m? au large de Charm el-Cheikh, en Egypte, le 3 janvier, causant la mort de 148 passagers, dont 135 Fran?ais.
D'apr?s le quotidien, "le pilote automatique ne s'est pas mis en service. Plus grave, l'?quipage ne s'en est pas aper?u (...) L'?quipage constate que "quelque chose ne va pas", mais ne comprend pas. Il est "surpris" car il consid?re que l'avion est toujours sous pilote automatique". Le Figaro explique que "lentement mais inexorablement, l'avion passe sur la tranche : le plan des ailes est alors perpendiculaire au sol. Un appareil de voltige peut rester quelques secondes dans cette position, soutenu par son moteur. le Boeing 737 n'en a pas les capacit?s."
"Jusqu'au dernier moment, il n'y a pas de panique", expliquait au Monde, le 6 f?vrier, le directeur du Bureau d'enqu?tes et d'analyses (BEA) de l'aviation civile, Paul-Louis Arslanian, en excluant une panne de d?rive. Jusqu'? la fin, les pilotes pensent ma?triser la situation, confirme Le Figaro. "Notre r?le est de savoir pourquoi l'?quipage est arriv? ? une telle situation", confie M. Arslanian au quotidien.
Le BEA a pourtant vivement r?agi, mercredi, ? la publication de ce sc?nario. "Aucun ?l?ment pr?cis ne permet d'expliquer se qui s'est pass?. Si nous avions un ?l?ment pr?cis, il aurait ?videmment ?t? rendu public", a indiqu? le BEA au Monde. "D?s qu'il y aura des informations, elles seront rendues publiques par les autorit?s ?gyptiennes qui dirigent l'enqu?te sur place", poursuit le bureau. Le chef des enqu?teurs ?gyptiens a qualifi? pour sa part de "pure sp?culation" la th?se d'un pilote qui aurait cru ? tort avoir enclench? le pilotage automatique. En revanche, le pr?sident de l'Association des victimes de Charm el-Cheikh, Marc Chernet, s'est r?joui, mercredi matin, de "cette explication rapide" qu'il "prend tr?s au s?rieux". "Elle avait ?t? ?voqu?e d?s le 31 janvier, en priv?", confie au Monde M. Chernet, qui s'interroge d?sormais pour savoir "si le comportement suppos? des pilotes constitue, en droit, une faute inexcusable".
LETTRE DU PREMIER MINISTRE
C'est en revanche mercredi matin que les familles des victimes de l'accident ont d?couvert ce nouveau sc?nario. M. Arslanian leur avait en effet adress?, le 20 janvier, une lettre pour r?pondre ? ceux qui s'inqui?taient "de la confiance qui -pouvait- ?tre faite aux enqu?teurs ?gyptiens". "Je confirme que les enqu?teurs -fran?ais et am?ricains- (...) ont eu un acc?s complet aux enregistreurs et qu'ils participent de plein droit aux discussions. (...) L'?quipage est conscient d'un probl?me et il tente de le g?rer professionnellement et sans affolement.".
Par ailleurs, dans une lettre dat?e du 1er mars, Jean-Pierre Raffarin ?crivait de son c?t? aux familles des victimes : "M?me si certaines des l?gitimes interrogations qui ont ?t? exprim?es demeurent ? ce jour sans r?ponse, j'esp?re de tout c?ur que -la r?union organis?e avec Dominique Perben, le garde des sceaux, le 31 janvier- aura r?pondu ? vos attentes (...) Je tiens ? vous assurer de la totale mobilisation de l'ensemble des services de l'Etat pour qu'il soit r?pondu ? ces interrogations et pour qu'en particulier les causes et les circonstances de ce drame soient totalement ?claircies". Une phrase qui, mercredi matin, avait un go?t amer pour plusieurs personnes endeuill?es par la mort de leurs proches, le 3 janvier, dans la mer Rouge.
Ariane Chemin

* ARTICLE PARU DANS L'EDITION DU 04.03.04
---------------------------------------------

All? Radovan ? C'est Slobo ? l'appareil
LEMONDE.FR | 03.03.04 | 14h14
"Alors, cet ambassadeur (d'Allemagne) me demande comment cela se fait que les Serbes de Croatie ont des armes. Je lui dis, attends mon gars, les Serbes ont toujours eu des armes, nous en tant que peuple, nous ne restons jamais d?sarm?s. (Rires) Et cet encul? de mes deux, tu sais ce qu'il me dit ? Oui, mais ils auraient ?galement des mortiers. A quoi je lui r?ponds : les mortiers, c'est bien des armes, non ?" Sur ce, les deux interlocuteurs, l'un ? Belgrade et l'autre ? Sarajevo, ?clatent de nouveau d'un long rire.
Ce n'est pas un personnage du cin?aste Quentin Tarantino qui s'exprime ainsi, mais Slobodan Milosevic, chef de l'Etat serbe, ici en ligne avec Radovan Karadzic, leader des Serbes de Bosnie. "Qu'est-ce que ce guignol attend de moi ?, ajoute le pr?sident serbe, visiblement tr?s content de lui-m?me. Que je lui dise que c'est moi qui ai fourni ces mortiers ? Ha, ha, ha..." En ce mois de juillet 1991, les premiers affrontements avaient d?j? ?clat? en Croatie, o? la minorit? serbe, soutenue par des unit?s de l'Arm?e populaire de Yougoslavie, s'appr?tait ? proclamer l'?ph?m?re R?publique autonome de la Krajina.
Cette conversation t?l?phonique fait partie des 245 documents sonores r?cemment vers?s au dossier d'accusation contre Slobodan Milosevic par le Tribunal p?nal international pour l'ex-Yougoslavie (TPIY), o? l'ancien pr?sident est jug? pour son r?le dans les trois grands conflits qui ont d?chir? l'ex-Yougoslavie de 1991 ? 1999 (Croatie, Bosnie, Kosovo). Il s'agit, selon l'agence IWPR (Institute of War and Peace report); qui couvre l'actualit? du tribunal, de conversations t?l?phoniques intercept?es par les services secrets de Sarajevo, qui auraient mis plusieurs hauts responsables serbes bosniaques sur ?coute d?s 1991.
Num?ris?s, tous ces enregistrements peuvent ?tre t?l?charg?s en format MP3 sur le site de l'ONG hollandaise Domovina.net, qui, depuis plusieurs ann?es, travaille ? constituer une base de donn?es sur la guerre en ex-Yougoslavie. Leur ?coute nous renseigne sur l'intensit? des ?changes entre Belgrade et Sarajevo ? la veille de la guerre en Bosnie : certains jours, Radovan Karadzic s'entretient ? plusieurs reprises avec Milosevic, mais aussi, plus sporadiquement, avec des personnages tels que le patron des services secrets serbes, Jovica Stanisic, le directeur des douanes, Mihalj Kertes, le paramilitaire "Arkan" ou Milorad Lukovic, alias "Legija", patron des B?rets rouges de sinistre renomm?e.
Concernant Milosevic, ces conversations "prouvent clairement, selon le TPIY, que l'accus? a pris une part active dans la planification, l'instigation et la pr?paration des crimes d?crits dans son acte d'accusation". Sur la forme, on ne manquera pas de relever le style ? la fois familier, paternaliste et piment? adopt? par le pr?sident d?chu lorsqu'il s'adresse ? son "cher Radovan" beaucoup plus respectueux des convenances et tr?s demandeur en conseils en tout genre. "Slobo" ponctue fr?quemment ses phrases par des jurons fleuris, des interjections et des rires rauques. Plut?t qu'aux hommes politiques croates ou bosniaques, il s'en prend r?guli?rement ? ses propres alli?s, qu'il traite de tous les noms d'oiseaux, tel un Milan Babic, "pr?sident" des serbes de Croatie, qualifi? tour ? tour d'"encul?", "idiot", "bon ? rien", "porc d?bile" et "schizo".
Malgr? des lignes t?l?phoniques en tr?s mauvais ?tat, on entend souvent comme toile de fond le claquement d'assiettes, des verres qui s'entrechoquent et des bruits de mastication. Les protagonistes se parlent souvent de chez eux, en compagnie de membres de leur famille, telle l'?pouse de Karadzic, Liljana, qui est pri?e un soir d'aller "baisser la t?l?". On s'informe poliment de la sant? des uns et des autres, on remercie Dieu si tout le monde va bien, et l'on se remet aux blagues grasses, aux intrigues et autres machinations politiques qui n'en constituent pas moins le pr?lude au plus sanglant conflit qu'ait connu l'Europe depuis la fin de la deuxi?me guerre mondiale.
Ce qui, ? partir de la fin de l'ann?e 1991, ne semble plus ?chapper au pr?sident serbe : "C'est, comme ils disent, la guerre, et nous sommes une des parties en conflit", rappelle-t-il ? un Radovan Karadzic visiblement mal inform?. En public, Slobodan Milosevic n'a jamais cess? de marteler que la Serbie, ? part se d?fendre contre "l'agression" de l'OTAN en 1999, n'a men? aucune guerre sur le territoire de l'ex-Yougoslavie.

Alexandre L?vy

----------------------------------------------------
Sa?f Al-Islam Kadhafi, au nom du p?re
LE MONDE | 03.03.04 | 14h02
Artisan du retour de la Libye au sein de la communaut? internationale, le fils a?n? de la seconde ?pouse du colonel Kadhafi est aussi le dauphin pr?sum? du chef de la Jamahiriya.
L'oeil ?coute, l'oreille s?lectionne. Inconnu il y a quatre ans, Sa?f Al-Islam Kadhafi est d?j? un pro de la communication. En Libye, le fils a?n? de la seconde ?pouse du colonel Kadhafi est un sultan qui chasse au faucon dans le d?sert, ?l?ve des tigres et des pumas. Ici, ? Londres, l'homme a pris l'apparence d'un golden boy de la City.
Blue-jean de grand faiseur, chemise ouverte, large sourire vendeur. Ce matin, dans le salon tr?s anglais de son h?tel particulier d'Hyde Park, le "Glaive de l'islam" - son nom en arabe - la joue modeste, sympa, d?tendu. A l'ext?rieur de l'immeuble, sous l'auvent ? colonnes battu par la pluie, ni plaque ni garde en armes. Discr?tion ?gale tranquillit?. Dans le d?cor gris perle du salon, le secr?taire qui prend des notes est libyen, le ma?tre d'h?tel qui sert le jus d'orange, britannique.
Grand, svelte, ?l?gant, le pr?sident de la Fondation internationale Kadhafi des organisations caritatives est un homme heureux. Les affaires marchent bien. Apr?s vingt ann?es de mise au ban international, la Grande Jamahiriya arabe et socialiste de Libye sort du purgatoire et rentre au pas de course dans le concert des nations. Et c'est en partie gr?ce ? lui. Sur le chemin de Canossa qu'a finalement d?cid? d'emprunter l'impr?visible colonel, Sa?f est l'?claireur, le guide du Guide en quelque sorte. Ou son masque le plus affable, comme on voudra.

Officiellement, ce grand gar?on de 32 ans bient?t n'est rien. A l'instar de son p?re, qui s'est d?fait de tous ses titres il y a des ann?es - ce qui lui permet, sans convaincre ?videmment quiconque, de plaider r?guli?rement l'innocence dans la triste situation libyenne -, le Glaive n'occupe aucune fonction ni ne joue aucun r?le dans les affaires de l'Etat. "Je suis juste un Libyen qui fait ce qu'il peut pour son pays." La presse arabe a senti en lui l'h?ritier d?sign?. Pour elle, il est "le prince de Libye". Les chancelleries suivent et le consid?rent ouvertement comme le dauphin pr?sum?. Les chefs d'Etat qui le re?oivent, Jacques Chirac en t?te, le traitent comme tel.

Mais Sa?f Al-Islam nie toute ?ventualit? de succession. Dans "l'Etat des masses", depuis la "grande r?volution" kadhafienne du 1er septembre 1969, il n'y a pas d'?lections, pas de Constitution, pas de libert? d'association, pas de partis politiques, pas d'information libre. M?me aujourd'hui, o? il est tant question d'ouverture, de r?formes, de privatisations massives, la Libye du Guide, c'est d'abord un grand silence. "Surtout, ne me citez pas, j'aurais de gros ennuis." Avocats, professeurs, ?tudiants, intellectuels, diplomates, hommes d'affaires, nul n'ose encore s'exprimer ouvertement. L'ouverture ? l'ext?rieur est r?elle, le changement strat?gique. Mais nul n'ignore en Libye qu'il suffirait que le Fr?re-Guide de la r?volution se l?ve un jour du mauvais pied pour tout refermer en une seule proclamation.

Les d?tentions au secret, les ex?cutions publiques, les assassinats d'opposants, les brutalit?s et les tortures syst?matiques qui ont ?maill? les trente-quatre ann?es d'existence de la Jamahiriya "tendent ? dispara?tre", note un chercheur. "Mais le long chemin de sang subi par les Libyens a marqu? les esprits pour plusieurs g?n?rations."Ces deux derni?res ann?es, Sa?f Al-Islam a obtenu la lib?ration de plusieurs centaines de d?tenus politiques et, pour la premi?re fois depuis quinze ans, une d?l?gation d'Amnesty International a ?t? autoris?e en f?vrier ? visiter les prisons. Selon l'un de ses membres, il reste "plusieurs centaines"de d?tenus politiques dans les ge?les du colonel.

"Politiques ? Non", se renfrogne le Glaive. Pour lui comme pour son p?re, qui cite ? tout-va l'"exemple" de George Bush et de ses cages de Guantanamo, les islamistes emprisonn?s "ne sont que des terroristes dangereux". Dans ce pays grand comme trois fois la France, mais ? 90 % d?sertique et peu peupl? (5,5 millions d'?mes), les "masses" sont cens?es se gouverner seules, via des comit?s populaires alternativement contr?l?s par les s?ides du colonel - arm?e, police politique, comit?s r?volutionnaires. "Mon p?re est un visionnaire qui n'est ni roi ni pr?sident, affirme le fils du "Berger de Syrte". Il n'a donc aucune charge h?r?ditaire ? transmettre." Il peut ?tre tr?s p?remptoire, l'h?ritier pr?sum?. Mais, dans un texte dat? du 13 d?cembre 2003, sign? de lui et diffus? sur son site Internet (www.gaddaficharity.org), le m?me jure aussi que la Libye "n'a pas ni ne cherche ? obtenir d'armes de destruction massive, nucl?aires, chimiques ou biologiques." Or on sait maintenant, gr?ce aux inspections d?ment autoris?es par le "ca?d" pour parfaire sa rentr?e en gr?ce, que ses programmes atomiques ?taient au contraire tr?s avanc?s. Sa?f Al-Islam est un politique...

Pens?e du d?sert ou d?sert de la pens?e comme on voudra, la "troisi?me th?orie universelle" contenue dans le Petit Livre vert du colonel est toujours d'actualit?. Cens?e d?velopper un syst?me ? mi-chemin entre socialisme et capitalisme, "la th?orie est d?mocratique et superbe", commente le fils pr?f?r?. "C'est sa pratique, affreuse, et sa mise en ?uvre, rat?e, qui doivent ?tre r?form?es."Des groupes d'?tudes "y travaillent", r?p?te-t-il depuis deux ans. Les Libyens pourront-ils un jour choisir librement leurs dirigeants par les urnes ? "Ce n'est pas qu'une question de vote, nous devons trouver le moyen d'ins?rer le peuple dans les m?canismes de d?cision", tranche le dauphin pr?sum?.

Pour l'instant, rien ne presse. Trop contente de pouvoir montrer au moins un dictateur arabe ayant pris suffisamment peur apr?s l'invasion irakienne pour ouvrir ses arsenaux interdits aux inspections, l'administration Bush, qui s'appr?te ? rouvrir son ambassade ? Tripoli, aussi bien que Tony Blair, attendu incessamment dans la capitale libyenne, ne se montrent gu?re regardants sur le chapitre des libert?s publiques. Le clan direct du colonel Kadhafi compte six enfants. Tous sont plus ou moins m?l?s ? l'administration du pays et ? ses plus juteuses op?rations financi?res. Il y a quelques ann?es, ce n'est pas Sa?f, mais son cadet d'un an, Saadi, r?put? proche de la ligne dure de la r?volution, qui semblait promis aux plus hautes destin?es. Et puis, buteur rat?, le cadet semble finalement se contenter de diriger la Ligue nationale de football. Quant ? la s?ur, la belle et blonde A?cha, "la Claudia Schiffer de Libye", dit la presse italienne, on raconte ? Tripoli que la politique lui aurait bien plu. Elle dirige elle aussi une organisation humanitaire. Mais, dans la soci?t? traditionnelle b?douine qu'est largement rest?e la Libye, "les femmes ne peuvent pas encore jouer ce genre de r?le", sourit un journaliste du cru.

Sa?f, lui, a l'oreille du ca?d et, tr?s vite, le p?re lui a donn? les moyens de ses ambitions. Fin 1994, ? peine frais ?moulu de l'universit? Al-Fatah de Tripoli, un dipl?me d'architecte en poche, il est charg? de concevoir un grand complexe immobilier avec h?tel, mosqu?e et logements. Bient?t, les projets se multiplient : villas, complexe sportif, centre de loisirs, etc. En Libye, le Glaive est c?l?bre. A l'ext?rieur, il n'existe pas encore. C'est en ao?t 2000 qu'il entre en pleine lumi?re. La Fondation cr??e trois ans plus t?t, "avec l'aide initiale de -son- p?re", reconna?t-il, s'entremet dans l'affaire des otages du groupe Abou Sayyaf de Jolo (Philippines).

La Jamahiriya, qui a financ? des ann?es durant tous les groupes ind?pendantistes ou s?cessionnistes arm?s de la plan?te, de l'IRA irlandaise aux Canaques n?o-cal?doniens, verse une ran?on estim?e ? 25 millions de dollars. Six otages occidentaux sont lib?r?s. La France remercie et ?voque "l'am?lioration des relations". Le chancelier allemand Gerhard Schr?der souligne que, "sans le colonel Kadhafi et son fils, rien n'aurait ?t? possible". La r?demption de l'"Etat des masses" commence. Aussi calme et pond?r? que son p?re appara?t col?reux, fantasque et violent, Sa?f Al-Islam est le nouveau visage du r?gime, "jeune, dynamique, r?solument moderne", ?crivent les gazettes. Embargo am?ricain, dures sanctions onusiennes : l'?conomie libyenne, au surplus g?r?e n'importe comment, est en lambeaux. Entre 1970 et 2003 la production p?troli?re, unique rente du pays apr?s l'?chec de tous les projets de diversification, a baiss? de moiti?. La Jamahiriya est seule, isol?e, mise au ban.

Le Glaive a vu le jour ? Tripoli, le 25 juin 1972, ? l'int?rieur m?me de la grande caserne militaire de Bal el-Azizya, o? r?side encore le colonel, entre "une maison modeste" et la grande tente b?douine o? il re?oit. Le 15 avril 1986, quand le pr?sident Ronald Reagan fait bombarder le site avec comme objectif d?clar? de tuer "le chien enrag? du Proche-Orient", le futur espoir libyen a 14 ans. Les bombardements ont fait 43 morts, dont la petite derni?re de la famille, un b?b? adopt? de quelques mois. Sa?f n'a pas oubli?. "C'?tait tr?s d?plaisant. Mais l'?v?nement a contribu? ? former ma nouvelle personnalit?, plus m?re. Vous connaissez le proverbe arabe : "Le coup qui ne brise pas ton dos te rend plus fort."" Quinze ans plus tard, il s'activera comme personne pour faire la paix avec l'Am?rique. Passionn?, dit-il, par les grands auteurs allemands, il philosophe : "Il y a un temps pour ha?r et un temps pour la paix."

Financ?e on ne sait trop comment - le FMI commence tout juste ? percer l'opacit? des comptes de la Jamahiriya -, la Fondation Kadhafi, dont on ignore m?me le budget, mais qui joue presque ouvertement le r?le d'un minist?re bisde la diplomatie, s'entremet dans tous les sales dossiers que tra?ne encore le r?gime. C'est elle qui mettra en place le r?glement des affaires Lockerbie (1988) et de l'avion fran?ais d'UTA qui a explos? en 1989 au-dessus du Niger - 270 morts dans le premier attentat, 170 dans le second. Dans les deux affaires, suite ? l'inculpation de plusieurs de ses ressortissants, la Libye reconna?t non pas sa culpabilit?, mais sa "responsabilit?". Et elle paye : autour de 3 milliards de dollars d'indemnit?s pour les familles des victimes. "Le prix de la paix", r?sume Sa?f, qui, comme son p?re, pense qu'il s'agit l? d'une sorte d'extorsion du fort au faible.

Aujourd'hui, alors que toutes les majors p?troli?res am?ricaines reviennent en Tripolitaine, "la r?volution est termin?e", constate le jeune Kadhafi. Avec le monde anglo-saxon en g?n?ral, avec l'Allemagne aussi bien qu'avec l'ancien colonisateur italien, tous les liens sont r?tablis. En deux ans, Silvio Berlusconi a d?j? accompli deux p?lerinages dans la tente du ca?d. Avec la France, "ce n'est pas la lune de miel", confie le fils du chef. "Mais j'ai confiance en Jacques Chirac, ajoute-t-il. L'affaire UTA r?gl?e, nous attendons de voir comment la France va r?agir. Si elle veut sinc?rement et s?rieusement tourner la page, nous r?pondrons."

Anglophone, germanophone et partiellement francophone, Sa?f Al-Islam n'est pas particuli?rement francophile. Dans les ann?es 1990, quand il voulait parfaire son ?ducation universitaire, Paris lui avait refus? un visa d'?tudiant. "Discrimination fond?e uniquement sur mon nom", commente l'int?ress?, qui n'a "pas oubli?"l'affront. Finalement, c'est l'Autriche qui l'accueillera, et c'est l?-bas qu'il obtiendra sa licence en administration des affaires. De ces ann?es heureuses o? le tr?s croyant "serviteur d'Allah" d'aujourd'hui laissera plut?t le souvenir d'un playboy flamboyant menant grand train avec la fortune de papa, notre homme, toujours c?libataire, nouera deux amiti?s importantes. La premi?re avec Choukri Ganem, un Libyen lib?ral form? aux Etats-Unis, alors num?ro trois de l'OPEP ? Vienne et qui est aujourd'hui le chef r?formiste du gouvernement libyen. C'est Sa?f qui a insist? aupr?s du colonel pour qu'il l'engage.

La seconde relation nou?e ces ann?es-l? est plus embarrassante. Il s'agit de J?rg Haider, le chef de la droite populiste autrichienne. Le Glaive ne renie rien : "C'est un ami, nous chassons ensemble, il vient chez moi, je vais chez lui." Cette proximit? n'est- elle pas un peu g?nante ? "Non. Nous avons de bonnes relations avec presque tous les politiciens de la droite extr?me europ?enne. J'ignore pourquoi, mais c'est ainsi."On insiste : "Yeah. Peut-?tre avons-nous quelques points communs, je ne sais pas..."

Patrice Claude

* ARTICLE PARU DANS L'EDITION DU 04.03.04
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Venezuela: The Next Cuba
By Paul Crespo
FrontPageMagazine.com | March 3, 2004
As Venezuela's embattled democratic opposition gears up for its planned August referendum against that South American nation's increasingly authoritarian ruler, President Hugo Chavez is consolidating his "Bolivarian Revolution" and subverting what's left of the country's constitutional democracy. Calling the legal referendum on his rule a "mega-fraud," Chavez is doing all he can to thwart the peaceful recall effort. Many fear that he has little intention of allowing a vote. Meanwhile, the migration of frightened Venezuelans to the US continues.
There is no doubt that Chavez - with Fidel Castro's help -- is creating a Cuban-style socialist state in Venezuela. Scholar Maxwell Cameron calls it the world's first "slow-motion constitutional coup." In the process, Chavez also is breathing new life into Fidel Castro's dying and decrepit dictatorship. But what's even more worrisome is the fact that the mercurial Chavez is turning the large, oil rich country into a base for international terrorism.
Sadly, not many people recognize this threat. In my July 2003 American Legion Magazine article -- The Other "Axis of Evil" I described the dangerous and growing alliance between Latin America's two major anti-American rogue states and international terror groups operating throughout the hemisphere.
Focusing on the close and burgeoning partnership between Castro and Chavez, I explored the links both Castro and his new Caracas-based clone have with Latin American communist guerillas, drug dealers and Islamic terrorists. Referring to Castro as an anti-American godfather, "increasingly advising his new alter-ego in Venezuela..." I wrote that Chavez, "with Castro's direction and support - may be turning Venezuela into a new anti-American terrorism hub."
Noting Castro's long history of subversion, espionage and terrorism -- including the October 2001 arrest in Washington, DC of Cuban spy Ana Belen Montes, the former senior Cuba analyst at the Defense Intelligence Agency (DIA) -- my article highlighted Castro's continuing threat to the US. Cuba remains on the US State Department list of state sponsors of terrorism. Chavez and Castro are intimately linked, meeting and talking regularly. Chavez has said Cuba and Venezuela are, in effect, "one team."
The partnership is so close that Venezuela's intelligence and security service, known as DISIP, reportedly has come under control of the Cuban intelligence service, the DGI. Because of this, US intelligence agencies have ended their longstanding liaison relationships with their Venezuelan counterparts. Hundreds of Cuban advisors, coordinated by Cuba's military attach? in Caracas, are also in charge of the elite presidential guard who defend Chavez against potential coups or military unrest.
Meanwhile, Chavez has purged and is reorganizing the Venezuelan military, making it personally loyal to him. Thousands of Cuban "teachers, doctors and sports trainers" also have flooded Venezuela. Their real job is to indoctrinate and train fanatically pro-Chavez paramilitary groups known as "Bolivarian Circles" that are part of a new 100,000-person People's Reserve militia recruited from Venezuela's poorest classes. These groups provide alternative armed cadres outside regular military channels loyal to Chavez.
While most of the mainstream media have ignored this growing menace, one major news magazine, US News and World Report, followed my piece with an in-depth investigative report in October 2003, Terror Close to Home: In Venezuela, a volatile leader befriends Mideast, Colombia and Cuba, confirming my exposition and clearly detailing the danger of Chavez's links to Castro and terrorism.
The weekly newsmagazine said that its two-month review, "including interviews with dozens of US and Latin American sources, confirms the terrorist activity," adding that "the oil-rich but politically unstable nation of Venezuela is emerging as a potential hub of terrorism in the Western Hemisphere, providing assistance to Islamic radicals from the Middle East and other terrorists."
Most prominent in Venezuela's list of friendly terror groups are the communist FARC guerillas (Colombian Revolutionary Armed Forces) who have terrorized Colombia for over 30 years and have killed thousands of people. Gen. Gary Speer, former acting chief of America's Southern Command, who said during a Senate Armed Services committee hearing in March 2002 that "we are very concerned about President Chavez ... the FARC operates at will across the border into Venezuela."
"There are arms shipments originating in Venezuela that get to the FARC and the ELN [National Liberation Army]," he added. "We have been unable to firmly establish a link to the Chavez government, but it certainly causes us suspicions. The company that Chavez keeps around the world, although under the guise of OPEC, certainly causes additional concerns as well." The US News piece details the exact location of FARC camps inside Venezuela where Venezuelan military advisors reportedly train FARC guerillas.
Sadly, Democratic presidential hopeful John Kerry stated in a February speech in Boston that the murderous FARC guerillas had "legitimate complaints" despite the fact that they have the support of less than three percent of Colombia's citizenry.
Chavez's links to Middle East terrorists may be more indirect but US officials note that Venezuela is providing support--including identity documents--that could prove useful to radical Islamic groups. U.S. News noted that Chavez's government has issued thousands of "cedulas," the equivalent of national ID cards, to people from Cuba, Colombia, and Middle Eastern `countries of interest' like Syria, Egypt, Pakistan and Lebanon that host foreign terrorist organizations.
According to US News, some of these cedulas were subsequently used to obtain Venezuelan passports and even American visas, "which could allow the holder to elude immigration checks and enter the United States." Chavez also was the only western leader to travel to Iraq to visit Saddam Hussein prior to his ouster by the US.
This article provoked an outcry from Chavez and his henchmen. The Venezuelan ambassador to the US, Alvarez Herrera, wrote an angry letter to the editor of US News deriding the article's accusations as "false" and "outrageous."
The ambassador then tried to counter the magazine's first-hand evidence by stating unconvincingly that "the government of Venezuela has ratified the Inter-American Convention Against Terrorism...and has signed multiple UN conventions on terrorism." Yet, the signature of this anti-democratic leftist demagogue on any international treaty hadly confirms his peaceful and lawful intent.
An indignant Chavez also told foreign reporters "I challenge the staff of US News and World Report or its owners to come here and look for one single shred of evidence, to show the world one single shred of proof." Chavez added that, "It is a strategy, to launch an offensive by concocting anything -- an assassination, a coup, an invasion." As a diversion from his terror links, Chavez has begun claiming loudly, and without any substantiation, that the CIA is trying kill him.
Much of the problem with our reaction to Chavez began with former US Ambassador to Venezuela, John Maisto who I briefly served as a military attach? at the US embassy in Caracas. His soft approach to the leftist demagogue was clearly flawed. Early on in Chavez's administration, the U.S. ambassador downplayed the Chavez threat, stating that it was Chavez's actions, not words that really mattered.
Other Clinton administration officials echoed that sentiment and said that we should ignore Chavez's rhetoric. That approach became informally known as the "Maisto doctrine." Yet, Chavez's actions inexorably have matched his rhetoric.
Despite his failure to appreciate the menace of a Chavez-Castro alliance, Maisto was inexplicably picked by the Bush administration to head - until recently -- the Western Hemisphere Affairs section at the National Security Council. He is still influencing Latin America policy as US Ambassador to the Organization of American States.
Fortunately, other members of Bush's National Security team such as Presidential Envoy to Latin America, Otto Reich and Assistant Secretary of State for the Western Hemisphere Roger Noriega do seem to understand the threat posed by the Chavez-Castro terror nexus.
Given the mischief Castro and Chavez are pursuing, Uncle Sam has his hands full dealing with the two dangers on either end of the Caribbean.
Paul Crespo is a former Marine Corps Officer and military attache at the US embassy in Caracas. An adjunct faculty member in the Political Science Departmnent at the University of Miami, he is also a Senior Fellow with the Foundation for the Defense of Democracies (www.DefendDemocracy.org) in Washington, DC.

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GAO wants acquisition process codified
By Laura M. Colarusso
Times staff writer
The Defense Department should codify a method for acquiring weapon systems that rely heavily on software development, according to a congressional report released Tuesday.
Though the Pentagon has a few success stories, it has wasted billions of dollars trying to evolve software code for various weapons, states the report from General Accounting Office, the investigative arm of Congress.
One of the most notable examples is the Air Force's F/A-22 Raptor. The service's premier acquisition program has run into numerous schedule delays and millions of dollars in cost overruns because of difficulties in developing the aircraft's software.
GAO blamed the Raptor's problems on managers not adhering to requirements and establishing reliable metrics.
But progress has been made. The Raptor "has been restructured with more oversight and has instituted more realistic controls over software development," the report stated.
Pentagon programs that are relatively successful, like the Navy's F/A-18 E/F Super Hornet fighter, upgraded and fielded software "incrementally," meaning they took small steps to evolve the code, which made the development process more manageable.
By using metrics -- such as cost, schedule, requirements, defects and quality -- to measure progress, developing complicated software loads would become more manageable, the study said.
The Pentagon should also model its acquisition programs on the best practices of software industry leaders, the report said.



Saddam allies appear ready to abandon fight
By William Cole
The Honolulu Advertiser
HELWE WOSTA, Iraq -- The dozens of former high-ranking Baath Party officials, including three generals and several colonels in Saddam Hussein's army, came to this tomato-and-watermelon-farming village to see one man: Army Lt. Col. Scott Leith.
A rogue's gallery that included murderers and thugs during Saddam's rule, they met with the American battalion commander over mutton and rice.
In doing so, they also sought peace: Partyless and jobless, they told Leith they want to carry the fight against Americans no more.
Tired of being hunted house to house, village to village first by the 4th Infantry Division and more recently Leith's 1st Battalion, 27th Infantry Wolfhounds, more than 20 high-echelon Baath Party officials and many more midranking members from southwest of Kirkuk said Friday they want to end their opposition.
"Several of them that were there spoke to one person, who spoke directly to Saddam," Leith said after the meeting, hosted by a local sheik.
Earlier, Leith, 40, told about 150 of the Sunni Arabs the Baath Party was gone for good, Saddam was a coward, and a new day had come to Iraq.
To reinforce the point, the Hawaii-based soldiers showed up heavily armed, and two Apache attack helicopters flew over mud huts, sheep and gaping Iraqis.
Leith said he was "guardedly enthusiastic" about the Baath members' decision to give up the fight. What coalition commanders will do with them still has to be determined.
"If this is true, these are people with an awful lot of information, and an awful lot of pull," Leith said. "So if they work with the coalition, certainly we can bring peace here quicker."
The day was another in an odyssey that Leith likens to living out an adventure novel. Several hundred villagers and children showed up to get a glimpse of the American soldiers, with the 6-foot-4 Leith leading the way.
He has met with three of the four tribal leaders in the 87-mile east-to- west swath he is responsible for, including the nearly 100,000-population city of Al Huwijah about 40 miles southwest of Kirkuk.
The sheik who hosted Friday's meeting, Mahmoud Azam Turk, is part of the Al Jabori tribe, which extends from Iran through northern Iraq and into Syria.
"The outgoing commander told me they see the commander of the region ... almost as sheiks of the area," Leith said. "It's kind of counter to our culture where I would normally defer to the age and social position of these gentlemen. But I can't. I must come forward with the might of the United States and the coalition."
Sitting cross-legged on a teal-colored carpeted floor in a room whose four walls were lined with sheiks and former Baath Party members, Leith did just that.
"We come asking for nothing. We are not asking for money, we are not asking for resources. We ask for one thing -- and that is your work to make this a peaceful and stable environment," Leith told the crowd. "People should not be dying in your fields. That is my responsibility and that is your responsibility."
In this Sunni Arab section of Iraq, where anti-American feelings still run strong, a few left the meeting room when Leith disparaged Saddam. U.S. soldiers took photos of those who attended, and wrote down their names at the meeting that included Special Forces.
Jasim Yunis Hamed, 30, a member of the Iraqi Civil Defense Corps, said the sheik Mahmoud has the power to keep the peace in his region. "He can control anything," Jasim said. "All the people here -- he told them to stop anything bad. He can do this."
The overture from the former Baath members is a step in the right direction, said Maj. Jeff Butler, the 1-27 operations officer. "They are wanted because they are high Baath Party members who went into hiding," Butler said. "Some are known to be financiers of terrorist actions against coalition forces."

Posted by maximpost at 3:23 PM EST
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Tuesday, 2 March 2004


Suicide Bomber May Have Been on Ferry
By TERESA CEROJANO
ASSOCIATED PRESS
MANILA, Philippines (AP) -
A man - listed by the Muslim extremist group Abu Sayyaf as one of its suicide bombers - was aboard a ferry carrying 899 people that caught fire last week after an explosion, the coast guard chief said Tuesday.
But Vice Adm. Arturo Gosingan said there was no indication so far that a bomb caused the blaze that gutted the Superferry 14 shortly after it left Manila on Friday. Police dogs checked the ferry before it departed.
One body has been found but at least 134 people remain missing, officials say.
Abu Sayyaf, an al-Qaida-linked group, claimed responsibility for the incident and identified the "suicide bomber" as Arnulfo Alvarado, 33, the Philippine Daily Inquirer newspaper reported.
However, the government has dismissed the Abu Sayyaf's claim of responsibility as propaganda.
Police intelligence reports have cited the ferries, one of the main forms of travel in the sprawling archipelago, as a potential target for Abu Sayyaf, which is on a U.S. list of terrorist groups and is known for kidnappings, murders, bombings and banditry.
A spokeswoman for the ship's owner, WG&A, initially said the name of the alleged suicide bomber was not on the passenger manifest.
But coast guard spokesman Arman Balilo said Tuesday that Alvarado was on the list of those who boarded the ferry. He also is classified as being missing.
"There is still an investigation going on, but the position of the coast guard is that ... anybody can make (such) a statement," Balilo said, referring to the Abu Sayyaf's claim of responsibility.
Witnesses said a powerful explosion triggered the inferno.
Divers, investigators and firefighters continued looking for the missing inside the wreckage, which was moored in the shallow waters of Manila Bay.
Divers retrieved what "looked like bones" but "we are not sure what it is," Gosingan said.
At least 70 percent of the half-sunken ferry has been inspected by divers and arson investigators.
Gosingan said rescue teams were lifting cargo and passengers' baggage from the 10,192-ton, steel-hulled ferry in an effort to find more bodies. He theorized that victims could have been trapped or crushed by falling debris, baggage and cargo when the ship turned on its side.
But those operations were hampered by poor visibility and the danger of jagged metal in the interior passageways, as well as embers and hot gases still fuming in the lower deck, he said.
President Gloria Macapagal Arroyo has said search efforts will continue until all the passengers are accounted for.
The fire occurred the same day that two alleged Abu Sayyaf members were convicted of kidnapping an American in 2000 and another was arraigned for participating in a separate mass abduction.

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North, South Korea Hold Economic Talks
By SOO-JEONG LEE
ASSOCIATED PRESS
SEOUL, South Korea (AP) -
A North Korean delegation arrived in South Korea Tuesday for talks on the construction of cross-border railways and roads and an industrial complex in the communist state.
The economic discussions, the eighth between the two sides since a historic inter-Korean summit in 2000, are to last four days. The two Koreas last met for economic talks in November.
Both sides are expected to focus on the details of rail and road links across their heavily armed border, and on an industrial park in the North Korean city of Kaesong. North and South Korean officials broke ground for the park last June.
Political and military tensions have delayed work on the transportation projects, and the two sides have failed to meet a number of deadlines.
The inter-Korean talks come just days after negotiations on North Korea's nuclear program involving the United States, Russia, China, Japan and the two Koreas ended without a major breakthrough in Beijing.
It was not clear whether South Korean officials would bring up the North's nuclear weapons program in the current talks.
South Korean officials say inter-Korean projects would accelerate if the nuclear dispute is resolved.
Official talks were scheduled to start on Wednesday. The 27-member North Korean delegation plans to return home Friday.
Also Tuesday, South Korea said it plans to provide 200,000 tons of chemical fertilizer to North Korea this spring - the same amount provided last year - to help boost the impoverished nation's farm yields.
In a report to the National Assembly, the Unification Ministry said it will use Red Cross channels to ship the fertilizer in time for the North's planting season in April and May.
South Korea provides fertilizer and other humanitarian aid to the North each year.
North Korea has relied on foreign aid to avert famine since the mid-1990s. Last month, the North Korean Red Cross asked South Korea for fertilizer aid.
The Unification Ministry said it will cost South Korea about $60 million to buy and ship 200,000 tons of fertilizer.

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Australia Troops Ill From Anthrax Shots
ASSOCIATED PRESS
CANBERRA, Australia (AP) - Australia injected soldiers headed to Iraq with an anthrax vaccine without telling them that forces who received the vaccine before going to Afghanistan had fallen ill, officials said Saturday.
Tony Austin, the defense health services director-general, defended the military's decision to keep quiet about the possible side effects of the vaccine, saying he had no definitive evidence the two were linked.
Austin said the forces already were being deployed to a stressful environment in Iraq and he had no proof that the problems were likely to recur.
"So I think to have advised people of that would have been quite counterproductive. I think that would have increased anxiety levels amongst our people," he said.
Defense documents released Saturday showed that almost three in four Australian troops who were given the vaccine before going to Afghanistan suffered from swelling and pain in the injected arm and a flu-like illness that kept some on sick leave for up to 48 hours.
In late 2001, Australia sent about 1,500 military personnel to Afghanistan to join the U.S.-led military action against the Taliban militia and al-Qaida.
The Weekend Australian newspaper reported Saturday that so many Afghanistan-bound personnel suffered temporary reactions to the vaccine that the anthrax vaccination program was suspended for two months in November 2001.
Vaccinations were resumed without telling troops heading to Iraq a year later of the side effects. Around 2,000 Australian troops were deployed to Iraq.
Austin said while he could not guarantee that the British-made vaccine was 100 percent safe, he could reassure inoculated troops and their families that their health had not been jeopardized.
"To this day, I have no evidence to suggest that the complications we saw in Afghanistan were directly attributable to the vaccine," he said.
Austin added unusual rates of adverse reactions had not been found in subsequent vaccinations.
In 2003, 52 Australian defense personnel were banned from serving in Iraq after they refused to take the anthrax vaccine.

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Arafat Accepts Key Reform for Foreign Aid
By MARK LAVIE
ASSOCIATED PRESS
JERUSALEM (AP) -
Palestinian leader Yasser Arafat on Tuesday agreed to a new system for paying his security forces - a key administrative reform that removed an obstacle to additional international aid, his prime minister said.
After months of delay, Arafat agreed that security force members would be paid directly, replacing the system of handing bundles of cash to commanders for distribution - an invitation to corruption. Foreign donors were balking at additional aid unless the reform was implemented.
In Gaza City, meanwhile, Arafat's position of authority took another blow early Tuesday when gunmen shot and killed Khalil al-Zaben, a close associate of Arafat for four decades. The killing was seen as part of escalating Palestinian power struggles in Gaza, and some feared chaos and civil war there.
A dire need for an influx of cash overcame Arafat's attempt to hold on to the pursestrings of Palestinian security forces, an element of control.
Israel and the United States have been pressing the Palestinians to consolidate more than a dozen overlapping and competing security forces and wrest control from Arafat, but to no avail.
Palestinian Prime Minister Ahmed Qureia said Arafat agreed to the financial reform step at a Cabinet meeting on Tuesday. "President Arafat approved paying all the security men through the banks," Qureia said after the meeting.
The 2004 Palestinian budget, approved in January, projected a 50 percent deficit of $800 million, underlining the critical role of foreign aid. The Palestinian economy has been decimated by more than three years of Mideast violence.
Palestinians blame Israel for punitive travel restrictions, but Israelis cite the need for security measures after thousands of attacks, including more than 100 suicide bombings.
Also Tuesday, Arafat hosted European and Arab diplomats after opening a new parliament building in Ramallah, the West Bank administrative and business center, where Arafat has been confined for more than two years by Israeli forces.
Arafat discounted a proposal by Israeli Prime Minister Ariel Sharon to evacuate settlements and withdraw from most of the Gaza Strip unilaterally if peace talks remain frozen.
Arafat said that under a timetable approved in interim peace accords in the 1990s, Israel should have been out of Gaza years ago. "But hundreds of houses were added to these settlements and thousands of dunams (acres) were confiscated," he said.
Negotiations over a permanent peace accord that would have included an Israeli pullout from Gaza broke down in 2000 over issues including Palestinian refugees and disposition of disputed parts of Jerusalem.
Statistics released by the Israeli government on Tuesday showed that construction in Jewish settlements in 2003 increased by 35 percent compared to the previous year, despite Israel's acceptance of a U.S.-backed peace plan that forbids such building.
Work started on 1,849 housing units in settlements during 2003, up from 1,369 in 2002, the bureau of statistics said. Construction inside Israel slumped by more than 10 percent during the same period.
The "road map" peace plan states that Israel must freeze "all settlement activity (including natural growth of settlements)." Israel insists that first, Palestinians must stop all violence, another "road map" requirement.
About 230,000 Jewish settlers live among around 3.5 million Palestinians in the West Bank and Gaza Strip, which Israeli captured in the 1967 Middle East War.
Palestinians charge that the settlements are encroachment on their land and demand that all be removed. The United States considers the settlements as obstacles to peace, and most other international bodies call them illegal.
Israel has traditionally said it has a historic, religious and security claim to the West Bank, justifying the settlements, but in recent years even hardliners have admitted that not all can remain where they are.
In Washington, top Sharon aide Dov Weisglass met with National Security Adviser Condoleezza Rice and Secretary of State Colin Powell to discuss the Gaza pullout plan, a statement from Sharon's office said.
In violence Tuesday, Israeli troops shot and killed an unarmed man fleeing from a West Bank house they were surrounding. The military said the man ignored orders to halt.

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Adviser to Arafat Slain in Gaza
By RAVI NESSMAN
ASSOCIATED PRESS
GAZA CITY, Gaza Strip (AP) -
The gangland-style killing of an adviser to Yasser Arafat on Tuesday was a chilling sign of increasing lawlessness in the Gaza Strip, where armed gangs and corrupt security forces are competing for power ahead of a proposed Israeli troop withdrawal.
Some fear the situation in Gaza is spinning out of control, and the territory could descend into chaos and even civil war.
"There is violence against everybody," said Marwan Kanafani, a Palestinian legislator. "You don't know who is killing whom or why it is happening."
"It's going to get worse," he warned.
Israel gets some of the blame, for destroying police installations during more than three years of violence. This may have left the security forces too weak to take on the armed gangs increasingly controlling Gaza's streets, including gunmen with ties to Arafat's Fatah movement.
But the Palestinian Authority's tangled web of competing security services and Arafat's hands-off policy toward gunmen is seen as the main factor in the chaos. As part of his leadership style, Arafat has encouraged rivalries to keep in line possible challengers and has condoned corruption as a perk for loyalists.
"There are those who want to take the law into their own hands, and most of them are in the higher ranks of the security forces," said Hafez Barghouti, editor in chief of the Palestinian daily Al-Hayat Al-Jadida.
Israel's army chief, Lt. Gen. Moshe Yaalon, told a committee of the Israeli parliament Tuesday that Palestinian society "is rife with internal power struggles, maybe we can even call it anarchy."
Israeli Prime Minister Ariel Sharon has been talking in recent weeks about a unilateral withdrawal from the Gaza Strip and some West Bank areas if peace efforts remain stalled.
There is concern Islamic militant groups, the main opposition to Arafat, could try to seize power following such a withdrawal. However, recent vigilante attacks on government offices and journalists in Gaza were blamed on gunmen with ties to Fatah, not on militants from Hamas or Islamic Jihad.
Despite the unrest, many Gazans were stunned when Khalil al-Zaben, 59, was riddled by a dozen bullets early Tuesday as he left his Gaza City office.
Arafat denounced the killing as a "dirty assassination" and convened his Cabinet and national security council to discuss what was seen as one of the most serious challenges to the Palestinian Authority.
"This chaos will not be tolerated. I believe the Palestinian government and security forces must take all action to end this chaos," Palestinian Cabinet Minister Saeb Erekat said. "It is really undermining the Palestinian struggle to establish an independent state."
Many Palestinian officials and scores of officers from three different security services attended al-Zaben's official funeral Tuesday. Members of Arafat's bodyguard acted as pallbearers.
There was no claim of responsibility, but one official said privately he suspected the assailants had ties to Fatah. Al-Zaben made enemies in Gaza by filing detailed reports to Arafat about various factions' activities, the official said.
Last week, al-Zaben distributed a leaflet denouncing "gangs of professional killers and assassins" whom he held responsible for a recent attack that wounded a Fatah politician. Al-Zaben, a local publisher, also headed a Palestinian Authority-backed human rights group that monitored the fate of Palestinians imprisoned in other countries.
Reporters Without Borders, a group that works to protect the rights of journalists, issued a statement calling on the Palestinian Authority to "immediately take clear, well-defined and effective steps to ... bring an end to the impunity with which Palestinian journalists are being attacked."
Even before al-Zaben's killing, internal violence was running high in Gaza, with a number of unsolved attacks.
In the past month, the offices of a weekly news magazine that criticized corruption were ransacked and a journalist from an influential newspaper had his car firebombed. Rival security forces opened fire at each other at Gaza police headquarters, killing a police officer.
About 15 masked Palestinians burst into a Palestinian Broadcasting Corporation office, demanding jobs at gunpoint on Saturday, three days after 20 masked men with assault rifles and hand grenades raided the Gaza City office of the Palestinian Land Authority, demanding land deeds be transferred to them.
The Land Authority took the unprecedented step of publishing a front-page ad in newspapers Sunday accusing many of the masked men of being members of the security forces and announcing the closure of all Land Authority offices in Gaza until "those that committed these crimes face justice."
Assailants then threw a hand grenade overnight at a charity backed by the Land Authority chairman.
"There is really almost nobody who is taking care of law and order," said Khalil Shikaki, a Palestinian political analyst and pollster whose West Bank offices were raided by a mob last year as he held a news conference.
Shikaki says the attacks are far from random and likely stem from feuding militia leaders, militants trying to crush criticism and groups jockeying for power ahead of a possible Israeli pullout.

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No Evidence Navy Pilot Was in Iraqi Hands
By ROBERT BURNS
ASSOCIATED PRESS
WASHINGTON (AP) - Investigations in Iraq since the fall of Baghdad have found no evidence that missing Navy pilot Michael Scott Speicher was held in captivity after being shot down on the first night of the 1991 Gulf War, the Navy's top admiral said Tuesday.
U.S. officials have been interrogating Iraqis and searching throughout the country for evidence of Speicher's fate since the regime of Saddam Hussein was toppled by U.S. forces in early April last year.
Despite having found no evidence that the Iraqis captured Speicher, the Navy is sticking to its position, declared publicly in October 2002, that Speicher is "missing-captured," Clark said.
"We have not found out new specific intelligence revelations that have changed our fundamental conclusion," Adm. Vern Clark, the chief of naval operations, told reporters at a breakfast interview.
The Iraqi government under President Saddam Hussein maintained from the start that Speicher died in the crash on Jan. 17, 1991, although his body was not recovered.
Asked directly whether evidence had emerged to reinforce the theory that Speicher had been taken captive by the Iraqis, Clark said no. He said there is no evidence either for or against it.
Other officials, speaking on condition of anonymity, said Tuesday that prewar assertions by informants that Speicher had been seen in a prison in Baghdad have been discredited.
Nonetheless, the Navy is maintaining its position that Speicher is "missing-captured," Clark said.
The Navy has changed its position on Speicher's status over the years.
In October 2002 the Navy changed Speicher's status from missing in action to "missing-captured," although it has never said what evidence it has that he was in captivity. In announcing that decision, Navy Secretary Gordon England wrote at the time, "I have no evidence to conclude that Captain Speicher is dead. He also wrote, "While the information available to me now does not prove definitively that Captain Speicher is alive and in Iraqi custody, I am personally convinced the Iraqis seized him sometime after his plane went down."
Hours after his plane when down, the Pentagon had declared Speicher killed in action, with no body recovered. But 10 years later, in January 2001, the Navy changed his status to MIA, citing an absence of evidence that he had died.
Clark said in the interview Tuesday that resolving the fate of Speicher is a high priority for the Navy.
"We do not have new intelligence that adds clarity and definition to what happened to him" after he was shot down, Clark said. "If you think about what I just told you, that tells you something about the discovery or lack of discovery."
Speicher was 33 when he was shot down. He held the rank of lieutenant commander at the time; he has since been promoted to captain.

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Gulf War pilot's status still `missing-captured'
By Robert Burns
Associated Press
Nearly a year after the fall of Baghdad, the Navy has yet to find evidence to change its position that F-18 fighter pilot Michael Scott Speicher, shot down on the opening night of the 1991 Gulf War, was at one time in Iraqi captivity, the Navy's top admiral said Tuesday.
Iraq has maintained all along that Speicher was killed in the crash. The Navy, which has changed its position on Speicher's status over the years, lists him as "missing-captured."
"We have not found out new specific intelligence revelations that have changed our fundamental conclusion," Adm. Vern Clark, the chief of naval operation, told a group of reporters at a breakfast interview.
In October 2002 the Navy changed Speicher's status from missing in action to "missing-captured," although it has never said what evidence it has that he was in captivity. He initially was listed as killed in action, with no body recovered. But in January 2001, the Navy changed his status to MIA, citing an absence of evidence that he had died.
Asked directly whether any evidence had emerged to support the Navy's position that Speicher had been taken captive by the Iraqis after he was shot down on Jan. 17, Clark said, "I can't answer that question."
Later a senior Navy official, speaking on condition of anonymity, conceded that no information has emerged that reinforces the theory that Speicher had ever been in captivity.
In fact, other officials have said in recent months that some information from informants, claiming before the U.S. invasion last March that Speicher had been seen in a prison in Baghdad, has since been discredited.
Clark said resolving the fate of Speicher is a high priority for the Navy.
"We do not have new intelligence that adds clarity and definition to what happened to him" after he was shot down, Clark said. "If you think about what I just told you, that tells you something about the discovery or lack of discovery."
Speicher was 33 when he was shot down. He held the rank of lieutenant commander at the time; he has since been promoted to captain. Speicher's family lived in the Kansas City area and moved to Florida when he was a teenager.

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Venezuela Panel Rules on Chavez Recall
By FABIOLA SANCHEZ
ASSOCIATED PRESS
CARACAS, Venezuela (AP) -
Venezuela's elections council ruled Tuesday that the opposition lacked enough signatures to force a recall referendum against President Hugo Chavez. Rioting over council delays had spread from Caracas to other cities before the decision.
Chavez opponents say they submitted more than 3.4 million signatures. Some 2.4 million are needed for a recall election.
But council President Francisco Carrasquero announced that just 1.83 million signatures were valid. Another 876,016 signatures may be valid - if citizens confirm that they indeed signed the petition, Carrasquero said.
The council said that voters whose signatures were under dispute would have between March 18 and March 22 to report to voting centers to confirm that they indeed had signed the petition.
Venezuela's opposition claims that such a monumental task, involving hundreds of thousands of citizens, could indefinitely postpone the referendum or derail it entirely.
Even before the announcement, protests surged as the opposition anticipated the result. National guard troops in armored personnel carriers rolled through several cities as demonstrators burned tires and hurled rocks and gasoline bombs at soldiers.
Protests were reported in at least 10 other cities, including the industrial centers of Valencia and Barquisimeto and the western oil city of Maracaibo.
Many opposition leaders had said they would not accept a decision requiring voters to confirm their signatures. The measure was allegedly not included in rules established for the verification process, they said.
"We are not negotiating the signatures," said opposition leader Juan Fernandez.
Chavez's foes have been blocking traffic throughout Caracas since Friday to protest what they view as a government plot to derail the referendum - their last chance of legally ousting Chavez before the next elections in 2006.
At least one person has been killed and 60 wounded since Friday. Dozens have been arrested.
Venezuelans had been waiting since Sunday for the council to release its findings.
The opposition tried to dislodge Chavez, a populist leftist first elected in 1998, through a shortlived coup in 2002 and a general strike that dragged on for two months last year.
Prodded by the Organization of American States and the U.S.-based Carter Center, the government and the opposition agreed in May on ground rules for an eventual recall referendum.
The petitions were delivered in December. But electoral authorities continue to delay an announcement on whether the recall effort can go ahead.
If Chavez loses in a referendum held before mid-August, the midway point for his term, new presidential elections must be held. But if he loses in a vote held after mid-August, Vice President Jose Vicente Rangel would take over for the rest of his term.
Opponents fear if that happens, Chavez would merely rule behind his right-hand man for the rest of his term, which ends in January 2007.
The opposition charges the elections council belatedly changed the rules to disqualify hundreds of thousands of signatures. The council says observers were told not to allow voters to simply sign already filled-out forms. But thousands of signatures were delivered that way.
Still, the OAS, Carter Center, Argentina, Brazil and other countries have urged Venezuela to overlook glitches and respect the apparent will of voters. Chavez - re-elected to a six-year term in 2000 - rejects their pleas as foreign interference and insists the petition is ridden with fraud.
Defense Minister Gen. Jorge Carneiro insisted his troops will restore order if necessary in areas where protests have been strongest - especially eastern Caracas, an anti-Chavez stronghold.
Chavez's government urged opposition mayors to stop rioting by deploying their police forces.
"It's amazing to see how some mayors are allowing the destruction of their own municipalities, private property and streets and their citizens' security," said Vice Security Minister Carlos Valter Bettid.
Protests forced private banks to shut 20 branch offices; prevented garbage collection; caused traffic jams and hampered transit by emergency vehicles. For a second day, thousands were unable to get to work.
The government published full-page newspaper ads Tuesday declaring that "violence is the shortest path to losing everything."
Opposition labor leader Manuel Cova countered: "Today they might steal our signatures. Tomorrow they might steal our votes."

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Troops increase presence at Afghanistan-Pakistan border
By Stephen Graham
Associated Press
KABUL, Afghanistan -- U.S.-led coalition troops have begun strengthening their presence in Afghanistan's lawless border regions in an attempt to crush Taliban and al-Qaida militants and garner intelligence on fugitives like Osama bin Laden, U.S. military officials said Tuesday.
The move to beef up the U.S. presence comes only weeks after the top U.S. commander in Afghanistan, Lt. Gen. David Barno, pledged that troops would switch from brief missions in pursuit of enemy fighters to taking "ownership" of areas by having more regular contact with villages, sometimes for days at a time.
"That process is under way and is gaining steam," military spokesman Lt. Col. Bryan Hilferty told reporters during a news conference in the capital, Kabul.
The new show of force marks a change in tactics for the military, which had earlier deployed hundreds of troops in large formations for weeks at a time into remote mountainous areas. The new strategy has the advantage of attempting to build closer ties with the community, yielding better intelligence as well as giving troops more time to thoroughly screen an area.
Now, locally based troops do "a long patrol, spend some time in villages and then come back to their main base, but then go back out to that village again," Hilferty said. "So we have repeated visits to places and we have better face-to-face and personal contact."
The new tactics have already met with some success, including the destruction of a terrorist cell that had been plaguing American forces in the restive border region near Pakistan, said Lt. Col. Harry Glenn, the commander of a U.S. military base in the province of Khost.
One operation in January around a remote pass linking Khost with neighboring Paktia province had led to several arrests in a stronghold of Jalaluddin Haqqani, a fabled former Taliban commander.
"There has not been an attack in that pass since," Glenn told The Associated Press in an interview on Monday.
Haqqani apparently fled the area, he said.
The number of U.S.-led troops in Afghanistan has crept up to 13,000 over recent months, including up to 1,000 in Khost.
Barno has said that U.S. forces are planning to work closely with Pakistani troops on the other side of the border in what he described as a "hammer-and-anvil" approach -- Pakistani troops will pressure the militants to cross into Afghanistan where American forces will be waiting.
Pakistani forces have poured into tribal areas bordering Afghanistan in hopes of pressuring fugitives to flee to Afghanistan -- where American forces will be waiting.
U.S. officials say they expect these operations, plus the establishment of security teams in provincial capitals such as Qalat to encourage reconstruction projects and undermine support for militants threatening landmark summer elections.

Posted by maximpost at 10:13 PM EST
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HOMELAND INSECURITY
Canada admits:
We're terror haven
22-page intelligence report says 'most notorious' groups still flock to nation
? 2004 WorldNetDaily.com
The world's "most notorious" terrorist groups continue to operate in Canada, says a classified intelligence report written two years after Parliament gave police new powers and money to dismantle the country's deadly terror networks, reports the National Post.
In a 22-page assessment of the security threats facing the nation, the Canadian Security Intelligence Service said international terrorists are still using the country as a base for waging worldwide political and religious violence.
"Terrorism of foreign origin continues to be a major concern in regard to the safety of Canadians at home and abroad," says the Oct. 10, 2003, report, titled "Threats to Canada's National Security." "Canada is viewed by some terrorist groups as a place to try to seek refuge, raise funds, procure materials and/or conduct other support activities. ... Virtually all of the most notorious international terrorist organizations are known to maintain a network presence in Canada."
The threat from terrorist groups using Canada as a staging ground was first reported in Joseph Farah's G2 Bulletin last September.
The document obtained by the National Post is classified "Secret: Canadian Eyes Only," but the paper got a copy under the Access to Information Act.
The CSIS report confirms a recent U.S. Library of Congress study that said Canada's welfare system, immigration laws, infrequent prosecutions and light sentences had turned the country into "a favored destination for terrorists."
Dozens of those who trained at Osama bin Laden's camps were citizens or residents of Canada. Unlike the United States, which has prosecuted American al-Qaida trainees, Canada has not brought criminal charges against those who attended bin Laden's terrorism schools.
The CSIS report confirms fundraising for terrorism has not stopped in Canada, even though halting the flow of money to such groups as al-Qaida, Hezbollah and Hamas was one of the chief aims of Canada's anti-terrorism bill.
"In Canada, supporters of a number of terrorist groups collect and send money abroad to finance their causes," the report says. "These supporters range from highly structured and well-run organizations ... which can raise substantial sums, to less formalized groups of individuals with limited fundraising abilities. The most effective way of raising money is through community solicitations and fundraising events, often in the name of organizations with charitable status. Other methods include the sale of publications, cultural or social events, or appeals to wealthy members of the community."

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>> CHURCHES?
A Faith-Based Case for Gulags
By Johannes L. Jacobse
FrontPageMagazine.com | March 2, 2004
The National Council of Churches (NCC) claims to represent more than 50 million American Christians. Drawing supporters mostly from mainstream Protestant congregations and the smaller Greek Orthodox Church, the NCC has positioned itself as a player on the far left side of the religious wing in the culture wars. It's not too much of a stretch to view the NCC as the institutional voice of the religious left.
In real terms, however, the NCC's membership claim is inflated. Regular congregants don't get a say in the participation of their church in the NCC. Most don't even know that the NCC exists. But inflating the numbers is common practice in religious circles. This gives organizations like the NCC an appearance of authority it does not really possess.
In many Christian churches there is a world of difference between the people in the pew and their leadership, a relationship that mirrors that of blue-collar workers and union executives. This division is most apparent in mainstream Protestant churches. A recent example is the elevation of a practicing homosexual to the rank of Bishop in the Episcopalian Church. Most of the American hierarchy favors it. Many of their flock disagree. It threatens that once noble institution with schism.
Most other Christian communions don't confront such divisive issues - not yet anyway. Two factors mask the division between the laity and the hierarchy. The first is trust in leadership. Short of a conflict like the Episcopalian debacle that forces the leadership out of the closet, congregants simply assume that the leadership shares the same values that they do.
The second factor is more duplicitous. Organizations like the NCC mask their political views in the vocabulary of the Christian tradition, making it appear that left wing politics is synonymous with Christian moral teaching. It's a well-crafted rhetorical ploy that allows the NCC to stake out the moral high ground and paint their conservative critics as uncaring and unsympathetic reactionaries who stand at the fringes - even outside - the Christian tradition.
Relevancy has always been a problem for the NCC. It doesn't really know why it exists. It was formed during the ascendancy of the Protestant mainstream in post war America before the cultural rifts of the 1960s emerged. How did it respond to the revolutionary tenor of the Sixties? The NCC adopted Marxist theory, putting it front and center in one of the great cultural debates of the day. But the glory was short-lived. Marxism fell and the NCC was left with the uneasy legacy of supporting totalitarian regimes known for their brutal persecution of Christians and others.
In the 1970s and 1980s, the NCC's enthusiasm for totalitarianism led it to put its stamp of approval on Liberation Theology, where Marxist ideology was fused with the Christian moral obligation to care for the poor. Liberation Theology swept through mainstream Protestant seminaries like wildfire. And the movement was, of course, widely embraced by left-wing Catholic thinkers, particularly the Jesuits, in Latin America and the United States. But the American Catholic Church never joined the NCC.
Like so many of their ideological soul mates, the NCC really believed it was on the right side of history. But the fall of Communism took them completely by surprise and in short order the time arrived to account for past sins. During a moment of unusual honesty and candor in 1993, the Rev. Joan Brown Campbell, former General Secretary of the NCC, confessed, "We did not understand the depth of the suffering of Christians under communism. And we failed to really cry out under the communist oppression."
This clarity did not last long. Recently the NCC displayed the same callous indifference to the brutality of the North Korean and Cuban regimes it previously showed toward the Soviet Union. It proves that the NCC's love affair with Stalinism is alive and well.
In June 2003, the NCC called for the United States to pledge to a "non-aggression pact" and the eventual normalization of relations with North Korea. The NCC demanded "increased trade, commerce, and investment," and a new infusion of humanitarian aid in the form of goods, medicine and medical equipment, and agricultural technologies.
At least the NCC displayed a minimal awareness of the massive suffering taking place in North Korea. No mention was made however, that the totalitarian policies of the North Korean government was the cause. It was silent about the Korean Gulags, of the millions dead by starvation, and of the shattered economy that directs all spending into the North Korean military machine. Moral condemnation was reserved for the United States alone. In February, the world learned that 50,000 people were imprisoned in Camp 22 -- North Korea's largest concentration camp -- where horrific chemical weapons experiments were conducted on prisoners. Many in the North Korean Gulag are Christians, a group hated by dictator Kim Jong-il.
The same scenario played out in Cuba during an NCC visit in January. The NCC roundly condemned America for the economic embargo on Cuba. No mention was made of Castro's stranglehold on the Cuban economy. His jailing of dissidents earned only a mild scolding, forgotten as soon as it was said.
The facts are that since 2001, Havana has been buying American grain, food, and medicine on a cash and carry basis. Today Cuba is flat broke, a condition that makes Cuban default on any debt inevitable.
The reality of Cuba's bankruptcy isn't lost on the rest of the world either. France, Spain, and Italy suspended all credit to Castro when the yearly $200 million subsidy from the Soviet Union stopped in 2001. Mexico has tried to freeze Cuban assets in three countries to recover the $400 million that Havana owes it. In July 2002, Reuters reported "direct foreign investment in Cuba plummeted to $39.8 million from $488 million the year before."
But facts don't matter to the NCC. Neither does Castro's human rights abuses. During the January visit, NCC representatives demanded entry to Guantanamo in order to condemn the U.S policy concerning the prisoners detained there. At the same time an NCC delegate pleaded with the leadership to visit a Cuban prison to highlight the plight of political dissidents. Those leading the NCC Cuba trip refused.
The NCC is habitually on the wrong side of history. It is as wrong about North Korea and Cuba today as it was about the Soviet Union and Liberation Theology. The NCC twists the language of the Christian moral tradition to apologize for totalitarianism. It is not the first time that Christians have betrayed their heritage and used good to defend evil. But Christians and their churches can do something about the National Council of Churches. They can sweep it into the dustbin of history where, along with the aging Stalinists in Cuba and North Korea, the world will not lament its demise.
Fr. Johannes L. Jacobse is a Greek Orthodox priest and edits the website www.OrthodoxyToday.org



Saving face: Nothing happened but most contenders call N. Korea nuclear talks 'very successful'
The six-nation talks on North Korea's nuclear program wound up in Beijing with what diplomats described as an exercise in face-saving on all sides. Speaking anonymously, a senior U.S. official called the talks were "very successful in moving our agenda toward our goal of complete, verifiable, irreversible dismantlement of the DPRK's nuclear programs." The issue of dismantlement "is now more on the table than ever."
S. Korea gains propaganda edge on North - at long last - thanks to IT
Chinese submarine maneuvers alarm Japan
ASIAN ECONO-MATRIX
China wants GE technology in exchange for deal / Singapore's Lee to pilots: Sacred cows 'can be slaughtered' . . . / Asian markers
CIA Director George Tenet testifies on world-wide threats before the U.S. Senate Intelligence Committee. AFP/Luke Frazza
CIA's Tenet: N. Korea still pursuing missile, dual use technology
N. Korean delegation in Libya assessing potential benefits of rejecting nuclear option
Kim Jong-Il visited military units during nuclear talks
Pyongyang attacks U.S. war plan for N. Korea
Japan Television shows North Korean labor camp
Survey finds shocking size contrast between N. and S. Koreans
Seoul seeks some international economic advice . . . and gets it
In S. Korea's scandal-fest, chaebol moguls again get off with a slap on the wrist
N. Korea seeks to establish Seoul branch of its commercial bank
Burma seeks advance Indian arms, communications technology
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Syria's Assad Jr. seeks to appease opposition his father suppressed
SPECIAL TO WORLD TRIBUNE.COM
Sunday, February 29, 2004
The regime of Syrian President Bashar Assad is being increasingly challenged by dissidents.
Syrian opposition sources said dissidents have become bolder under the new regime. The sources said that despite a crackdown on reformers an increasing number of prominent Syrians have pressed for democratic freedoms.
So far, more than 2,000 prominent Syrians have signed a petition to Assad that urged an end to emergency law. [Syria has been under emergency regulations since 1963, Middle East Newsline reported.]
"We, the signatories, herein demand the Syrian authorities lift the state of emergency and annul all associated measures," the petition said.
The petition was drafted by the Committees for the Defense of Democratic Liberties and Human Rights in Syria. Members of the group have not reported any significant retaliation by the Assad regime.
Opposition sources said that under the regime of Assad's father, who ruled Syria from 1970 until 2000, protests and petitions for democracy were quickly and brutally quelled. But they said the new regime has been perceived as much weaker in wake of the U.S.-led war in Iraq, which placed U.S. troops along the border with Syria.
Unlike his father, Bashar appears to have launched an effort to reconcile with his Islamic opposition. Over the last month, the president ordered the release of more than 120 prisoners, most of them Muslim Brotherhood members detained since 1982.
Bashar, who has rejected the U.S. campaign for democracy in the Middle East, has also allowed some political activity in Syria. They include the operation of seven parties aligned with the ruling National Progressive Front. The president has also allowed more than 170 Syrian supporters of the Iraqi Baath Party to return from exile.
At the same time, Syrian authorities prevented the head of the human rights committee, Haitham Al Malah, from traveling abroad. A statement by the group said Al Malah had sought to board a flight from Damascus to the United Arab Emirates for a family visit.
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We were behind ferry blast: Abu Sayyaf
Man claiming to be leader of terror group says it planted a bomb on the ferry but authorities call claim a publicity stunt
By Luz Baguioro
MANILA - Local affiliates of the Al-Qaeda terror network yesterday claimed responsibility for the explosion that triggered a fire in a ferry off the Philippine capital early on Friday.
The incident left one person dead. About 185 passengers are still missing.
A man who identified himself as Abu Sayyaf leader Abu Sulaiman called the Radio Mindanao Network (RMN) in Manila on a satellite phone to claim the group had planted a bomb in one of the cabins of the Superferry 14.
'This is a revenge,' RMN programme director Benji Alejandro quoted him as saying when asked by the Associated Press.
The fire broke out in the 10,192-tonne ferry shortly before 1am on Friday as it passed Corregidor island, about two hours after leaving the capital for the central Philippines.
Several survivors who were picked up by rescue teams recounted being woken up by a loud explosion.
President Gloria Macapagal Arroyo dismissed the Abu Sayyaf's claim that it had planted a bomb on the Superferry 14, saying it appeared to be an afterthought by the group to use the accident for propaganda and to spread fear.
'There is nothing in the investigation that proves that this was an act of terrorists,' she said at the coast guard headquarters, where she met relatives of the missing passengers late yesterday.
The claim by the rebels was also brushed aside by the military authorities.
They said it could be a ploy by the Abu Sayyaf to debunk perceptions that it had become a spent force because of successive battlefield losses and the arrests of its top leaders.
'The rebels just want to ride on the issue because they have become a degraded force,' said southern Philippines military spokesman Renoir Pascua.
'The Abu Sayyaf is trying to hitch on the issue to gain media mileage, but it is unlikely that tragedy was terror-related,' armed forces spokesman Danilo Lucero said.
But RMN programme director Alejandro did not agree.
He said the Muslim extremist group had contacted him in October to warn that they would target passenger vessels belonging to WG & A, which owned the burned ferry, and to warn Muslims not to travel by boat.
He claims to have notified the shipping company of the rebel warning at that time.
Mr Alejandro said that an aide to the President had called him and requested then that Sulaiman's statement not be aired.
He agreed, partly out of concern that it might contain rebel codes that could be used by the extremists.
A company spokesman said 712 of the 899 passengers and crew had been accounted for, all of them picked up by fishing boats and passing vessels.
The authorities said those missing might have been trapped inside the ship because of the fast-spreading blaze.


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U.S. probe al-Qaeda ties of Russian in Guantanamo (Part 2)
ROSTOV-ON-DON. March 2 (Interfax) - The extradition decision on the eighth Russian held at the U.S. Guantanamo naval base will be made after an investigation by the country's special services.
"The American side has offered the explanation that the suspected ties of this person with international terrorists are being investigated," Deputy Prosecutor General Sergei Fridinsky told Interfax on Tuesday.
He quoted the U.S. as saying that the eighth Russian national was seized in Afghanistan together with al-Qaeda fighters.
Seven of eight Russians fighting for the Taliban in Afghanistan were extradited to Russia last weekend.
Fridinsky said the seven former Guantanamo inmates have been taken to different detention facilities in Stavropol territory.
"They are being charged, under three articles of the Russian Criminal Code, with illegal border crossing, acting as mercenaries and participating in a criminal community. However, the charges may be changed after the completion of the investigation," he said.
Officials from the Prosecutor General's Office visited Guantanamo at the beginning of 2002, and identified the Russian nationals held there. Official requests for their extradition were later filed. One more official traveled to the base this year.
The names of the Russian Guantanamo inmates are Shamil Khazhiyev and Ravil Gumarov from Bashkortostan, Rasul Kudayev and Ruslan Odigov from Kabardino-Balkaria, Ravil Mingazov and Airat Vakhitov from Tatarstan, Rustam Akhmerov from Chelyabinsk and Timur Ishmuradov from Tyumen region.
The Prosecutor General's Office says that all of them were recruited by radical Islamic organizations and taken to Afghanistan, where they fought for the Taliban. [RU EUROPE EEU EMRG AF CRIM ASIA US] ml tl
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Putin: Military Must Fix Flaws Exposed In Exercises
Moscow, 1 March 2004 (RFE/RL) -- Russian President Vladimir Putin today urged the military to identify and correct the errors that occurred in last month's military exercises, which were observed by the president.
Putin told a meeting of top military officials that new exercises, possibly on a smaller scale, should be planned so that he can make sure all problems have been solved.
Two ballistic missiles failed to take off and a third went off course during the massive military exercises in the Barents Sea, described as the largest such maneuvers in over 20 years.
Defense Minister Sergei Ivanov said analysis of the errors is under way.
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Russian premier outlines reforms
ft.com
By Andrew Jack in Moscow
Published: March 2 2004 19:18 | Last Updated: March 2 2004 19:18
Mikhail Fradkov, the choice of President Vladimir Putin as Russia's new prime minister, on Tuesday asserted his determination to push ahead with economic reform and restructuring of the civil service.
Speaking after confirmation hearings with the dominant pro-Kremlin United Russia group in parliament in Moscow, he said that he would name Alexander Zhukov, the liberally-oriented politician, as his first deputy.
He also said he would reduce the size of the cabinet, cutting the number of deputy prime ministers, ministers and officials, in a move that might help speed government decision making and the implementation of policy.
The moves reflect Mr Putin's calls for greater parliamentary involvement in the operations of future governments and his demands for faster progress in overhauling the administration and boosting liberal reform.
The proposed appointment also demonstrates a continuing effort by Mr Putin to balance different interests within his new administration.
Mr Fradkov's background is in both foreign commercial relations and the tax police.
Mr Fradkov's appointment does not follow a pattern of other top appointments by Mr Putin in coming from his native St Petersburg although in another change on Tuesday, Alexander Bortnikov, who currently works in St Petersburg branch of the FSB security services, was named deputy director of the FSB's headquarters.
Mr Fradkov's statements on Tuesday preceded a formal vote in parliament on his nomination on Friday, after which he is likely to unveil further details of his cabinet, even ahead of Mr Putin's presidential re-election ballot on March 14.
Mr Zhukov is an English-speaking economist and experienced politician. He headed the budget and taxes committee in the previous parliament and was credited with steering through important financial reforms and defending fiscal prudence during Mr Putin's first term.
Mr Zhukov was named one of several first deputy speakers in the new Duma elected in December, but had been tipped as a likely finance minister or holder of another senior government post including as a potential prime minister.
The Communist party refused to hold confirmation hearings with Mr Fradkov, in a sign of protest, while a group of liberal democrats called for voters to boycott Mr Putin's presidential election.

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Greenspan warning to Japan over reserves
ft.com
By Barney Jopson in Tokyo and Jennifer Hughes in New York
Published: March 2 2004 19:34 | Last Updated: March 2 2004 19:34
The "awesome" scale of Japan's accumulation of dollar reserves could become "problematic" for the Japanese economy, Alan Greenspan, chairman of the US Federal Reserve, said last night.
"It must be presumed that the rate of accumulation of dollar assets by the Japanese government will have to slow at some point and eventually cease," he said in a speech in New York.
Mr Greenspan has spoken about Asian central banks three times in the past month, stressing that their continuing intervention in the dollar cannot be sustained.
However, it is unusual for him to single out a particular country's policy for such blunt commentary.
Mr Greenspan acknowledged that intervention was partly an anti-deflationary policy designed to reverse Japan's deflationary record. "In time, however, as the present deflationary situation abates, the monetary consequences of continued intervention could become problematic," he said.
However, a drop in the level of official dollar buying from Asia would not necessarily cause an automatic dollar fall because it was "difficult to judge" how large the impact of dollar buying had been on the yen, while the euro's strength against the US currency was unrelated to Asian intervention, he said.
Mr Greenspan said the dollar's recent decline would help curb US trade and current account deficits without massive disruption to financial markets. But his speech to the Economic Club of New York played down market concerns about the danger of a broad dollar collapse and a corresponding leap in US interest rates.
The dollar rose to its highest in four months against the yen yesterday as investors continued to close their long-held bets on the dollar's continued weakness against the Japanese currency.
The dollar rose to Y110.42. Traders said the rise could push the dollar still higher in the days ahead if investors took the move above the level of Y110 as a signal to give up their bets on dollar weakness.
The gains against the yen sparked a wide rally for the greenback. The euro slid more than 2 cents to $1.2202, its weakest in more than two months, while sterling tumbled nearly 4 cents to $1.8356.
The dollar's strength helped lift equity markets across Asia to new highs.
Stock markets in Japan, South Korea and Australia ended at their highest levels since mid-2002, thanks partly to exporters whose prospects have brightened in the past two weeks due to the dollar's renewed strength. Demand for commodity stocks and a growing belief that deflation in the region is fading away also contributed to the stock markets' rise.
But Spencer White, chief Asia strategist at Merrill Lynch, said: "Look at what has been performing and it is not all export-led. This recovery is broader than previous ones. It is more about what is happening inside Asia."
Soaring commodity prices have helped the materials sector rise 29 per cent in Asia outside Japan in the past six months, compared to 23 per cent for the market overall.
Market sentiment in Australia continued to be lifted on Tuesday by the news that BHP Billiton, the world's largest mining company, had signed a $9bn contract for iron ore sales to China.
Additional reporting by Song Jung-a in Seoul and Leora Moldofsky in Sydney
-------------------------------------------------

Eco-Traitor
Three decades ago, Patrick Moore helped found Greenpeace. Today he promotes nuclear energy and genetically modified foods - and swears he's still fighting to save the planet.
By Drake Bennett
Patrick Moore has been called a sellout, traitor, parasite, and prostitute - and that's by critics exercising self-restraint. It's not hard to see why they're angry. Moore helped found Greenpeace and devoted 15 years to waging the organization's flamboyant brand of environmental warfare. He campaigned against nuclear testing, whaling, seal hunting, pesticides, supertankers, uranium mining, and toxic waste dumping. As the nonprofit's scientific spokesperson, he was widely quoted and frequently photographed, often while being taken into custody.
Then, in 1986, the PhD ecologist abruptly turned his back on the environmental movement. He didn't just retire; he joined the other side. Today, he's a mouthpiece for some of the very interests Greenpeace was founded to counter, notably the timber and plastics industries. He argues that the Amazon rain forest is doing fine, that the Three Gorges Dam is the smartest thing China could do for its energy supply, and that opposition to genetically modified foods is tantamount to mass murder.
Photo by Susan Howe
Patrick Moore
Moore's turnabout was the biggest change of heart since Harold "Kim" Philby left Her Majesty's secret service for the Soviet Union - or was it? Moore insists that he hasn't changed a bit. His professional life, he says, has been a single-minded quest for true ecological sustainability. To his opponents, however, it adds up to little more than an ideologically bankrupt series of betrayals.
Consider the public hearing held at Boston City Hall on October 23 last year. The matter at hand was a proposal to ban the purchase of polyvinyl chloride products using city funds. An impressive array of expert witnesses testified in favor of the resolution - an Environmental Protection Agency toxicologist, a Tufts University economist, a Boston Public Health Commission official, the head of purchasing for a cancer research center. The production and incineration of PVC products, they argued, releases chemicals known as dioxins, exposure to which can lead to endocrine disorders, cancer, diabetes, infant mortality, and cognitive and developmental problems in children.
Then Patrick Moore took the floor. "It's a good thing most of the people who got up here before me weren't under oath," he began. "There is not a public benefit to be derived from a ban on PVC." The whole issue is "based on bad science and misinformation."
First of all, Moore argued, total dioxin emissions have dropped 90 percent since 1970, to levels safely below those that cause health problems. Furthermore, dioxins are not some newfangled product of the industrial age. They've been around as long as fire. If the council wanted to make a real difference, he said, it could ban backyard burning, which spews nearly 60 times more dioxins than PVC manufacturing, or residential fireplaces, which emit 10 times more.
Throughout his presentation, Moore made barbed references to the devious forces behind the legislation, the same pack of Luddites who "hijacked a considerable portion of the environmental movement back in the mid-'80s and who have become very clever at using green language to cloak campaigns that have more to do with anti-industrialism, antiglobalization, anticorporate, all of those things which are basically political campaigns."
It was a bravura performance. When Moore returned to his seat, he was greeted with handshakes and backslaps from the folks who had paid his way: the Vinyl Institute.
For Moore, the PVC showdown was part of a larger crusade to reform environmentalism. He derides today's activists as philosophically unmoored and blindly technophobic, and he offers an alternative philosophy that not only accepts but celebrates humankind's growing ability to alter the planet. With a tip of the hat to best-selling "skeptical environmentalist" Bj?rn Lomborg (and perhaps Thomas Paine), he has anointed himself the sensible environmentalist and set out to win converts. There haven't been many. So far, Moore has succeeded mostly in making himself a pariah and a cautionary tale.
Greenpeace was born in 1971 when an aging fishing boat steamed out of Vancouver, British Columbia, to disrupt an American nuclear test at the far end of the Aleutian Islands. Halfway there, the boat was intercepted by the US Coast Guard and the crew arrested. But the mission proved successful: The subsequent global show of support for the band of plucky environauts caused President Nixon to cancel the remaining tests. When the crew returned to shore, it adopted the name of the boat, Greenpeace, and turned its mediagenic activism into a global institution. By the mid-1980s, the organization had offices in 21 countries and an annual income of more than $100 million in donations and grants.
Patrick Moore was on board for that inaugural voyage, and he went on to serve as president of Greenpeace from 1977 to 1979 and as a member of the international board for seven years after that. He was a natural activist, impassioned and articulate, and his PhD from the University of British Columbia gave him a mantle of scientific legitimacy. Greenpeace veteran Rex Weyler recalls that "you could put Moore in front to talk to the media on scientific issues, and you could always rely on him. He'd get his facts straight, and he was tough as nails in any debate."
In his study in the neat, airy Vancouver home he shares with his wife, Moore keeps scrapbooks of his activist days. News clippings show him, with a cloud of tawny hair and a bandit's mustache, poring over nautical charts and shielding baby seals. Today the mustache is gone. The mane has receded to a mat of gray.
Moore won't have anything to do with Greenpeace these days, but he still gets a charge out of talking about the early campaigns. He shows me an aerial photo of a tiny raft floating in the way of a supertanker. The ship fills half the frame, like a snub-nosed sea monster. He and Weyler are on the raft, about to be arrested by the US Coast Guard. "Cool, eh?" he says with a hot-rodder's grin.
Moore was made-to-order for Greenpeace. He was raised in Winter Harbour, a village on the far northwestern tip of Vancouver Island. "It was like growing up in a dreamworld," he says. "My most memorable moments were in my boat with the motor turned off, floating over the shallow tide flats and looking down at all the marine life, or in the forest with the moss and the ferns." It's easy to see how that little wood sprite went on to study ecology and fashioned himself into an environmental shock trooper. Even today, Moore can sound druidic when talking about the natural world. He's a firm believer in James Lovelock's Gaia hypothesis, which posits that Earth is a self-regulating superorganism. He hates the word weed, he says, because "it's a value judgment about plants."
Moore's family made its living off the land. His father and grandfather were loggers, and his mother came from a clan of fishermen. Perhaps this explains why, despite his animist tendencies, his ecological attitudes are grounded in an obsessive rationalism. He's fascinated by nature's cycles, mechanisms, and systems, and he sees no reason to privilege natural systems over man-made ones.
When he was 8, one of his toys was a one-cylinder engine that he would take apart and reassemble. For his dissertation research, he built a transmissometer, a device that measures water quality. He's as likely to wax didactic about the minutiae of paper pulping ("There's more computer power in a paper mill than there is in a 747!") as about the life cycle of the moths in the eaves of his porch. Moore is equal parts tinkerer and mystic, and his environmental thinking may be an attempt to reconcile those two impulses.
Like many people who earn a living making speeches, Moore prefaces much of what he says with phrases like "my line on this is" and "as I like to put it." As he likes to put it, he left Greenpeace in 1986 because "I'd been against at least three or four things every day for 15 years, and I decided I'd like to be in favor of something for a change. Suddenly, presidents and prime ministers were talking about the environment. We had won society over to our way of looking at things. As I like to say, maybe it's time to figure out what the solutions are, rather than just focusing on problems."
Courtesy Patrick Moore
Moore in 1971, on his way to protesting US atomic bomb tests.
Moore got a glimpse of how an environmentally responsible society might function four years earlier, at the 1982 Nairobi Conference of the United Nations Environmental Program. In a presentation given by Tom Burke, then leader of Friends of the Earth UK, he first heard a phrase that was an oxymoron by Greenpeace standards: sustainable development. It was several years before the idea gained wide currency, but for Moore, "The light went on."
"When I understood sustainable development," he recalls, "I realized that the challenge was to take these new environmental values that we had forged and incorporate them into the traditional social and economic values that drive public policy. In other words, it was a job of synthesis."
Moore's new interest in sustainable development led him increasingly far afield of the rest of the environmental movement and estranged him from the organization he had helped found. Inspired by Elizabeth Mann Borgese's book Seafarm, he started a salmon farm and became head of the fledgling Salmon Farmer's Association - only to find himself pitted against Greenpeace, which blamed saltwater aquaculture for polluting the ocean.
In 1991, as his farm was going under due to a salmon glut, he joined the board of the Forest Alliance of British Columbia, a group created by the timber industry to address the accusations of environmentalists. There, he saw his role as a mediator. He proudly points to his stubborn - and ultimately successful - insistence that the industry soften its resistance to national parks and government regulation. At the same time, however, he was attacking the eco crowd, proclaiming that "clear-cuts are temporary meadows."
Moore's enemies have a simpler explanation for his conversion: revenge. After all, he left Greenpeace amid complaints about an autocratic leadership style and abrasive personality. When it became obvious that he lacked enough votes to keep his seat on the board of directors, he went off to farm fish. When that didn't work out, he joined the loggers.
And then there's money. Even 18 years after he left Greenpeace, Moore's business relationships with polluters and clear-cutters elicit disgust from his erstwhile comrades. "He'll whore himself to anything to make a buck," says Paul George, founder of the Western Canada Wildlife Committee. In an email, former Greenpeace director Paul Watson charges, "You're a corporate whore, Pat, an eco-Judas, a lowlife bottom-sucking parasite who has grown rich from sacrificing environmentalist principles for plain old money."
Moore admits he's well paid for his speaking and consulting services. He won't say how well, avowing only that his environmental consultancy, Greenspirit Strategies, has been "very successful because we know what we're talking about and give good advice." Nonetheless, he adds, he refuses to tailor his opinions to please a client. "People don't pay me to say things they've written down or made up. They pay me to tell them what I think." Furthermore, he maintains that his positions - with the exception of his take on nuclear energy (which he now favors) - have hardly changed since 1971. The rest of the movement, he says, has shifted around him.
It's possible that fat fees or wounded feelings give Moore's vehemence an edge. And it's not inconceivable that he's an out-and-out mercenary. But although his critique of latter-day environmentalism strains in a few places, it does have a larger coherence. The unifying principle is simple: "There's no getting around the fact that 6 billion people wake up every morning with a real need for food, energy, and material." It is this fact, he charges, that environmentalists fail to grasp. "Their idea is that all human activity is negative, while trees are by nature good," he says. "That's a religious interpretation, not a scientific or logical interpretation."
Moore's accusation may read like a caricature, but its outlines are readily apparent in environmentalist thinking. Bill McKibben, one of the movement's preeminent intellectuals, warned in his 1989 book The End of Nature that human beings, not through any particular action but simply by becoming the dominant force on the planet, were destroying nature, a "separate and wild province, the world apart from man to which he adapted." In effect, McKibben's argument blurs the line between man changing the planet and destroying it.
Perhaps the best evidence of Moore's integrity is his enthusiasm for genetically modified foods. He's not on the payroll of any biotech companies, yet he has become an outspoken GM advocate.
"This is where the environmental movement is dangerous," he says. "Environmentalists are against golden rice, which could prevent half a million kids from going blind every year. Taking a daffodil gene and putting it into a rice plant: Is this Armageddon?"
Even if the benefits of golden rice have been oversold - something Moore doubts - the limitations of one particular and still-experimental crop shouldn't discredit the possibilities of the entire technology. For all GM's risks, he argues, there are greater risks in failing to develop it.
For Moore, the stakes are higher, even, than a half-million blind children. "The Dark Ages are always just around the corner," he warns. "There will be future Dark Ages, and with this antiscience agenda we may be entering one right now."
I'm reminded of this flourish later, when he mentions that he tries to use his experience as an activist against the activists themselves. It's obvious he hasn't forgotten the art of rhetorical one-upmanship: No matter what environmental catastrophe keeps you awake at night, Moore can always conjure a bigger bogeyman.
While describing his childhood, Moore says something telling. His hometown was "a pristine environment, but it was an industrial environment. People were catching fish and cutting trees." This is what separates him from most environmentalists (and all linguists): the belief that there's no necessary contradiction between pristine and industrial, that development is not despoliation.
One of Moore's favorite metaphors is "gardening the earth." He's all for setting aside land as wilderness, but the rest we should not be afraid to use.
Courtesy Patrick Moore
Moore, piloting a Greenpeace raft, approaches Soviet whaling ships in 1975.
"When you've got over 6 billion people, you can't just say we'll let nature do its thing," he says. "We have no choice but to garden - why don't we do it better? Why don't we do it more efficiently?"
Moore's notion of gardening encompasses plenty of things that environmentalists wouldn't object to. He's full of uplifting stories about rice farmers in California who have turned their fallow fields into shorebird sanctuaries, and cattlemen in Montana who leave dead cows for grizzlies that might otherwise eat live ones. He's a passionate advocate for the geothermal heat pump, an unfortunately obscure device that uses solar energy trapped in the ground for residential heating and cooling. But gardening also means genetically engineered trees that grow faster, resist disease, and pulp better. It means large-scale fish farming to take the pressure off wild stocks. It means the widespread use of nuclear energy to replace fossil fuels. It means a willingness to distort nature's cycles to fit human needs.
Shortly after we spoke, Moore emailed Paul Watson, a longstanding enemy of his with whom I had spoken a few weeks earlier, and reopened an old feud. Moore accused Watson of, among other things, lying to me about the details of a 1977 seal campaign involving Brigitte Bardot and falsely claiming authorship of Greenpeace's Declaration of Interdependence. The back-and-forth that followed was Vesuvian in its viciousness and stunningly petty, from Watson's end in particular. I was CC'd on the whole thing. Afterward Moore seemed a bit embarrassed.
In what may have been an effort at damage control, he forwarded me some recent posts from visitors to Greenspirit.com, his Web site. One was from a German man disillusioned with his country's Green Party. Another was from a registered Republican who was "always interested in greener ideas if they make sense" and wanted Moore's opinion on the prospects of alcohol-burning engines. A third was from a former Sierra Club development officer feeling "a little disheartened, to tell you frankly, with the environmental movement as it is today." They were examples, Moore told me, "of the kind of response I get very regularly from people who go to my Web site cold. This is a big part of what keeps me sane in this very emotionally charged environment."
The note was poignant, but its subtext was clear: Here was the prophet of moderation, cast out by his colleagues, tending a growing flock of ideological misfits. The legacy - and the curse - of Moore's Greenpeace days is that he knows how little it takes to ignite a movement. He lit that match once, more than 30 years ago. Now he's looking for a fresh spark.

Drake Bennett (drakepbennett@yahoo.com) is a writer based in Boston.
Copyright ? 1994-2003 Wired Digital, Inc. All rights reserved.
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>> SOROS WATCH...

"Charitable" Foundations: ATMs for the Left
By Ben Johnson
FrontPageMagazine.com | March 2, 2004


One of the unlamented developments of this election year is the Democratic Party's retreat to the Left. Although the media claim the party's voters have learned their lesson by settling for the "electable" John F. Kerry, a cursory examination of the Democrats shows they remain animated by anti-Bush furor. The party rank-and-file may have decided they prefer the sing-song cadences of John Kerry or the charming drawl of John Edwards to the red-faced shrieks of Howard Dean, but the message spread by the party faithful will remain the same: George W. Bush is a "liar," a "betrayer," a "war criminal" and a "Nazi."

What explains the Left's pathological animosity toward a president who has shielded the American homeland from jihad for more than two years and liberated two nations from the hands of hostile fanatics? In part, it is due to the rising importance of activist groups like MoveOn.org and take-to-the-streets peaceniks like United for Peace and Justice. These organizations, in turn, are financed by the seemingly endless reserves of the nation's non-profit "charitable" foundations, which long ago abandoned their commitment to philanthropy in favor of political activism. These separate entities - environmentalists, `60s radicals, union organizers, Islamists and abortion advocates - repeatedly converge in dizzying combinations. Inevitably, the large tax-exempt foundations fund the same radical personalities and groups. Their staff is invariably composed of the same far-Left activists (and a curiously high number of Clinton administration appointees). Ultimately, these inter-related organizations form one well-heeled, left-wing Brain Trust with literally billions of dollars at their disposal. These foundations are positioned to permanently shift our nation's political dialogue to the Left through their grant-making power.



George Soros and the Open Society Institute


Perhaps the most openly political of these philanthropic poseurs is currency speculator George Soros, whose Open Society Institute's (OSI) assets totaled more than $175 million in 2001. Soros has said defeating George W. Bush "is the focus of my life" and has compared the sitting president to the Nazis occupiers of his native Hungary. To bring about "regime change" in Washington, Soros has pledged $10 million of his own money to the newly formed Democratic voter turnout group, Americans Coming Together (ACT) and vowed to raise a total of $95 million.



ACT is the most prominent of a new generation of leftist groups: the 527s. These organizations are so-named because of their IRS status, which allows them wider latitude to receive and spend "soft" money than traditional political parties enjoy. ACT formally seeks to boost minority voter turnout in17 battleground states vital to the Democratic Party. A look at the Executive Committee of ACT reveals a leftist organization composed of the usual suspects:



ACT president Ellen Malcolm is also founder of the fringe abortion advocacy group EMILY's List;
CEO Steve Rosenthal was political director of the AFL-CIO from 1996-2002;
Minyon Moore is a former assistant and Director of White House Political Affairs for President Clinton;
Carl Pope is executive director of the Sierra Club;
Andy Stern is president of the Service Employees International Union (SEIU), one of two major unions to endorse Howard Dean before the Iowa caucuses; and
Cecile Richards is a former deputy chief to House Democratic leader Nancy Pelosi, D-CA. Cecile is the daughter of former Texas Governor Ann Richards, who lost her governorship to George W. Bush. The younger Richards is also president of "America Votes," another Democratic 527 that has already collected $250 million.


Although not ona board member, former SEIU political director Gina Glantz is considered a prime mover within ACT. The clear purpose of ACT is to run "issue advocacy" ads smearing President Bush in the hopes of electing a Democrat.



Political strategist Dick Morris has stated the 527s have another purpose as well: they act as a party-in-exile for the Clintons. In a FrontPage Magazine column, Morris suggested the Clintons were funneling money into these start-ups, which could provide campaign support to favored candidates (e.g., Hillary in 2008), in the event they lose the formal party machinery. (Current DNC Chairman Terry MacAuliffe was handpicked by Bill Clinton and has demonstrated impeccable loyalty.) This may explain the large numbers of Clinton functionaries active in 527s. Minyon Moore is on the Executive Committee of ACT. Moore is Clinton's former political director and assistant, as well an ex-DNC officer. ACT President Ellen Malcolm joined with Clinton aide Harold Ickes to form the Media Fund, another 527 organization that seeks to purchase "issue advocacy" ads attacking President Bush near election-time.



The organization most clearly tied to the Clintons, however, is the Center for American Progress, headed by former Clinton Chief of Staff Leon Panetta. CAP is a think tank meant to rival the Heritage Foundation. Like Heritage, CAP intends to lay the ideological basis for left-wing legislation, as well as provide a philosophical opposition to Bush administration proposals. George Soros has set aside $3 million for the Center.



Soros' deep pockets also financed the feminist movement, dispersing money to the National Organization for Women, the Feminist Majority, Planned Parenthood and NARAL. Soros' kind support also established the Million Mom March, getting the anti-gun rally off the ground in 2000.



These organizations are intended to serve partisan functions: to elect or intellectually bolster Democrats, and although these groups are to the Left, they fall within the mainstream of the political discussion. However, much of Soros' money goes to organizations on the wrong side of the War on Terror. Soros has given multiple millions of dollars to the ACLU over the years. Likewise, the Ford Foundation gave the ACLU more than $335,000 last year alone. The ACLU's leftist orientation has been well known since 1988, when Michael Dukakis lost the election in part because of their stance on capital punishment and the Pledge of Allegiance. But the ACLU has more important flags to burn; in recent years, the ACLU has lied about the effects of the Patriot Act, rallied to defend Maher "Mike" Hawash (who has since pleaded guilty to providing support for the Taliban), protested the Justice Department's arrest of illegal immigrants from Iraq on the eve of war, falsely accused John Ashcroft of abusing his authority (without evidence, naturally) and protested for the inhumane treatment of terrorist fundraiser and professor Sami al-Arian (on the grounds that he had an inalienable right to change his underwear more than once a week). The Ford Foundation also got in on the act, giving the ACLU endowment fund $7 million in 1999 alone.



Despite its deep hostility to the War on Terrorism, many classify the ACLU as a mainstream "liberal" organization. Be that as it may; George Soros' funding is hardly reserved to the mainstream. OSI also funded the fantasies of the American-Arab Anti-Discrimination Committee Research Institute. This is the same group that falsely accused the Justice Department of inhumane treatment of a Muslim prisoner, claiming they forcibly extracted numerous teeth, brutalized him and forced him to eat pork - all later proven to be lies. ADC Communications Director Hussein Ibish has defended Palestinian suicide bombers (as long as they don't target "civilians"; how big of you, Hussein!), praised Hamas for "running hospitals and schools and orphanages," defended Sami al-Arian and praised Mao Tse-tung.



The Open Society Institute also supports radical black Muslims, who idolize gangsters waging a bloody war against the nation's police. In 2001, OSI gave $65,000 to the Malcolm X Grassroots Movement. This group is a fitting counterpart to Aryan Nations, which seeks an "All White Pacific Northwest"; the Malcolm X Grassroots Movement campaigns to "free the land!" - specifically, the Southeastern United States, from South Carolina to Louisiana, on which they would establish an all-black homeland. Moreover, this new racist entity would be communist, as the Movement seeks to "(t)o place the major means of production and trade in the trust of the state." In this, they have gotten tips from the experts; Speakers Bureau member Ina Solomon "represented the organization internationally during her five-month residency in Cuba."



Most disturbing, the Malcolm X Grassroots Movement's website lionizes a group of "political prisoners," all of whom were convicted of killing policemen. Sundiata Acoli, Robert Seth Hayes, Jalil Muntaquin, Herman Bell and Russell Maroon Shoats were all radical black revolutionaries, serving with the Black Panthers and/or Black Liberation Army. Moreover, the website repeatedly excuses their crimes. For instance, of Shoats, the website writes: "In 1970, along with 5 others, Maroon was accused of attacking a police station, which resulted in an officer being killed. This attack was said to have been carried out in response to the rampant police brutality in the Black community." Of Teddy "Jah" Heath, a "political prisoner who died for the cause" (in prison, of natural causes), the website records: "Teddy `Jah' Heath, along with former (Black) Panther 21 defendant Baba Odinga, was arrested and charged with the politically motivated kidnapping of an organized crime figure from Westchester County. The kidnapping ended peacefully and without injury to anyone." How reassuring.



Elsewhere, the Movement website deems the Left's favorite whitey-murderer, Mumia Abu-Jamal, a "political prisoner." This is not the only pro-Mumia group Soros has funded. His foundations gave generously to the NAACP Legal Defense and Education Fund (NAACP-LDEF), which has filed an amicus curiae brief on behalf of Mumia Abu-Jamal. LDEF leaders frequently speak at "Free Mumia" rallies. The Ford Foundation gave the NAACP-LDEF half-a-million dollars in 2002.



Not content to merely advocate for the release of violent offenders, Soros' foundations have also helped expand the right to vote . . . to felons. LDEF has also encouraged Florida's convicted felons to vote in 2000, although that violates state law. As Thomas Ryan noted on yesterday's FrontPage Magazine, the OSI is also a major contributor to The Sentencing Project, a group that advocates voting rights for felons; much of this support came after a study Soros funded revealed Democrats would receive 70 percent of the felon vote. The Ford and MacArthur Foundations have also funded The Sentencing Project.



In keeping with his tendency to fund racist groups that want to ethnically cleanse portions of the United States, Soros has also funded the racist National Council of La Raza and Mexican American Legal Defense and Education Fund (MALDEF). Both groups seek to open America's borders and have visions of "reclaiming" Aztlan (the American Southwest, "stolen" from Mexico by the Yanquis). MALDEF is in essence a Ford Foundation creation, with Ford radicalizing the once-noble organization with a $2.2 million grant in 1968.



Money from Soros' foundations also goes to the "peace" movement. In 1999, OSI gave $100,000 to the comically misnamed People for the American Way (PAW), an organization dedicated to removing religion from public life. (The Ford Foundation also gave PAW $150,000 from 2000-1.) PAW also helped create a communist-led "peace" movement to oppose the Bush administration. International ANSWER had sponsored the major "peace" rallies, but when its radical nature became known, it was PAW that looked for a more "acceptable" organization to sponsor these enormous demonstrations. PAW created United for Peace and Justice (UFPJ) and chose as its "mainstream" leader Leslie Cagan, who was a member of the Communist Party after the fall of the Berlin Wall. She describes Castro's Cuba as the ideal state.



Cagan's fellow communists at the National Lawyers Guild (NLG) also enjoy George Soros' largesse. Founded as a Communist Party defense agency, the NLG history is replete with pro-Communist agitation. In 1977, Guild President William Goodman warned his Maoist members, "We will not be able to organize people into the Guild, and in fact we will lose much of our membership, if we promote slogans of opposing the Soviet Union and opposing the Communist Party." The keynote speaker at NLG's 2003 national convention, Lynne Stewart, praised Ho Chi Minh, Mao Tse-tung, Fidel Castro and Che Guevara. Soros gave the NLG $50,000 in 2000.



The Center for the Study of Constitutional Rights (CCR) is another legal organization with close ties to communist politics and terrorism. The CCR has opposed our every effort to defend ourselves in the War on Terror, moaning that America would not admit any immigrant with a "position of prominence within any country to endorse or espouse terrorist activity." Soros has given the CCR more than $120,000 over the last six years. In this, he trails the Ford Foundation, which gave CCR more than $150,000 last year alone.



The now-defunct Soros Documentary Fund gave Medea Benjamin money to produce "Indonesia: Islands on Fire." Benjamin is best known as head of Global Exchange, an organization that takes credulous leftists on propaganda tours highlighting the "successes" of socialist nations and the "horrors" of American foreign policy. Benjamin played a leading role in the violent 1999 World Trade Organization protests in Seattle, and in the 2001 G-8 protests in Genoa, Italy, which also ended in violence. Most recently, she teamed up with Leslie Cagan to form International Occupation Watch, whose professed goal was to get U.S. GIs stationed in Iraq to declare themselves conscientious objectors and get them sent home. This, wrote Benjamin in The Nation last April, would cause the war effort to collapse and force us to beat a hasty retreat from other terrorist hotspots. In the same piece, Benjamin endorsed "preemptively" sending human shields to hot spots like North Korea and Iran. Like Cagan, Benjamin has described Marxist Cuba as "heaven" and has found her way onto the foundations' gravy train.



These are but a few of the radical organizations Soros has funded. In fact, it is impossible to know exactly how many other radicals are receiving Soros' money. Soros gave more than $13 million to the Tides Foundation/Center between 1997 and 2003. (In this, he is in good company; Sen. John Kerry's wife, Teresa Heinz Kerry, has contributed more than $4 million to Tides over the years.) The Tides Foundation acts as a middle-man between wealthy leftists and far-Left advocacy groups, with which the wealthy leftists do not wish to be associated. Among Tides beneficiaries are the National Lawyers Guild, the Center for Constitutional Rights, CAIR, United for Peace and Justice, the Institute for Global Communications and a wide assortment of groups on the extreme margins of the political debate.



Vile Leftists: The Personal Touch


These extremist organizations form a coalition most would find unsavory, but shady personal alliances are nothing new to Soros. His right-hand man is the former director of the ACLU's Washington, D.C., office: Morton Halperin. As Rep. Phil Crane, R-IL, noted in the Congressional Record, "Halperin has called for dissolving the CIA covert career service, tagged the CIA as `the subverter of everybody else's freedom' and declared it `an open question' whether the CIA and other U.S. intelligence services would turn to assassinating American citizens." Halperin, a lifelong leftist agitator, testified for Daniel Ellsberg and served as a character witness for Philip Agee. Agee famously printed the names of more than 700 of his CIA colleagues before fleeing to the workers paradise of Cuba. For his close association with a known traitor, Bill Clinton appointed Halperin assistant to Defense Secretary Les Aspin in 1993. Another longtime Soros associate, Peter Lewis of Progressive Insurance, has been described as "a functioning pothead." Like Soros, he is a staunch advocate of drug legalization, and like Soros, he has also earmarked a cool $10 million in personal funds to defeat President Bush in November. Quota Queen Lani Guinier, Clinton nominee for Assistant Attorney General for Civil Rights, sits on OSI's Board of Trustees. So does ubiquitous PBS presence Bill Moyers.



Bill Moyers and the Schumann Foundation


Bill Moyers has learned well from his comrade Soros. In addition to sitting on the board of Soros' Open Society Institute, Moyers is president of the Florence and John Schumann Foundation, from which position he funds both the respectable and the radical Left.



Just as Soros' millions created Americans Coming Together from nothing, Moyers steered Schumann Foundation money into an obscure journal known as The American Prospect. Once a tiny bimonthly academic journal, Moyers turned loose the foundation's spigots and flooded TAP with pledges of nearly $11 million. It was a $5.5 million grant in 1999 that transformed TAP from an academic journal to a biweekly newsstand publication meant to rival National Review. The Ford Foundation similarly gave TAP a $600,000 grant. Although Schumann money conferred respectability upon this publication, TAP maintains connections to the radical Left. The Prospect's Editor-at-Large, Harold Meyerson, is a Vice-Chair of the Democratic Socialists of America; DSA chairs include Barbara Ehrenreich, Cornel West, Gloria Steinem and Delores Huerta. TAP founders include Robert Kuttner and diminutive Clinton Labor Secretary Robert Reich.



Similar support has gone to leftist website TomPaine.com.

The Schumann Foundation gave $332,000 to Ralph Nader groups Public Citizen Foundation and U.S. PIRG from 1995-2000. The Ford Foundation gave $450,000 to Public Citizen in 2000; the Rockefeller Brothers Foundation gave the Naderites $100,000.

Schumann also gave $52,000 to Citizen Action, an organization later mired in controversy over supporting Ron Carey in the 1996 Teamsters presidential election. (Edward Kelly, former head of the Massachusetts chapter, recalled Citizen Action's metamorphosis from grassroots organization to partisan pressure group: "Before the Teamsters scandal, there were problems. Basically, I saw national go from a nonpartisan, grass-roots organization to a partisan one tied to the Democratic Party." The scandal did not deter the Ford Foundation, which gave Citizen Action $150,000 in 1997.

Schumann money funded the Institute for Public Accuracy, headed by leftist Norman Solomon. The IPA coordinated Sean Penn's first trip to Baghdad, before the war; Medea Benjamin coordinated Penn's return trip late last year.



The Florence Fund (part of the Schumann Foundation, headed by Bill Moyers' son, John) contributed to a full-page New York Times ad to publicize the "Win Without War" coalition. Coincidentally, Moyers later interviewed two "Win Without War" officials on his PBS program, "NOW with Bill Moyers." At no time did Moyers disclose his financial ties to his guests.



The MacArthur Foundation


The John D. and Catherine T. MacArthur Foundation is another name immediately familiar to anyone who has watched PBS for more than five minutes. The Chicago-based "charity," with $4 billion in assets, has underwritten all forms of public broadcasting, but their $170 million annual grants go to less benign faces than Big Bird's. PBS is not the only not-for-profit television MacArthur funds; it is also listed as a contributor to radical leftist propaganda outlet Link TV. The MacArthur, Surdna and Rockefeller Brothers Foundations were among the many non-profits Link TV acknowledged on the air during last weekend's pledge drive.

The MacArthur Foundation is also among the numerous "philanthropic" organizations to fund leftist agitator Medea Benjamin. MacArthur gave Global Exchange more than $400,000 in 1999-2000 alone. Benjamin also received the MacArthur Foundation's Writer's Fellowship.

Benjamin is a fierce partisan of Marxist Cuba. Other MacArthur grants have explicitly supported Castro's gulag archipelago. MacArthur gave a $347,000 grant to the prestigious Council on Foreign Relations, "a portion (of which) supports the Council's Cuba Program," which, in the grant's words, "seeks to broaden the national debate on normalizing relations between the United States and Cuba." MacArthur also gave $30,000 to the Cuban Committee for Democracy, which wants to counteract "conservative Cuban-Americans (supporting) an agenda that favors the isolation and punishment of the Cuban people because of their government."

The Institute for Policy Studies similarly has a history of colluding with Communist governments. Phyllis Bennis of IPS is on the board of International Occupation Watch, along with Medea Benjamin and Leslie Cagan. She was also an outspoken opponent of the liberation of Iraq. MacArthur gave IPS $233,000 in 2001 alone.

On the serious policy front, MacArthur has charitably given money to undermine the president's defense and foreign policy agenda. MacArthur awarded the Aspen Institute $841,000 to study "global interdependence." The Aspen Institute's Global Interdependence Initiative website says it works "to better inform, and to more effectively motivate, American support for forms of U.S. international engagement that are appropriate to an interdependent world." Translation: We oppose the president's "unilateral" (that is, effective) foreign policy. This grant generated more "scholarly" opposition to President Bush.

Since 9/11 exposed how vulnerable the nation is to terrorist attack, Bush has renewed the nation's interest in a Missile Defense system. MacArthur has funded the opposition, giving more than $300,000 to the left-leaning Center for Defense Information, a longtime opponent of Missile Defense.

The Tip of the Iceberg

These grants, sadly, only touch upon the deep, sustained pattern of leftist political activism funded by these enormous, tax-exempt foundations. And these three foundations - OSI, Schumann and MacArthur - are only a selective representation of the enormous grant-making power the Left has accrued by capturing the leadership of the nation's largest foundations. FrontPage Magazine has documented the activities of the multi-billion dollar Ford Foundation in a series of articles; Ford has, indeed, created entire academic disciplines on our nation's campuses. Carnegie and others follow Ford's lead. Together, these grants have the ability to realign our national political discourse, subsidizing and mainstreaming the rhetoric of the far-Left. Conservatives have no similar funding sources. Conservative philanthropists typically leave their money to churches, colleges and community improvement projects; leftists leave all their funds to fellow activists. This fundamental difference may one day have a transforming effect upon this nation.

This author is particularly indebted to the invaluable work of Mike Bauer, who contributed much of the raw data about the Open Society Institute's grant figures.


--------------------------------------------------------------------------------
Ben Johnson is Associate Editor of FrontPage Magazine.

Posted by maximpost at 8:49 PM EST
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>> CONVERSATIONS WITH RNC?

http://www.moretothepoint.com/
The Presidential Primary Process
New York and California have more Democrats than any other states, but presidential hopefuls Howard Dean, Dick Gephardt, Wesley Clark and Joe Lieberman never got a chance to ask for their votes. Today, in those and eight other so-called "Super Tuesday" states, millions of Democrats may be doing little more than ratifying the decisions of 120,000 caucus-goers last month in Iowa. If that prediction proves true, voters in Florida, Texas, New Jersey and Pennsylvania won't have any choice left at all. Has the early primary schedule created a bandwagon for front-runners that disenfranchise the bulk of the Party? Is "momentum" the best qualification for the November campaign? We hear from a political scientist, the Democratic National Committee, the National Association of Secretaries of State, and former Senator and Democratic presidential hopeful Gary

Hart.


>> WAITING FOR CONGRESS?

The U.N.Scam: Time for Hearings
by Nile Gardiner, Ph.D., and James Phillips
WebMemo #438
March 1, 2004 | printer-friendly format |
In the ten months since the downfall of the Iraqi dictatorship, a clear picture has emerged of how Saddam Hussein abused the United Nation's oil-for-food program. The Iraqi Governing Council has begun to release critical information detailing how, in the words of The New York Times, "Saddam Hussein's government systematically extracted billions of dollars in kickbacks from companies doing business with Iraq, funneling most of the illicit funds through a network of foreign bank accounts in violation of United Nations sanctions." In effect the program was little more than "an open bazaar of payoffs, favoritism and kickbacks."[1] The seriousness of these charges warrants investigation by the U.S. Congress and an independent, Security Council-appointed commission.
Serious Allegations
The evidence emerging from Baghdad confirms the suspicions of the U.S. General Accounting Office (GAO), which had earlier estimated that the Iraqi regime generated several billion dollars in illicit earnings through surcharges and oil smuggling in the period between 1997 and 2001.
A mosaic of international corruption is also emerging in the patchwork of politicians and businesses across the world that benefited from the oil-for-food program and helped keep Saddam in power. The Iraqi Oil Ministry recently released a partial list of names of individuals and companies from across the world that received oil from Saddam Hussein's regime, allegedly at below-market prices. Unsurprisingly, French and Russian names dominate the list, with former French Interior Minister Charles Pasqua and the "director of the Russian President's office" listed as beneficiaries. The list also implicates U.N. Assistant Secretary-General Benon V. Sevan, executive director of the oil-for-food program, who has stringently denied any wrongdoing.[2]
History of the Oil-for-Food Program
The oil-for-food program was established by the United Nations Security Council through Security Council Resolution 986 in 1995 "as a temporary measure to provide for the humanitarian needs of the Iraqi people" while economic sanctions remained in place. Of Iraq's population of 24 million, 60 percent were dependent on food shipments administered through oil-for-food.
Between 1996 and 2003, the program generated over $63 billion in revenues for the Iraqi regime. With little oversight from the U.N., the Iraqi dictatorship was able both to circumvent and to exploit the oil-for-food program. It is suspected of selling its oil at bargain basement prices that benefited numerous middlemen while overpaying for various imports, which allowed it to reward suppliers. The program was officially brought to an end in November 2003.[3]
Congressional Hearings
The charges being leveled against the United Nations over its handling of the oil-for-food program are of such a serious nature that they warrant congressional hearings by both the House and Senate. The hearings should investigate how Saddam Hussein was able to exploit a vast U.N.-operated sanctions program to enrich his family, influence foreign governments, and prop up his brutal regime. The hearings should investigate and expose the vast network of politicians and companies that helped keep Saddam Hussein in power. Congress should also examine the close ties between the Russian and French governments and the Iraqi regime, and how this influenced the international debate over Iraq.
A Security Council Commission of Inquiry
In addition to congressional hearings, as a key member of the U.N. Security Council, the United States should lead the way in calling for a wide-ranging and in-depth independent investigation into the way in which the U.N. handled the oil-for-food program.
The Commission should be appointed by the Security Council, but should be completely independent of the United Nations and made up of non-U.N. employees. Great care should be exercised by the United States and Great Britain to prevent such a Commission from being unduly influenced by other Security Council members who may have a vested interest in protecting their own officials.
Conclusions
The abuse of the oil-for-food program was the result of a staggering management failure on the part of the United Nations and has raised troubling questions about the credibility and competence of the world organization. Several conclusions can be drawn:
The oil-for-food debacle reinforces the need for sweeping reform of the United Nations bureaucracy and the need for an annual external audit if its accounts.
Senior U.N. bureaucrats with responsibility for running the oil-for-food program should be investigated and held accountable for their actions. In particular, the role played by Benon V. Sevan, executive director of the Office of Iraq Programs, should be carefully scrutinized. If the allegations against Mr. Sevan are true, he must be prosecuted.
Overall responsibility for the program's failure should lie with U.N. Secretary General Kofi Annan, who in effect turned a blind eye to one of the biggest financial scandals of modern times. The U.N.'s inability to successfully manage the oil-for-food program represents a spectacular failure of leadership on the part of Mr. Annan.
The mismanagement of the oil-for-food program raises serious doubts about the U.N.'s ability to manage future programs of a similar scale. The United Nations should never again be placed in charge of the administration of an international sanctions regime.
The links between Saddam Hussein's regime and leading European companies and politicians were extensive. The United States should call for those who violated the sanctions regime to be prosecuted by their governments.
The United States was right to exclude the U.N. from a key role in administering post-war Iraq - the U.N. was clearly incapable of performing such a function.
The Pentagon was right to bar companies from nations who had opposed regime change in Iraq, such as France and Russia, from bidding for U.S.-funded contracts for the rebuilding of Iraq. Russian and French companies in particular benefited from the exploitation of the oil-for-food program.
Nile Gardiner, Ph.D., is Fellow in Anglo-American Security Policy, and James Phillips is Research Fellow in Middle Eastern Affairs, in The Kathryn and Shelby Cullom Davis Institute at The Heritage Foundation.
[1] See Susan Sachs, "Hussein's Regime Skimmed Billions From Aid Program," The New York Times, February 29, 2004.
[2] The names were published in January in the Arabic Iraqi newspaper Al Mada and subsequently reported on by Therese Raphael in her article "Saddam's Global Payroll," published in The Wall Street Journal, February 9, 2004.
[3] For further background on the Oil for Food program, see Claudia Rosett, "Oil, Food and a Whole Lot of Questions," The New York Times, April 18, 2003.
? 1995 - 2004 The Heritage Foundation
All Rights Reserved.
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Le scandale des ?coutes ? l'ONU rebondit
LEMONDE.FR | 27.02.04 | 08h41
Au lendemain des d?clarations de l'ancienne ministre britannique, Clare Short, qui a affirm? que des agents de son pays avaient effectu? des ?coutes dans les bureaux de Kofi Annan, un ancien chef des inspecteurs en d?sarmement, l'Australien Richard Butler, a assur? que ses conversations avaient ?t? ?cout?es par au moins quatre pays, dont la France.
Le jeune scandale des ?coutes de responsables des Nations unies a rebondi vendredi apr?s qu'un ancien chef des inspecteurs en d?sarmement, le diplomate australien Richard Butler, a d?clar? qu'au moins quatre pays, dont la France, avaient espionn? ses conversations alors qu'il menait de d?licates n?gociations pour tenter de d?sarmer l'Irak.
R?agissant aux d?clarations de Clare Short, ex-ministre britannique, qui a affirm? jeudi que des agents britanniques avaient effectu? des ?coutes dans les bureaux de Kofi Annan, secr?taire g?n?ral de l'ONU, M. Butler a d?clar? ?tre certain d'avoir lui aussi ?t? espionn? aux Nations unies. "Bien s?r, je l'ai ?t?, j'?tais parfaitement au courant de ?a, a-t-il d?clar? ? la radio ABC. Comment l'ai-je su ? Parce que les gens qui l'ont fait sont venus me voir et m'ont montr? les enregistrements faits d'autres personnes pour m'aider dans ma t?che pour d?sarmer l'Irak."
LA FRANCE ELLE AUSSI EN ACCUSATION
"Ils ont dit 'nous sommes juste ici pour vous aider' et ils n'ont jamais montr? aucun enregistrement me concernant", a d?clar? Richard Butler, pr?cisant qu'il avait ?t? espionn? par les Am?ricains, les Fran?ais, les Britanniques et les Russes.

"Je l'ai su par d'autres sources, j'?tais absolument persuad? que j'?tais espionn? par au moins quatre membres du Conseil de s?curit?", a-t-il ajout?.
Richard Butler, chef des inspecteurs en d?sarmement de l'ONU en Irak de 1997 ? 1999, a ?galement ?voqu? le fait que les diplomates allaient se mettre ? l'?cart pour que leurs conversations demeurent secr?tes, parce qu'ils estimaient que le si?ge de l'ONU ? New York ?tait truff? d'espions. "Si je voulais vraiment avoir une conversation sensible avec quelqu'un... j'en ?tais r?duit ? me rendre soit dans une caf?t?ria bruyante dans le sous-sol de l'ONU et de parler en murmurant, soit carr?ment d'aller marcher dans Central Park", a-t-il d?clar?.
Richard Butler a ?galement estim? que les accusations d'espionnage dans le bureau de Kofi Annan montraient ? quel point les relations internationales sont un jeu cynique. "Si les gens ordinaires savaient ? quel point ce jeu est malhonn?te, ils exprimeraient sans doute des protestations", a-t-il affirm?.
HANS BLIX AURAIT LUI AUSSI ?T? ?COUT?
La radio ABC a par ailleurs rapport? que des responsables des services secrets australiens avaient vu des transcriptions de conversations ? partir d'un t?l?phone mobile de Hans Blix, chef des inspecteurs en Irak avant la guerre, qui avaient ?t? fournies par les services de renseignement britanniques ou am?ricains. "A chaque fois qu'il (Hans Blix) arrivait en Irak, son t?l?phone ?tait mis sur ?coute et la transcription des enregistrements ?tait mise ? la disposition des Etats-Unis, de l'Australie, du Canada, de la Grande-Bretagne et aussi de la Nouvelle-Z?lande", a affirm?, un journaliste d'ABC, en citant des sources non identifi?es.
Le premier ministre australien, John Howard, a pour sa part refus? de commenter ces affirmations, arguant que sa politique ?tait de ne jamais confirmer ou infirmer des informations relatives aux services secrets.
Le secr?taire d'Etat am?ricain, Colin Powell, s'est lui aussi refus? jeudi ? commenter les accusations selon lesquelles la Grande-Bretagne aurait espionn? le secr?taire g?n?ral de l'ONU, Kofi Annan, avant la guerre en Irak. "Je n'ai rien ? dire au sujet des activit?s du Royaume-Uni. Nous ne parlons jamais de questions touchant au renseignement en public", s'est-il born? ? d?clarer ? la presse ? l'issue d'une rencontre avec le ministre bulgare des affaires ?trang?res, Solomon Passy.
CLARE SHORT PERSISTE ET SIGNE
L'ex-ministre britannique du d?veloppement international, Clare Short, a provoqu? jeudi 26 f?vrier un formidable scandale en affirmant que des agents britanniques avaient espionn? M. Annan.
Le secr?taire g?n?ral de l'ONU a r?agi avec prudence : il serait "d??u" si ces affirmations sont av?r?es, a indiqu? jeudi son porte-parole, Fred Eckhard, soulignant l'"ill?galit?" de tels actes.
Clare Short a d?menti jeudi soir que ses d?clarations fracassantes sur la mise sur ?coutes de Kofi Annan par les Britanniques avant la guerre en Irak mettent en danger la s?curit? nationale, comme l'a affirm? Tony Blair. "C'est l'itin?raire de ma conscience, a-t-elle expliqu? lors d'une interview ? la cha?ne Channel Four diffus?e en d?but de soir?e. Je ne dis pas que c'est un itin?raire parfait, mais c'est une (question de) conscience et ?a n'a rien ? voir avec la loi sur les secrets officiels et ?a n'a rien ? voir avec la s?curit? nationale."
Lors de sa conf?rence de presse mensuelle en milieu de journ?e, le premier ministre a qualifi? de "profond?ment irresponsables" les all?gations de Clare Short, qui "minent la s?curit? de ce pays" selon lui. "La s?curit? nationale britannique n'est pas en jeu lorsqu'on r?v?le que les coups de fil priv?s de Kofi Annan ont ?t? divulgu?s de fa?on incorrecte, et dire cela publiquement ne repr?sente un danger pour aucune personne travaillant dans les services de s?curit? britanniques", a r?pliqu? Mme Short sur Channel Four.
Mme Short avait d?missionn? en mai 2003 du gouvernement de Tony Blair pour protester contre l'intervention am?ricano-britannique en Irak sans le feu vert de l'ONU.
L'affaire tombe tr?s mal pour M. Blair, qui tente de se r?concilier avec une opinion publique plut?t hostile ? la guerre en mettant l'accent sur des th?mes de politique int?rieure.
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Avec AFPIsrael Gets a Taste of Friedman
Bibi is leading a charge for tax cuts, deregulation and economic liberty.
BY KIMBERLEY A. STRASSEL
Monday, March 1, 2004 12:01 a.m. EST
Addressing foreign journalists in a Knesset conference room last fall, Ehud Rassabi began his talk with the following statement: "I am a fan of Milton Friedman." As the parliamentarian went on to detail his plans to cut Israel's public sector, slash taxes, draw down entitlements and privatize state assets, several reporters looked around in confusion, wondering if they were still in the land of the kibbutz.
But it definitely was Israel, and even as the world has focused more attention on the Palestinian issue, it has overlooked a significant story. The land once labeled the "last remaining socialist state in Eastern Europe," has seen its governing coalition embark on what could be the most important economic reform in the country's history. The impetus for change has come via a popular mandate that helped propel reformers like Mr. Rassabi to the Knesset in the last elections. The will to see it through comes via Benjamin "Bibi" Netanyahu, the firebrand former prime minister who surprised everyone a year ago in agreeing to become finance minister. The next few months will decide whether he and his fellow free-marketers have the political wherewithal to succeed.
This stab at transformation couldn't have come too soon. When Mr. Netanyahu took over, Israel was years into a steep recession. Tax revenues were in a free-fall even as the country handed over more money to welfare programs (with some 30% of its $70 billion budget going to transfer payments). The Bank of Israel, worried about inflation, had kept interest rates high, strangling an economy that the financial community was worried could collapse.
Even a year into Mr. Netanyahu's emergency economic reforms, GDP growth has remained anemic--just 1.3% in 2003. Some 10% of the work force is unemployed, despite the government employing one out of every three workers. And Israel's government expenditures total a startling 55% of GDP. U.S. expenditures, both federal and state, are less than one-third.
Economic turmoil isn't exactly new in Israel, but what has changed is the public's toleration of it. The country has seen a growing divide between private workers, who continue to float Israeli society on their overtaxed backs, and public-sector employees who earn many times the average Israeli salary. A fed-up middle class, weary of the inflation, layoffs, and a growing tax burden, has flowered into a movement that bears more than passing resemblance to the American tax revolt that preceded and carried through the Reagan era.
That movement found its feet in Israel's January 2003 elections. The party to which Mr. Rassabi belongs, Shinui (which stands for "Change"), had muddled along for years, a small player in Israeli politics. But this time Shinui's platforms of secularization (a reference to growing discontent with the country's ultra-Orthodox Jews who refuse to work, and live on entitlements) as well as a freer economy, hit home. Shinui went from seven Knesset seats to 15, making it the third largest party after Likud (40 seats) and Labor (19). It became part of Likud's governing coalition, where it has since been doggedly pushing its economic reform agenda.
And it found a powerful ally in Mr. Netanyahu. Bibi's appointment was originally met with skepticism; financial watchers worried he'd simply mind the economic store until he could launch another bid for prime minister. Instead, Mr. Netanyahu has tackled economic reform with the zeal and single-mindedness that has marked his career, drawing comparisons to New Zealand's Roger Douglas, the finance minister who liberated his own nation's economy in the 1980s.
Mr. Netanyahu's emergency economic plan spared no holy cows: It included cuts in government expenditures, welfare entitlements and public-sector jobs. It also sought to lower taxes and jump-start a stalled privatization program. While he's levered through a fair amount of reform already, now comes the hard question of whether he can break the backs of the country's most entrenched institutions.
In one corner, he's wrapped in a showdown with Israel's labor organization, Histadrut, and the leader of that massive body, Amir Peretz, makes U.S union bosses look cuddly. Histadrut's response to possible layoffs or wage cuts has been to do what it always does in the face of threats to its protected fiefdom: strike. While Histadrut strikes have not materialized to the huge degree promised, they have damaged Israel's fragile economy and already forced certain reform concessions.
Similarly, Mr. Netanyahu is facing off against monopolies that have dominated the economy for decades. The Israeli government owns almost all of the country's land, along with water, energy, telecommunications and natural resources. It also holds stakes in major banking institutions, a handful of which control financial markets and distort the allocation of credit.

Private industry is also besieged by monopolies, raising consumer prices by an average of 30%. Many of these organizations (run, again, by organized labor) have been pushing hard to delay Mr. Netanyahu's privatization plans.
There are positive signs that reforms are working. Mr. Netanyahu has managed to bring the top marginal tax rate in Israel down to below 50%. He's cut two consecutive budgets and is set to restrain spending increases to 1% a year in real terms in 2005 to 2010. He's also managed reductions in the public work-force and salaries. The Bank of Israel has in turn brought interest rates down, unleashing needed capital, and the economy is predicted to grow by 2.8% this year.
But there are also worrying signs that Mr. Netanyahu is losing momentum. He recently agreed to let the Knesset meddle with his budget, and bowed to a freeze in planned public-sector layoffs. His loud calls for privatization of key parts of the Israeli economy, such as the ports, have faded. Part of the problem is that his own party, under fire on the peace issue, has been increasingly reluctant to court criticism on the economy and has failed to give Mr. Netanyahu the backing he needs.
It might consider that a strong Israeli economy is vital not only to the country's security needs now, but also to underpin any future peace deal with economically disadvantaged Palestinians. Should Mr. Netanyahu gain his government's backing and see this fight through, he'll have arguably done as much for Israel as he did, or could do, as prime minister.
Ms. Strassel is a senior editorial page writer for The Wall Street Journal.


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It's back to the Dark Ages on trade
http://www.NewsAndOpinion.com | It is Feb. 24 2005, and President John Kerry and his economic team -- Roger Altman and Alan Blinder from the U.S. Treasury and U.S. trade representative Clyde Prestowitz -- are busy converting the U.S. into a protectionist fortress.
- The North American Free Trade Agreement? Rewrite it to force Mexican wages upward.
- The World Trade Organization? Reconsider.
- Japan? Ralph Nader, special envoy, is just landing in Tokyo.
- And oh, that meeting with Pascal Lamy, the European Union's trade commissioner? Schedule it later.
This vision of a return to the Dark Ages of protectionism seems improbable, especially considering the sunny American scenario of just a few weeks ago. No protectionist presidential candidate cast his shadow across the election stage -- Ross Perot and Patrick Buchanan were nowhere to be seen. The only two serious candidates who talked about protectionism were Dick Gephardt (D-Mo.) and former Vermont Gov. Howard Dean. And Iowa voters chucked them out early, a humiliation that seemed to underscore the anachronistic nature of the protectionist message.
In short, Americans generally seemed to have internalized the principal economic lesson of the 1990s: that the sort of global commerce symbolized by NAFTA is a good thing. Certainly, the U.S. transition to an international service economy has been difficult. Many citizens have lost jobs or know people who have. It is infuriating to see Morgan Stanley and JP Morgan thinking about hiring in Mumbai, formerly Bombay, when people are worrying about the death of manufacturing in Montgomery, Ala.
Nonetheless, most voters also know that U.S. unemployment dipped to historic lows in the decade following the signing of NAFTA; they know that even now, post-recession, unemployment is lower than the average of the past quarter-century. Finally, Americans know that more jobs will materialize eventually. For while outsourcing may "kill" some jobs, it also helps companies generate more profits, and those profits are reinvested -- eventually -- in jobs.
But something is changing to obscure this logic. This month Kerry and Sen. John Edwards (D-N.C.) have discovered that the loss of manufacturing jobs is unnerving voters and that calling for "job protection" -- precise meaning to be worked out later -- has enormous appeal.
Suddenly, the basic laws of economics no longer seem to apply. And without considering much the implications of their actions, the candidates are edging toward old anti-trade positions. Thus earlier this month, Edwards told an audience in Wisconsin that trade deals such as NAFTA were bad as they "drive down our wages and ship our jobs around the world." He also spoke repeatedly about "fair trade not free trade."
Kerry has been more circumspect; he, after all, supported NAFTA in the Senate, as well as China's entry to the WTO. And his economic guru, Blinder, spent his career repeating the formula, "increasing productivity and trade equals growth and jobs." Nonetheless, Kerry has also -- as James Hoffa of the Teamsters union recently put it -- "evolved" on trade. NAFTA, Kerry says, has to be reopened and rewritten. The Kerry campaign has also reminded voters that its agenda calls for a moratorium on new trade agreements until all old agreements are reviewed, and Kerry has said he wants to "bring back" jobs. What can that mean?
The Republicans have also done their part to put back the clock. This month saw a new low for the party, when Dennis Hastert, the House speaker, made the inquisitorial demand that Greg Mankiw, chairman of the White House Council of Economic Advisers, deny his suggestion that outsourcing can increase American well-being.
Hastert, a wonderful man but, after all, a former wrestling coach, was forcing Mankiw, author of one of the best economic textbooks, to deny a basic law of economics. ("Recant, Galileo, admit that outsourcing always kills jobs!")
It is easy to argue that this retrograde shift doesn't matter. Bill Clinton also asked for NAFTA riders during his first presidential campaign. But by crusading so hard for American jobs, today's candidates are suggesting the problem is free markets. They thus make it virtually inevitable that they will have to deliver protectionism after the election -- even in areas where they do not intend such an outcome.
This spells trouble. Democrats these days generally like to portray themselves as multilateralist. But protectionism is inherently unilateralist. If you are interested in international co-operation at all, you can see that this is exactly the wrong moment to bash international trade.
The second problem is that by "protecting" jobs, the new administration is likely to kill them. Kerry's international tax plan will force companies to stay in the U.S. at the expense of profitability. This in turn will force them to lay off workers. His scapegoating of "Benedict Arnold chief executives" certainly won't inspire new companies to list on U.S. exchanges. As for Kerry's domestic tax increases, they represent the one kind of step that ensures lost jobs will not return: they reduce U.S. relative competitiveness.
The third problem is subtler: intellectual dishonesty. Congressmen of the 1990s saw first-hand what trade can do for growth. By ignoring that experience, Edwards and Kerry -- and Hastert even -- force Americans to ignore it along with them. In effect, these men are erasing history. You can't get more medieval than that.
Amity Shlaes
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Dingell: DoE letter 'bizarre'
By Jim Snyder
In a letter that Rep. John Dingell (D-Mich.) described as "bizarre," a top Department of Energy (DoE)official accused a Democratic Energy and Commerce Committee staffer of refusing to hand over documents related to allegations of misconduct at the Hanford, Wash., nuclear site until a critical newspaper article appeared.
Beverly Cook, the assistant secretary for environment, safety and health, wrote to Edith Holleman, a staffer on the committee: "I understand that you have been in possession of information relevant to this investigation and that a Departmental request for these documents would not be met until `a Washington Post' story on this subject runs."
The Feb. 25 letter did not detail what documents the department was seeking.
The letter noted that DoE has been investigating allegations of "supervisor misconduct, fraud, and medical records mismanagement" since September, including problems associated with the Hanford Environmental Health Foundation (HEHF), a private nonprofit clinic where sick workers are treated.
A lengthy story in Thursday's Washington Post detailed allegations of misconduct at Hanford, including at HEHF. The Post story quotes an e-mail from Energy Department official Alan Hopko as saying that contractors cleaning up the site "have an incentive to minimize the number of workdays lost" to employee injuries. Contractors get a bonus if they
meet an accelerated clean-up schedule.
The nonprofit watchdog group Government Accountability Project first disclosed allegations of misconduct.
A third of the 177 waste tanks at Hanford are leaking radioactive and toxins into the groundwater, according to the Post. The administration has put the clean-up on an accelerated schedule, reducing the projected date for completion from seven to three decades.
This week, Energy Secretary Spencer Abraham announced that the investigation into Hanford's management had been expanded to include the Office of Independent Oversight.
"I am certain you appreciate the serious nature of the allegations lodged against HEHF and respectfully request that you reconsider your decision and provide this information to our investigators," Cook wrote
Holleman.
"I know you share the Department's commitment to ensuring the safety of its workforce."
The letter prompted a sharp retort from Dingell, who is the ranking member on the committee and has been a frequent critic of DoE's worker safety record.
"I am in possession of a bizarre letter dated February 25, 2004," Dingell wrote Energy Secretary Spencer Abraham.
Dingell did not agree to turn over the alleged documents, instead promising that his staff's independent investigation "will be made known in proper time and place."
"We are not anxious to abet the cover-up culture that has permeated DoE and its contractors for too long," he wrote.
He also questioned why DoE -- "with all of the investigatory resources available to it" -- couldn't get the documents in question.
"Please be advised that I have instructed Ms. Holleman not to respond to Ms. Cook's letter, and I ask that any further correspondence on this matter be directed to me," Dingell wrote.
? 2003 The Hill


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>> DEATH PENALTY EUROPE?

http://www.spiegel.de/archiv/dossiers/0,1518,287849,00.html
KINDERSCH?NDERPROZESS
Dutroux schl?ft auf der Anklagebank ein
W?hrend ganz Belgien auf den kleinen Gerichtssaal in Arlon blickte, machte der Hauptangeklagte Marc Dutroux ein Nickerchen. Der Kindersch?nder und mutma?liche M?rder von zwei M?dchen zeigte kein Interesse an der Auswahl der Geschworenen, die ?ber sein Schicksal entscheiden werden.
AP
Schlafender Dutroux: Keine taktisch wichtigen Dinge
Arlon - "Herr Dutroux schl?ft nachts sehr schlecht. Da ist es normal, dass er sich - wenn im Saal keine taktisch wichtigen Dinge passieren - ein wenig erholt", sagte der Anwalt des Mannes, dem die grausamsten Verbrechen in der belgischen Kriminalgeschichte vorgeworfen werden.
Marc Dutroux war bei der Auswahl von zw?lf Geschworenen und ihren Stellvertretern vor?bergehend in Schlaf gefallen. Den Kopf auf die Arme gebettet, lag er auf dem Tisch, was den Vorsitzenden Richter St?phane Goux veranlasste, Dutroux zur Ordnung zu rufen.
Am Mittag war die Wahl der Geschworenen beendet. Das Gericht in der Provinzhauptstadt Arlon ernannte je sechs M?nner und sechs Frauen, die am Ende der Beweisaufnahme ?ber Schuld oder Unschuld Dutrouxs und seiner Mitangeklagten entscheiden.
DPA
Dutroux, Polizist: Der verurteilte Kindersch?nder wollte sich nicht fotografieren lassen
F?r Aufregung sorgten neue Spekulationen ?ber einflussreiche Hinterm?nner. Der Fernsehsender VTM berichtete ?ber einen Brief von Dutroux, in dem dieser ein kriminelles Netzwerk mit Verbindungen zu Sicherheitsbeh?rden erw?hnt. Einer seiner Anw?lte, Ronny Baudewijn, sagte, die neuen Angaben seines Mandanten seien "nicht die beste Entscheidung" gewesen. Dem Fernsehsender zufolge soll der mitangeklagte Br?sseler Gesch?ftsmann Michel Nihoul als Kontaktperson zu den Hinterm?nnern gedient haben. Jan Fermon, Anwalt der Nebenklage, bezeichnete solche Theorien als "Beleidigung der Opfer".
Dutroux werden Mord an der 17 Jahre alten An und der 19-j?hrigen Eefje vorgeworfen, die im August 1995 verschleppt worden waren. Zudem soll er f?r die Entf?hrung, Freiheitsberaubung und Vergewaltigung der beiden M?dchen sowie der beiden achtj?hrigen Julie und Melissa sowie der zur Tatzeit 1996 zw?lfj?hrigen Sabine und der 14 Jahre alten Laetitia verantwortlich sein.
Die Morde an den M?dchen streitet Dutroux ab. Zugegeben hat er lediglich, seinen Komplizen Bernard Weinstein umgebracht zu haben. Sabine und Laetitia konnten lebend aus dem Haus Dutrouxs gerettet werden, Julie und Melissa wurden wie An und Eefje tot aufgefunden.
Da die Umst?nde des Todes der beiden Achtj?hrigen nie gekl?rt werden konnten, hat die Staatsanwaltschaft in diesen F?lle keine Klage erhoben - zum Entsetzen von Julies und Melissas Eltern, die dem Prozess daher fernbleiben.
Der Vater der ermordeten An, Paul Marchal, tritt in dem Verfahren als Nebenkl?ger auf, ebenso die Eltern der ermordeten Eefje.
Rechtsanwalt Jan Fermon, der das befreite Dutroux-Opfer Laetitia vertritt, formulierte die hohen Erwartungen an das Verfahren: "Laetitia erwartet Antworten auf das Wie und das Warum" ihrer Entf?hrung vor fast acht Jahren.
Mit Dutroux sitzen seine Exfrau Michelle Martin, sein Komplize Michel Lelievre und der Br?sseler Gesch?ftsmann Michel Nihoul auf der Anklagebank.

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Marc Dutroux se pose en victime d'un "syst?me mafieux"
LEMONDE.FR | 01.03.04 | 18h35
Il adopte ainsi la strat?gie d?fendue par ses avocats. Le proc?s de "l'ennemi public n?1" de la Belgique devrait durer au moins deux mois.
Marc Dutroux a affirm? lundi 1er mars, ? l'ouverture de son proc?s devant la cour d'assises d'Arlon en Belgique, qu'il ne constituait qu'un rouage d'un r?seau belge de p?dophilie, adoptant ainsi la strat?gie de d?fense annonc?e par ses avocats.
"Ce n'est pas parce que j'ai fait des conneries que je vais payer pour un syst?me mafieux dont je ne suis pas le moteur", avait d?j? d?clar? "l'ennemi public num?ro un" de Belgique, dans une d?claration diffus?e dimanche soir par la cha?ne de t?l?vision flamande VTM. Marc Dutroux, accus? d'une s?rie d'enl?vements, de viols et d'assassinats de fillettes, a ainsi relanc? une th?se ? laquelle croient beaucoup de Belges, sceptiques devant la th?orie du "pr?dateur isol?", mais qu'il n'a jamais utilis?e auparavant.
La premi?re journ?e du proc?s, qui s'est d?roul?e sans aucun incident notable ni v?ritable manifestation, a ?t? pour l'essentiel consacr?e ? la s?lection des douze jur?s, au terme de pr?s de cinq heures de proc?dure pour constituer le jury populaire charg? de juger Marc Dutroux et ses complices pr?sum?s. "Six hommes et six femmes, cela repr?sente exactement ce que nous attendions", s'est r?joui Me Georges-Henri Beauthier, avocat de Laetitia Delhez, l'une des jeunes filles enlev?es par Marc Dutroux et retrouv?e vivante dans sa propri?t? de Marcinelle, pr?s de Charleroi, en ao?t 1996.
Au total, 180 habitants de la province du Luxembourg belge, ?g?s de 30 ? 60 ans, avaient ?t? convoqu?s lundi matin par la justice pour constituer le jury. Plus de cent d'entre eux ont demand? ? en ?tre dispens?s, pour des raisons familiales ou professionnelles.
V?tu d'une veste sombre et portant une cravate sous un pull de laine, il est apparu tr?s calme lors de son entr?e dans le box prot?g? par une ?paisse vitre blind?e, comme les trois autres accus?s : son ?pouse Michelle Martin, son complice Michel Leli?vre et un quatri?me homme, Michel Nihoul.
"JE M'APPELLE MARC DUTROUX"
"Je m'appelle Marc Dutroux," a-t-il r?pondu d'une voix pos?e au pr?sident de la cour, St?phane Goux. Profession ? "Actuellement, je n'en ai pas". Domicile ? "La prison d'Arlon", a-t-il ajout? avant de plonger le nez dans ses papiers.

Quelques minutes plus tard, le pr?sident a signal? ? l'un de ses avocats que Dutroux, qui a ?t? plac? aux c?t?s de son ?pouse, semblait sommeiller dans son box.
Larmes aux yeux, les parents d'An et Eefje, deux jeunes filles dont les cadavres ont ?t? retrouv?s le 3 septembre 1996, ?taient pr?sents dans la salle de la cour d'assises. A l'inverse, les parents de deux autres victimes, Julie et Melissa, 8 ans au moment de leur enl?vement, ?taient absents de ce proc?s auquel ils ne croient pas.
Le proc?s entrera dans le vif du sujet mardi, avec la lecture de l'acte d'accusation, r?sum? de l'instruction criminelle la plus longue de l'histoire du pays, qui a dur? plus de sept ans, et d'un dossier de 440 000 pages. Quelque 500 t?moins seront appel?s ? la barre. Les audiences devraient durer au moins deux mois.
Avec AFP et Reuters


----------------------------------------------


India Nuclear Chief Tells AP Stores Safe
By RAMOLA TALWAR BADAM
ASSOCIATED PRESS
BOMBAY, India (AP) -
India's nuclear chief defended the country's atomic security, telling The Associated Press Monday that weapons secrets can't easily leak and that facilities are safe from terrorist threats.
"Our installations are very secure," said Anil Kakodkar, chairman of India's Atomic Energy Commission. "There is a scare arising out of terrorism, but there need be no fear on that count here."
Since testing nuclear weapons in 1998, India has repeatedly said it is a responsible nuclear-armed state with laws preventing the illegal sale of information on nuclear arms and missiles.
A. Gopalakrishnan, a top nuclear engineer, also said he believed India's facilities were secure.
"I am 100 percent sure that there is no chance of anything going out of India," said Gopalakrishnan, chairman of India's nuclear regulatory board from 1993-96.
"In strong contrast to Pakistan, the Department of Atomic Energy tightly controls the material here, and no senior scientist or senior person can take out any material."
Indian Prime Minister Atal Bihari Vajpayee said last week that India was increasing security measures in view of the transfer of nuclear knowledge from Pakistan to Iran, Libya and North Korea.
India and other countries fear the nuclear secrets sold by Pakistani scientist Abdul Qadeer Khan, the father is the country's nuclear program, could fall into the hands of international terrorist groups.
At all of India's nuclear installations, electrified fencing and four barriers manned by armed guards protect critical areas, while high sensitivity detectors are installed along the gates, according to a top scientist, who spoke on condition of anonymity.
"We have been vigilant from the very beginning," said K.S. Parthasarthy, who retired in January after 16 years as the secretary of the Indian Atomic Energy Regulatory Board, which regulates India's 14 civilian nuclear installations.
There was speculation last week that India and Pakistan may be using the same black market network to supply their nuclear programs.
This came after a Washington court document showed that a South Africa-based Israeli businessman - facing felony charges of exporting nuclear bomb triggers to Pakistan - was also dealing with an Indian trader trying to buy material for Indian rocket facilities.
Atomic energy officials have said their dealings are aboveboard, and the Indian businessman told AP the material he sought was for the country's civilian space program and not for weapons.

----------------------------------------------------------------

Going Soft on Iran
From the March 8, 2004 issue: The temptation of America's foreign policy "realists."
by Reuel Marc Gerecht
03/08/2004, Volume 009, Issue 25
ACCORDING TO THE NEWSPAPERS and the CIA, Iranian "hard-liners" dealt their country's reform movement and fledgling democracy a heavy, perhaps lethal, blow on February 20. With over 2,000 candidates "disqualified" before the parliamentary elections even took place, the ruling clerical elite ensured that the reformers, who've won office and national attention since the presidential election of Mohammad Khatami in May 1997, would no longer dominate the parliament, or Majles, which has become a forum for public discontent and frustration with the ruling mullahs. With a majority of seats in the next parliament, and already firmly in control of the country's internal security organizations and courts, the "hard-liners" will be able to fracture and silence, so the reporting goes, the political parties, newspapers, and organizations that left-wing clerics, like Khatami, had used to create a national movement for change.
According to many American "realists"--the school of foreign policy most often associated with such men as former national security advisers Brent Scowcroft and Zbigniew Brzezinski, former diplomats James Baker, Richard Murphy, Thomas Pickering, and Richard Haass, and institutions like the Nixon Center and the Council on Foreign Relations--there may be a silver lining in the bad news. Iran's "hard-liners" may in fact be "pragmatic conservatives," to borrow a phrase often heard now in the colloquies of Washington's think tanks where the intellectual laborers of American realism are trying to devise a new strategy for Iran and the Greater Middle East. In the post-9/11 world, the fear of weapons of mass destruction in the wrong hands dominates public policy debates, and a growing number of American realists believe that Iran's "pragmatic mullahs"--in Persian translation, this means former Iranian president Ali Akbar Hashemi Rafsanjani, the major-domo of the clerical establishment, and Ali Khamenei, the "spiritual leader" of the country--are the men to cut a deal to halt Iran's WMD programs.
There is even a sense in certain quarters that we might actually be lucky that Khatami and the parliamentary reformers have been whipped. Rafsanjani and Khamenei may play a very rough game domestically--Hezbollah thugs beat dissidents, "rogue" intelligence agents knife and run down liberal intellectuals, the judiciary jails any dangerous political opposition figure too prominent to off, and the Council of Guardians preemptively disqualifies troublemakers from office--but externally they are, so the theory goes, responsible, rational actors who are principally motivated by geopolitics and economics (and, in the case of Rafsanjani, lucre). They are, in other words, real men, not distracted by all the leftist intellectual debates that consumed so many on the Khatami side of the political house.
It's worthwhile to remember that not that long ago prominent American realists made a different argument. In May 2001, just before President Khatami won his second term, Brent Scowcroft wrote in the Washington Post that we should unilaterally engage the Islamic Republic by lifting sanctions--specifically those targeted against the energy sector--even before talking about the clerical regime's fondness for terrorism, its development of nuclear arms and other weapons of mass destruction, or its unrelenting hostility to a peace process between the Israelis and Palestinians. According to Scowcroft, such a unilateral move was not to be viewed as "a sign of weakness in light of continued predations by an obnoxious and repressive regime." Such a charge would "miss the central point, which is that an active struggle is underway to determine the future course of Iran. The key is to speak to the people of Iran, not to their oppressors." Thus, for the Bush administration to give "a signal from the United States showing the desire for a better bilateral relationship might provide encouragement and impetus to reformers and the people who so eagerly seek change."
Of course, Scowcroft didn't explain how exactly an oil deal with Conoco or ExxonMobil would empower Iran's democratic forces.

(One wonders whether Scowcroft, who has been a paid consultant to U.S. energy companies, would have made this argument to the shah of Iran, or whether American oil executives have ever made this case to the energy-rich princes and dictators of the Middle East, post-Soviet Central Asia, or the Caucasus.) Neither he nor the other heavy hitters who cochaired a major review of U.S.-Iran policy in 2001 (former secretary of defense James Schlesinger and Democratic congressman Lee Hamilton) explained why Rafsanjani and Khamenei, two clerics who have excelled at machtpolitik, would not view unilateral American concessions as unilateral American concessions.
Needless to say, the realist case has evolved with events, and now it is time for the United States to engage "an obnoxious and repressive regime" since Iran's nuclear program, which is much more advanced than we'd guessed, gives us no choice.

Thomas Pickering, the perennial ambassador and former undersecretary of state for political affairs, has also underscored Iran's "capacity for making life uncomfortable and messy for the United States and its allies in Iraq" as a reason to seek a modus vivendi with Tehran's clerical overlords.
From the realists' perspective, the reformers had their day, they lost, and now America must deal with the facts on the ground. And, fortunately, Iran's rulers are corrupt divines who no longer believe in their hearts they have a mandate from heaven. First and foremost, they want to stay in power, within secure borders, unthreatened by the United States, Israel, or its neighbors, recognized as a legitimate regional power with accepted interests in Iraq and the Persian Gulf. If we let them be a member of the club, if we make Rafsanjani and Khamenei feel safe, in their own country and in others', then they might give up the bomb.
This realist American diplomacy would be complemented by the efforts of the British, French, and Germans--the "E.U. three" who are responsible for the European Union's Iranian relations. Simultaneously, the Europeans would suggest to Tehran that they might bring the Islamic Republic before the United Nations Security Council for censure for its nuclear prevarications.

And if the Iranians continue to misbehave, the Europeans would hint with increasing frankness the possibility of economic sanctions against Tehran--the type of sanctions that American realists want first to lift as a carrot to induce better clerical behavior.
Though not known for using economic sanctions as political tools--Paris just announced a $2 billion oil exploration deal with the Islamic Republic even though its diplomats and spooks have long known that the clerical regime has been blatantly lying to the International Atomic Energy Agency about its nuclear "research" program--the Europeans will, this time, so the theory goes, get serious. After all, they, too, dread the spread of nuclear weapons. They, too, view the Non-Proliferation Treaty as a cornerstone of the liberal internationalist order. Perhaps most of all, they wouldn't want George Bush untethered from adult European supervision, possibly inclined to bomb Iran to keep Rafsanjani and Khamenei from getting a nuclear weapon.
OF COURSE, none of the above makes much sense. Not the understanding of what happened in Iran on February 20. Not the realist position on the ruling clerical elite. Not the likelihood of effective joint action between the Americans and the Europeans.

What does make sense, however, is the coming realist assault on President Bush's post-9/11 foreign policy. The realist temptation in the American foreign-policy establishment is always powerful, principally because it is the path of least resistance and least action, and it dovetails nicely with the status-quo reflexes of the State Department, the Central Intelligence Agency, and the military brass at the Pentagon. Senator John Kerry appears to have embraced the realist cause.
But if the Bush administration opts for a variation of the realist approach to Iran--and fatigue from rebuilding Iraq certainly reinforces the administration's hitherto pronounced preference to avoid gaming out worst-case contingency plans for dealing with Iran's nuclear weapons programs or the clerical regime's "detention" of senior members of Osama bin Laden's al Qaeda--it will gut what is left of its post-9/11 "axis of evil" doctrine. It will effectively deny the primary transcendent lesson that President Bush has drawn from 9/11: that the Middle East is politically dysfunctional, that U.S.-backed tyranny in Muslim lands was an essential element in the development of the holy-warriorism of al Qaeda, and that the spread of democracy in the Muslim Middle East remains the only cure for the sacred terror of 9/11.
American realists want none of this. Even after 9/11, they don't really want to be involved in other people's "internal affairs." By nature, they hate Promethean missions. They don't like for America's transatlantic relations--and most realists are pretty devout transatlanticists--to be roiled by a terrorist threat so defined that it mandates a doctrine of preemption.

Ideological combat is always an ugly, unmanageable affair, which is why many realists tried so hard to read ideology out of the Cold War. If the Bush administration is serious about transforming the Muslim Middle East--and the jury is still out on whether it is--it will inevitably unsettle, if not alienate, every single "pro-American" king, emir, and dictator in the region.
The issue of weapons of mass destruction is thus an ideal wedge for the realist camp. If Libya can become, as the British Foreign Office is obviously hoping, the template for approaching the rulers of the Middle East--that is, if stopping WMD trumps spreading democracy--then the realists have an excellent chance of stifling the Bush administration's post-9/11 rhetoric. President Bush's pro-democracy speeches have been driving U.S. foreign policy in the Middle East. They have been driving the efforts, feeble though they may be, by the rulers of the Middle East to open their political systems. The national dialogues of Saudi Arabia's Prince Abdullah are a direct result of President Bush's words and actions (the invasion of Iraq and the inevitable empowerment of Iraq's Shiites certainly encouraged Prince Abdullah to have his first dialogue about Saudi Arabia's oppressed Shiites, who happen to live on top of Saudi Arabia's oil in the Eastern Province). Silence those Reaganite speeches, and the foreign affairs bureaucracies will take over.
Then Bush II could start looking like Bush I a lot faster than Brent Scowcroft or Zbigniew Brzezinski has ever dreamed.

Because Iran's nuclear weapons program is so damnably hard to delay without preemptive American or Israeli airstrikes, and the Bush administration remains understandably loath to contemplate military action against another Middle Eastern state, the realists within the administration and without could lock the White House into exploring some kind of dialogue with Rafsanjani and Khamenei, who would, of course, approve of any American effort to lift unilaterally economic sanctions on the Islamic Republic. (They know, even if the realists do not, that these sanctions have seriously cramped Iran.)
There is a big hurdle coming up for those who want to believe (or to pretend to believe) that diplomacy offers a solution to Iran's WMD aspirations. The International Atomic Energy Agency must issue another report on Iran's compliance in June--the same time the Bush administration is supposed to release its Greater Middle East Initiative, which will show how serious the administration is about pushing democracy in a region where the leaders hate it. It has become obvious to all concerned that the Iranians have been willfully trying to deceive IAEA officials and the European diplomats who are responsible for maintaining the WMD dialogue with the clerical regime. European officials, including the French, don't bother even in private to deny Iran's nuclear weapons objectives, its continuing deceit, and the difficulty they are going to have in verifying Iranian compliance.
The clerical regime has yet to sign the more intrusive protocol to the Non-Proliferation Treaty, despite its promise to do so. (The Europeans, of course, have not yet seriously threatened the clerics with any penalty for their failure to sign.)

Hassan Rohani, the secretary of the Supreme National Security Council--a long-time bastion of power for Rafsanjani--recently declared, in one of those delightful and not infrequent moments when Iranian hubris betrays the revolutionary clergy's bent for mendacity and deception, that the Iranian use of polonium, an element applicable in both power-generation and weapons, and P2 centrifuges, which are designed for enriching uranium, "is not the only research we are doing. . . . We have other projects which we have not declared to the IAEA and we see no need to do so." It is very likely that the Europeans, including the British, will be able to walk round Rohani's prevarications.
Anyone who has dealt with the Europeans involved in this process, particularly the French, knows that the odds of Paris agreeing to threaten Tehran with sanctions that would truly hurt--for example, an oil embargo--are virtually nil. In all probability, nuclear proliferation in Iran, or elsewhere, will not prove to be an issue where Western Europeans can collectively agree to use force. Ethically they are simply operating, as Robert Kagan has very politely pointed out, in a different realm. And as the Nixon Center's Geoffrey Kemp has remarked, "the Europeans have to play their part" for a realist foreign policy to be credible. However, the Bush administration is hoping to punt this problem down the road, at least until after the November elections. The Europeans will have at least one more chance to devise "imaginative diplomacy" to dismantle Iran's nuclear weapons program without threatening the use of force.
But the Europeans won't be the only ones working against the Americans who desperately want to find a "credible" diplomatic process for dealing with Iran's quest for nuclear arms. The Iranians are very unlikely to play the roles realists envision for them. Rafsanjani and Khamenei may well be "pragmatic" mullahs--I have certainly long argued that they are. But they have also been among the godfathers of Iranian terrorism. From Beirut to Buenos Aires to Paris to Berlin and to the Khobar Towers barracks in Saudi Arabia, Rafsanjani and Khamenei put terrorism into the foreign policy lexicon of the Iranian clergy. When Iranian intelligence officials or their surrogates surveilled American diplomatic facilities and personnel around the world in the 1990s, it was on their orders. (Whatever these exercises were for, it is unlikely they were innocent in intent.)
These same gentlemen have, of course, always wanted to buy American. Conoco, ExxonMobil, Boeing, GE--it would be hard to find an American firm that Rafsanjani wouldn't welcome. It also beggars the imagination to believe that these two gentlemen don't control the fate of al Qaeda inside Iran. The Bush administration has chosen to play down the issue of al Qaeda in the Islamic Republic. The Pentagon and State Department remonstrated with the Iranians when they first realized that al Qaeda forces had fled into Iran after the fall of the Taliban in Afghanistan. News leaks about worrisome intercepts surfaced. And then the subject disappeared until official leaks again surfaced in 2003 suggesting that al Qaeda was in Iran and had possibly plotted from there attacks into Saudi Arabia. Al Qaeda in the Islamic Republic again returned to the back burner.
This was a serious mistake. Regardless of whether al Qaeda members in Iran were operationally involved in terrorist attacks in Saudi Arabia or elsewhere, these individuals are among the most wanted men in American history. We have never had worse enemies, yet we did nothing when Iran prevaricated about whether they were in the country when we clearly knew they were.

Remember, Rafsanjani and Khamenei are master chess players of power politics. If Americans don't rise in righteous indignation over the "detention" of possibly active al Qaeda members--and the key component of President Bush's Axis of Evil doctrine is that countries that harbor terrorists will be treated as terrorists--why shouldn't Rafsanjani and Khamenei, with their nuclear weapons, tempt America's wrath?
KHAMENEI and especially Rafsanjani have nurtured Iran's nuclear program from its infancy. More than anyone else, they are the will and mind behind this program. It is not unreasonable to conjecture that their very identity--who they are as leaders, clerics, and Muslims--is wrapped up in Iran's bomb program. And they are supposed to give it away to Americans, who don't threaten them over al Qaeda, and to Europeans, who keep offering the Iranians more time after the clergy has blatantly lied to them? If you were a "pragmatic" mullah who had beaten the shah, survived the American-aided legions of Saddam Hussein, and eaten alive your revolutionary colleagues-turned-enemies, would you be intimidated by such folks?
And the realists shouldn't count out the fallen clerical left in Iran. Neither the clerical left nor the vastly greater number of ordinary Iranians who are disgusted by the ruling clergy are likely to remain quiescent. They may not go into violent counterrevolution--the Iranians still remember the violence of the first revolution and the Iran-Iraq war, and many obviously hope that they can find some peaceful way to real democracy. But patience is not a well-known Iranian virtue.

Sooner not later, the discontent will boil forth. Rafsanjani and Khamenei know that many Iranians have more backbone than Khatami. Iranian prisons are full of such men. The Special Clerical Court, where the regime discreetly intimidates dissident mullahs, remains a busy place. The left-wing clergy were right to believe that they were riding an unstoppable democratic wave in Iranian history. They were wrong to think that their erstwhile brethren, who cling more tightly to the notion that the nation will go to hell without an indomitable clerical vanguard, would simply roll over when confronted with devastating election results.
But the die is now cast. The anti-climactic nonelection on February 20 at least confirmed that. The clerical opposition that has more fire in its belly--and the numerous disciples of Grand Ayatollah Hosein Ali Montazeri, Iran's premier dissident cleric, certainly appear to be made of sterner stuff than Khatami--won't make the same mistake twice. Neither will the students and other young Iranian men of the streets who've grown disgusted with the regime.
The ideas of constitutional government and democracy have been driving Iranian political thought for a hundred years.

Rafsanjani, if not Khamenei, is sufficiently educated to know that he is a product of this movement. More protests are inevitable. They will undoubtedly be enough to make it politically unacceptable, if not morally distasteful, for even the most true-blue American realist to deal with such "an obnoxious and repressive regime."
The realist vision of Iranian politics and U.S.-Iranian relations has zero chance of providing a solution to the WMD conundrum. The Bush administration needs to hang tough and be guided by the golden rule of Iranian clerical politics: Do unto them before they have a chance to do unto you. Give the Europeans a chance--several chances--to prove themselves serious. Let the French ruin the Non-Proliferation Treaty. And then decide whether you want Rafsanjani and Khamenei to have the bomb. In the end, only democracy in Iran will finally solve the nuclear and terrorist problems. Ditto for the rest of the Middle East.

Whether the Bush administration understands this come June is, of course, a different matter.
Reuel Marc Gerecht is a resident fellow at the American Enterprise Institute and a contributing editor to The Weekly Standard.

? Copyright 2004, News Corporation, Weekly Standard, All Rights Reserved.

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CONSTITUTIONAL DEALS
By AMIR TAHERI
March 2, 2004 -- AFTER months of heated debates, Iraq's interim leaders have approved a constitutional draft designed to close decades of tyranny. It will be put to nationwide debate ahead of elections for a constituent assembly that will write the final text of the nation's new constitution.
Until even a week ago, some believed that the Governing Council would be unable to agree on a text. The more pessimistic observers even predicted the council's disintegration. In the West, many Saddam nostalgics hoped the council would fail, thus "proving" that Iraqis can only live under a bloodthirsty despot.
The document is remarkable for a number of reasons. To start with, it is a patchwork of compromises in a region where give-and-take is regarded as a sign of political weakness if not outright dishonor.
In the macho world of Middle Eastern politics, the "strongman" imposes his will by force, giving even the mildest critic no quarter. In a game in which the winner takes all, the most that the losers can hope for is not to be put to the sword, thrown into prison or forced into exile. This is why, with the exception of Turkey, there has never been a genuine coalition government in any Muslim country.
The Iraqi success in agreeing to a draft is all the more meritorious because the compromises that had to be made concerned fundamental issues.
The most hotly debated was the place of Islam in a future Iraqi state. Some members, arguing that the new state should belong to all citizens, opposed any mention of Islam as the state religion. Others campaigned for an Islamic state in which non-Muslim Iraqis would, in effect, become second-class citizens in a system of apartheid based on faith.
The compromise: Islam is mentioned as the religion of the state but will not be used as a means of barring non-Muslim citizens from public office. Nor will the state interfere in personal religious matters, as is the case in many other Muslim countries, notably neighboring Iran.
Some radical secularists have already expressed disappointment at this compromise. In fact, giving the state a right of oversight on matters Islamic will prove good for Iraqi democracy. Under a totally secular system, Islam would be monopolized by the most radical elements that could use it as a political base from which to build a state within the state.
Consider two examples:
First, the shrines at Najaf, Karbala, Kazemiah and Samarra are bound to emerge as magnets for mass pilgrimage for the world's estimated 200 million Shi'ites. Linked with these shrines are thousands of endowments in the form of real estate, farms, industrial units and commercial businesses. Allowed to escape some form of state control, these could develop into a string of mini-empires controlled by the mullahs who could then be tempted into creating a parallel authority, thus weakening the democratic state. Under the compromise, the shrines and the businesses linked with them, worth billions of dollars, could be managed by a ministry in an atmosphere of transparency.
The second example concerns the way Islam is taught in the new democratic Iraq. If the state excludes itself from the process in the name of secularism, it will leave an important space open to groups with extremist ideologies. This has happened in Turkey and Pakistan in recent years, with private madrassas (Islamic schools) monopolizing the teaching of religion under the auspices of radical groups.
At a time when the European Union is leaning towards honoring its "Christian culture" in its proposed new constitution, no one should take the Iraqis to task for acknowledging the religious heritage of 95 percent of their people.
Linked to the issue of Islam as state religion was that of the role that sharia (Islamic law) might play in Iraq's legal system. Some on the Governing Council wanted it declared the sole source of legislation in the new Iraq. This was never a serious proposal but the opening gambit by several parties who used Islam as a weapon against the Ba'athist regime and its supposed socialist ideology.
Under the compromise, the sharia is mentioned as one source of Iraqi law. This is reasonable: There is much in the sharia that reflects centuries of customs, traditions and practices that do not contravene the Universal Declaration of Human Rights of which Iraq was one of the first signatories.
The draft constitution offers yet another important compromise. It allows the two Kurdish enclaves of the north to retain the autonomy that they have enjoyed since 1991. The compromise was designed to avoid a battle between those who want a federal system, patterned on Germany, and those who believe that federalism is inapplicable to Iraq.
This writer supports the latter view. A federation comes into being when two or more existing states come together to form a single one. This is not applicable to Iraq which was put on the map as a unitary state from the start. There is also the need for a strong central authority to distribute the oil revenue and manage the nation's water resources.
Nevertheless, it is impossible to re-impose a highly centralized state. Those Kurds who have enjoyed autonomy for the past 13 years are unlikely to accept any system in which all key decisions are made in Baghdad.
There are aspects of the proposed draft with which it is hard to agree:
* Having both an executive president and a prime minister is a recipe for perpetual fights at the summit of the state. Things could become even more complicated: The draft envisages the appointment of two vice presidents, presumably to represent ethnic and religious minorities, thus encouraging communalism at the highest level.
* The new constitution cannot emphasize both the concept of "Iraqiness" (Uruqa) and encourage ethnic and/or religious sectarianism.
* The decision to impose quotas for women - 25 percent in the parliament and 40 percent in government departments - is not helpful. Added to the quotas for religious and ethnic minorities, these "reserved places for women" could complicate the task of forming an efficient administration with the help of the most qualified Iraqis.
Helping women secure a bigger role in the decision-making process could better be assured by political parties and, later, cabinet ministers, on an informal basis. The parties, for example, could include more women in their electoral lists. More women could also be appointed to key positions such as governorships of provinces, ambassadorships and the management of major state-owned corporations. There is no need for constitutional "charity," so to speak.
The Governing Council has already taken a much more important step towards removing discrimination against women by canceling the law on "identity and personal matters." That infamous law made women subservient to men, in many cases treating them as second-class citizens.
Overall, the Governing Council has come up with a credible draft. That success must be seen as further encouragement to those who believe that, given a chance, most Iraqis can learn the rules of democratic politics. And that, in turn, is a strong argument for holding free and fair elections as soon as possible.
E-mail: amirtaheri@benadorassociates.com

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Crisis Delayed
The Iraqi interim constitution could fail.
By Andrew Apostolou
BAGHDAD & SULAIMANI, IRAQ -- Iraqi politicians have been congratulating themselves on the interim constitution that they agreed on March 1, 2004. Adnan Pachache, a Sunni Arab representative on the Iraqi Governing Council (IGC), called the transitional administrative law "an inspirational document which looks to the future." The initial coverage has been favorable, viewing the text as a series of sensible compromises, such as over the role of Islam in Iraqi politics and Kurdish autonomy. An arguably more accurate interpretation is that the carefully drafted document, with its often deliberately vague language, will struggle to survive the ambitions of Iraqi politicians. Not one of the Iraqi parties and factions has given up their sometimes-incompatible aims. Instead, they have simply agreed to delay the inevitable clash between them.
The compromise on the role of Islam is particularly unconvincing and could prove to be a time bomb. The provision on the role of religion is riddled with contradictions. Islam is "a source of legislation," but not the sole source. The document, however, is careful not to name other sources of legislation. Under the interim constitution, no law can be adopted which is inconsistent with the basic principles of Islam, which implies an Islamic veto on legislation. Yet the document goes on to say that no law can be adopted which contravenes democratic principles or civil rights, a counter veto to that handed to the Islamists. The contradiction may not be apparent to American diplomats who repeat the claim religion is not incompatible with democracy like a mantra, but the inconsistency is obvious to secular Iraqis, particularly women and the Iraqi Kurds.
One need look no further than the controversy over December 2003's IGC decree 137 which introduced sharia (Islamic religious law) in the place of secular family law to see how poorly democratic values are entrenched. Passed at a time when key secular members of the IGC were out of the country, and the chairman of the IGC was a Shia Islamist, decree 137 was denounced by the Kurds, women's groups, and some secular parties as undemocratic and discriminatory. Ambassador Bremer refused to sign decree 137, which meant that it could not be implemented.
Although decree 137 never had any force, the IGC bowed to pressure from women's groups in particular and symbolically repealed the decree on February 27, 2004. The reaction of some of the Shia Arab members of the IGC to the February 27, 2004 vote was troubling and revealing. Unhappy at losing the vote on decree 137, eight Shia members of the IGC walked out of the session when women's groups in the room cheered and shouted their pleasure at the vote. The eight Shia members did not just accept their defeat with ill grace. They then attempted to nullify their defeat through the interim constitution negotiations, a bid to put Islam on the statute books by every route available. The Shia Islamists and their allies are likely to continue with these tactics and can be expected to seek to undermine the current compromise text.
The provisions on oil revenues are similarly lacking in detail. In theory, oil revenues will be equitably distributed, but the recently closed U.N. Oil for Food program had a similar aim and failed dismally. The Kurds, always denied their proper share of Iraq's national wealth, are happy with the promise in the interim constitution that the future central government of Iraq has a duty to parcel out oil income in a fair manner. There is, however, nothing in this document that will prevent a future Iraq government from short changing the Kurds as had happened so often in the past. The best protection is for the regions, whether Kurdish or Shia Arab, to own and control the oil within their regional boundaries -- which Ambassador Bremer has consistently opposed.
Women have done poorly in the interim constitution. The aim is to give women 25 percent representation in the future national assembly, but the goal is not binding. The British government has taken the view that 25 percent should be the minimum. By contrast, Ambassador Bremer, understandably unwilling to pick more fights with the Islamists than was strictly necessary, has been keen to avoid any provision that smacked of quotas for women.
The most positive elements in the interim constitution, the clauses that could keep the interim constitution and Iraq together, relate to federalism. Kurdish autonomy, established in a federal region in all but name in 1992, has been accepted and validated. The agreement now extends the federal-style autonomy under which the Kurds have flourished to the rest of Iraq. Arab provinces can now join together as autonomous regions. Federalism could prevent a return to past abuses.
Concentrating power in the hands of a few politicians in a Baghdad based centralized state is what allowed men like Saddam Hussein to seize power so easily in Iraq. As importantly, federalism could thwart the Islamists, should they seize power in Baghdad, from imposing their views on the rest of the country.
The terrible irony is that Ambassador Bremer, fearing that Iraqi might break up, has consistently stressed a strong central state with only token federalism. The unitary state has been the disaster of Middle Eastern politics, creating the context within which tyranny can flourish. By distributing power away from the center, through giving the long-repressed Kurds and politically disenfranchised Shia Arabs in the provinces control over their own affairs, the interim constitution could give Iraqi democracy a sporting chance.
-- Andrew Apostolou is director of research at the Foundation for the Defense of Democracies. He is presently traveling in the Middle East.
http://www.nationalreview.com/comment/apostolou200403020835.asp

-----------------------------
Politics
More Kerry Hypocrisy: Offshore Corporations and Contributions
Posted Mar 1, 2004
Add this to the list of Sen. John Kerry's (D.-Mass.) hypocrisies: The Washington Post reports that on the stump the Democratic frontrunner often uses the term "Benedict Arnolds" to describe companies that send their operations overseas to avoid U.S. taxes. On the other hand, he has accepted fundraising assistance and campaign contributions from the top executives of such companies.
According to the Post, Kerry's presidential campaign has raked in $140,000 from employees of the firms. Citizen Works, a left-wing corporate watchdog, claims Kerry has received $119,285 from "the 25 Fortune 500 corporations with the most offshore tax-haven subsidiaries." He has taken $20,000 more, the Post reports, "directly from individuals at companies with mailing addresses offshore to avoid paying U.S. taxes, records show."
Moreover, "two of Kerry's biggest fundraisers, who together have raised more than $400,000 for the candidate, are top executives at investment firms that helped set up companies in the world's best-known offshore tax havens." The article points to Thomas Steyer and David Roux, each of whom has helped expatriate at least one American company.
Bush has taken more money than Kerry from such companies, the Post notes, but "the President has not made a major campaign issue out of clamping down on them."
"Kerry has come under attack from President Bush, as well as some Democrats," noted the paper, "for criticizing laws he voted for and lambasting special interests after accepting more money from paid lobbyists than any other senator over the past 15 years."

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Analysis: Crazy train of N. Korea nuke talks
By ED LANFRANCO
BEIJING, March 1 (UPI) -- Locomotives were one of the favorite metaphors used during the second round of the Six Party Talks aimed at eliminating North Korea's nuclear weapons programs that ended in Beijing over the weekend.
The slow pace of progress, even on reaching a basic consensus of what was accomplished during the diplomatic event, indicates that while all six nations remain on board and future discussions seem still on track, the train has not yet left the station.
A final joint communique between the United States, North Korea, China, South Korea, Japan and Russia could not be issued after three days of intense grinding negotiations. Talks ended on Feb. 28 with a face-saving chairman's statement.
At a press conference following the closing ceremony, Vice Foreign Minister Wang Yi from host nation China downplayed his disappointment, saying, "There's not much difference between the two" as neither requires a binding signature.
Wang said that the Democratic People's Republic of Korea -- the DPRK, or North Korea -- suggested additional revisions at a point in the meeting that did not leave time for other countries to get approval from their respective governments.
The final document ending round two of talks on the Korean nuclear crisis consisted of seven points, three containing no substance that progress was made and four others offering a vague timetable for another plenum and what it hopes to accomplish.
The first and second points covered when and where the talks took place as well as who headed each delegation identifying individuals by name, position and country. The seventh point said all participants expressed appreciation to the Chinese side for staging two rounds of discussions.
Most of the third and fourth points tried to put a good spin on the lack of forward movement. The United States and North Korea both know the destination, but remain at loggerheads on how to get there. All parties agreed the latest round of talks were beneficial.
The main gist of the Six Party Talks was contained in the fifth and sixth points of the chairman's statement.
Point five said, "Parties expressed their willingness to coexist peacefully" then gave a vague route ahead to "take coordinated steps to address the nuclear issue and address the related concerns."
The sixth point was an agreement "in principle" to hold another round of talks in Beijing no later than the end of the second quarter of 2004. It included the establishment of a working group in preparation for the next plenary session.
Before Wang's press conference, several senior U.S. officials from the Bush administration held a background briefing Saturday afternoon, providing a look into the slow process of negotiations with North Korea, including the final document for the second round of talks.
One of the high-ranking officers, speaking on condition of anonymity, described to United Press International the situation heading into the last day of talks:
"We believed last night (Feb. 27) that there was a statement there that was signed on to by everyone except the U.S.A.; and the U.S.A. signed on to it about 12:30 am Beijing time. And then this morning, we found out well, everyone was almost in the same place, but the DPRK was asking for some changes."
"This train had just gone down the track a little too far," the senior American official told UPI.
The railroad metaphor was also used by the head of the DPRK delegation Kim Kye-gwan at a news conference early Saturday evening.
UPI asked Kim what the difference was between the chairman's statement and the version North Korea wanted.
"The relationship between the statement made by the chairman, and also with my briefing on the second round of talks, I think I should make clear that the chairman's statement today is based upon the agreement of the six nations," Kim stated.
In his opening statement Kim said, "We made ourselves and our position very clear that we can freeze our nuclear weapons program and we wanted to hear the corresponding measures from the U.S. side."
"We view that the freeze on our nuclear weapons program is a first step towards denuclearization. Perhaps I can compare this to a train: We want to reverse the course of the train; in order to do so, we have to stop it first."
The North Korean offer to freeze its nuclear weapons program in exchange for energy assistance and security assurances during the talks was endorsed by South Korea, China and Russia, but only received expressions of "understanding and support" from the United States and Japan.
Since the crisis began in October 2002, the United States has said negotiations must involve all of the countries in the region as well as a total elimination of North Korea's nuclear weapons programs before aid and normalized relations with the DPRK are possible.
The American briefing described talks as "very successful in moving the agenda toward our goal of complete, verifiable and irreversible dismantlement of DPRK nuclear programs."
"CVID is now more on the table than ever. ... It is essentially accepted by all of the participants except DPRK," according to senior U.S. officials who added, South Korea, Japan, China and Russia are "on the same page with CVID; we think that is a pretty solid accomplishment."
Kim's description of the issue was blunt: "The U.S. side has repeated its lies again and again that they seek the so-called CVID of all the nuclear activities of the DPRK."
"The serious attitude of my delegation was not reciprocated by the U.S.; worse, we have confirmed the U.S. delegation does not have an attitude to resolve the nuclear issue through dialogue and negotiations," he added.
Kim stated dissimilarities in attitude between the DPRK and U.S. delegations "demonstrate fundamental differences of positions in the two governments toward resolving the nuclear issue. Such differences also exist in the concept and approaches for issue resolution."
UPI also asked Kim if the DPRK would be willing to allow outside inspectors of its civilian or military nuclear programs, specifically mentioning China.
The head of the North Korean negotiating team said, "I think if you are to freeze a nuclear weapons program, the verification process will follow."
"As to who and when and how, are something that should be held at the forthcoming talks and I think you can have answers to that when the talks are going on at a certain point in the future," Kim added.
On the controversial issue of North Korea's highly enriched uranium program, senior U.S. officials said, "DPRK denials are there but seem only to result in a self-isolation; there is a broadening of recognition as assorted scraps of information from around the world get together."
In one exchange with the North Koreans on uranium, the American side said, "You know, we know, and third countries know; and the fact is that's what's out there."
When the DPRK asked for evidence, the U.S. team responded, "The reasons that countries go to enriched uranium programs is because it's much easier to conceal than plutonium weapons programs. ... If we were to tell you everything that we knew, it would make easier for you to conceal them."
The third round of the Six Party Talks may indicate whether this crazy train stops then backtracks as the North Koreans demand, or rolls forward to a comprehensive and verifiable denuclearized destination that the Americans insist upon.
Observers must content themselves for now with the knowledge that the slow pace of movement at least makes it harder for negotiations to derail.
Copyright 2004 by United Press International.
All rights reserved.



Posted by maximpost at 6:12 PM EST
Permalink
Monday, 1 March 2004

>> SOMETHING ROTTEN IN BELGIUM...

Trial torments Belgian town
By Emma Jane Kirby
BBC correspondent in Arlon, Belgium
Police and media surround the suspect when he appears
Marc Dutroux is Belgium's public enemy number one.
The newspapers describe him as Belgium's most hated man.
His face is etched onto the Belgian psyche and although everybody here would rather forget about him, that is absolutely impossible at the moment.
The little town of Arlon is flooded with journalists - at least 200 different television companies are here beaming Belgium's shame across the world.
Turned away
Many hotels here have refused to take anybody associated with Marc Dutroux.
People will want to know why he was allowed out of prison after serving just three years of a 13-year sentence for raping five young children
His lawyers are having to sleep at the military barracks because no one will put them up.
Emotions are running so high here that even restaurants - which are benefiting from increased trade with so many media crews in town - are giving away a lot of the money they raise to charities connected to the families of the victims.
There is a huge amount of security, including for Mr Dutroux himself, who is making his court appearance in a bullet-proof vest.
Mr Dutroux could begin to give his evidence on Wednesday, and he and his co-defendants - which include his now ex-wife Michelle Martin - will stand behind a special bullet-proof glass cage.
Horrific detail
Security helicopters are constantly buzzing overhead.
There is not an entrance or exit from this court not covered by policemen and camera crews hoping to catch a glimpse of the defendants as they make their way back to prison.
Thousands of Belgians took to the streets in protest at delays
The whole day has been taken up with swearing in the jury - the 180 people brought to court first thing on Monday morning have now been whittled down to 12 jurors and 12 stand-ins.
But many people made excuses when asked to stand, saying they would be simply too upset and too sensitive to listen to the horrific details of these alleged crimes.
They did not want to have to spend the next four months listening to more and more details of a case that the whole country would like to put behind it.
Many questions
The big question among many is why this case took so long to come to trial.
There have been so many police blunders - including missing clues throughout this whole case.
Police failed to find two girls held in a house
We know for example that Mr Dutroux was building a dungeon, but police did not act on the tip-offs they received.
They did go to his house while two eight-year-old girls were being kept in the dungeon but could not find them.
We now know the girls starved to death.
Mr Dutroux is a convicted child rapist and people will also want to know why he was allowed out of prison after serving just three years of a 13-year sentence for raping five young children.
The families too will want answers to some of these questions.
Mr Dutroux's lawyers have presented a seven-page dossier supporting his claims to be part of a wider paedophile mafia which he alleges included senior politicians and businessmen.
But the prosecution begins first and they have started to read out the charges of rape, abduction and murder against him.
There is a lot to get through.
It will be a gruelling three to four months for the families, some of whom were already in tears on the first day of their ordeal.

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Lessons of Dutroux affair still to be learnt
Convicted child rapist Marc Dutroux has gone on trial in Belgium on charges of kidnapping and abusing six young girls in the 1990s and murdering four of them.
The case has spurred Switzerland and other European nations to step up the fight against paedophile crime.
Dutroux - who admits he abducted and imprisoned girls but denies murdering them - was arrested in 1996.
Eight years on hundreds of journalists have descended on the town of Arlon to report on his trial.
Street protests
The case caused public outcry after revelations of inept police work and led to huge demonstrations in Belgium.
Protests of a similar nature also took place elsewhere in Europe. In 2002 thousands of protesters took to the streets of Switzerland to demand more action to protect children from sexual abuse.
In 2001 a special unit was created within the Federal Police Office to deal with paedophile crime and coordinate investigations between cantons and with other countries.
But protesters argued that the unit should be supplemented by a formal nationwide cybercrime office, which was launched early last year.
Three cantons - Geneva, Vaud and Bern - have also set up local cybercrime offices to investigate paedophile activities on the internet.
Tackling crime
Some observers, however, say the Swiss authorities could do more to tackle paedophile crime.
"There has been no major improvement in the fight against paedophilia on the internet since the Dutroux affair," argues Pascal Seeger, the former head of canton Geneva's cybercrime unit.
Seeger, who left the police to work for the anti-paedophile non-governmental organisation, Action Innocence, told swissinfo not enough resources were available to fight sexual abuse of children.
"The laws don't give us enough latitude to arrest paedophiles, nor to punish them," he said.
He also expressed concern that the Swiss government's planned budget cuts would make it more difficult to track down paedophiles on a systematic basis.
But Philippe Kronig, who heads up the Swiss Coordination Unit for Cybercrime Control, disagrees with this assessment.
"We are able to handle the same workload that other countries deal with," he said.
Monitoring websites
Kronig's eight-strong team monitors suspicious websites by copying their contents on to their own systems. They then check them for links or references to Switzerland and determine whether their authors could be legally prosecuted.
But the unit is not supported across the country. Canton Zurich has declined to contribute financially, arguing that the bureau is too small to make a difference.
Critics also warn that any nationally-coordinated action is hindered by Switzerland's federal structure, which leaves responsibility for dealing with paedophile crime to individual cantons.
"We can only take over some tasks if the cantons specifically ask for them," said federal police spokesman, Guido Balmer.
"But most of them prefer to rely on their resources and knowledge."
Seeger argues that the issue is more complex and points out that the cantons and federal authorities cannot always decide who is ultimately responsible.
"It's unfortunate because the French and the Germans have managed to overcome the jurisdiction problem and achieved good results," he told swissinfo.
Positive results
Coordinated police operations over the past two years have led to investigations into more than 1,000 suspected child pornographers in Switzerland - including local officials, civil servants and teachers.
Last month the Swiss Conference of Cantonal Directors of Public Education produced a blacklist of suspected paedophile teachers in a bid to prevent anyone convicted from finding new employment by moving to a school in a different canton.
Gabriela Fuchs, the conference's spokeswoman, said the aim of the list was not to name people specifically.
"We don't give out names," she told swissinfo. "The cantons will only get a 'yes' or 'no' answer if someone is blacklisted."
The Catholic Church has also begun to deal with paedophile priests within its ranks, and says it is prepared to hand offenders over to the courts.
"If they are found guilty, they will have to go to prison like everybody else," said Marc Aellen, spokesman for the Swiss Bishops Conference.
swissinfo, Scott Capper
Copyright ? Swissinfo / Neue Z?rcher Zeitung AG
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Trial Opens Against 'Monster of Marcinelle'

March 1, 2004
by Danielle Russo
Arlon, Belgium (MND NEWSWIRE) - Almost eight years after a string of sex crimes played out in a small city in Belgium, the trial against accused rapist and killer Marc Dutroux began in the Arlon trial court this morning.
Dutroux, a 47 year old electrician also known as 'the monster of Marcinelle', is the center of one of the most chilling tales of pedophilia of modern times. He is alleged of kidnapping beating, raping, and stowing six young girls in a dark chamber underneath his home. Four of these girls died. Dutroux admits to having abducted them but denies any hand in their murder.
Paradoxically, when the 'monster' was captured in August 1996, Belgium had done away with the death penalty a few months earlier. Now, there are some who would like to see it reinstated for this case, even though some say that Dutroux was merely one link in a chain of criminals including local businesspeople, politicians, and members of the justice system.
Aside from Dutroux, three others are also on trial, including his ex-wife.
The trial is expected to last at least a few months, with 450 witnesses scheduled to be heard. In the small city of Arlon, more than 300 agents have been stationed around the courthouse for security purposes.
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Belgian justice on trial with Dutroux
By Chris Morris
BBC Europe correspondent
It has taken eight years for Belgium's most hated man to come to trial.
Dutroux says he was part of a wider conspiracy
But Marc Dutroux is finally due in court on Monday charged with the abduction, rape and murder of young girls in a case whose gruesome detail shocked the country and the world.
Long-standing allegations of a cover-up and charges of police incompetence led to mass protests against Belgium's archaic judicial system. But many fear the trial will still leave many questions unanswered.
Back in 1996, Mr Dutroux led police to the bodies of four young girls buried underground. Two eight-year-olds had starved to death in captivity. Two other girls were rescued from Mr Dutroux's cellar. One of them had been abused for 80 days.
What has made it worse are claims of a broad conspiracy and a paedophile network at the heart of the Belgian establishment.
I think the ordinary Belgian doesn't understand why it had to take eight years to judge a man whose crimes are so horrific
Mark Eeckhaut
De Standard newspaper
Belgian kidnap victim tells her story
Ordinary Belgians were and have remained stunned. Mark Eeckhaut from De Standard newspaper said: "The word that comes to mind is monster.
"I think the ordinary Belgian doesn't understand why it had to take eight years to judge a man whose crimes are so horrific, so I think 99% of Belgians maybe think the process is a waste of time."
Shock turned long ago to public fury. The police and judiciary seemed guilty of gross incompetence.
The first investigating magistrate was dismissed after having supper with one of the victim's families. Several prosecutors, police officers and witnesses have committed suicide. Evidence has gone astray.
After Mr Dutroux's arrest it transpired not only that he had been under surveillance, but also that he had served six years of a jail term for child rape.
Potential connecting information fell through the cracks between different police services. Worse still, police searched the house where two of his victims were hidden but failed to find them.
The pair later starved to death after Mr Dutroux was arrested on a completely separate issue - car theft.
The police faced further humiliation in 1998 when Mr Dutroux suceeded in escaping for three hours after overpowering an officer who was guarding him.
The interior and justice ministers resigned after the incident.
Several of the parents of the young victims later said they had lost faith in the will of the authorities to uncover the truth.
Mr Dutroux - who admits abduction, but denies murder - has accused the Belgian police and justice system of refusing to investigate leads he provided, which he says would prove that he was just part of a wider paedophile conspiracy.
But Belgian officials say that the long delay bringing the case to court partly results from the need to investigate these alleged networks, which they say do not exist.
'System on trial'
Back in 1996, hundreds of thousands took to the streets in the White March, one of the biggest protests Brussels has ever seen.
Thousands of Belgians took to the streets in protest
The government - shaken by the immense scale of public anger - promised changes to the constitution to reduce political interference in the judicial process.
But there is still a sense that the system itself is now on trial as well.
Conspiracy or no conspiracy, the system failed to follow clues and prevent terrible crimes taking place and then it failed to administer justice for eight long years.
Even now there is an unsettling sense of mystery hanging over this entire case.
Martine Van Praet, the lawyer charged with the defence of Belgium's most hated man says she fears it will be little more than a show trial.
"They've made him into a devil. And they say, 'There's the paedophile, the little girls, the horrible abuse'.
"They have made Mr Dutroux a devil and they are going to throw him away because he's been condemned, before the trial and it will leave the door open so all the bad things can continue."
But in a courtroom in the provincial city of Arlon, Mr Dutroux and three alleged accomplices, including his ex-wife are finally about to face Belgian justice.
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Deconstructing Belgium
Even after 173 years of nationhood, the Belgian state appears as implausible as ever. In a country united by pragmatism and divided by language, Khaled Diab asks whether Belgium will be torn apart by the force of words or be held together with the power of good sense.
Belgium celebrated its national day on Monday 21 July. As the nation kicked back its heels to enjoy the festivities, the royal family clocked in for their most important day's work of the year. While the strain of public life showed on some of the more obscure royals who snoozed in the aisles, King Albert II delivered his tenth anniversary address.
As is the custom, the easy-going Albert spoke in both French and Dutch. On the occasion of his 10 years on the throne, the king took the opportunity to express national pride and unity. But with no common language, no national newspapers or broadcasters, and an increasingly powerless federal government, the oneness of Belgium he sought to exalt was an extremely complex creature to pin down.
In fact, the royal family is one of the few threads holding the country's complex identity in place. Groping around for another symbol, he turned to sport. He referred to two rising Belgian icons - Kim Clijsters and Justine Henin-Hardenne - as symbols of national unity, and wished both of them luck as they battled for Belgium in the Fed Cup.
The sports-mad king was perhaps not just waxing lyrical because of Juju and Kimmy's historic moment - if lacklustre hour and a half - on the Roland Garros centre court in Paris, delivering him the first all-Belgian grand slam final (and title), exclusive access to the royal box and the opportunity to hand out the trophy.
I'm no monarchist and I certainly don't think that an elegant backhand or a killer serve should personify national identity. However, I can see the beautifully parallel careers of the tennis wonders - one a Fleming, the other a Walloon - both playing under the tricolours can raise the spirits, if not the essence, of modern Belgium.
Although the two enjoy a friendly rivalry and have such contrasting personalities, they have got on well since childhood. And the fact that they are tied so closely - Kim is the world's number two and Justine is number three - does not give a chance for regional envy or gloating to surface.
Nevertheless, the two young icons are daughters of their time and are living manifestations of the language fault line along which the country is slowly drifting apart: in public, Justine speaks French or English and does not speak Dutch, while Kim speaks Dutch or English, and prefers not to speak French. In fact, English is increasingly becoming the lingua franca in Belgium.
Post modern states of mind
To my eyes, Belgium, as a nation, can only be described as post-modern. The once central state apparatus is gradually being deconstructed and its competencies slowly devolved to the regions.
This devolution has resulted in a unique parallel system of government where power is divided geographically into regions and linguistically into communities. 'Regions' satisfied Walloon ambitions for greater regional economic power while 'communities' met Flemish aspirations for greater cultural autonomy.
The latter innovation came into existence to resolve the thorny issue of bilingual Brussels, which is predominantly French speaking but is historically and geographically Flemish. The settling of the status and borders of Brussels was the most ambitious constitutional reform Belgium had undergone since it was established in 1830.
And, just as a revolt at the unlikely venue of the opera house paved the way for Belgian independence in the 19th Century, the tiny village of Voeren/Fouron brought about the collapse of the national government in 1987 and sparked the reforms that would turn Belgium into a federal state.
'Federal' in Belgium has a special meaning. Whereas in most countries it means increasing centralisation of power, here it has meant the exact reverse. However, the most radical reform was to exclude the ultimate supremacy of national over regional government. This decoupling of hierarchies has led to the rather surreal situation of each region setting its own foreign policy.
It's hard to miss the apparent paradox of Belgium, while being one of the founder members of the European Union and home to most of its institutions, is concurrently dismantling its own instruments of state.
However, it can be argued that, in a unifying Europe, national boundaries are becoming less relevant. Strangely enough, the very fact that Belgium is at the heart of a larger evolving animal could be facilitating its own devolution.
One should not necessarily lament the passing away of the centralised Belgian state. This gradual devolution was born of a pragmatic awareness - a Belgian compromise, no less - that nationalistic tensions could quickly flare up into violence if they were not effectively dissipated.
Like a couple whose marriage was on the rocks, Belgium decided to go to counselling and reinvent its relationship. Now the two sides have more breathing space and are increasingly able to do their own thing. But this has led to a growing level of estrangement.
Now crunch time is approaching, and the disgruntled spouses have to decide whether they are willing to give union another chance under new terms or whether they should start proceedings for a divorce.
On the face of it, divorce might be the best option to end this weird union. But language is not everything. For historic and cultural reasons, Flemings are not willing to countenance becoming part of the Dutch-speaking Netherlands and, similarly, Walloons do not want to join France. In fact, although language divides Belgians, it also unites them in their respective distrust of their linguistic cousins across the border.
Since Belgians do not want to become part of another country and each region is too small to survive effectively on its own in the big, bad world, it is in the interest of Flemings and Walloons to stick it out together.
Beyond words
For the marriage to work, Belgians need more to bind them than a royal family, a passion for sport and a taste for beer, chocolate and fries. Apart from Brussels and its environs, people living in one region have very little awareness of what's going on in the other and very little contact with its people and culture - in fact, it's almost like being in two different countries.
In order to help overcome this in the short term, the regional media needs to give more attention to issues in the other part of the country. But the biggest barrier to greater mixing and understanding is language. Belgians need some way to bridge the language divide in order to make Belgium feel more like a single country.
One effective way to ensure that future generations move closer together is to introduce a system of bilingual education in which children receive instruction in a mix of their mother tongue and the other language.
Canada has successfully implemented bilingual education for years. In addition to promoting better social cohesion between communities, such a system has actually been shown to improve the academic and linguistic aptitude of students.
With the language barrier penetrated, a new generation of bilingual Belgians will move around the country more and intermix to a greater degree, enhancing the sense of shared nationhood.
Although the musical variety performance under the Justice Palace on 21 July underscored the cultural schism separating Belgians, it nonetheless demonstrated how joint cultural events can do their little bit to bring people closer - as was exhibited by a group of teenage Walloons who were delighted to discover that Hooverphonic was a Flemish rather than English band!
Perhaps Belgium should follow the example of some of its musicians. Urban Trad nearly stole the show in the kitsch world of Eurovision by demonstrating, with their wordless song, to Europeans - who are also divided by language - that people share something beyond words.
Through bilingual education and more intermixing as cultural equals, Belgians can make this bicultural marriage work by putting language in the backseat.

July 2003
http://www.expatica.com/source/site_article.asp?subchannel_id=49&story_id=1579

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...IN THE U.S.?

China issues 2003 US human rights record
www.chinaview.cn 2004-03-01 10:07:07
BEIJING, March 1 (Xinhuanet) -- China issued the Human Rights Record of the United States in 2003 Monday in response to the Country Reports on Human Rights Practices for 2003 issued by the U.S. on Feb. 25.
Released by the Information Office of China's State Council, the Chinese report listed a multitude of cases to show that serious violations of human rights exist on the homeland of the United States.
"As in any previous year, the United States once again acted as'the world human rights police' by distorting and censuring in the'reports' the human rights situation in more than 190 countries and regions across the world, including China. And just as usual, the United States once again 'omitted' its own long-standing malpractices and problems of human rights in the 'reports'. Therefore, we have to, as before, help the United States keep its human rights record," said the report.
The report reviewed the human rights record of the United States in 2003 from six perspectives: Life, Freedom and Safety; Political Rights and Freedom; Living Conditions of US Laborers; Racial Discrimination; Conditions of Women, Children and Elderly People; and Infringement upon Human Rights of Other Nations.
This is the fifth consecutive year that the Information Office of the State Council has issued human rights record of the United States to answer the Country Reports on Human Rights Practices issued annually by the State Department of the United States. Enditem


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...IN CHINA...
China
Briefing to the 60th Session of the UN Commission on Human Rights
January 2004
Objective
The Commission on Human Rights should adopt a resolution condemning China's violations of the rights to freedom of expression, association and assembly, religion and belief, repression of minorities in Tibet and Xinjiang and violations of the right to non-discrimination for people living with HIV/AIDS. The resolution should urge judicial proceedings that meet international standards. It should also urge China to cooperate fully with UN monitoring mechanisms.
Background
Human Rights Watch has documented abuses directed against political dissidents, religious believers, labor activists, tenants' rights advocates, people living with HIV/AIDS, alleged "separatists" in Xinjiang and Tibet, and North Korean asylum seekers.
Freedom of association and the right to strike. China's constitution and the International Covenant on Economic, Social, and Cultural Rights (which China has ratified) guarantee the right to freedom of association, but China prohibits independent trade unions. Labor protests have multiplied in many regions. In May 2003, after problematic trials, Liaoning province labor activists Yao Fuxin and Xiao Yunliang received seven and four-year sentences, respectively, for their role in organizing protests. Family members report that both men are seriously ill.
Xinjiang-Uighur Autonomous Region. China uses the U.S.-led "war on terror" to leverage international support for its crackdown on ethnic Uighurs in northwestern Xinjiang. Chinese authorities do not distinguish between peaceful and violent dissent, or between separatism and international terrorism. The state's crackdown on Muslim Uighurs has included summary trials and mass sentencing rallies. There have been credible reports of the extensive use of torture and the death penalty. The Chinese government has closed printing houses producing unauthorized religious literature; instituted mandatory "patriotic re-education" campaigns for religious leaders; stepped up surveillance of Muslim weddings, funerals, circumcisions, and house moving rituals; arrested clerics; raided religious classes; banned traditional gatherings; and leveled mosques.
Tibet. The Chinese government continues to impose severely repressive measures limiting any display of support for an independent Tibet. China curtails the Dalai Lama's political and religious influence through control of religious and cultural expression of Tibetan identity. In 2002, after a trial marred by lack of due process, a court sentenced Tenzin Delek Rinpoche, a locally prominent lama, to death with a two-year suspended sentence. He had been charged with causing explosions and "inciting the separation of the state." His alleged co-conspirator, Lobsang Dondrup, was executed. Several of Tenzin Delek's associates remain in prison; close to a hundred others were detained, many for attempting to bring information about the crackdown to the attention of the foreign community. Credible sources report ill-treatment and torture in detention.
The HIV/AIDS epidemic. China faces what could become the largest HIV/AIDS epidemic in the world. But widespread discrimination by state agencies and individuals forces many people with HIV/AIDS to hide without access to treatment or care. People living with HIV/AIDS interviewed by Human Rights Watch report that hospitals test them without their consent or knowledge and refuse care if they test positive for HIV. Persons at high risk of HIV/AIDS, such as injection drug users, face detention without trial in prison-like "forced detoxification centers." Such methods drive persons at high risk underground, out of reach of any state AIDS prevention programs. In the 1990s, profitable but unsafe state-run blood collection centers spread HIV in many regions of the country. The state has failed to investigate the role of local authorities in the epidemic or to hold officials accountable. Some responsible officials have been promoted. Although China has taken steps by promising to offer anti-retroviral treatment to impoverished persons with HIV/AIDS, the lack of legal and institutional reforms to protect their rights means such promises will be difficult to realize.
Forced eviction. China's rapid economic development has led to forced evictions in urban and rural areas. Residents complain of lack of advance notice, low compensation, and violent evictions by hired thugs and bulldozers. Chinese laws permit forced evictions to continue even while residents are suing to prevent them; many courts refuse to hear the cases. Protests have escalated, and there has been a series of suicide protests. In response, police have jailed tenants' rights advocates. The Chinese government has promised policy reforms, but while local Party officials can intervene to influence courts, these will be difficult to implement.
Restrictions on the Internet. Chinese authorities continue to restrict use of the Internet. In May 2003, a Sichuan provincial court sentenced Internet activist Huang Qi to a five-year prison term on charges of subversion. Others have been apprehended or sentenced for posting political opinions on bulletin boards or chat rooms. Chinese users cannot access foreign sites government officials consider "sensitive," domestic sites are arbitrarily shut down, and Internet service providers--including international ISPs such as Yahoo--are prohibited from publishing news that has not been officially cleared. Monitoring and censorship of electronic mail is routine, and China is reportedly training "cyber police" to monitor the activities of Chinese activists.
Repatriation of North Korean asylum seekers. China has forcibly repatriated North Korean refugees who have fled the harsh political and economic conditions in their homeland. China is a party to the 1951 Refugee Convention and its 1967 Protocol which prohibit such repatriation. China has not permitted the U.N. High Commissioner for Refugees to establish a presence on the China-North Korean border.
Judicial proceedings. Police officials, prosecutors, and judges routinely compromise the legal rights of defendants. Although the 1997 Criminal Procedure Law revisions reinforced the rights of defendants, there is no presumption of innocence; defendants are denied timely access to counsel or to counsel of their own choosing; and defense counsel's ability to gather and present evidence is severely limited before and during any trial. China maintains "re-education through labor," a system of administrative punishment that incarcerates thousands of citizens each year without benefit of judicial review.
Recommendations
The Commission on Human Rights should:
Call on the Chinese authorities to immediately and unconditionally release all those held for peacefully exercising their rights of free speech, expression, and association, including those accused of religious or political offenses, labor activism, and so-called separatist activities; to abolish the reeducation-through-labor system; to legislate against discrimination on the basis of HIV status; to investigate and hold accountable officials who profited from blood collection centers that spread HIV and covered up the epidemic; to amend Chinese laws and regulations to bring them into conformity with international human rights law; to rescind the reservation to article 8(1)(a) of the International Covenant on Economic, Social and Cultural Rights; and to permit workers to form and join their own trade unions and to bargain collectively.

Urge China to ratify the International Covenant on Civil and Political Rights, which it signed in October 1998.

Urge revision of the Criminal Procedure Code and Law on Protecting State Secrets in line with international human rights standards.

Insist that China honor its refugee protection obligations, immediately halt all repatriation of North Koreans entering China, and begin a dialogue with the U.N. High Commissioner for Refugees about access to the China-North Korea border.

Urge China to cooperate fully with U.N. mechanisms, including by inviting thematic rapporteurs to visit the country.
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...IN IRAN...

Iran
Briefing to the 60th Session of the UN Commission on Human Rights
January 2004
Objective
The Commission on Human Rights should build upon the United Nations General Assembly's resolution on the human rights situation in Iran by re-establishing a Special Procedure to monitor and report on Iran's implementation of the resolution's recommendations. The Commission should also call on the Iranian authorities to implement the recommendations made by the Working Group on Arbitrary Detention in its June report.
Background
Iran's standing invitation to the Commission's thematic mechanisms was a welcome development in 2002.
However, Iran's human rights situation has steadily deteriorated since the 59th session of the Commission. In June and July armed plainclothes security forces attacked peaceful protesters. The Office of the Chief Prosecutor ordered the detention of scores of students, writers and journalists throughout the year. The use of torture in interrogations of political prisoners was highlighted by the death in custody of photojournalist Zahra Kazemi in July. The visit of the Special Rapporteur on the promotion and protection of the right to freedom of opinion and expression was undermined by the arrest and detention without charge of at least one activist who spoke with him in Tehran.
Iran held its first two dialogues on human rights with the European Union, but the sessions have failed to produce results.
Absence of Due Process. The Office of the Chief Prosecutor, led by Said Mortazavi, routinely ignored Iranian and international law by ordering the arrest of journalists, students and writers who criticized government policies. Few of those formally charged or tried had access to an attorney, and many trials occurred in camera. Human Rights Watch is especially alarmed by the routine use of prolonged solitary confinement in combination with videotaped confessions. Some political prisoners, including Taqi Rahmani, Hoda Saber and Reza Alijani, have been in detention without charge for at least six months, much of it incommunicado. Siamak Pourzand, a 74-year-old journalist and activist, has been held in detention for over nine months and his family members are greatly concerned for his health.
Freedom of Expression. Many journalists and writers remain behind bars solely for exercising their right to freedom of expression. These include Akbar Ganji, Hassan Youssefi-Eshkevari, Abbas Abdi, Iraj Jamshidi, Taqi Rahmani, Hoda Saber and Reza Alijani. Lawyers who defend writers, journalists, and activists who have spoken out against the government are also at risk of arrest and detention. Plainclothes groups have also threatened those who advocate publicly for human rights. The government has not held these groups to account, and law enforcement forces often stand aside during confrontations. Nobel Prize recipient Shirin Ebadi was recently threatened by Ansar-e Hezbollah members while addressing students at al-Zahra University.
In 2003, following the attack on the reformist press launched three years earlier which resulted in the closure of all but two reformist papers, the authorities turned to the budding internet media. Chief Prosecutor Mortazavi ordered the arrest of several popular weblog writers, including Sina Motallebi, and the government attempted to block access to web publications. On January 7, 2003, it was reported that the judiciary ordered the blocking of reformist news website Emrooz to Iranian internet subscribers.
Torture and Ill-Treatment in Detention. The routine lack of respect for basic due process, as well as the frequent use of solitary confinement and prolonged interrogations heighten the risk of torture and ill-treatment in detention. Many freed political prisoners report regular beatings with cables on the back and soles of feet, assault with boots and fists on the head and torso, and forced immobilization in contorted positions. These methods are often used during and prior to interrogations and demands for videotaped or signed confessions.
The Working Group on Arbitrary Detention expressed concern in its June 2003 report about lack of access to counsel, abuse of solitary confinement practices, and breaches of due process.
Discrimination Against Religious and Ethnic Minorities. The lack of public school education in the Kurdish language remains a perennial source of Kurdish frustration. Followers of the Baha'i faith also continue to face persecution, including being denied permission to worship or to carry out other communal affairs publicly. At least four Baha'is are serving prison terms for their religious beliefs.
Recommendations
The Commission on Human Rights should:
Re-establish a special mechanism to monitor and report on the human rights situation in Iran.
Call on the Iranian authorities to facilitate visits by the U.N. Special Rapporteurs on violence against women, torture, and freedom of religion; and make public and time-based commitments to full implementation of the Working Group on Arbitrary Detention and other Special Rapporteurs' recommendations.
Call on Iran to:
ratify the CEDAW and CAT treaties, and announce an official review of reservations entered upon ratification of other major human rights instruments;

release all political prisoners;

authorize an independent and impartial investigation into judicial abuses by the Office of the Chief Prosecutor;

abolish of the death penalty for juvenile offenders (persons convicted for offences committed under the age of 18) as a first step towards total abolition of the death penalty;

amend the press law to safeguard freedom of the press and permit publications closed by unlawful judicial procedures to reopen;

establish strict limits on the use of solitary confinement in prisons, as well as the use of videotaped interrogations;

establish and enforce strict limits on incommunicado detention, and ensure prompt access to lawyers and family members for detainees. Courts should not admit as evidence incriminatory statements obtained through use of coercion; and

initiate a program of action to identify and address discrimination against minority groups.
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...IN CHECHNYA...

Russian Federation/Chechnya
Briefing to the 60th Session of the UN Commission on Human Rights
January 2004
Objective
The Commission on Human Rights should adopt a strong resolution on the situation in Chechnya, condemning ongoing violations of human rights and international humanitarian law by both parties to the conflict; urging the Russian authorities to establish a genuine accountability process for these abuses; calling on Russia to desist from coerced returns of internally displaced persons and to ensure their well-being; calling on Russia to invite key U.N. thematic mechanisms, in particular the Special Rapporteurs on torture and on extrajudicial, summary or arbitrary executions; and urging Russia to agree to a new Organization for Security and Cooperation in Europe (OSCE) mandate for Chechnya.
Background
The October 2003 presidential elections in Chechnya did not change dynamics in the republic. Despite government claims of normalization, the situation there continued to be very tense.
Russian forces round up thousands of men in raids, loot homes, physically abuse villagers, and frequently commit extrajudicial executions. Those detained face beatings and other forms of torture, aimed at coercing confessions or information about Chechen forces. Federal forces routinely extort money from detainees' relatives as a condition for release.
"Disappearances" remain a hallmark of the conflict, and their frequency rose sharply in early 2003. According to statements by pro-Moscow Chechen officials, in the first half of 2003 an average of two people went missing every day, many of them after being detained by Russian forces. The Russian human rights group Memorial documented 294 "disappearances" between January and November 2003, including forty-seven people whose corpses were later discovered in unmarked graves or dumped by the roadside. The group estimates that the real number of "disappearances" was three or four times higher.
Starting in spring 2003, the conflict increasingly spilled over into other regions of Russia. Human Rights Watch research in Ingushetia in July found that Russian forces regularly conducted military operations there, targeting both Chechen internally displaced persons but also the local Ingush population. A series of suicide bombings in the North Caucasus and Moscow, often carried out by Chechen women, reinforced fears of a spreading conflict.
Harassment of applicants to the European Court of Human Rights emerged as a new and worrisome trend. After having "disappeared" an applicant in June 2002, Russian forces extrajudicially executed another applicant and her family in May 2003. Also, nongovernmental groups that represent Chechen victims of human rights abuses before the Court have documented threats against other applicants or their families in at least seven other cases.
IDP crisis. Russian authorities have continued to put undue pressure on displaced persons to return to Chechnya, where they remain at risk. In 2003, they closed two more camps for internally displaced persons in Ingushetia. Although eventually some camp dwellers were allowed to resettle in Ingushetia, months of carrot-and-stick tactics had already resulted in the return of many to Chechnya. Following a September 2003 visit to the region, the U.N. Representative of the Secretary General for Internally Displaced Persons stated that "IDPs in camps in Ingushetia were acutely apprehensive that the camps might be closed and that they might be forced to return to a situation in Chechnya which they regarded to be unsafe..." He also noted that persons who had returned to Chechnya due to incentives asserted that "they had not found much of what they had been promised including compensation and adequate humanitarian assistance and that they remained seriously concerned about the security situation and their own safety."
Abuses by Chechen fighters. Chechen rebels were responsible for several suicide bombings in and around Chechnya that caused major loss of civilian life. In December 2002 and May 2003, suicide bombers destroyed administrative buildings in Grozny and Znamenskoe. In June, a suicide bomber drove a truck into a military hospital in Mozdok. Chechen rebel groups may also have been responsible for a series of other suicide bombings in Chechnya and other parts of Russia. Rebel fighters also continued their assassination campaign against civil servants and others who cooperated with the Moscow-appointed administration in Chechnya.
Accountability. Russia continued to resist establishing any meaningful accountability process for crimes committed by its forces. Although the procuracy opened hundreds of criminal investigations into abuses by Russian troops, in most cases officials failed to conduct even the most basic investigative steps (including questioning eyewitnesses and relatives). As a result, most investigations remained unsolved and almost none were sent to the courts.
In one significant positive development, after three years of convoluted legal battles, Yuri Budanov, the only high-ranking officer tried for abuses related to the Chechnya conflict, was found guilty of murdering a young Chechen woman and sentenced to ten years' imprisonment. Budanov's conviction demonstrates that the Russian authorities are capable of bringing to justice those responsible for abuse provided the political will is there.
Access. In contrast to 2002, for most of the year no international monitors worked in the region. The OSCE Assistance Group's mandate expired in late 2002 and Russia has since refused to agree to a mandate that contains a human rights component. The Council of Europe's experts were withdrawn from Chechnya in early 2003, after a bomb attack on their convoy, and the volatile security situation since has not allowed them to return. In the four years of the conflict, Russia has not complied with U.N. resolutions calling for deployment of U.N. thematic mechanisms, with the exception of the Representatives of the Secretary-General on children in armed conflict and internally displaced persons. Among those who have been seeking access for years are the Special Rapporteurs on torture and on extrajudicial, summary, and arbitrary executions. While agreeing to a visit by the Special Rapporteur on violence against women, Russian authorities have canceled scheduled missions on a number of occasions, citing security conditions.
The Russian military periodically prevents access by journalists and human rights activists to the remaining tent camps in Ingushetia.

Recommendations

The Commission on Human Rights should:
Condemn ongoing violations of human rights and humanitarian law by both parties to the conflict. The resolution should call on the Russian authorities to immediately put an end to arbitrary detention and to observe international and Russian legal standards; to end the use of torture and ill-treatment; to put an end to the pattern of enforced disappearances; to end extrajudicial executions; and to stop harassing and threatening applicants to the European Court of Human Rights. It should call on Chechen rebel leaders to cease all attacks on civilians, including retaliatory attacks on Chechen civilians who cooperate with the Russian authorities.

Insist on accountability. The resolution should call on the Russian authorities to ensure meaningful investigations into all reported crimes by Russian troops against civilians in Chechnya or Ingushetia, and for the prosecution of the perpetrators; it should call on the Russian authorities to publish a detailed list of all current and past investigations into such abuses and indicate their current status; it should renew its call for a national commission of inquiry to document abuses by both sides to the conflict; and make clear that Russian authorities' continued failure to make progress on accountability will result in the establishment of an international commission of inquiry to document and produce an official record of abuses.

Call on Russia to desist from coerced returns of internally displaced persons and to ensure their well-being. The resolution should strongly condemn Russia's efforts to force internally displaced persons to return to Chechnya. It should call on the Russian authorities to stop moving any displaced persons to parts of the conflict zone where their safety and security cannot be guaranteed and where international humanitarian agencies do not have free and safe access.

Call on Russia to invite key U.N. thematic mechanisms, particularlythe Special Rapporteur on torture, the Special Rapporteur on extrajudicial, summary or arbitrary executions, and the Special Rapporteur on violence against women. Russia should also renew its invitation to the High Commissioner for Human Rights to visit the region and report to the Commission on the findings.

Call for renewal of the OSCE Assistance Group's mandate and cooperation with the Council of Europe. The resolution should call on the Russian government to agree to the renewal of the Assistance Group's mandate that expired on December 31, 2002, which should include a human rights component. It should also call on the authorities to cooperate with the Council of Europe.
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...IN EGYPT...

Egypt's Torture Epidemic
A Human Rights Watch Briefing Paper
February 2004
Torture in Egypt is a widespread and persistent phenomenon. Security forces and the police routinely torture or ill-treat detainees, particularly during interrogation. In most cases, officials torture detainees to obtain information and coerce confessions, occasionally leading to death in custody. In some cases, officials use torture detainees to punish, intimidate, or humiliate. Police also detain and torture family members to obtain information or confessions from a relative, or to force a wanted relative to surrender.1
While torture in Egypt has typically been used against political dissidents, in recent years it has become epidemic, affecting large numbers of ordinary citizens who find themselves in police custody as suspects or in connection with criminal investigations. The Egyptian authorities do not investigate the great majority of allegations of torture despite their obligation to do so under Egyptian and international law. In the few cases where officers have been prosecuted for torture or ill-treatment, charges were often inappropriately lenient and penalties inadequate. This lack of effective public accountability and transparency has led to a culture of impunity.
Police and state security agencies continue to use torture in order to suppress political dissent. In the past decade, suspected Islamist militants have borne the brunt of these acts. Recently, increasing numbers of secular and leftist dissidents have also been tortured by police and security officials. In March and April 2003, for instance, the authorities tortured and ill-treated in detention some demonstrators and alleged organizers of public protests against the U.S. led war in Iraq.2
Egyptian police regularly detain street children they consider "vulnerable to delinquency" or "vulnerable to danger."3 During arrest these children are routinely beaten with fists and batons. Children also told Human Rights Watch that police subjected them to sexual violence or tolerated sexual violence by adult detainees while in custody. They face brutal and humiliating treatment and, in some cases, this ill-treatment was so severe as to constitute torture.4
In addition, groups made vulnerable by stigma or social marginalization continue to be subject to police torture and ill-treatment. Many men arrested solely for consensual homosexual conduct, or suspicion thereof, have been beaten and tortured in police custody.5
Methods of torture include beatings with fists, feet, and leather straps, sticks, and electric cables; suspension in contorted and painful positions accompanied by beatings; the application of electric shocks; and sexual intimidation and violence.
Deaths in custody as a result of torture and ill-treatment have shown a disturbing rise in the past two years. Egyptian human rights organizations report at least ten cases in 2002 and seven in 2003 [see Appendix]. The Prosecutor General's office opened criminal investigations in some of these cases following formal complaints filed by human rights lawyers and family members. To Human Rights Watch's knowledge, none of these investigations have led to criminal prosecution or disciplinary actions against the perpetrators.
In the September-November 2003 period alone, Egyptian human rights organizations reported four cases of deaths in custody.
The Cairo-based Human Rights Centre for the Assistance of Prisoners (HRCAP), reported thatMuhammad `Abd al-Sattar al-Roubi, a 26-year old engineer, died on September 19 while in State Security Investigations (SSI) custody in Ebshiway detention center in Tibhar (al-Fayyum), after being tortured in an attempt to extract from him a confession regarding his political affiliations. The HRCAP reported that SSI officers told al-Roubi's father that his son had committed suicide. No autopsy report was made public stating the cause of death.6
The Association for Human Rights Legal Aid (AHRLA), an Egyptian human rights organization, reported that Muhammad `Abd al-Qadir, thirty-one, died on September 21, 2003, after being tortured in SSI custody in Cairo. Family members who saw Muhammad while he was still in custody said he told them that he had been beaten and tortured with electricity, and that marks of this torture were visible on his face and body. On September 21, police reportedly told his family that Muhammad had been moved to al-Sahil hospital; hospital officials then told the family his body had been moved to the Zainhum morgue for forensic examination. No forensic report was made public. AHRLA reported that medical personnel at the hospital told the family that Mohammad died as a result of being harshly beaten, and family members who saw the body said it bore evident signs of torture and ill treatment.7
The Egyptian Organisation for Human Rights (EOHR) reported that Mahmud Gabr Muhammad-a worker and resident of the al-Sayyida Zainab neighborhood- died on October 4, 2003, while being detained without charge in the al- Sayyida Zainab police station. Mahmud was arrested that day while he was in a caf?. A relative of the victim told EOHR that there were visible injuries on the corpse, including bruises under the knee, bleeding from the mouth, and other injuries all over the body. EOHR called for an investigation and a forensic examination in order to determine the cause of death.8
On November 6, 2003, the EOHR reported the death in custody of Mas`ad Muhammad Qutb, an accountant at the Engineers' Syndicate. He was reportedly arrested on November 1, 2003, by the SSI for being a member of the banned Muslim Brotherhood. He died on November 4, 2003, while being transferred from the SSI office in Gabir Ibn Hayan to Umm al-Masryyin Hospital. EOHR, citing al-Duqi police station report (No. 9214/2003), said that the Prosecutor General's investigation confirmed signs of inflicted injuries on the corpse and ordered a forensic examination to determine the cause of death. 9
Egypt is party to the major human rights treaties dealing with torture, notably the International Covenant on Civil and Political Rights (ICCPR) and the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment (Convention against Torture). Hence, Egypt is strictly obliged to prohibit any form of torture and ill-treatment and to take positive measures in order to protect victims of torture by carrying out thorough, impartial, and prompt investigations into allegations of torture and ill-treatment and filing criminal charges where appropriate. However, Egypt did not sign the Optional Protocol to the ICCPR, which establishes a mechanism for receiving individual complaints. Egypt also entered reservations with regard to Articles 21 and 22 of the Convention against Torture. Those articles affirm the right of State parties to the Convention to file torture-related complaints against another state as well as the right of victims of torture to file grievances directly with the committee that oversees compliance with the Convention.
Article 42 of Egypt's Constitution provides that any person in detention "shall be treated in a manner concomitant with the preservation of his dignity" and that "no physical or moral (m`anawi) harm is to be inflicted upon him." Egypt's Penal Code recognizes torture as a criminal offence, but the definition of the crime of torture falls short of the definition in Article 1 of the Convention against Torture. For example, under article 126 of the Penal Code, torture is limited to physical abuse, occurs only when the victim is "an accused," and only when torture is being used in order to coerce a confession. While confessions are frequently the object of torture, this narrow definition improperly excludes cases of mental or psychological abuse, and cases where the torture is committed against someone other than "an accused" or for purposes other than securing a confession.
Article 126 of the Egyptian Penal Code only penalizes acts of civil servants or public employees who commit or order acts of torture. The definition of torture in Article 1 of the Convention against Torture, by contrast, also covers situations when "pain or suffering is inflicted by or at the instigation of or with the consent or acquiescence of a public official or other person acting in an official capacity,"
Egypt's Penal Code also fails to provide for effective punishment of law enforcement officials responsible for torture and ill-treatment. Article 129 of the Penal Code states that any official who subjects persons to "cruelty," including physical harm or offences to their dignity, "shall be sentenced to an arrest period of no longer than one year, or with a fine not to exceed L.E. 200 [$30]." Article 280 of the Penal Code provides for similarly inadequate penalties regarding illegal detention.
Articles 63 and 232 (2) of Egypt's Code of Criminal Procedure give the Office of the Prosecutor General exclusive authority to investigate allegations of torture and ill-treatment, even in the absence of a formal complaint, to bring charges against police and SSI officers, and to appeal court verdicts. However, under articles 210(1) and 232(2) of the Code of Criminal Procedure persons filing complaints against police for torture or ill-treatment do not have the right to challenge any decision, be it administrative or judicial, by the prosecutor's office. These articles prevent victims of torture from challenging arbitrary or capricious decisions by the Prosecutor General, thus granting the authorities effective immunity from judicial review, and thus unfettered discretion in determining how to respond to complaints of torture.
In practice, the government undertakes very few investigations and dismisses the seriousness of the problem of torture and ill-treatment in the country. Egyptian authorities admit only to "the occasional case of human rights abuses."10 One factor underlying Egypt's failure to investigate and punish acts of torture by law enforcement officers may be the apparent conflict of interest in placing the responsibility to monitor places of detention, order forensic exams, and investigate and prosecute abuses by officials within the same office that is responsible for ordering arrests, obtaining confessions, and successfully prosecuting criminal suspects.
Medical evidence is crucial to determining whether torture has been committed. In the absence of medical evidence or a forensic report the Prosecutor General need not undertake an investigation, much less a criminal prosecution, but access to specialists in the Justice Ministry's department of forensic medicine requires referral by the Prosecutor General or a court. The Prosecutor General is under no obligation to provide a referral in prompt and timely manner.
The government's failure to investigate promptly and impartially credible allegations of torture and ill-treatment of political detainees and ordinary citizens, even in many cases of death in custody, has fostered a culture of impunity and contributed to the institutionalization of torture. In the rare instances where the courts have convicted officials of torture, penalties have been lenient. The authorities do not provide information on the number of complaints received, and have seldom divulged criminal, administrative or civil actions taken in relation to incidents of death in custody or torture and ill-treatment.
Under Egyptian law, victims of torture and the dependent heirs of those who have died in custody may file a claim at the administrative court for compensation and for violations of personal freedoms protected by the Constitution. Victims of torture are usually reluctant to bring civil lawsuits for fear of retribution by the perpetrators and a desire to put the experience behind them.11 In addition, when plaintiffs are successful the courts rarely award compensation that is "fair and adequate," as mandated by Article 14(1) of the Convention against Torture.12 This, coupled with the absence of an effective system of criminal prosecution of torturers, makes torture very "affordable" for the Egyptian government.
The U.N. Committee against Torture, the U.N. Human Rights Committee and the U.N. Special Rapporteur on Torture have consistently expressed concern at the persistence of torture and cruel, inhuman or degrading treatment at the hands of law-enforcement personnel, in particular the security services. These bodies also criticized the lack of investigations into such practices, punishment of those responsible, and reparation for the victims.13
Despite Egypt's lamentable record on torture and ill-treatment, in recent years several countries, including the United States and Sweden, have extradited or rendered into Egyptian custody persons wanted by the government for alleged security-related offenses.14

Recommendations to the Government of Egypt

I) Policy Initiatives and Administrative Reforms:

Acknowledge the scale of torture in Egypt and its serious implications for Egyptian society. Initiate broad public and internal debate involving the Ministry of Interior, the Prosecutor General, the People's Assembly, the presidency, and relevant nongovernmental organizations about causes of and solutions for the problem of torture.
Issue and publicize widely a directive from the President of the Republic stating clearly that acts of torture and ill-treatment by law-enforcement officials will not be tolerated and that reports of torture and ill-treatment will be promptly and thoroughly investigated and perpetrators will be criminally prosecuted.
Direct the Office of the Prosecutor General to fulfil its responsibility under Egyptian law to investigate all torture allegations against law enforcement officials, including allegations filed by a third party (for instance, a human rights organization).
Establish an independent body, under the authority of the judiciary and comprising judicial, legal, and medical experts known for their independence and integrity, to oversee investigations of allegations of torture and ill-treatment by law enforcement officials and to evaluate the performance of the Office of the Prosecutor General with respect to due diligence in this regard.
Insure the independence of the Office of the Prosecutor General from political interference and activate prosecutorial oversight of all places of detention. Mandate prosecutors to conduct unannounced inspections of all places of detention, speaking to all inmates in conditions of privacy, and taking complaints.
End the practice of arresting children considered to be "vulnerable to delinquency" or "vulnerable to danger" and ensure that no child is subject to arrest, detention, or imprisonment except as a measure of last resort, and then only for the shortest possible time. In all such cases, children should be held separately from adults unless it is in their best interest to do otherwise.
Ensure that victims of torture have prompt access to medical care and forensic medical examinations and remove obstacles to the use of independent forensic examinations in criminal proceedings,
Maintain and make available to the public at least on an annual basis information and statistics regarding allegations and complaints of torture filed, and the legal and administrative responses to those allegations and complaints.
II) Legal Reforms:

Amend Article 126 of the Penal Code to make the definition of torture consistent with Article 1 of the Convention against Torture.
Amend provisions prohibiting torture and ill-treatment by officials, in particular Penal Code Article 129 on the use of cruelty by officials, and Article 280 on illegal detention, to make the penalties commensurate with the seriousness of the offenses and reclassify these offences as felonies rather than misdemeanours.
Amend Articles 210 and 232 of the Penal Code to allow persons filing complaints of police abuse to challenge any prosecutorial decision not to investigate credible allegations of torture or not to prosecute those suspected of committing acts of torture and ill-treatment.
III) Transparency and international obligations:

Ratify the first Optional Protocol to the ICCPR to allow the Human Rights Committee to receive and consider individual complaints regarding violations of the ICCPR.
Make the necessary declaration under Article 22 of the Convention against Torture allowing the U.N. Committee against Torture to receive and consider individual complaints submitted by victims of torture and ill-treatment.
Invite the U.N. Special Rapporteur on Torture and the U.N. Working Group on Arbitrary Detention to visit and report on conditions in Egypt.
Ratify the Optional Protocol to the Convention against Torture (2002) under which state parties agree to allow independent international experts to conduct regular visits to places of detention within the country; to establish national mechanism to conduct visits to places of detention; and to cooperate with the international experts.
Recommendations to the Arab League
Call upon the Egyptian government to respect and comply fully with the principles and obligations laid down in the Arab Charter on Human Rights (1994), and specifically to meet its obligations under Article 13 of the Charter, which reads:
"(a) The States parties shall protect every person in their territory

from being subjected to physical or mental torture or cruel, inhuman or
degrading treatment. They shall take effective measures to prevent such
acts and shall regard the practice thereof, or participation therein, as
a punishable offence."

Recommendations to the African Union

Call upon the government of Egypt to respect its commitments under the African Charter on Human and Peoples' Rights (1981), and to take effective steps in accordance with the Guidelines and Measures for the Prohibition and Prevention of Torture, Cruel, Inhuman or Degrading Treatment or Punishment in Africa, adopted in 2002 by the African Commission on Human and Peoples' Rights, to end the practice of torture in Egypt.
Request that Egypt invite a committee of experts from the African Commission on Human and Peoples' Rights to investigate and report on the problem of torture and ill-treatment of detainees.
Recommendations to the International Community
Raise with the government of Egypt in all official meetings concerns over widespread torture and ill-treatment of detainees in police stations and security interrogation facilities.
Insist that Egypt take concrete and effective legal and policy steps to end the practice of torture and ill-treatment to hold accountable those responsible, and to provide fair and adequate redress for victims of torture.
Assist the Egyptian government with training programs for police, prosecutors, judges, and forensic doctors, with special emphasis on combating torture and treating the victims of torture and ill-treatment.
? Decline to extradite or render to the Egyptian authorities any person until the government has taken concrete and effective steps to stop the practice of torture and hold criminally responsible those law enforcement officials who order, condone, or commit such acts. Do not accept diplomatic assurances as sufficient for purposes of extradition or rendition.



Egypt: Reported Deaths in Custody owing to Torture and Ill-Treatment, 2003
Name & Age Date of Detention Date of Death in Custody Place of Detention Actions Taken Source

`Abdullah Rizq `Abd al-Latif May 2003 October 6th police station EOHR communication

Ahmad Muhammad `Umar June 1, 2003 July 6, 2003 al-Mahalla al-Kubra police station AHRLA communication

Ragab Muhammad `Afifi Zidan July 16, 2003 July 16, 2003 al-Minia police station Family filed case with Public Prosecution office. Forensic doctor confirmed that body did not show signs of suicide, contrary to claims made by the authorities. EOHR communication

Muhammad `Abd al-Sattar al-Rubi, 26 September 12, 2003 September 12, 2003 Ebshiwai detention center, Tibhar, al-Fayyum Family filed case with Public Prosecution office. Forensic Doctor assigned to the case. HRCAP communication

Muhammad `Abd al-Qadir, 31 September 14, 2003 September 21, 2003 Hadayyiq al-Qubba police station AHRLA communication

Mahmud Gabr Muhammad October 4, 2003 al-Sayyida Zainab police station EOHR communication

Mus`ad Muhammad Qutb, 43 November 1, 2003 November 6, 2003 al-Duqi police station EOHR communication

Egypt: Reported Deaths in Custody owing to Torture and Ill-Treatment, 2002
Name & Age Date of Detention Date of Death in Custody Place of Detention Actions Taken Source

Sayyid Khalifa `Issa, 24 January 26, 2002 Unknown Nasr City police station 2 officers sentenced to 3 years in prison on August 8, 2002; 2 others acquitted; 4 officers received one year suspended sentences and 1000 L.E fines EOHR annual report

Ahmad Taha Yusif, 42 February 23, 2002 February 23, 2002 al-Wayli police station Case referred to Cairo Criminal Court July 11, 2002 EOHR annual report

Midhat Fahmy `Ali, 35 March 10, 2002 March 10, 2002 al-Gumruk police station Pending charges against one police officer for cruelty EOHR annual report

Muhammad Mahmud `Uthman, 25 May 27, 2002 May 28, 2002 Masr al-Qadima police station Complaints filed by family & EOHR EOHR annual report

Mustafa Labib Abu Zaid, 25 Was already in prison July 3, 2002 Shubra police station Complaints filed by family & EOHR EOHR annual report

Muhammad Muhammad Shahin, 44 June 18, 2002 July 8, 2002 Wadi al-Natrun 430 prison EOHR annual report

Nabih Muhammad `Ali Shahin, 33 June 18, 2002 July 8, 2002 Wadi al-Natrun 430 prison EOHR annual report

Ibrahim `Umar Mustafa, 29 August 8, 2002 August 10, 2002 Giza police station Complaints filed by family & EOHR EOHR annual report

Shibl Bayumi Ibrahim, 32 September 11, 2002 Unknown Tanta Security Directorate Family & EOHR complaints EOHR annual report

Ahmad Khalil Ibrahim, 35 October 1, 2002 October 4, 2002 al-Gumruk police station Family & EOHR complaints EOHR annual report


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1 See, for example: Human Rights Watch World Report 2003,(New York, 2003), p. 434; World Report 2002 (New York, 2002), pp. 415-16; World Report 2001 (New York, 2000), pp. 373-74; World Report 2000 (New York, 1999), p. 346; World Report 1999 (New York, 1998), pp. 347-48.

2 Human Rights Watch, Security Forces Abuse of Anti-War Demonstrators, Vol. 15, No.10(E), November 2003.

3 These categories, set forth in Egypt's Child Law 12 of 1996, have become a pretext for mass arrest campaigns to clear the streets of children, obtain information about possible criminal activity, and force children to move on to other neighborhoods.

4 Charged with being Children: Egyptian Police Abuse Children in Need of Protection, HRW Vol. 15, No. 1(E), February 2003.

5 Human Rights Watch, "Egypt: Crackdown on Homosexual Men Continues," October 7, 2003.

6 Human Rights Center for the Assistance of Prisoners Press Release, "Citizen dies while in the State Security station in Ebsheway, Governorate of Al-Fayoum," September 22, 2003.

7 The Association for Human Rights Legal Aid Press Release, "The series of torture continues," September 30, 2003.

8 Egyptian Organization for Human Rights Press Release, "EOHR calls for investigating the death of a citizen in the office of the State Security Investigations in Gaber Ibn Hayaan," November 6, 2003.

9 EOHR Press Release, November 6, 2003: http://www.eohr.org/press/2003/8-1103.htm

10 U.N. Committee against Torture, Summary Record of the 385th meeting, May 14, 1999, U.N. doc. CAT/C/SR.385, Para. 11.

11 According to the Egyptian Human Rights Center for the Assistance of Prisoners in the majority of cases of torture, torture victims "prefer not to file lawsuit either due to fear of the perpetrators or to their relief at being released from the hell they experienced." Torture in Egypt: A Judicial Reality, HRCAP, March 18, 2001, page 27.

12 In 2000, only in four cases were victims of torture awarded compensation. The sum of awards ranged between 2,000 to 10,000 Egyptian pounds ($570 to 2,860 U.S.). The government told the Committee against Torture in 2001 that a total of seventeen compensation awards were made to victims in the period between 1997-2000.

13 United Nations, Conclusions and Recommendations of the Committee against Torture: Egypt, CAT/C/CR/29/4, December 23, 2002; United Nations, Concluding Observations of the Human Rights Committee: Egypt, CCPR/CO/76/EGY, November 28, 2002; United Nations Economic and Social Council; Report of the Special Rapporteur on Torture to the Commission on Human Rights, Question of the Human Rights of all persons subjected to any form of detention or imprisonment, in particular: Torture and other cruel, inhuman or degrading treatment or punishment, E/CN.4/1996/35, January 9, 1996.

14 See, for example: Anthony Shadid, "America Prepares the War on Terror: U.S., Egypt Raids Caught Militants," Boston Globe, October 7,2001; Rajiv Chandrasekaran and Peter Finn, "U.S. Behind Secret Transfer of Terror Suspects," Washington Post, March 11, 2002; Anthony Shadid, "In Shift, Sweden Extradites Militants to Egypt," Boston Globe, December 31, 2001.



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Egypt: Crackdown on Homosexual Conduct Exposes Torture Crisis
(Cairo, March 1, 2004) -- The Egyptian government continues to arrest and routinely torture men suspected of consensual homosexual conduct, Human Rights Watch said in a report released today. The detention and torture of hundreds of men reveals the fragility of legal protections for individual privacy and due process for all Egyptians.
"The prohibition against torture is absolute and universal, regardless of the victim," said Kenneth Roth, executive director of Human Rights Watch. "Accepting torture of unpopular victims--whether for their political opinions or their sexual conduct--makes it easier for the government to use this despicable practice on many others."
The 144-page report, "In a Time of Torture: The Assault on Justice in Egypt's Crackdown on Homosexual Conduct," documents the government's increasing repression of men who have sex with men. The trial of 52 men in 2001 for the "habitual practice of debauchery"--the legal charge used to criminalize homosexual conduct in Egyptian law--was only the most visible point in the ongoing and expanding crackdown.
Today, Egyptian police use wiretaps and a growing web of informers to conduct raids on private homes or seize suspects on the street. Undercover police agents arrange meetings with men through chat rooms and personal advertisements on the Internet--and then arrest them.
Police routinely torture men suspected of homosexual conduct. The report cites testimonies of victims telling how they were bound, suspended in painful positions, burned with cigarettes or submerged in ice-cold water, and subjected to electroshock on their limbs and genitals. Numerous testimonies in the report accuse Taha Embaby, head of Cairo's Vice Squad, of direct participation in torture.
Doctors participate in torturing suspected homosexuals, under the guise of collecting forensic evidence to support the charge of "habitual debauchery," Human Rights Watch found. Prosecutors refer suspects to the Forensic Medical Authority, an arm of Egypt's Ministry of Justice. Doctors there compel the men to strip and kneel; they massage, dilate and in some cases penetrate the prisoners' anal cavities, subjecting them to intrusive, abusive, and degrading examinations to "prove" the men have committed homosexual acts.
Human Rights Watch called on the government to reform the criminal justice system to protect all citizens against torture and abuse. It also called on the government to end arrests and prosecutions based on adult, consensual homosexual conduct.
Five Egyptian human rights organizations--the Egyptian Association Against Torture, the Egyptian Initiative for Personal Rights, the Hisham Mubarak Law Center, the Nadim Center for the Psychological Management and Rehabilitation of Victims of Violence, and the Arabic Network for Human Rights Information--joined Human Rights Watch in Cairo to launch the report. They also joined in releasing the Arabic-language version of "Security Forces Abuse of Anti-War Demonstrators," Human Rights Watch's November report on arrests and torture of antiwar demonstrators during March and April 2003
"These reports together document a crisis in Egypt's criminal justice system," said Roth, who presented the report at a press conference in Cairo. "Impunity for torture and arbitrary arrest puts all Egyptians' rights at risk."
In its November report, Human Rights Watch documented excessive use of force by security forces to disperse demonstrators protesting the U.S.-led war against Iraq in March and April 2003. After arresting hundreds of protesters, police beat and mistreated many detainees--some to the point of torture--and failed to give medical care to seriously injured persons. Some of those beaten and tortured at the time filed official complaints with Egypt's Prosecutor General, requiring that office to investigate the allegations. Nearly a year after the arrests and complaints, the Prosecutor General has failed to launch an investigation.
Human Rights Watch has documented arbitrary detention and torture in Egypt for more than a decade. In 1992 the organization published "Behind Closed Doors: Torture and Detention in Egypt," a 219-page report that examined the routine use of torture, particularly against alleged Islamist activists and sympathizers, by the State Security Investigations Office (SSI) of the Ministry of Interior.
"It saddens me that Human Rights Watch has been documenting torture in Egypt for over a decade," said Roth, who also released the 1992 report at a press conference in Cairo. "The government's recent initiatives to improve its human rights image mean nothing unless it lives up to its obligation to investigate and punish those responsible for torture."

"In a Time of Torture: The Assault on Justice In Egypt's Crackdown on Homosexual Conduct" is available in English at http://hrw.org/reports/2004/egypt0304/

To read testimonies from the report, please see: http://hrw.org/english/docs/2004/02/27/egypt7675.htm

To read a recent Human Rights Watch briefing paper on police abuse and torture of detainees in Egypt, please see: http://hrw.org/english/docs/2004/02/26/egypt7660.htm

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Iran, Syria vow to expand military cooperation
Iranian Minister of Defense and Armed Forces Logistics Rear Admiral Ali Shamkhani said in Damascus Friday that Iran and Syria would boost their bilateral security cooperation to guarantee the security in the Middle East region.
Speaking to IRNA after inking a military and defense
agreement between the two sides, he said they have pledged to make every effort to preserve the security in the region.
He stressed the importance of expanding defense cooperation with Syria and hoped his visit to Damascus would lead to more palpable results in the area of defense and security cooperation.
For his part, Syrian Defense Minister Major General Mustafa Tlas expressed satisfaction over his Iranian counterpart`s visit to Syria and termed it important in light of the current sensitive regional and international situation.
He it is important for both countries to cooperate on security.
Commenting on the US pressure on Syria and the alleged infiltration of Muslim fighters into Iraq through Syrian borders, Tlas said Syria has become accustomed to US pressures and such issues would not lead to neglecting the country`s goals.
Iran's top nuclear negotiator holds talks in India Iran's top nuclear negotiator was in New Delhi on Thursday for talks with Prime Minister Atal Bihari Vajpayee.
Hasan Rowhani, head of Iran's powerful Supreme National Security Council, was also scheduled to meet Brajesh
Mishra, India's national security adviser, the Associated Press quoted officials as saying.
India is a member of the 35-nation IAEA, whose board is convening in Vienna on March 8.
The officials said Rowhani was in New Delhi for scheduled meetings which are part of an India-Iran strategic dialogue.
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Iranian DM arrives in Damascus for military talks
Iran's Minister of Defense and Armed Forces Logistics Rear Admiral Ali Shamkhani arrived in Damascus on Wednesday on an official visit to Syria.
Upon arrival in the Damascus international airport, Shamkhani was welcomed by Syrian Minister of Defence Major General Mostafa Tlas, as well as a number of political and top figures of Syria, IRNA reoprted.
Iranian envoy to Syria Mohammad Reza Baqeri and a number of officials at the Iranian institutions and embassy to Damascus were also present at the airport along with the Syrian officials.
Shamkhani is in Syria on the first leg of a four-day official visit which would take him also to Lebanon.
During his stay in Syria, Shamkhani will hold talks with Syrian top-brass officials and would visit some military sites and centers as well as the defensive industrial unites of Syria.
Shamkhani, upon arrival, said that the scientific and industrial cooperation between Iran and Syria in defense and security fields will be high on agenda.
He told reporters that the two sides are to review the level of cooperation in various fields, in particular in the political, security and defense arenas.
In his two-day visit to Damascus, the Iranian Defense Minister will meet the Syrian President and commander-in-chief of the armed forces Bashar Assad, Foreign Minister Farouk al-Shara, Defense Minister Mostafa Tlas and commander of the army and armed forces headquarters Major General Hassan Tourkamani.
During his stay, Shamkhani and the accompanying delegation will also sign a defense and military memorandum of understanding. The Iranian delegation will leave Damascus for Beirut on Friday.
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Iran says Rumsfeld understands nothing regarding Iraq, Middle East
Iran's Foreign Ministry Spokesman Hamid-Reza Asefi said Tuesday that establishment of stability and security in Iraq would strengthen regional security.
In a reaction to recent remarks made by US Defense Secretary Donald Rumsfeld, Asefi said, "Iran has always took steps to establish stability and security in Iraq because it considers security and stability in that country as (a factor) in strengthening t he security of the region."
According to IRNA, he said the Islamic Republic of Iran does not allow any group to infiltrate into Iraq through Iranian borders and will encounter any illegal measures strongly. "It is surprising that the US Defense Secretary does not tend to understand realities in Iraq and in the region," Asefi added.
On Monday, Rumsfeld warned Iran and Syria about fighters crossing their borders into Iraq. "Syria and Iran have not been helpful to the people of Iraq," he told journalists during a visit to Baghdad. "Indeed they have been unhelpful."
"We know Iran has harbored Al-Qaeda, we know they had people moving across the border. They were certainly aware of that." "We know Syria has been a hospitable place for escaping Iraqis" following the US-led invasion of Iraq last year, he added.

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Syria slams US human right report as Powell ''disappointed'' with Assad policy
A Syrian legislator responded Thursday to U.S. criticism of its human rights record by saying the annual State Department report represented a "blatant and meaningless interference in other countries' internal affairs".
Syria was one of more that 150 states included in the U.S. report, which covers numerous issues such as the state of democracy, freedom of speech and religion in countries around the world.
The report, released Wednesday, claimed Syria used torture, limited the right of free speech and assembly and allowed no political opposition.
On his part, Suleiman Hadad, a Syrian legislator and a former assistant foreign minister, told reporters that the United States could not talk about human rights as it is an aggressive country, occupying a foreign land.
According to IRIB, he said there was no problem with human rights in Syria, which had embarked on a democratic process.
However Haitham Maleh, the chairman of the committees for the defence of human rights in Syria, acknowledged that there are many violations of human rights in Syria, but also rejected any interference from any foreign country.
On Wednesday, US Secretary of State Colin Powell said he was "disappointed" with Syria's Middle East policy, and that relations between Damascus and Washington were "not as I would like them to be."
"I think it is time for Syria to really take a hard look at the policies they followed in the past and whether those policies are relevant to the future in light of what's happened in Iraq," Powell said in an interview with the US Middle East television channel Al Hurra.
"I think it's time for Syrian President Bashar Assad to start looking at steps he might take to change his relationship with the United States and his relationship with the other countries in the region," Powell said in a transcript of the interview.

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CIA: Hizbullah to attack US, Israeli targets if Syria, Iran invaded
The U.S. Central Intelligence Agency (CIA) has warned that Hizbullah would launch a war of "terror" against US and Israeli interests around the globe if either Syria, or Iran, or both, are attacked or invaded like Iraq.
This warning came in a testimony made by CIA chief, George Tenet, to the Senate Select Intelligence Committee at the U.S. Congress in Washington on Tuesday.
According to Tenet, the Bush administration's war against global terrorism had made "important inroads" in the past two years.

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Report: Israel sends to Hizbullah ''by mistake'' body of Jewish man
Hizbullah is demanding that Israel give it the bodies of 30 fighters in exchange for the body of a man that Israel mistakenly transferred to the Lebanese resistance movement, a Nazareth-based newspaper reported Friday.
The corpse in Hizbullah's hands was accidentally sent during the January 29 prisoner swap in place of Mohammed Biro, a Lebanese drug dealer who died in an Israeli prison 11 months ago.
The newspaper, Kul Al-Arab, quoted a senior Lebanese official saying the body Israel forwarded is that of a Jewish man.
Meanwhile, an Israeli source told Army Radio on Friday that he was not aware of any demand from Hizbullah, but that Israel intends to return Biro's body to Lebanon in any event.


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Saudi Arabia tightens controls on charities
In response to Western claims that Saudi charities fund terrorism, the Kingdom has set up a special agency that will oversee the nation's fund raising abroad.
According to SPA, the Saudi National Commission for Relief and Charity Work Abroad will "protect Saudi charitable work from any harmful activities that might undermine it or tarnish its reputation." The commission will announce its regulations following its official launch in the coming weeks.
The commission will be managed by a group of Saudi nationals known for their expertise in the field of charity work, stated a royal decree.
Saudi Arabia has been facing US pressure to prevent charitable donations from reaching Islamist activists abroad. Last month, the governments of Saudi Arabia and the United States asked the United Nations (UN) to add Saudi-based Al-Haramain Foundation to a list of groups whose assets are to be blocked as part of a financial squeeze on Osama Bin Laden's Al-Qaeda network. -- (menareport.com)
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Saudi Arabia, Egypt oppose reforms imposed from abroad
Egypt and Saudi Arabia stressed on Tuesday that Arab states are following a development, upgrading and reform path that matches with their peoples' interests and values and rejecting any reform ?style imposed on Arab and Islamic states from abroad.?
These comments came in a joint declaration issued on conclusion of the short visit paid by President Hosni Mubarak to the kingdom after talks he held with King Fahd bin Abdulaziz and Crown Prince Abdullah bin Abdulaziz.


Posted by maximpost at 8:12 PM EST
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