eveningbulletin.blogspot.com

Do the right thing, Mr. Buffett
advertisementThe insurance scandal has rocked an industry, but I don’t think Berkshire will be dragged into the mess. Of course, Buffett could go one better and unwind any questionable contracts.

http://moneycentral.msn.com/content/P99093.asp?Printer

How Wall Street trumps Social SecurityadvertisementIf you’d invested what you’ve paid in employment taxes over the years, chances are you’d beat what Social Security would pay you in retirement. Here’s how to get a personalized breakdown of the numbers.
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LINKS OF THE DAY - EUROPE & CHILE

Remarks
John D. Graham. Conference on "Risk, Science, and Public Policy: Setting Social and Environmental Priorities" Event Proceeding 04-24. Oct 2004.

http://aei-brookings.org/admin/authorpdfs/page.php?id=1064

Precautions Against What? The Availability Heuristic and Cross-Cultural Risk Perceptions
http://aei-brookings.org/admin/authorpdfs/page.php?id=1069

Chile's Private Pension System at 18: Its Current State and Future Challenges by L. Jacobo Rodríguez

http://www.cato.org/pubs/ssps/ssp17.pdf

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ARTICLES

Terrorist Leaders Remain Largely Untouched
By LOUIS MEIXLERAssociated Press Writer

ISTANBUL, Turkey (AP) -- Turkish security forces say they have dismantled much of the network behind last year's suicide bombings in Istanbul, but the two suspected masterminds remain at large, a scenario being played out around the world: police quickly make arrests but struggle to catch the organizers of terror attacks.
While authorities shut down the network behind the Turkish bombings, attacks that killed some 60 people, the leaders of the strikes are thought to have fled to Iraq.
"What al-Qaida and other terrorist groups often do is make sure that the true masterminds leave the country or go underground" after an attack, said Daniel Byman, a senior fellow at the Saban Center at the Brookings Institution. "In general, the expendable foot soldiers remain."
Just look at Morocco, where police detained about 7,000 people after a May 16, 2003, string of bomb attacks killed at least 33 people in Casablanca. More than 700 remain behind bars; intelligence officials admit key suspects are on the run.

In Madrid, police haven't identified a mastermind behind the March 11 train attacks that killed 191 people. And in Kenya, where suicide bombers destroyed the U.S. Embassy in 1998, police have caught only one of four suspected ringleaders.
U.S. forces, backed by thousands of Pakistani soldiers, have so far failed to nab Osama bin Laden for the Sept. 11, 2001 attacks. The al-Qaida leader feels so secure in hiding that he released a videotape last month warning Americans that the United States must stop threatening the security of Muslims if it wants to avoid "another Manhattan."
The Turkish crackdown after the Istanbul bombings illustrates the successes and the difficulties that security forces have in uprooting terrorist networks.
A year ago Saturday, suicide bombers slammed two trucks into the Istanbul headquarters of the London-based HSBC bank and the British Consulate. Five days earlier, truck bombs devastated two synagogues.
Police quickly found the owners of the trucks and checked the records of cell phones that had been used in the area of the attacks. That led to raids that netted hundreds of suspects nationwide.
Those detentions helped lead to the unraveling of the local terror network, including discovery of a detergent factory where the bombs were secretly loaded on the trucks and the detention of dozens of people believed to have been part of the supply network.
But Habib Akdas, believed to be the leader of the attack, and Gurcan Bac, the suspected chief bombmaker, fled to Iraq. Akdas left via Iran while Bac fled through Syria using a fake passport, officials said.
A half-dozen other suspects also are fugitives.
"In general, the operational masterminds often escape, but the logistical networks often remain and being able to crack down against that is something of a success," Byman said. "It's good to wrap up the foot soldiers, but that is only half of the battle."
A month after the bombings, Istanbul Gov. Muammer Guler said the group behind the attack had been "totally dismantled" but admitted key members were believed to be abroad.
"Unless these people come back to Turkey and get caught it is hard to see how these people will be apprehended or killed," said Michael Radu, a terrorism analyst at the Foreign Policy Research Institute in Philadelphia.
If the United States and Pakistan have not been successful in their hunt for bin Laden "with all our technology and all our means, it is certainly unlikely that Turkey can do it if the main leaders are outside of the country now," Radu said.
Some 7,000 Pakistani soldiers, supported by U.S. forces and intelligence, are combing the mountainous border area with Afghanistan where bin Laden is believed to be hiding.
In Turkey, 69 suspects are on trial for terrorism related charges. And while the top leaders weren't captured, they were forced to flee and terrorists have not mounted another big attack.
Akdas is believed to have joined militants fighting the United States in Iraq. Militants announced in September that Akdas was killed in a U.S. airstrike, and released a videotape of what they said was his body. A relative who saw the video told authorities the body appeared to be Akdas. Police say they have not been able to confirm the death, although most intelligence analysts believe the video is genuine.
There have been some key successes in the war on terror.
Pakistani security forces captured Khalid Shaikh Mohammed, the suspected mastermind of the Sept. 11 attacks, but a year and a half after the attacks on New York and Washington.
His arrest followed that of his close associate, Ramzi Binalshibh, who is believed to have helped plan the Sept. 11 attacks. He was captured on Sept. 11, 2002, at a house in Karachi, Pakistan after a shootout.
Southeast Asia terror leader Riduan Isamuddin, also known as Hambali, was arrested in Thailand last year and is now in U.S. custody.
Hambali is believed to be the main link between al-Qaida and Jemaah Islamiyah, the regional terror group blamed for the 2002 Bali bombings that killed 202 people, and an attack the next year the Jakarta Marriott hotel that killed 12 people.
The capture of those leaders, along with the global crackdown. has helped isolate and fracture al-Qaida's leadership, leading to more decentralized operations, analysts say.
But al-Qaida also has proved capable of replacing those captured or killed.
"If one leader falls, they can replace him," Byman said.
© 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy.

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U.N. Staff: 'No Confidence' in Top Leaders
Friday, November 19, 2004
UNITED NATIONS — A union representing United Nations (search) staff has voted "no confidence" in the world body's senior management.
It is the first time in the labor organization's history that it has cast such a vote, which is largely symbolic and has no effect over any U.N. officials' jobs. The vote was tallied behind closed doors Friday afternoon at U.N. headquarters in New York.
The move was in response to a series of scandals plaguing the United Nations.
Union members said the vote wasn't directed at Secretary-General Kofi Annan (search), but at the management of several top officials. In fact, the head of the labor organization said members actually did have confidence in Annan himself.
"We not only have confidence in him, we support him fully," said U.N. Staff Union President Rosemarie Waters on Friday after the no-confidence vote passed. "He is in a very difficult job under very difficult circumstances, but we continue to have hope that he is doing his best. We only want his senior managers to exhibit the transparency and accountability that he has prescribed for the organization."
The resolution, a copy of which has been obtained by FOX News, accuses top officials of several instances of mismanagement.
Union officials said the final straw was the decision this week to clear a senior U.N. official on charges of favoritism and sexual harassment.
The U.N. pardoned the official, Dileep Nair, was announced even though employees accused Nair of harassing staff and practicing favoritism in his hiring and promotion methods.
It was the second time in two weeks that U.N. management has refused to take action against a senior official accused of harassment.
The vote was also in response to management's failure to accept the “honorable action” of the deputy secretary-general who tried to resign as a result of the bombing of the 2003 United Nations building in Baghdad that killed 22 staff members.
Additionally, U.N. workers are unhappy with leaders for failing to hold accountable the chef de cabinet, whose son was hired to work there in violation of staff rules.
Another concern is the ongoing internal investigation into the Oil-for-Food scandal. At issue is whether a senior U.N. official accepted bribes in exchange for diverting the Oil-for-Food program funds meant as aid for impoverished Iraqis directly to former Iraq dictator Saddam Hussein (search).
A U.N. spokesman said he hopes the body can work out its problems so it doesn't have to pass resolutions like this one.
"The idea is to keep dialogue going and see if we can’t sort out our differences so it isn't necessary to adopt resolutions saying we don’t have confidence in senior management,” said the spokesman, Fred Eckhart.
FOX News' Todd Conner and Catherine Donaldson-Evans contributed to this report.

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Once a Model, a Health Plan Is EndangeredBy RICK LYMAN
ASHVILLE, Nov. 19 - A decade after Tennessee inaugurated a health care plan for the state's most vulnerable residents that was hailed as a model for the nation, the program is once more being held up as a model - of failure in an era of soaring medical costs and voters' aversion to higher taxes.
Today the plan, TennCare, which sought to improve health care for Medicaid recipients while covering those who fall through the federal program's cracks, is on the ropes.
Gov. Phil Bredesen, a conservative Democrat and former health maintenance organization entrepreneur, has threatened the program with extinction, saying that rising costs and generous benefits - TennCare consumes nearly a third of the state's $25 billion budget - make it unaffordable unless it can be radically restructured to save money and limit benefits.
In the coming year alone, the program faces a potential deficit of $650 million.
After more than a week of tense negotiations between the governor and advocates for TennCare's 1.3 million users - nearly a quarter of the state's population, including an estimated 430,000 who would not be covered by Medicaid if TennCare disappeared - the two sides decided to "step back from the brink," as Mr. Bredesen put it.
"Before I go down the road of taking 430,000 people off the rolls - more specifically, before I can face even one of them, individually, and tell them that it is over, that I can no longer help - I need to be clear in my own heart that I've done everything that I know how to do to solve this," the governor said.
Rather than immediately kill TennCare, as he was poised to do, the governor agreed on Wednesday to one more round of talks after Thanksgiving, though he said saving the program was still a long shot.
In the meantime, TennCare's precarious future leaves those who depend on the program in a state of vigilance and dread.
"In this country, rich as it is, people shouldn't have to choose whether their child will live or die," said Angela Ray, the mother of a severely ill 12-year-old girl in Lawrenceburg. "It's amazing to me that it's come down to this."
Her daughter, Jasmine, must take 20 extremely expensive medications every day to control the rare stew of chronic diseases, including Elephant Man Syndrome, that make it impossible for her to run and play. There are no doctors in Tennessee who can treat her, so her parents must frequently drive her to Birmingham, Ala., for care.
Soon, she may lose that care - out-of-state trips are covered by TennCare, but not by Medicaid - and possibly, her life.
Anita Hyche, 35, a suburban Nashville homemaker who suffers from a rare and agonizing disorder that causes her bone joints to dislocate easily, takes a battery of painkillers that make it possible for her to live a normal active life. Her disease makes her uninsurable, and she would not qualify for Medicaid, so if TennCare ends she will no longer receive $1,200 a month worth of pills.
Ever since she heard that TennCare might be killed, Ms. Hyche said, she has been hoarding her medication - taking seven pills a day instead of a dozen or more - and she thinks she has squirreled away enough to last for several months. After that, she does not know what will happen
"The thing that scares me the most isn't thinking about coming up with the money, it's thinking about going back to the way my life was before I had this medicine," she said. "I don't want to feel that bad again."
The fate of TennCare has profound national as well as personal implications. Other governors, also under pressure to stem rising health insurance costs, are watching to see whether Tennessee will provide a model for how to trim their own programs.
And there are fears that Republicans in Washington, flush with their recent election victories, will try to cut away at federal medical benefits, further squeezing the states.
"There's no question it's going to be a tough year ahead for Medicaid," said Victoria Wachino, director of health policy for the Center on Budget and Policy Priorities, a liberal Washington research group. "But there are ways to reduce the deficit without further shifting additional health care costs to the states."
Created by former Gov. Ned McWherter, TennCare replaced Medicaid for those Tennessee residents not covered by other health insurance on Jan. 1, 1994. As costs for health care and prescription drugs rose steadily in subsequent years, TennCare became a larger and larger portion of the state's budget and a frequent political flashpoint.
In 1995, TennCare cost $2.5 billion. In this fiscal year, it will cost $8 billion out of the state's $25 billion budget. The money comes from the federal government (nearly $5 billion), state tax revenue (about $2.5 billion) and sources like premiums from those who can afford to pay for their care (just under $500,000).
Tennessee is one of the few states without an income tax. When proponents of establishing one argued several years ago that it was needed, in part, to pay for TennCare, conservative politicians and talk-show hosts increased their criticism of what they called a socialist program, and legions of "horn honkers" drove past the state capitol and TennCare offices.
By the time Mr. Bredesen, a former Nashville mayor, ran for governor in 2002, TennCare had become the state's sharpest political thorn, and he won partly by promising to overhaul it. In 2003, the state began phasing in a preferred drug list to cut the cost of prescriptions.
On Feb. 17, citing a recent report that TennCare would be $650 million in the hole in 2005, Mr. Bredesen offered what he called a "last chance" to save the program. "We need to face the facts," he said. "We have too many people with too many benefits for the money we have."
He said he could come up with a new, permanent TennCare fix that was affordable and fraud-free without cutting benefits for children, pregnant women and the disabled.
In May, the Legislature approved the broad outlines of his plan, including a limit of 10 doctor visits per year (later raised to 12) and six prescriptions per month (recently, the governor said that might have to be lowered to four).
"What began as a grand vision had become a political scramble to cut the program as fast as possible," said Gordon Bonnyman, head of the Tennessee Justice Center and the leading legal advocate for TennCare recipients.
The program's advocates fought back. In June, Mr. Bonnyman went to federal court to argue that the changes violated four consent decrees he had won over the years that forced TennCare to abide by federal standards in certain crucial areas, like eligibility, home health visits and medical screening for children.
Particularly troubling to advocates was that access to TennCare services would be dictated by "medical necessity" - which would be determined by the state or its medical contractor, rather than a patient's doctor - and that the state would be required to provide only the least expensive "adequate" care. Also, the governor asked federal officials for "pre-approval" of moves he might make later, without spelling out what those cuts might entail.
The lines were firmly drawn. On one side was the governor, the Legislature and representatives for doctors, hospitals and drug companies. On the other side were Mr. Bonnyman and other advocates for TennCare's users, like AARP, the Children's Defense Fund and dozens of charities and associations like the Alzheimer's Foundation and the National Mental Health Foundation.
In September, Mr. Bredesen officially requested federal approval of some of the changes he had sought, providing fresh specifics that further troubled the program's advocates.
Meanwhile, the governor has grown increasingly vocal about what he calls the advocates' intransigence, and ratcheted up his rhetoric, comparing the health care program favored by Mr. Bonnyman to "a dictator in a glass coffin" and declaring the program he was proposing as "more American."
The advocates have also shown a willingness to appeal to emotions.
"Certainly, some people will die who would not otherwise have died," if the program is killed, Mr. Bonnyman said.
On Nov. 10, attacking the advocacy groups for their persistent lawsuits, Mr. Bredesen said he was ready to give up his overhaul efforts and pull the plug on TennCare.
Mr. Bonnyman asked for more time and the governor said he would continue talking.
On Wednesday, just when it appeared that negotiations were stalled for good, Mr. Bredesen invited Mr. Bonnyman to his office for their first one-on-one meeting and, that evening, made his unexpected announcement.
"These talks have not gone well, and we are at an impasse," the governor said. "By any reasonable measure, I should say, 'it's over,' and move on."
Instead, the governor promised to give it one more try after a vacation and a Thanksgiving holiday.
"It's good news," Mr. Bonnyman said. "We have really pulled back from the brink."
The governor agreed.
"I need to try again," he said.
At a hearing on Friday, Judge John T. Nixon of Federal District Court suggested that former Governor McWherter, whose administration created TennCare, be summoned as a mediator. Both sides said they would consider the idea.
Meanwhile, TennCare's enrollees, especially those who depend on the program to keep them alive and well, wait and wonder and continue to hoard their pills.
"It would have been better never to have started TennCare than to treat people for a while, help them get well, and then kill the program and let them get sick again," Ms. Hyche said, staring at the array of prescription bottles spread across the coffee table in her living room. "It's just so cruel."
Copyright 2004 The New York Times Company

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CIA plans riskier, more aggressive espionage
By John Diamond, USA TODAY
WASHINGTON — CIA Director Porter Goss told his new chief of spy operations this week to launch a much more aggressive espionage campaign that would use undercover officers to penetrate terrorist groups and hostile governments such as North Korea and Iran, according to a senior U.S. official with direct knowledge of Goss' plans.
As chairman of the House Intelligence Committee, Porter Goss called the CIA's human intelligence efforts "dysfunctional."
Alex Wong, Getty Images
The risky new strategy would be a sharp departure from the CIA's traditional style of human intelligence, in which field officers under flimsy cover as diplomats in U.S. embassies try to recruit foreign spies and gather tips from allied intelligence services. Those methods don't work with terror groups or in countries where the United States has no embassies, such as prewar Iraq or present-day North Korea and Iran.
The new strategy is dangerous — agents could gather much better information but would run a much higher risk of being killed if found out. Goss hinted at this strategy during his confirmation hearing and has told agency officials it is key to his effort to revamp the agency to meet new and unconventional threats.
The new spy operations chief, an official who is himself under cover, took over his post Tuesday after a messy shake-up in which his predecessor and the No. 2 official at the spy service resigned after clashing with aides to Goss. Since the Sept. 11 terrorist attacks, the CIA has struggled to transform the Directorate of Operations, as the spy service is formally known, but not to Goss' satisfaction. When he was chairman of the House Intelligence Committee, Goss issued a scathing report in June that referred to the CIA's human intelligence efforts as "dysfunctional."
The move to more aggressive field operations represents Goss' first major effort to put into effect a strategy that he laid out on his first day on the job Sept. 24, when he told agency employees that the CIA is "the pointy end of the spear" in the war on terrorism, "and now is the time that we need the pointy end of the spear."
The speech was transmitted or distributed in writing to agency employees worldwide. Portions of the speech were read to USA TODAY by the U.S. official who described Goss' plans for transforming espionage operations. The official also read portions of an e-mail Goss sent to agency employees Monday telling them they should provide unbiased intelligence but must not oppose administration policies. The official asked not to be named because the speech and e-mail have not been made public, and because the CIA's clandestine operations are highly classified.
"Our core business in my view is close-in access to the plans and intentions" of adversary states and terror groups, Goss said in his speech. He said he expects the strategy to yield successes, but also painful failures he will have to explain to Congress. Goss said he would give his field officers "more autonomy" to do their work and pledged to back them if they fail. "We're going to encourage and expect calculated risk-taking that will be rewarded," he said. "I know it won't go right all the time. When it goes wrong, it will be supported."
Field officers who blow their diplomatic cover are typically thrown out of foreign countries. Under the new tactics, officers caught under deep cover could expect no protection and could be executed. If caught trying to penetrate a terrorist group, they could count on being tortured and murdered.
Goss wants to train and field more officers as "NOCs" — meaning they would work under "non-official cover" to give them more options for penetrating an adversary, the official said. Goss' strategy was described Tuesday night by former CIA director James Woolsey on Boston radio station WBUR's On Point program. Woolsey said he has spoken this week to top CIA officials.
The high-stakes shift in intelligence collection comes at a time of turmoil:
• Four senior officials have resigned from the CIA in less than a week, including the top two officials at the Directorate of Operations who left after feuding with aides to Goss.
• President Bush pressed Congress this week to pass legislation that could reduce the CIA's influence and access to the president by creating an intelligence post above the level of the CIA.
• With the United States involved in two wars and expecting further terrorist attacks, the CIA is struggling to close major intelligence gaps on the growing Iraqi insurgency and to find al-Qaeda leader Osama bin Laden.
• The intense scrutiny on past CIA mistakes shows no sign of abating. Bush met Wednesday with members of a government commission headed by former senator Chuck Robb, D-Va., that is investigating the poor intelligence reporting on Iraqi weapons prior to the U.S.-led invasion of Iraq.
Goss' push for more aggressive covert action and human intelligence collection comes as the Pentagon is gaining power to conduct operations previously restricted to the CIA. This year's defense authorization bill gives Defense Secretary Donald Rumsfeld authority to spend up to $25 million to support "foreign forces, irregular forces, groups or individuals" assisting U.S. commandos in the war on terrorism. Such cash handouts to shadowy paramilitary groups had been the sole purview of the CIA.
In the e-mail sent to agency employees Monday, Goss warned of more turmoil ahead. He said he will "announce a series of changes — some involving procedures, organization, (and) senior personnel." White House spokesman Scott McClellan and CIA spokesman Paul Gimigliano discussed its contents Wednesday.
Goss' e-mail gave his employees "rules of the road" concerning relations with the White House. "We support the administration and its policies in our work," Goss wrote. "As agency employees we do not identify with, support or champion opposition to the administration or its policies. We provide intelligence as we see it — and let the facts alone speak to the policymaker."
Gimigliano said that by "support," Goss meant providing accurate, unbiased intelligence, not political support for administration policies. At the White House, McClellan said the CIA's job was to "provide unvarnished facts" and stay out of policymaking. Likewise, McClellan said, policymakers would stay out of the intelligence business.
Contributing: Judy Keen

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Defense Department Briefing on Progress of Reconstruction Work in Iraq; Plans For Reconstruction in Fallujah
In-Depth Coverage
MODERATOR: BRYAN WHITMAN

WHITMAN: Good morning, gentlemen. This is Bryan Whitman from the Pentagon. Can you hear us?

HESS: Yes, we can.

WHITMAN: Good morning. As many of you here in the Pentagon know, the Project and Contracting Office is responsible for implementing nearly two-thirds of the $18.4 billion Iraqi Relief and Reconstruction Fund that was approved by Congress, and so they're a key organization to the success of our mission in Iraq.

And today we are welcoming Charles Hess, who is the director of the Iraq Project and Contracting Office, and Ambassador Bill Taylor, who is the director of the Iraq Reconstruction Management Office, for what is going to be one in a series of briefings that we hope to bring you over time periodically. Thanks to Amy Burns for arranging for this one and for subsequent ones that we'll have as we go into the future.

They're also prepared today to discuss a little bit about the reconstruction plans for Fallujah.

They can hear you but they can't see your smiling faces today, so when we get to the questions, if you'd just identify yourself and your organization, that would be helpful for them. They do have a presentation that they're going to make before we get into the questions. And so with that, gentlemen, I'd like to turn it over to you.

HESS: Thank you very much.

This is Charlie Hess. And on behalf of the Army's Project and Contracting Office of the Department of Defense, we're happy to be here this evening to brief the Pentagon press corps from Baghdad.

We're also very pleased, as was indicated, to have Ambassador Bill Taylor of the State Department's Iraq Reconstruction Management Office joining with us tonight.

And again, while our group, PCO, is responsible for the contracting and program project management aspects of the Iraqi Reconstruction and Relief Fund, Ambassador Taylor's group has broad responsibility for identifying the requirements and the priorities as we discussed the last time we briefed, on the 7th of October. Together I think we can give you sort of a comprehensive understanding of where we are today with respect to reconstruction activities.

I know that you all have been actively engaged in covering the events in Fallujah. Many of your colleagues actually have been embedded in the action. We would also like to brief you today on that related subject and to include what's projected to happen in Fallujah as well as give you a broader sense of what's happening with reconstruction efforts in general.

Again, we'd like to give you some indication of what's happened in about the six weeks since we talked the last time, and so I will do that and then I'm going to turn it over to Ambassador Taylor to give you some thoughts and focus on what's happening with respect to Fallujah.

First of all, let me give you some insight into the metrics that we talked about last time, and again, which was briefed to you on the 7th of October. With respect to the money that's been committed of the $18.4 billion, that amount that we talked about last time was about $10.66 billion, that has grown to $12.77 billion today, which is an increase of almost 20 percent, or roughly $2 billion.

Obligations. The amount of money that we're contractually bound, obligated to pay firms is up by over a billion dollars, from $7.7 billion to $8.9 billion, or approximately 15.6 percent.

Additionally, as a point of information, many of those contracts, which were awarded in open -- full and open competition -- many of those have been awarded to Iraqi firms, approximately 4,500 of which are under the management and stewardship of Iraqi-owned firms.

Amount of money that's been disbursed with respect to the program has gone from 1.3 billion (dollars) to approximately 1.77 billion (dollars), which is an increase of nearly half a billion dollars, or 34 percent, since the 7th of October.

And while those financial numbers are, I think, good news, perhaps the more compelling story is the number of construction starts. Right now, since the 7th of October, when we had 703 construction projects under way, we've now increased that number to 873, which is an increase of approximately 24 percent. And we are on target to surpass our goal of having a thousand construction starts by year end, which was outlined to you in our last briefing.

As we've talked previously, security is still a serious challenge. But as we indicated in these metrics, we are still moving forward, and we are still working to achieve our three main goals, which we talked about also at that briefing: one, which was to improve the infrastructure of Iraq; second, to improve Iraqi employment through the use of local Iraqi firms and subcontracting to the maximum extent we can to Iraqi firms; and then, finally, to build capacity within the ministries and within the interim Iraqi government, so that they can in fact do much of this work in the future themselves.

With that as a backdrop, let me turn it over to Ambassador Taylor, who can update you as well and give you some specifics on the situation in Fallujah. Thank you.

TAYLOR: Thank you, Charlie.

On Fallujah, as you know, the successful military operation needs to be followed by an equally successful reconstruction operation. The Marines, who have been doing most of the work along with Army and working very closely with the Iraqi forces, have done a lot of preparation for the reconstruction in Fallujah. They have focused their attention on preparing for humanitarian work. They've pre-positioned a lot of stocks of food and water and medicine. They have been preparing to start up on small reconstruction projects, in particular those that will restore essential services. So people are taking a look and assessing what the problems are with electricity distribution lines, for example, and sewer lines, water treatment in order to get clean water to people. We will then be able to move into the smaller projects of schools and clinics, and then eventually get to the larger projects that will -- that have been planned for some time but have not been able to move forward during the past several months.

This, as I said, is a carefully coordinated program. We are working very closely with the Iraqi government. The Iraqi government has designated a Cabinet minister, Minister Hassani, who is the Minister of Industry and Minerals, to be the lead for the Iraqi government in this reconstruction effort. So he and I have met now two times. Our staffs have gotten together. The ministries of electricity and health and water resources, municipalities have gotten together with our folks in terms of the Marines and the Army, who are going to undertake these efforts, to coordinate that work. They've put up a good amount of money. We have some funds identified that will allow us to move forward on this reconstruction. As I say, this will be as important as the military operation in order to consolidate the victory.

With that, I think we're ready to take your questions.

WHITMAN: All right. Thank you, gentlemen, for that overview.

Let's go ahead and start right here.

Q: This is Will Dunham with Reuters. Gentlemen, can you say how much money is being devoted to Fallujah? When do you think the earliest that some of the projects can begin in earnest?

TAYLOR: We have identified tens of millions of dollars. The government of Iraq has identified tens of millions of dollars. These -- we're still working -- as I indicated earlier, we are working together with them to figure out which projects we should do and which they should do. This could get into the order of a hundred million dollars or so, into Fallujah.

In terms of when, of course, the first thing that has to happen is the final military action needs to be completed. As you know -- as you've seen, there are still some problems there. It's not totally done. I think we are in full control, but there are still pockets of resistance. And there's a lot of booby traps and of other explosives that are around that will inhibit our work.

Some work, however, has already begun. As I say, the Marines have begun some clean-up work themselves. I would imagine within a week or two our projects will be able to be assessed and begun in terms of contracts with local construction firms, that is with Iraqi construction firms there in Fallujah. So within a week or two, again, depending on when the city is cleared of people opposing what we're trying to do, we ought to be able to get the first of these small projects going, as I mentioned earlier.

HESS: (Off mike) -- with Bill's assessment there. Again, our experience in Najaf and Samarra has indicated to us that it takes approximately a week to two weeks. Many of these projects that will be started are in fact projects that were curtailed as a result of the hostilities. We have existing contracts, and it's a matter of just getting those contract entities back in position and getting them started up again. But clearly, we are waiting for our cue from the maneuver commanders to do that.

As an example of some of the projects that will be undertaken in Fallujah, we have a significant amount of money, approximately $8 million, identified for water-supply improvements. We've identified four new schools that will be constructed for a total of about $4 million. We'll be buying new solid-waste equipment, garbage trucks, so that they have some continuing means of debris and trash removal, along with many other projects. So those are the kinds of things that are in the portfolio.

Q: Briefly, the $100 million figure that you mentioned, that is a combination of U.S. money and Iraqi money?

HESS: That's correct.

WHITMAN: Pam, go ahead.

Q: Gentlemen, this is Pam Hess with UPI. Mr. Hess, I don't think we're related. (Laughter.) I have two questions for you. The first one is on that $100 million. That's money that was allocated before this battle. How much more do you think Fallujah is going to take to reconstruct, because that money was already on the books before at least 250 buildings were destroyed.

My second question is longer term. One of the problems that you have had throughout Iraq, but especially in Fallujah, is that there's not really a strong local economy. And it is our understanding from what you all have told us that the insurgency was a large part of that economy -- people were getting paid to take potshots at U.S. forces; paid to lay bombs. What are you going to do long-term for the economy there to make sure that Fallujans have actual jobs even after the initial money is spent from reconstruction, because obviously there will be an uptick in local employment for a while?

HESS: Let me start with the first question. And again, I think that addresses the issue of what needs to be done and how do we address those needs.

The reality is, we have teams of people, along with the civil/military operations folks, in Fallujah. They've been there for probably the last week to 10 days, assessing what needs to be done. And those -- frankly, those assessments will continue as more and more of the city becomes available for us to evaluate. So consequently, our estimates and our evaluation of what needs to be done will change, very likely, across the upcoming days.

Again, many of the projects that we've -- we have in our original portfolio are the kinds of things that you would need in any event -- again, improvements to the water system, power lines to certain neighborhoods, water pumping stations and so forth.

But in addition to that, we'll be certainly looking at damage. And again, one of the elements of this sort of portfolio that we're pulling together -- it's not just what's in the existing IRRF program, but it's also monies that had been allocated to the maneuver commanders and the Commanders’ Emergency Response Program. So between that, the money that the Iraqi -- interim Iraqi government is going to be allocating for Fallujah, again, we will try and make the best match of projects and fill in the gaps with the money that's also coming in from other sources.

TAYLOR: Exactly right. That hundred million, as we said before, is both U.S. and Iraqi funds. And so none of the Iraqi funds were scheduled to go in there before the fighting. So those -- all of those are new.

As Charlie indicates, some of the more mobile programs, such as the CERP, the Commanders’ Emergency Relief Program funds that the maneuver commanders have, but also USAID has similarly mobile funds under a program run by the Office of Transition Initiatives, OTI, in USAID -- and those you can move, and those have been increased. Both the CERP and the OTI funds have been increased, along with the Iraqi funds. They're a significant amount of new money going in, in addition to the current plans.

On the longer-term question, you're of course exactly right. In the long term, the economy needs to grow. People need to go back to work in jobs there -- Fallujah was known, has been known for some time as the center or a center of construction jobs and construction firms. So it has a base, it has an economic base that needs to be rebuilt because there is damage to the city, but that's the kind of program -- the kinds of projects we need to move into; that is, restoring the electricity, restoring the water, restoring basic services so people can move back in, begin to repair and resume their lives, hopefully better lives without the extremists there. And that will generate the jobs that is the answer. The jobs are the answer for the long term.

WHITMAN: Donna, I think you were next if you --

Q: No, actually --

WHITMAN: You didn't? Okay. I'm sorry.

Q: Thank you. (Laughs.)

WHITMAN: Let's go ahead over here.

Q: Mr. Hess, is it? I'm Joe Tabet from Al Hurra TV. Could you tell us if there is any construction projects on the Iraqi border to protect Iraq from illegal entry? And if yes, what kind of -- what type of project are --?

HESS: I'm sorry; I didn't catch the full extent of the question. I think you asked about Iraqi construction firms involved in projects?

WHITMAN: I think the question, if I may paraphrase, has to do with any projects that might help with border security and what those might be.

HESS: Yes. In fact, there are many projects. We have a substantial number of border forts under way, which are a part of the portfolio for the MNSTC-I program, and General Petraeus. Those projects are scattered throughout the bordering provinces to many countries, including Syria, Iran and others. And so those are under way and in construction, and many of those have been completed.

WHITMAN: Martha, go ahead.

Q: Just a couple of questions, sir. It's Martha Raddatz from ABC. I'm looking at your figures that you passed out on -- in these papers or your PowerPoint presentation here and you have -- say that you prepositioned humanitarian assistance, to include 14 days' supply of food and water, 2,000 health and comfort packages, 90-day supply of first aid. That seems low. How many people do you think are in the city that need assistance, and could you give some more specifics about what else is prepositioned in terms of sewage trucks, in terms of electrical workers that you've coordinated with the Marine Corps?

TAYLOR: In terms -- to your question about how many people are in the city, most people left. Most people left the city before the fighting. The people who remained did the fighting with our forces. We are now in the process of going out to the surrounding villages, where many of the people who left Fallujah are now staying. And they're staying with friends and relatives, in hotels and schools. So they are gradually going to come back into Fallujah, at which time we will, together with the Iraqi government, be able to provide for their needs.

The Iraqi government is making their plans, their very specific plans, to move food through the normal food-rationing system into Fallujah. The medical supplies that we've got there -- actually, it may not be fully evident -- medical supplies are adequate for probably three months in the clinics and in the hospitals there.

Right now, when people drive through the city they don't see civilians; the civilians are not there. There may be some people in houses, but they haven't come out in any kind of numbers yet. There are not very many people in the hospitals at this point. So we are prepared and ready for them when they come back; the government is prepared and ready for them when they come back, and additional supplies are coming from Baghdad and from the surrounding areas into Fallujah to be prepared.

Q: If I could just follow up, too, if you could go into the specifics. And also, one of the things you said in one of the questions, I guess, was we haven't decided on some of the projects who will do them, the Iraqis or the Americans -- if I'm correct about that. It seems that that would have been something you would want decided before this happened. Are you concerned that working this out also loses time?

TAYLOR: As I mentioned, the Iraqi government has recently decided how much -- in some general terms, how much money they're going to put into Fallujah. We have been meeting for the past two weeks with the Iraqi government and their ministries to talk about the specific projects and their priorities and our priorities. We have described to them our existing plans, that Charlie has described; we have described to them our ability to make changes, and particularly in the smaller, more immediate projects of cleaning and repairing with the two more mobile programs that I mentioned earlier, both the CERP and OTI.

So yes, we've been doing some planning well in advance on the Marine side. They've been doing some thinking about that. We are now comparing. We've got a week or two to continue these preparations, to bring supplies in, to identify contractors, and to be able to get started when the military commander on the Marine side, together with the governor, the acting governor that the Iraqi government has appointed, when they say it's time to go in and this part of the city is clean and ready to move, and this part of the city is clear of military problems, then we'll be able to move in. And I believe we will have a well-coordinated program. We have the makings of it right now. In the next week, we'll continue to work on that.

HESS: And I would add I think we also have contractual mechanisms in place that would allow us to rapidly get additional contracts placed if there are particular needs. For example, in terms of debris removal and things of that nature, where you don't necessarily have a full understanding of the quantity of materials to be removed, clearly we have indefinite delivery, indefinite quantity type contracts that can be used to adjust, based upon what we find when we get there and have more understanding of what the needs really are.

WHITMAN: Tony?

Q: This is Tony Capaccio with Bloomberg News. One question, one narrow question. Can you give us a sense of the extent of damage in Fallujah, in terms of how many homes, buildings, and what that represents from the whole city standpoint? It's hard to get a feel from Washington.

TAYLOR: Both Charlie and I will be down there shortly to take a look for ourselves. The reports that we've gotten in the last couple of days are that there are many buildings that are damaged. A limited number of buildings have been destroyed, but a large number of buildings have been damaged. So we understand there's a lot of work to be done.

The electricity distribution -- transmission and distribution lines are down. They need to be repaired. There is the need for rebuilding of some houses, probably many houses, at least repair of these houses.

So I'm expecting that we will see the extent of the damage when we go down there shortly.

HESS: Right. And I guess if -- I think we'll probably expect to see more damage, obviously, than we saw in Najaf and Samarra. So again, if you have some sensing of what that was like, I think this will be certainly more significant.

Q: To what extent are you getting the sense from Iraqis that this is going to be considered a major test of both the interim government and the U.S.'s ability to not only defeat the insurgency but to restore stability? Are you worried about heightened expectations that you need to dampen?

TAYLOR: We have a commitment to the people of Fallujah -- indeed, to the people of Iraq -- to help them reconstruct their city and their country. We take that commitment very seriously.

There is no doubt that there is damage to that city, and we've seen over the past year and a half damage to this country, and that's what Charlie and his colleagues and others that are working on this thing are committed to help repair. So yes, we have a commitment; we are confident that we will meet that commitment.

WHITMAN: Bob Burns.

Q: Ambassador Taylor, this is Bob Burns from Associated Press. Last time we talked to you, in early October, you discussed the extent to which security was a limitation on carrying out the construction projects. And I'm wondering, beyond Fallujah and the rest of the Sunni Triangle in particular, would you say now at this point that security is more or less of an obstacle than it was six weeks ago?

TAYLOR: I would say it's different. In some places it's more; in some places it's less. It is less of a problem in many of the provinces. There are only three or four provinces where security is a big problem. There are incidents in other provinces, but in particular in the northeast and in the south, we are able to operate projects without much difficulty.

As you indicate, in the center, the center -- Baghdad, Fallujah, Ramadi, up to Samarra, then up in Mosul -- so the city areas and then up in Mosul, it is worse today than it was, and we are having greater difficulties from security at that time.

We are at this kind of one by one. Charlie indicated -- he reminds us that we did this in Najaf, we did this in Samarra, we did this in Sadr City. We're now doing it in Fallujah. We are moving through the areas, the cities where the insurgents have given us a hard time and have kept us from doing reconstruction. And indeed, we're worried that in some areas -- again, not all, in some areas it would now be difficult to have elections. And it's that kind of work that we need to do between now and January so that we can have elections in the entire country.

HESS: And I would agree with Bill in that assessment. Again, we're seeing, I think, a change in terms of what's happening in the security environment. Again, one of our mechanisms to deal with that, frankly, is to start as many projects as we can, given the fact that we know the insurgents can't be everywhere. And so consequently, the more projects we start, we certainly are moving Iraqis out, we're getting them employed, they are doing meaningful labor, they're restoring their country. And in and of itself, that is a very positive and powerful thing that we want to accomplish here between now and the elections in January.

WHITMAN: Lisa?

Q: Lisa Meyer from Associated Press Radio. Following up on what Bob was talking about, gentlemen, I'm wondering what are you going to do specifically to protect projects against sabotage? And what security arrangements, in broad terms, do you have in place to protect the people that are working on the projects?

HESS: Let me start with that one. In regard to sabotage, that is still a challenge. Clearly, we've seen instances of that occurring in various places, particularly in the oil sector, where the insurgents have a propensity for damaging and destroying the source of revenue and income for the government. And that is a problem.

Given that, again part of the solution is to make sure that we've got systems and mechanisms in place to deal with the security, by either hiring firms; by looking at mechanisms to track and maintain visibility over the commodities that we move into the country, which we're doing; by more closely aligning ourselves with the maneuver commanders who are out there in the battle space so we know where we should operate and where we shouldn't operate; and by, again, using many more Iraqi firms to help support the effort, given the fact that there's a lower profile and they can fit in and have less of a footprint in terms of security problems. And so we're using all of those things in various ways and in various places, I think, to try and mitigate the security situation.

TAYLOR: Charlie mentioned the problems with oil and oil supplies. The product deliveries into Baghdad have been receiving an inordinate amount of attention from the insurgents. And the Minister of Oil is very concerned about this exact question, about the security of people repairing oil lines, and intimidating truck drivers. He has come to us, and we've been working, as Charlie indicates, with the maneuver commanders in the area to provide specific protection and convoy protection on the way between supply points.

But in addition, he also has been in touch, of course, with his Prime Minister and his Minister of Defense, who has agreed to provide two battalions that the oil minister needs to be deployed on specific areas. So in addition to the measures that Charlie described, the Iraqis themselves are taking measures to help deal with the security problems.

WHITMAN: Gentlemen, we'll make this the last one.

How about somebody that hasn't one. Go ahead.

Q: Thank you. Rebecca Christie from Dow Jones Newswires. I wanted to ask about contracting relationships, particularly by the U.S. U.S. contractors have said that there are more auditors on the ground in Iraq than there are project managers, and that they have sort of run into trouble with contracting regulations because they don't have the on-the-ground oversight to help them navigate these U.S. rules, and then auditors are trying to apply rules that maybe don't work as well in an unstable environment.

HESS: Let me provide some comment on that. Clearly there are a lot of auditors here. You're dealing with an exceptional amount of money, and we need to protect the public and the Congress' interest in the amount of money that they put into the Iraqi Relief and Reconstruction Program. And so, consequently, you will see auditors.

My belief, in talking to the prime contractors and the sector contractors who are working with us on this program, is that where there have been issues in terms of providing information to the auditors, we've done that. Again, I think it's important that we have appropriate oversight. This is an extremely large amount of money and it's moving in very many different places to try and accomplish many things at the same time. And so, consequently, we want to make sure that, when all is said and done, we've gotten the best value for the taxpayer's dollar in terms of the investments we've made throughout the country. And so, again, my sense is if there are issues we're working through those, and I'm personally not aware of any at this particular instant, which are truly an impediment to us making progress.

Having said that, we certainly are embracing the use of Iraqi firms. Clearly they play a very large part of this equation, and it's very much as if this were a U.S. disaster where local firms need to be engaged in the solution, and those local firms come from all over Iraq, not just from here in Baghdad.

Q: (Off mike) -- contractors are penalized by auditors for hiring local firms because they can't provide the same documentation or the same types of accounting that a Western contractor might be able to provide?

HESS: I'm not aware of any issues at this particular point in time with local firms being precluded from bidding on a project as a result of accounting requirements. In fact, just recently, most of the work that's being done on the village roads -- we've got five governorates awarded now, approximately 217 kilometers of roadway under way. All of that work is being done by local Iraqi firms.

WHITMAN: Well, gentlemen, again, thank you very much for your time this evening. We hope to have you back in a couple of weeks to continue to give us updates on how things are going in the reconstruction business in Iraq. Thank you.

HESS: Thank you very much.

TAYLOR: Thank you.

http://www.defenselink.mil/transcripts/2004/tr20041119-1609.html

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Israel’s low-intensity conflict doctrine - inner conflict Alon Ben-David JDW CorrespondentTel Aviv JDW reports on the radical shake-up of the Israel Defence Force (IDF) as it focuses its resources on fighting what it terms 'sub-conventional warfare'. As what has become known as the second Intifada enters its fifth year, the IDF is gradually transforming itself from a force designed to fight short conventional wars into a military adapted and aimed at managing a continuous low-intensity conflict (LIC). The effects of the last four years of fighting are evident in every part of the IDF: from structure and equipment to training and military doctrine. IDF Chief of Staff Lt Gen Moshe Ya'alon notes, however, that perhaps to define the current fighting as LIC is too narrow. Gen Ya'alon says the conflict "is better described as sub-conventional warfare - this consists of LIC and also terror and counter-terror operations and various forms of guerrilla warfare". The IDF has previously experienced asymmetric warfare during the popular, mainly unarmed first Intifada in the West Bank and Gaza from 1987-92 and during the 18 years of guerrilla fighting in Lebanon from 1982-2000. However, it was taken aback by the characteristics of the recent round of violence that broke out in September 2000. What started as an armed struggle directed against the IDF in the territories quickly came to involve an extensive terror campaign inside Israel, led the IDF into reoccupying the West Bank in 2002 and descended into continuous fighting, mainly in highly populated Palestinian urban areas. The traditional strategic doctrine of Israel, which, according to the IDF, was designed for a force geared at striking short and decisive blows at threatening or invading forces, became unsuited to the new situation, as did most of the tactical concepts and thinking of the IDF. The shift, however, was fast: since taking over the Palestinian territory in Operation 'Defensive Shield' in March 2002, the IDF began developing and improvising solutions to the conflict. All of the IDF's resources, mainly in intelligence, but also in equipment and personnel, were brought into the battle and after 18 months began to bear fruit. "We are now successful in thwarting more than 90% of planned attacks against Israel," Defence Minister Shaul Mofaz told JDW. "The motivation of terror organisations remains high, yet their capabilities have been significantly decreased," he added. For the first time since the current conflict erupted, Israelis are now marking six months without a suicide bombing inside Israel. In 2004 there have been three suicide attacks in Israel, compared with 18 attacks in 2003 and 38 attacks in 2002. All the bombers came from the West Bank, except in two cases in which bombers got through the fence surrounding the Gaza Strip.

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NK Refugees Seek New Path to Seoul
By Reuben StainesStaff Reporter
Mongolian Foreign Minister Munkh-Orgil Tsend shone a ray of hope on the more than 100,000 North Korean refugees hiding out in China this week when he said his government will grant passage to all defectors who present themselves at its borders.
But despite the bold offer, the refugees’ passage to South Korea, through Mongolia or otherwise, still appears to be long and winding, according to activists and experts in Seoul.
Officials at the Mongolian Embassy in Seoul Friday declined to confirm its official stance toward North Korean asylum seekers, saying that they are awaiting confirmation from their foreign ministry.
An informed source, however, said Mongolia may now be mulling the consequences of the public offer to accept defectors, particularly on its relationships with China and North Korea.
``The Korean media has put Mongolia in a tight spot,’’ he told The Korea Times on condition of anonymity, referring to the dense coverage of the foreign minister’s statement by the local press.
Following a crackdown by Beijing on defectors’ attempts to seek asylum at foreign embassies, human rights activists and refugees have been searching for safer alternatives to travel to Seoul.
Chinese police arrested 62 North Koreans last month as the defectors prepared to enter the South Korean Consulate in Beijing and they are expected to be repatriated to Pyongyang, where they will face harsh punishment.
Recognizing Mongolia as a possible gateway for defectors, the South Korean government and activists reportedly investigated the possibility of setting up a refugee camp in the sparsely populated country bordering China.
While the governments of Mongolia and South Korea have since ruled this out, activists involved in assisting North Korean refugees have taken note of the minister’s welcoming remarks toward defectors.
``It is really good news for us and for North Korean defectors,’’ Kwon Un-kyong, assistant secretary of Democracy Network Against North Korean Gulag, a Seoul-based civic group. ``It is the only country that has said it will receive defectors publicly.’’
But Kwon also foresaw difficulties if large numbers of North Korean defectors began heading for the Mongolian border. ``There are many political problems between the countries and Mongolia depends on China,’’ she explained.
With asylum bids in China considered too dangerous for now, Russia has also emerged as a possible route for those attempting to escape the communist North.
Two North Koreans have entered foreign embassies in Vladivostok in the past month and both seem likely to be put on flights to Seoul after their cases are processed, Seoul officials said.
But while it is easier for North Koreans to seek diplomatic protection in Russia than communist China, it is unlikely that large numbers will be able to reach South Korea this way, according to Douglas Shin, a Korean-American pastor and spokesman for Los Angeles-based human rights group Exodus 21.
``It’s just a trickle. We not going to see the floodgates open,’’ said Shin, who is involved in helping North Koreans in Russia.
Access to Russia for defectors is limited by the deep Tumen River estuary. Most North Koreans there are working in heavily guarded construction sites or as loggers under labor contracts between Pyongyang and Moscow.
The number of North Koreans in Russia is tiny compared to the massive number in China. South Korea estimates about 4,000 North Koreans are working in Russia’s Far East but others say the number could be more than twice that.
``Probably all of them want to leave, to seek freedom, but they just don’t know how,’’ Shin said.
Last month, Russian authorities arrested 45 North Korean laborers working in the Maritime Provinces of Siberia for deserting their workplaces and entering the Kamchatka Peninsula in the Far East.
rjs@koreatimes.co.kr 11-19-2004 17:36

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SPECIAL REPORT

PR in Pyongyang: Removal of Kim's portrait from major hall confirmed East-Asia-Intel.com, November 19, 2004
A portrait of North Korean leader Kim Jong-Il has been taken down in the People's Cultural Palace, a major public building in Pyongyang. South Korean intelligence sources said the action was a public relations initiative undertaken by Kim aimed both at his own people and the outside world. A photo in the October edition of the North Korean magazine, Chosun (Korea), acquired by South Korea's Joong-Ang Ilbo newspaper, shows that Kim's portrait, which had hung side by side with that of his father Kim Il-Sung, had been removed from the massive hall in the building. The photos provide the first confirmation of rumors that Kim's portraits have been taken down in public buildings in North Korea.
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Only a portrait of the senior Kim appeared in the very center of the wall [see above right], dismissing speculation that the removal of Kim Jong-Il' portrait may have been temporary before being replaced by a new one. Some defectors from North Korea had said in response to news reports about removed portraits, that they would be replaced by new ones in more ornate frames. The North Korean magazine showed in its July edition that Kim Jong-Il's portrait remained on the wall [See above left], alongside his father's. The picture was taken in May.
A European diplomat in Seoul, who said he witnessed the sole picture of the senior Kim at the People's Cultural Palace during his visit to Pyongyang in early September, said the removal took place on or about July 8 which marked the 10th anniversary of the death of Kim Il-sung. He said portraits of the junior Kim were quietly taken down in several other public buildings.
A South Korean intelligence source also said that portraits of Kim Jong-Il had been taken down in several public buildings and hotels in Pyongyang, which were open to foreign visitors. "But as far as we know, North Koreans are not removing Kim's portraits in other places, such as factories, companies and home," he said.
"The removal of portraits are not happening across the country, but just at several public buildings foreigners are allowed to visit, as part of efforts to ease the cult worship image of him," a government official said.
The North Korean Foreign Ministry denied news reports of the removal of Kim's portraits from public offices, according to China's Xinhua news agency on Nov. 19. The Chinese official news agency quoted a ministry official as denying the reports as a "groundless fabrication."
The removal was a direct order from Kim Jong-Il, the intelligence official said. It is essentially a public relations initiative to demonstrate to North Koreans his filial duty to his deceased father as well as to improve his external image to a world which considers the deification of leaders bizarre, he said.
The issue of the portraits demonstrates the country's decades-long cult worship. When a massive explosion killed hundreds of North Koreans in a border city with China in April, Pyongyang's official media praised the "heroic deaths" of the people who rushed into collapsing or burning buildings to save "treasured" portraits of Kim Jong-Il.
Portraits of Kim and his deceased father are mandatory fixtures in every home, office, public buildings and factory in the country. All adults are required to wear lapel pins bearing images of one or both Kims.
Koh Yu-Hwan, a North Korea specialist at Dongguk University in Seoul, said the removal of his portraits seemed aimed at easing burdens on policy failures that led to economic troubles. "Mr. Kim is probably trying to re-establish an image as a down-to-earth leader, no longer with demi-god status like his father," he said.
The intelligence source and other government officials downplayed Japanese reports that North Korea's state media had dropped the honorific title — "Dear Leader" — to refer to Kim Jong-Il.
Tokyo-based Radio Press Inc. which monitors North Korea's state-run media, said on Nov. 18 that the North's official Central News Agency dropped the "Dear Leader" from its report of Kim's visit to an army unit, sparking speculation that he may be involved in a power struggle or his status was challenged.
But Seoul officials said there were no "unusual signs at all" in North Korea's power structure. There are no notable signs that Kim is in poor health, they said.
Kim has been given some 1,200 titles, they said, and the North's media for the most part continue to use the honorific title of "Dear Leader."

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East-Asia-Intel,

www.eas-asia-intel.com, November 16, 2004 Copyright © 2004 East West Services, Inc. All rights reserved.
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The case of Kim Jong-il's missing portraits By Kosuke Takahashi
TOKYO - If you love a good, multi-layered mystery, and convoluted Asian machinations with international implications, then you'll love this one.
Speculation among North Korea watchers is feverish and rampant, and experts are trying to figure out what's going on with the world's last grand personality cult in the world's most reclusive kingdom. Some of the ubiquitous portraits of North Korea's Dear Leader Kim Jong-il are disappearing, reportedly at his direction, from some but not all public places in Pyongyang. Furthermore, the standard honorific "Dear Leader" has been dropped in many cases.
Reports on North Korea's leader Kim Jong-il's order to remove his portraits from some public places in Pyongyang are prompting rife speculation worldwide. Some analysts have said "Dear Leader" Kim might have been shifted from the top position, signaling the beginning of his downfall at a time of unprecedented economic and international political problems. Some said it could be preparation for the transfer of power to one of Kim's sons. Some said Pyongyang is just switching old portraits for new ones bearing a better, older likeness, while others conjectured Kim has just decided to show the world that the Hermit Kingdom will humanize a bit and open up a bit toward the outside world. This suggestion of possible humanism, humility and almost certain pragmatism comes at a time when North Korea, like the rest of the world, is increasingly conscious of the hardline United States administration, in advance of the still-unscheduled next round of six-party talks on defusing the Pyongyang nuclear crisis.
Nobody is sure about what is really going on. Is this an authentic downsizing of the larger-than-life personality cult, an effort to win friends and influence people, or the result of a power struggle by those dissatisfied with Kim Jong-il's refusal to undertake reforms and make concessions at a time of unprecedented international pressures, a barely sustainable economy, and now a Japan that is considering economic sanctions over its citizens abducted by North Korea years ago?
"Those portraits' removal aims to get more sympathizers with Pyongyang from international society, especially targeting South Korea's pro-North politicians and younger people by showing the world the softening of a personality cult at home," Lee Young-hwa, the representative of Rescue the North Korean People! (RENK), a Japan-based citizens' group supporting North Korean asylum seekers in China since early 1990s, told Asia Times Online. Lee is also an economics professor and third-generation Korean resident in Japan.
Many are surprised to learn that this is not the first time Kim, now 62, has ordered his own portraits to be taken down from public buildings. This goes back to the summer of 2002. It first happened in Japan in the Chongryon society, an organization of North Korean residents who for years boasted iron-clad solidarity for their motherland. The purpose for the removal of Kim's portraits from public spaces in Japan had been to emphasize Koreans' unity, North and South, as the same race. At that time the move sought to soften, dilute, even diminish the ideology of a personality cult and to play up Kim's conciliatory stance toward South Koreans - putting people before ideology. Kim specifically ordered Chongryon (the General Association of Korean Residents in Japan) to remove his portraits from North Korean schools in Japan in order to win more pro-North Korea supporters from ethnic Koreans, to make them future Chongryon members and encourage them to enroll their children in Chongryon-affiliated schools.
Kim now seems to have decided to do the same thing domestically, especially when Pyongyang faces a profound international predicament, ranging from its stubborn refusal to do away with its nuclear-arms program to Tokyo's fury over its citizens abducted over the years by North Koreans. He may well have been trying to attract more South Korean supporters for his dynasty, just by showing some limited, possibly just cosmetic, flexibility in his Stalinist nation. It might be Pyongyang's typical divide-and-rule strategy in dealing with South Korea, the United States and Japan, this time counting on pro-North supporters in the South.
The Russian news agency Itar-Tass was the first to report on Tuesday that many paintings of Kim were being removed from their usual positions, alongside those of his father, North Korea's founder Kim Il-sung. Adding fuel to the speculation on Thursday, Radiopress, the Japanese monitoring agency of North Korean media, reported that North Korea's official media on Wednesday dropped the glorifying description of "Dear Leader" from Kim's title. Radiopress said the North's Korean Central Broadcast, the Korean Central News Agency and other media simply described him as "general secretary of the Workers Party of Korea, chairman of the DPRK [Democratic People's Republic of Korea] National Defense Commission, and supreme commander of the Korean People's Army".
In the latest development, a North Korean diplomat who defected to the South last year said on Thursday that Kim himself ordered the portraits removal as early as last year, according to the Korea Times. On the same day, Japanese media reported that Kim's portraits have been removed only from certain public places - those frequented by foreign guests, including the People's Culture Palace - not from all public places in Pyongyang or across the country.
Whenever Kim actually decided to take down his portraits, at least some of them, he appears to have believed that without de-emphasizing his personality cult, leavening his rigid ideology and thus getting more support from South Koreans - especially from the pro-North ruling Uri Party members in Seoul - he cannot effectively confront the US and Japan over Pyongyang's nuclear-weapons program and its past abductions of Japanese citizens.
After Kim's order in late August 2002, Chongryon directed all of the pro-Pyongyang 110 Korean elementary and junior high schools across Japan to remove his portraits; most of this took place in September 2002. Behind this move was the dwindling number of North Korean residents in Japan. Currently about 600,000 North and South Koreans are said to live in Japan. More than 500,000 are said to be South Koreans, while only 100,000 are North Koreans. Until the 1960s the numbers from each Korea had been almost the same. But recently, many South Koreans have changed their nationality from North to South. Moreover, not a few Koreans have become naturalized Japanese citizens in recent years.
As a result of all these factors, enrollment in pro-Pyongyang schools is falling year by year. This trend was fueled by expensive tuition, due to the lack of subsidies from the Japanese government. North Korean parents therefore are reluctant to send their children to those schools, seeking instead to enter them in Japanese public schools.
Moreover, the eruption of the abduction issues - Pyongyang agents abducting Japanese over the years - also accelerated Japan's trend toward anti-North Korea sentiment. Faced with this threatening of Korean national self-determination, Kim ordered Chongryon to take down portraits at schools in August 2002, to make things more comfortable for South Korean parents and to lower their resistance to sending their children to pro-North schools in Japan.
Faced with recent mass movements of refugees from North Korea - more than 460 in July - Kim might have wanted to play down the personality cult to stem the outflow, with some so desperate to leave the worker's paradise that they even climb the walls of various embassies and consulates in China, to Beijing's great embarrassment. Moreover, the decision to lower the profile of the dictator in the reclusive communist state is in line with the extremely adverse situation that North Korea has created for itself. In the past four years, US President George W Bush has applied increasing pressure to thwart North Korea's nuclear-weapons program and chronic human-rights violations. This approach appears to have been reinforced by his appointment of the tough and pragmatic Condoleezza Rice as new secretary of state in his second administration once Colin Powell leaves that post.
As for Japan, Pyongyang has continued the risky cat-and-mouse game of diplomacy with Tokyo as its economy continues to deteriorate - in a bid to run up the amount of potential Japanese economic aid and post-World War II reparations for past wrongs. Today in Tokyo, however, not a few lawmakers and citizens are asking the administration of Prime Minister Junichiro Koizumi to consider economic sanctions on North Korea. The anti-North Korea attitude has become even more acute after a Japanese delegation's week-long stay in Pyongyang did not yield good news about the fate of abducted Japanese. Instead, they brought back to Tokyo the ashes of at least two persons, including Megumi Yokota, who was kidnapped in 1977 at age 13 (see The ashes of little Megumi, November 18).
North Korea now can only rely on South Korean President Roh Moo-hyun's center-left, pro-Pyongyang administration. South Korean political circles are sharply divided into conciliatory pro-North progressive camps of the Uri Party and antagonistic conservatives of the main opposition, the Grand National Party. Capitalizing on these divided political circles, Kim basically appears to have adopted a conciliatory strategy toward South Koreans by downsizing the personal cult of ideology.
Professor Lee Young-hwa, who said Pyongyang is trying to get more Seoul sympathizers, also pointed out that Kim once ordered his portraits alongside those of his father Kim Il-sung to be taken from public buildings in 1978, four years after Kim Il-sung officially nominated his son as his dynastic successor. Lee, an associate professor of economics at Kansai University, said that at the time Kim Jong-il was testing his people's loyalty to him: those who actually took down his portraits as ordered were said to have been punished and sent to gulags, or prison camps, often meaning death. This is one of the major reasons, Lee said, that Koreans cannot take what appears to be Kim's direct order at face value this time around. They are cautious: wanting to obey their leader who says take down his pictures, but also aware that obedience may carry a price.
Moreover, concerning the removal of the glorifying - though some find it odious - honorific "Dear Leader" from Kim's title, Lee said that also signifies Kim's efforts at conciliation toward South Korea. "Recently North Korea has intensified its media campaigns towards [the] South Korean audience, especially in Hangul [the Korean alphabet] on the Internet," said Lee. Now North Korea is coming to realize that the "Dear Leader" title inspires disgust among Korean audiences, especially the young.
Still, Lee said he could not exclude the possibility that Kim just wants to replace his old portraits with new ones because the old standard portraits depict a man in his 20s. Then again, maybe he wants to test his people's loyalty to their Dear Leader, again.
Kosuke Takahashi is a former staff writer at the Asahi Shimbun and is currently a freelance correspondent based in Tokyo. He can be contacted at Kosuke_everonward@ybb.ne.jp.
(Copyright 2004 Asia Times Online Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.)

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How Russia keeps China armedBy David Isenberg
WASHINGTON - China may have lost the latest skirmish with the European Union to get the latter to lift its arms ban, but Beijing is still able to buy what it needs - solid, serviceable hardware and technology - from Russia, former Soviet-bloc nations and Israel. And the embargo gives China greater incentive to develop its own weapons systems.
On Wednesday, the European parliament in Brussels voted, as expected, to maintain the EU embargo on arms trade with the People's Republic of China until the PRC improves its human rights record. It voted not to weaken national restrictions on such arms sales and said the ban should continue in force until the EU itself had adopted an improved code of conduct, providing legal restraints on arms experts. The current ban is largely voluntary, and strongly opposed by France and Germany.
No matter, China is still a big arms buyer, though economic constraints if maintained at the current level probably will keep Beijing from doing anything extraordinary, military-wise, for the next decade, experts say.
There is a famous incident recounted by the late Colonel Harry Summers, author of the classic 1982 book On Strategy: A Critical Analysis of the Vietnam War. In it he notes that at the very end of the war he was in Hanoi trying to make an agreement on the former Republic of Vietnam. In the course of the conversation he said, "Well, at least we never lost a battle to you." One North Vietnamese general then replied, "That's true, but it doesn't matter."
Much the same thing might be said concerning the debate over lifting the arms embargo on China. While China does not have the most modern weaponry or military technologies, the reality is that it has most of what it needs and is not having great difficulties in procuring from other countries, outside the European Union and the United States, what it does need. So the European parliament vote is not that significant to China.
Where does China turn when it shops for military weapons? In a word, Russia. According to the Russian Center for Analysis of Strategies and Technologies (CAST), China constitutes the largest single importer of post-Soviet Russian arms and military equipment, with purchases ranging between 30% and 50% of Russia's entire annual deliveries.
Without those arms exports to China, Russia would lack the funds to modernize its own military. In fact, in the past Russia has prohibited the export of certain of its military aircraft, or production licenses, to China only to revoke the ban later on.
Rosoboronexport, the sole state intermediary agency for Russia's military arms sales and exports, estimated that sales will total US$4.1 billion this year, down from $5.1 billion in 2003. Aircraft and ships account for over half of the exports.
China purchased eight missile systems this summer from Russia and has already received 24 Su-30MKK fighters. Jane's Defence Weekly reported last month that China is in talks with Ukraine to obtain 42 turbofan engines to power its NAMC JL-8 basic jet trainer/light attack jet. The talks are a follow up on the 58 engines ordered in 1997 and since delivered to Beijing.
China is also reported to have launched preliminary talks with Ukraine on the potential acquisition of the Antonov An-124 and An-225 Mriya heavy-transport aircraft to address long-standing strategic lift requirements for the People's Liberation Army. The former is the world's largest production aircraft and can carry a payload of at least 120 tons. The latter is even bigger, with a payload capacity in excess of 250 tons.
In October, the Admiralteiskiye Verfi shipyard in St Petersburg turned over the first of two improved Kilo-class attack submarines to China's navy, PLAN (People's Liberation Army Navy). The two submarines were unveiled at the shipyard last summer and are part of a Russia-China deal worth $1.5 billion that was signed in May 2002. The contract called for five submarines. Two are being built by Admiralteiskiye Verfi, while two others are being built by Sevmash in Severodvinsk. The final one is being built by Krasnoye Sormovo in Nizhni Novgorod.
The Kilo is considered one of the most advanced diesel-electric submarines in the world and the subs will boost China's ability to conduct a naval blockade of Taiwan. According to a November 17 article in the Asian Wall Street Journal, by 2007 the PLAN force will have 12 Kilo-class subs. Most will be armed with "Club" anti-ship missiles, which have a range of 136 miles.
According to John Pike, director of GlobalSecurity.org, a non-profit research group in Alexandria, Virginia, "China has acquired an enormous number of Sukhoi [fighter aircraft] variants from Russia, as well as destroyers and subs." He thinks the debate over an embargo is unimportant. "The EU decision to keep the arms embargo on China is not relevant to China insofar as Taiwan, or asserting rights in the South China Sea, is concerned," he told Asia Times Online.
Sometimes when China is blocked from obtaining military systems it desires, that denial serves as an incentive to develop the arms and technology domestically. For example, in 2000, the US pressured Israel to back out of a $1 billion agreement to sell China four of its Phalcon phased-array radar systems, which would have been used for a Chinese AWACS (Airborne Warning and Control System). Last week the Washington Post reported that China has developed its own AWACS, using a domestically produced advanced radar mounted on a Russian-made Il-76 transport aircraft, and is test-flying the first models for early deployment in the Taiwan Strait. The AWACS could be operational within one or two years, assuming the tests are successful.
Israel has also been a long-standing supplier of advanced military technologies to China. According to the findings of a past US congressional committee chaired by Representative Christopher Cox (Republican-California), Israel has "offered significant technology cooperation to the People's Republic of China, especially in aircraft and missile development", including helping China build its current F-10 fighter jet. The Chinese F-10 is virtually identical to the discontinued Israeli Lavi fighter, an aircraft designed using $1.5 billion in US aid. The Lavi program, funded by the US and based largely on the F-16, was intended to provide Israel with its first domestically built fighter jet.
Israel also transferred to China its STAR-1 cruise missile technology that incorporates US stealth technology and is a version of Israel's Delilah-2 missile, which contains US parts and technology.
Perhaps the biggest constraint on advanced Chinese military modernization is economic, not political. According to Ted Carpenter, director of foreign policy studies at the Washington, DC-based Cato Institute, qualitatively, "they are still close to a generation behind the United States. Chinese progress will depend on how much economic resources they want to devote to it," he told Asia Times Online. "At the current level they would be hard put to do anything in the next decade."
David Isenberg, a senior analyst with the Washington-based British American Security Information Council (BASIC), has a wide background in arms control and national security issues. The views expressed are his own.
(Copyright 2004 Asia Times Online Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.)
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Detoxifying Yasser Arafat's Disastrous Legacyby James PhillipsExecutive Memorandum #950
November 19, 2004

Palestinian leader Yasser Arafat, who died on November 11, has left the Middle East a more brutal, nasty, and toxic place. Arafat's disastrous leadership exploded the once promising Arab-Israeli peace process and left the Palestinians mired in growing violence, anarchy, and misery. Although Arafat's death has removed one obstacle to Israeli-Palestinian peace, his legacy of terrorism has poisoned the prospects for future negotiations. There is little chance of attaining a genuine peace until Arafat's successors disavow his failed policies, reject terrorism, and build mutual trust with Israel. This will take time, probably several years--if it happens at all. In the meantime, the United States should avoid the temptation to convene a premature summit that will likely fail to resolve intractable final status issues. Instead, Washington should focus on incremental, short-term steps to reduce violence, facilitate Palestinian elections, and encourage Palestinian cooperation with Israel's planned withdrawal from Gaza.
Arafat's Double Game. Arafat welcomed the peace process, but not genuine peace. He played a double game until the very end, often extending the olive branch to Israel when speaking in English to Western audiences while calling for jihad and "martyrdom" when speaking in Arabic to his own people. Throughout more than a decade of protracted negotiations, he never permanently halted his use of terrorism, despite repeatedly committing to do so.
Arafat went along with negotiations as long as he gained more than he lost. The Oslo peace process, which began in 1993, anointed him the sole leader of the Palestinians, rescued him from near irrelevance in Tunisia, allowed him to return to Gaza in 1994, and strengthened his stranglehold on Palestinian politics. Arafat supported the Oslo process to pocket a long list of Israeli concessions, including recognition of the Palestine Liberation Organization; the acceptance of Arafat's Palestinian Authority, which would become an embryonic Palestinian state; the withdrawal of Israeli military forces from Palestinian areas; and the negotiation of a two-state solution that would involve extensive Israeli territorial concessions--including Palestinian control over the Muslim holy places in Jerusalem.
However, when it came time to negotiate a final settlement, Arafat squandered an historic opportunity to negotiate peace at the July 2000 Camp David summit. He rejected Israeli and American proposals without offering a counterproposal and walked away from the negotiating table. In September 2000, Arafat unleashed the second intifada, the violent uprising that drove the last nails into the coffin of the Oslo peace process.
Arafat leaves Palestinians much worse off than when he returned to Gaza in July 1994. Under his capricious leadership, the Palestinian Authority became corrupt, unaccountable, and incompetent. His refusal to end terrorism poisoned the peace negotiations, led Israel to reoccupy Palestinian areas and close its borders to Palestinian workers, and crippled the Palestinian economy. Palestinian parents have been horrified to find their children brainwashed into becoming suicide bombers and cannon fodder for Arafat's revolutionary pipedreams.
The ultimate beneficiaries of Arafat's failed policies are likely to be the Islamic radicals of Hamas, who hope to pick up the pieces after the discrediting of the Palestinian Authority. Although Arafat often escaped criticism because he had managed to turn himself into the human flag of the Palestinian movement, Arafat's successors inside the Palestinian Authority have little popular support or personal charisma. Arafat's death will likely leave a power vacuum that will trigger a lengthy power struggle. Arafat never groomed a successor, because doing so could create a threat to his own personal power. Initially, he will probably be succeeded by an unstable collective leadership composed of several of his protégés.
Until the succession struggle is settled, no Palestinian leader is likely to take political risks to revive the stalled negotiations with Israel. In fact, political rivals are more likely to compete with each other to see who can take the hardest line against Israel. Once a new leader has consolidated power, he is likely to grow increasingly pragmatic in order to stay in power. At that point, the dynamics of Palestinian politics might encourage a successor to take personal political risks to renew negotiations with Israel in order to relieve the misery that Arafat's ruinous policies have imposed on Palestinians.
Incremental Steps. Incremental steps are preferable to high-risk summitry. British Prime Minister Tony Blair has proposed an overly ambitious summit to jumpstart the stalled peace negotiations, but the Bush Administration should not rush to engage Arafat's successors in a premature bid to forge a final settlement. Such a push could backfire by energizing Palestinian hardliners and discrediting pragmatic leaders before they can consolidate power. A hastily prepared summit could break up in disarray or produce an agreement that Arafat's successors may not have the power or legitimacy to implement. Presidential involvement should be ruled out until the diplomatic sherpas have mapped out a path for attaining a summit agreement acceptable to both sides.
Instead, the Bush Administration should adhere to its principled policy of urging Palestinians to halt terrorism and reform the Palestinian Authority to develop a responsible, transparent, and democratic leadership capable of advancing Palestinian interests by reaching a genuine peace with Israel. To help Palestinians along this path, Washington should focus on brokering a ceasefire and fostering bilateral Israeli-Palestinian cooperation on elections to fill Arafat's office as leader of the Palestinian Authority. President George W. Bush should also appoint an ambassador-at-large to encourage Palestinians to coordinate with Israel on its withdrawal from Gaza, scheduled for next year. Over time, the mutual trust created by ending the violence and resolving immediate issues could grow enough to provide a hopeful basis for addressing the many thorny final status issues.
Conclusion. Arafat's death could lead to a long-term opportunity for progress in Israeli-Palestinian negotiations, but his legacy of terrorism and treachery remain a formidable obstacle to peace. The United States cannot rescue the Palestinian people from bad leadership, nor can it impose a lasting peace on reluctant Palestinians. Until a new Palestinian leadership has emerged that rejects Arafat's legacy of terrorism, there is little hope of achieving a final settlement of the Israeli-Palestinian conflict.
James Phillips is Research Fellow in Middle Eastern Studies in the Kathryn and Shelby Cullom Davis Institute for International Studies at The Heritage Foundation.
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Arafat's Widow Retrieves Medical Records
By LARA SUKHTIANAssociated Press Writer
PARIS (AP) -- Yasser Arafat's widow took possession of his widely sought medical records Friday, and was deciding whether to release the information publicly to "stop all these false ideas" of what caused the Palestinian leader's death, her lawyer said.
Suha Arafat obtained the file from the Percy military hospital in suburban Paris in mid-afternoon, and was studying it, attorney Jean-Marie Burguburu told The Associated Press by telephone.
"The decision is in the process," he said. "The problem is ... to try to stop all these false ideas about the death of President Arafat - these rumors."
French officials insist the law prevents them from making Arafat's medical records public - but they can give them to family members, who can then reveal information if they wish.
Authorities had said Thursday they would release Arafat's records to his nephew, Nasser al-Kidwa, the Palestinian representative at the United Nations. Al-Kidwa was reportedly traveling to Paris Friday as an emissary of the Palestinian leadership, which has promised to make the records public.
A week after his death, speculation still swirls around what killed Arafat. Cirrhosis of the liver, AIDS, a blood disorder and poisoning are frequently mentioned in unconfirmed reports - all consistent with the little that is publicly known about the medical condition that landed the Palestinian leader in a French hospital.
Similar to the uncertainty that shrouded his illness, there is a lack of clarity about who is entitled to the records. French officials insist the French law prevents them from making Arafat's medical records public, and they have refused to announce the cause of his death Nov. 11. They say only family members are entitled to receive the files.
Burguburu appeared to be bracing for a legal showdown, insisting that under French law, only Arafat's wife has the right to obtain the medical report.
"If the hospital made a copy - I don't know if they did, they didn't tell me - but in principle, it does not have the right to," he said. "If it did, that would be against the law."
Palestinian Prime Minister Ahmed Qureia told the AP there was no doubt that Arafat's medical records would come to light.
"When we get this report, we will study it and hear the opinions of the doctors," Qureia said by telephone, "and then we will inform the Palestinian people with all the details about the health situation of President Arafat and what led to his death."
It was unclear when al-Kidwa would arrive in Paris. But he confirmed Thursday to The Associated Press that he would be traveling to France. It wasn't immediately clear how the latest development would affect the mission.
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MI6 agents drafted in to improve Gaza security By Anton La Guardia, Diplomatic Editor(Filed: 20/11/2004)
MI6 agents and British police are setting up a high-tech control centre for Palestinian security services in the Gaza Strip to help them maintain control in the volatile territory after the death of Yasser Arafat.
As one of the few countries with credibility among both Israeli and Palestinian leaders, Britain is moving quickly to try to turn the death of Mr Arafat into an opportunity to revive peace talks after four years of bloodletting. Tony Blair last week secured a commitment from President George W Bush to push for the creation of a Palestinian state.
Jack Straw, the Foreign Secretary, will follow up with a visit to the region next week, when he will be offering "practical support".
The nerve centre for Palestinian security forces in Gaza is expected to become operational within weeks.
It is an attempt discreetly to shore up moderate Palestinian leaders and pave the way for Israel's planned withdrawal from the Gaza Strip next year.
"Everybody agrees that in a time of transition, security is the key," said a senior British source.
But the deployment of British security "advisers" in Gaza is risky, amid power struggles between rival Palestinian factions and the armed confrontation between Israeli forces and Palestinian gunmen.
During a visit to Gaza last week, the new leader of the Palestine Liberation Organisation, Mahmoud Abbas, was caught in a battle between rival Palestinian gunmen in which two people were killed and 10 wounded. Palestinian officials insist it was not an assassination attempt but it highlighted the volatility of the situation in Gaza.
Britain is one of the few countries, apart from the US, trusted by the Israelis on security issues.
British officials are working alongside US colleagues in monitoring a Palestinian prison in Jericho to reassure Israel that high-profile inmates remain behind bars.
However, there was controversy last year when Britain recalled Alistair Crooke, an ex-MI6 officer working for the EU, who was involved in several ill-fated attempts to negotiate ceasefires between Israel and Palestinian factions.
Earlier this year, British officials set up a joint operations room to help unify the myriad of Palestinian security services in the West Bank city of Ramallah.
"The central operations room is a good news story. If you have relatively modest objectives you can succeed," said a British official.
However, senior Israeli security sources regard it as pointless until Palestinians find the political will to fight militants. Britain held back from setting up a control centre in Gaza because of fears of unrest. But after Mr Arafat's death, they hope it will provide a stabilising influence.
British officials said the Gaza security nerve centre will at first deal only with "civil policing" rather than more politically charged issues of curbing attacks against Israel. This appears to be a recognition of the rivalry between Gaza factions.
British officials say their role will be limited to behind-the-scenes "advice". The main outside security role in Gaza is reserved for Egypt. But it is unclear whether Israel's accidental killing of three Egyptian security officers on the border this week will prompt Cairo to rethink its involvement.
The Israeli army's chief of staff yesterday ordered an investigation into claims that Palestinian corpses were desecrated by Israeli soldiers following the publication of photographs in a newspaper. One of the pictures, which appeared in the mass-selling Yediot Aharonot daily, showed a soldier pointing his weapon at a corpse while pressing his foot into the half-naked body.------------------------------------------------------------------------------------------------

U.S. says Iran racing to beat uranium deadlineBy JONATHAN S. LANDAYKnight Ridder Tribune News
WASHINGTON - Iran is racing to produce large amounts of a uranium compound that can be used to make nuclear weapons before a deadline next week to halt all uranium-purification work, U.S. officials said Friday.
The allegation came as the Bush administration said it was standing by Secretary of State Colin Powell's assertion Wednesday that Iran also is working to modify missiles to carry nuclear warheads.
The new allegations could escalate tensions over Iran's nuclear intentions ahead of a meeting Thursday of the International Atomic Energy Agency on the Islamic republic's nuclear activities.
The United States wants the IAEA to refer the matter to the U.N. Security Council for consideration of economic sanctions.
Iran denies that it is seeking nuclear weapons, saying its nuclear activities are for generating electric power.
Britain, France and Germany are anxious to avert a showdown.
If Iran does not halt its reprocessing, it could soon be on a path to acquiring a nuclear arsenal that could threaten Israel and U.S. troops in the Middle East. A nuclear-armed Iran would change the balance of power in the Persian Gulf.
Under an accord reached by the European countries and Iran last week, Iran is to suspend all uranium-purification activities beginning Monday while it negotiates a deal in which it would receive trade incentives and peaceful nuclear technology.
In return, it would indefinitely suspend uranium enrichment and related activities, including building centrifuges.
A State Department official and a senior administration official, who spoke on condition that they not be identified, said Iranian technicians were converting uranium ore into substantial quantities of uranium hexaflouride gas before Monday's deadline at a facility in the central city of Isfahan, Iran.
Spun at high speeds in centrifuges, uranium hexafluoride gas can be purified into low-level uranium fuel for nuclear power reactors or into highly enriched uranium for the explosive core of a nuclear weapon.

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Iran steps up nuke work, envoys sayBy George JahnASSOCIATED PRESS
VIENNA, Austria — Iran is producing significant quantities of a gas that can be used to make nuclear arms just days before it must stop all work related to uranium enrichment, raising doubts about its commitment to dispel international distrust, diplomats said yesterday. Iran recently started producing uranium hexafluoride at its gas-processing facilities in the central city of Isfahan, the diplomats said. When introduced into centrifuges and spun, the substance can be enriched to varying degrees. Low-grade enriched uranium is used in nuclear power plants. Highly enriched uranium forms the core of nuclear warheads.

While Iran says it is only interested in enrichment to generate power, the United States and its allies accuse Tehran of wanting the technology to make weapons-grade uranium. In the latest accusation, Secretary of State Colin L. Powell said Wednesday he had seen intelligence to confirm an assertion by an Iranian dissident group that Tehran is secretly running a program intended to produce nuclear weapons by next year. Iranian Foreign Minister spokesman Hamid Reza Asefi dismissed that accusation yesterday. "There is no place for weapons of mass destruction in Iran's defense doctrine," he said, according to the official Islamic Republic News Agency. Mr. Asefi suggested that U.S. officials "reconsider their intelligence sources." In Washington yesterday a State Department spokesman defended Mr. Powell's charges. "We believe we are on very, very solid ground in pointing to a clandestine effort by Iran to develop weapons of mass destruction and their delivery systems," Adam Ereli told reporters. Iran last week agreed to suspend uranium enrichment and all linked activities in a deal worked out with Britain, France, Germany and the European Union. The deal, which goes into force Monday, prohibits Iran from all uranium gas-processing activities, as well as other programs linked to enrichment. A senior EU diplomat said Iran's decision to carry out uranium processing right up to the freeze deadline disappointed the Europeans and cast doubt on Tehran's good will — even if it did not violate the letter of the agreement. It also appeared to bolster the U.S. effort to have the U.N. Security Council examine Tehran's nuclear activities. When the deal was announced last week, it looked to weaken the U.S. drive, even though the agreement commits Iran to suspension only while a comprehensive aid agreement with the EU is finalized. Asked about quantities being processed at Isfahan, one of the diplomats said, "It's not little." But he declined to elaborate. But another diplomat familiar with the International Atomic Energy Agency (IAEA), the U.N. nuclear watchdog, said the Iranians apparently were in the process of converting 22 tons of uranium into gas, either as a precursor to uranium hexafluoride or as the finished product. Iran has huge reserves of raw uranium and has announced plans to extract more than 40 tons a year. That amount, if converted to uranium hexafluoride and repeatedly spun in centrifuges, could theoretically yield more than 200 pounds of weapons-grade highly enriched uranium, enough for about five crude nuclear weapons. Iranian officials say the Isfahan plant can convert more than 300 tons of uranium ore a year. Iran announced suspension of enrichment last week, and the IAEA said it would police that commitment starting next week, ahead of a Nov. 25 meeting of the agency's board of governors.

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Briefing frenzy in Washington over Iran nuclear fearBy Alec Russell in Washington (Filed: 20/11/2004)
A briefing war erupted in Washington yesterday over the threat posed by Iran's nuclear ambitions and how to counter them - a debate reminiscent of the countdown to the invasion of Iraq.
Washington has been thrown into a frenzy following Secretary of State Colin Powell's remarks that Iran is studying how to equip a missile with a nuclear bomb.
Colin Powell: a rare stumble or deliberate political manouevre? Even as officials pondered whether his remarks were a slip or a deliberate attempt to scupper a new initiative by Germany, France and Britain, the debate intensified yesterday over reports that the intelligence had been based on a single, unvetted source.
According to the Washington Post a "walk-in" source approached US intelligence earlier this month with more than 1,000 pages of documents containing the information that Mr Powell cited.
The suggestion that the information was based on a single source aroused alarm. Many politicians and journalists in Washington are still reeling from their over-reliance on single sources for the misleading pre-war intelligence about the state of Iraq's weapons of mass destruction.
Mr Powell's comments initially fuelled speculation that Washington was seeking to undercut a tentative deal by three European Union states with Teheran for it to freeze its nuclear enrichment programme. Yesterday he played down the impact of his remarks, saying: "This shouldn't be brand new news. . .this shouldn't surprise anybody."
The growing diplomatic consensus, however, was that Mr Powell had made a rare stumble and had been lulled into saying more than he intended.
But the administration has stood by his remarks, which chime conveniently with the dominant view in Washington that the EU's diplomatic overtures are naïve and doomed. But for the moment, the administration seems willing to give the Europeans a chance, not least because it is still mired in Iraq.
"We've seen previous agreements signed," one senior administration official told The Telegraph yesterday. "What we would like to see is a real commitment. Our concern is that we see action. We'll wait and watch."
Jo Cirincione, director of the non-proliferation programme at the Carnegie Endowment for Peace, said it appeared that Mr Powell had stumbled and had not intended to "sink the (EU's) deal". But, he added, the "result is the same" and his comments played into the hands of administration hawks.
"The administration did not back down," he said. "It had numerous opportunities to do so but did not."
President George W Bush flew to Chile yesterday for the summit of Asian and Pacific leaders for his first appearance on the world stage since his re-election, with the nuclear proliferation threat posed by North Korea at the top of his agenda.
Back home in Washington, the main focus will be on Iran, likely to be the defining issue of Mr Bush's second term.
Despite yesterday's attempts to undermine Mr Powell's intelligence, the administration appears far more unified in its intention to confront Iran, than it was to face down Saddam Hussein.
Patience in Washington is fast running out. John Bolton, under-secretary of state for arms control, has been pushing for a tougher line and is said to believe that Iran should have been referred to the UN Security Council a year ago.
American officials will be looking for clear means of verifying the Iranian claims that they are freezing their programmes from Monday.
The claims were being greeted with increasing scepticism in Washington yesterday in the light of reports from Iran that it using its last few days before the deadline to produce a gas that can be used to make nuclear weapons.
Diplomats told the Associated Press that Iran was using its last few days to produce significant quantities of uranium hexafluoride which can be enriched into weapons-grade uranium.

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Fresh suspicion over Iran's nuclear aims
Ian Traynor in Zagreb and Suzanne Goldenberg in WashingtonSaturday November 20, 2004The Guardian
A breakthrough deal between Iran and the EU aimed at defusing an international crisis over Tehran's alleged nuclear ambitions was thrown into uncertainty last night when diplomats said Iran was rushing to process feed material for the manufacture of bomb-grade uranium. Only days after Tehran sealed an agreement with the EU over its nuclear activities and days before a crucial meeting of the International Atomic Energy Agency in Vienna about Iran, diplomats monitoring the issue said Tehran was "going flat out" to convert tonnes of uranium concentrate into uranium hexafluoride, the gas that is centrifuged for enrichment into nuclear fuel or for nuclear warheads.
"It's outrageous," said one well-placed non-American diplomat in Vienna, adding that the move could wreck a delicate agreement that took the heat off Iran, effectively calling a truce in the two-year dispute.
Another European diplomat in Vienna said the Iranians had started manufacturing the uranium gas on Thursday and were going as fast as possible to process the uranium before a deadline on Monday for a complete freeze on all activities connected with uranium enrichment.
Uranium enrichment is the key to making a nuclear bomb. Iran has a sophisticated enrichment programme which it insists is designed purely for power plants it does not have and will not have for years. But under the deal with Britain, Germany and France reached last Sunday, Iran is to suspend all enrichment activities next week and IAEA inspectors are to verify the freeze.
This week the IAEA chief, Mohammed El Baradei, circulated a broadly positive report on Iran's nuclear programme ahead of next week's meeting of the 35-strong IAEA board that had been expected to result in a victory for Iran and a defeat for US hawks pressing to have Tehran penalised for its breaches of international nuclear commitments.
That scenario was upset by last night's reports. The information on the uranium hexafluoride came from IAEA inspectors, diplomats said, although other sources close to the IAEA believed there was some confusion over the science of uranium enrichment.
Under the agreement with the EU, Iran is to be allowed to convert uranium concentrate into uranium tetrafluoride, an intermediate stage in uranium enrichment, but not to hexafluoride, which is the final stage before feeding the gas into centrifuges for enrichment.
In the El Baradei report circulated on Monday, the IAEA chief said that Iran had in formed him last Sunday that the IAEA could "coordinate" all conversion of uranium and that such conversion would not proceed beyond uranium tetrafluoride. As of last month, Mr El Baradei said, the agency's inspectors had found that no uranium concentrate was being turned into uranium hexafluoride.
"This makes no sense," said one source. "Why would they risk their deal with the EU three days before it comes into force?"
If confirmed, the move is certain to upset the cautious optimism about containing the problem.
The reports of uranium hexafluoride conversion were denied categorically in Tehran last night.
The development could also play into the hands of hawks in Washington, where the drumbeat for regime change has only intensified with the EU-brokered deal. Administration hawks dismiss the agreement as a sham.
This week the Bush administration said Iran was actively trying to develop a missile delivery system for a nuclear bomb. The outgoing secretary of state, Colin Powell, told reporters: "We are talking about information that says they not only have missiles but information that suggests they are working hard about how to put the two together."-----------------------------------------------------------
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U.N. staff in uproar over top leadershipBy Marc CarnegieAGENCE FRANCE-PRESSE
NEW YORK — The U.N. staff union met yesterday to discuss a no-confidence measure against senior management of the world body, which has been rocked by a series of scandals involving top officials. But sources said a planned vote could be put off until next week after U.N. officials asked to meet with union members to quell the uproar over any no-confidence vote in senior management led by Secretary-General Kofi Annan. "The idea is to keep dialogue going and see if we can sort out our differences so that it isn't necessary to adopt [the no-confidence] resolution," Annan spokesman Fred Eckhard said.
"We'd certainly like them to have more confidence in us, and we hope that we can achieve that through dialogue," he told reporters. A draft union resolution obtained by Agence France-Presse on Thursday complained of "a lack of integrity, particularly at the higher levels of the organization," and asked to "convey this vote of no confidence to the secretary-general." The measure cites unnamed senior management, but both sides — faced with heavy press scrutiny after news of the resolution broke — insisted Mr. Annan was not the prime target. Mr. Eckhard said it was a "misinterpretation" to call the measure a no-confidence vote in Mr. Annan, even though he is the most senior official in the United Nations. In a press release, the staff union stressed that the draft text had not yet been adopted and said the measure did not "express the desire" for a no-confidence vote against Mr. Annan. Sources said the immediate anger behind the resolution had been sparked by the announcement Tuesday that Dileep Nair, head of the Office of Internal Oversight Services, had been cleared of wrongdoing by Mr. Annan. Mr. Nair had faced charges of harassment and favoritism but was exonerated after what Mr. Eckhard termed a "thorough review" of the case. Some accusations had been made in an anonymous letter, he said. The staff crisis comes amid accusations of fraud and corruption in the U.N. program that oversaw oil sales by Iraqi dictator Saddam Hussein's regime. Mr. Annan has publicly complained of a "campaign" against the United Nations over the oil-for-food program in operation between December 1996 and November 2003. But it also follows the exoneration in July of Ruud Lubbers, the top U.N. official for refugees who had been the target of a sexual harassment complaint brought by a female member of his staff. Mr. Annan cleared Mr. Lubbers of any wrongdoing in that case but reportedly sent him a letter conveying his "concerns" about the official's behavior. Mr. Eckhard acknowledged the staff union was "not happy" with this week's decision on Mr. Nair, whose office functions as the U.N.'s internal watchdog, and said the question would be discussed next week. "It's been a bit of an up-and-down relationship" with the union, he said, but added: "We accept them as the legal representatives of the staff."

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Kofi Annan : des membres de l'ONU coupables de violences sexuelles en RDCLEMONDE.FR 19.11.04 20h35 Les archives du "Monde" : plus de 800 000 articles à consulter. Abonnez-vous au Monde.fr
Des personnels à la fois civils et militaires seraient en cause. Cette déclaration du secrétaire général intervient alors que sa gestion de certains scandales interne est très critiquée par le syndicat des personnels des Nations unies, qui se réunit vendredi 19 novembre. Des responsables civils de l'ONU et un petit nombre de soldats de la force de paix des Nations unies en République démocratique du Congo (RDC) ont commis des violences sexuelles dans ce pays, a annoncé, vendredi 19 novembre, le secrétaire général des Nations unies, Kofi Annan, qui s'est déclaré "outragé", dans un communiqué.

Un "rapport détaillé (...) sur l'enquête lancée il y a quelque temps à la demande de l'ONU à la suite d'allégations d'exploitation sexuelle de la part à la fois de personnels civils et militaires de l'ONU en RDC" a été envoyé au secrétaire général, indique le communiqué.
"Je crains qu'il y ait des preuves évidentes que des actes graves se sont produits. C'est quelque chose de honteux que les Nations unies doivent reconnaître, et j'en suis absolument outragé", a ajouté M. Annan dans ce communiqué.
RÉVÉLATIONS DANS UN CLIMAT DÉJÀ TENDU POUR M. ANNAN
Ce document a été publié alors que le syndicat du personnel de l'ONU devait se réunir vendredi 19 novembre à 19 h 15 (heure de Paris) pour se prononcer sur une motion de défiance à l'égard de M. Annan, critiqué pour sa gestion d'une série de scandales.
Il y a une possibilité pour que le syndicat du personnel des Nations unies fasse alors approuver une motion dans laquelle les employés de l'organisation retirent leur confiance à M. Annan et à sa direction, ce qui serait une première dans l'histoire de l'organisation.
La gestion de Kofi Annan était déjà mise en cause dans plusieurs affaires dans lesquelles étaient impliqués de hauts responsables des Nations unies. Mais c'est l'annonce, cette semaine, qu'il avait exonéré le Singapourien Dileep Nair, secrétaire général adjoint aux services de contrôle interne, accusé de favoritisme et de harcèlement sexuel, qui a déclenché la grogne du personnel.
Le porte-parole de M. Annan, Fred Eckhard, avait indiqué mardi que celui-ci avait exonéré M. Nair "après un examen approfondi" des allégations portées contre lui et souligné qu'il avait "toute confiance" en lui.
"C'est un acquittement pur et simple", a dénoncé Guy Candusso, un responsable du syndicat du personnel, relevant que, selon les propos du porte-parole de M. Annan, "aucune autre action n'est requise" dans cette affaire.
Cependant, une lettre adressée par le chef de cabinet de M. Annan, Iqbal Riza, au syndicat avait affirmé que M. Nair avait reçu comme "conseil de faire preuve de circonspection" dans l'avenir afin de "réduire le risque d'une perception négative".
Cette affaire avait été précédée par la révélation, en juillet, que le secrétaire général avait déjà exonéré le haut commissaire aux réfugiés, Ruud Lubbers, d'une accusation de harcèlement sexuel, malgré les résultats de l'enquête interne.
Or les enquêteurs avaient en effet conclu que l'ancien premier ministre néerlandais s'était bien rendu coupable de harcèlement sexuel, comme l'en accusait une de ses employées.
Avec AFP

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Europe 'should have UN seat'By Rachel Sylvester(Filed: 20/11/2004)
The European Union should have a permanent seat on the UN Security Council, the new Commissioner for External Affairs has said.
Benita Ferrero-Waldner, who was confirmed in the post on Thursday, believes that the EU must take a more communal approach in international institutions such as the UN.
Benita Ferrero-Waldner: Commissioner for External Affairs "The more we speak with one voice, the better for us and the better for Europe. We are not important if we don't speak with one voice," she said.
The proposal will infuriate Eurosceptics and lead to accusations that the commissioner wants to undermine British sovereignty over foreign policy.
At the moment, there are only five permanent members of the UN Security Council: Britain, France, Russia, China and the United States.
Miss Ferrero-Waldner, a former Austrian foreign minister, said that the creation of an EU seat would give greater representation to smaller member states. She believes that Britain and France would not necessarily have to relinquish their seats if an EU position was created.
In her first interview with a British newspaper since being confirmed as commissioner, Miss Ferrero-Waldner said that the disagreement within the EU over Iraq was regrettable.
Although member states still retain a veto over foreign policy, the commissioner thinks that they should make more effort to reach a common position.
Her comments follow the attempt by Tony Blair and Jacques Chirac to strike a conciliatory tone during the French president's visit to London this week.
The commissioner also called for more co-operation between Europe and America though she said that there are cultural differences with the EU more concerned with life quality.
She believed the re-election of George W Bush provided a chance to take a "fresh look" at relations between Europe and America.

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Chirac calls for makeover of UN Agence France-Presse Saturday, November 20, 2004
OXFORD, England President Jacques Chirac of France, during a visit to Britain, called Friday for an overhaul of the United Nations, which he said was outdated and in need of serious reform.
But Chirac also called on the world to respect the laws of the international community as determined by the United Nations, while arguing his case for a multipolar, interdependent world.
Speaking to 200 students and academics at the University of Oxford, Chirac said that when peace or human rights were threatened, the right to intervene or to launch pre-emptive military action must be applied, but only if strictly supervised by the United Nations.
"It's not for any given country to consider that a situation is open to stepping in and interfering," Chirac said.
"It's up to the international community to do so, in particular the UN, which alone has the authority to intervene," said the French president, an outspoken critic of the U.S. and British decision to invade Iraq in March 2003 without explicit UN approval.
If countries intervened independently, he said, it would "throw the door wide open to hosts of reasons to wage wars under the guise of legitimate interference," he warned, adding: "War is always a poor solution."
Chirac was in Britain on a two-day visit to mark the 100-year anniversary of the Entente Cordiale, a diplomatic agreement to end centuries of intermittent warfare between the two countries.
Repeating comments made Thursday during a joint news conference with Prime Minister Tony Blair after their annual French-British summit, Chirac played down talk of a rift between the two European powers. Instead, he hailed "a very strong historical link" between London and Paris. And while acknowledging "one or two differences of view on Iraq" with Blair, he told the audience not to believe everything they heard.
"The link between the United Kingdom and France is a very strong historical link," and even if there is "difference of interests," he said, "the foundations are strong."
He highlighted issues in which the two nations worked together, such as on European defense, pointing to joint military commitments in Afghanistan, the Balkans and Africa.
Speaking in broader terms, Chirac called for modernization of an outdated United Nations, which he said needed serious reform if it was to be "representative of the world today." He suggested that Germany, Japan, India, Brazil and a "large African country," such as Nigeria or South Africa, should become permanent members of the UN Security Council. There currently are five permanent members: the United States, Russia, China, Britain and France.
Earlier Friday, Chirac laid a wreath in Saint George's Chapel at the tomb of King Edward VII, the British monarch in power when the Entente Cordiale was signed 100 years ago.

Copyright © 2004 The International Herald Tribune www.iht.com
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Chirac Urges Security Council Expansion
Friday November 19, 2004 11:01 PM
AP Photo LON119
By JILL LAWLESS
Associated Press Writer
OXFORD, England (AP) - French President Jacques Chirac said Friday that the United Nations Security Council does not represent today's world and should be expanded to include Germany, Japan and developing nations such as Brazil and India as permanent members.
Speaking to about 200 students and faculty at Oxford University, Chirac laid out his vision of a ``multipolar'' world, balanced among various blocs and alliances rather than dominated by the United States.
Chirac, at the end of a two-day visit to Britain designed in part to heal the two countries' rift over Iraq, said his world view was shared by Prime Minister Tony Blair.
``When it comes to multilateralism, we share the same vision,'' the French president added. ``When it comes to new rules of law or U.N. reform, we are speaking with one voice.''
Chirac said the decision-making U.N. Security Council ``is no longer truly representative of the world as it is today. So it needs to be modernized.''
Britain has also backed expansion of the Security Council. Britain, France, China, the United States and Russia are all permanent members.
Chirac suggested the body's membership should rise from 15 permanent and rotating nations to 20 or 25 to reflect how the world had changed since the United Nations was founded in 1945.
``You cannot simply take a snapshot of 1945 and apply it to 2004,'' Chirac said.
A relaxed and voluble Chirac acknowledged differences over the U.S.-led Iraq war - which Britain strongly supported and France vociferously opposed. But he said the two governments were united on other key issues: fighting poverty, increasing international tolerance and salvaging the endangered environment.
``France and Britain have a shared vision of what the great challenges of today are,'' Chirac said. Chirac's visit marks the 100th anniversary of the Entente Cordiale, the pact that ended centuries of warring and hostility between the two countries.
Talking to reporters after talks on Thursday, Blair and Chirac put aside their long-simmering differences over Iraq and pledged to work together on reviving the Middle East peace process, alleviating poverty in Africa, slowing global warming and a host of other issues.
Speaking Friday to an audience that included international Rhodes Scholars - in a room hung with a portrait of the scholarship's founder, British imperialist Cecil Rhodes - Chirac said Iraq was ``froth in a reality which is one of deep and cordial entente between France and the United Kingdom.''
Earlier this week, Chirac expressed skepticism about Blair's aim of being a bridge between Europe and the United States. But on Friday he played down the trans-Atlantic rift over Iraq.
``North America and Europe are destined to work together because they share the same values, the same background,'' he said. ``The trans-Atlantic link is quite simply the political expression of our great and fundamental values.''

Guardian Unlimited © Guardian Newspapers Limited 2004
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USAID in the Hot Seat--Again By Roger Bate, Samantha Dovey, Emma Morrison Posted: Friday, November 19, 2004 ARTICLES Tech Central Station Publication Date: November 19, 2004 Senator Brownback (R-Kansas) is concerned that even though in the past five years U.S.-funded malaria control efforts--through the offices of the United States Agency for International Development (USAID)--have increased several-fold, global malaria rates have skyrocketed--increasing 10 percent at least.
Asia, the Near East and Africa account for ninety-six percent of deaths caused by malaria. Indeed, "conditions in many Asian countries are far worse today than they were decades ago when insecticides were sprayed on house walls to combat malaria" argued Dr. Donald Roberts, a malaria expert testifying last month before Senator Brownback, chairman of the Senate International Relations subcommittee on East Asia.
Testifying alongside Dr. Roberts was Dr. Robert Desowitz, tropical diseases expert and Emeritus Professor at the University of Hawaii and Dr. Anne Peterson of USAID. It was left to Dr. Peterson, Assistant Administrator for Global Health to defend why USAID is not providing DDT and other insecticides as part of a comprehensive prevention strategy.
USAID's Peterson claims "Insecticide Treat Nets (ITNs) are unquestionably the most effective way that families can protect themselves from malaria." But because of this one-pronged ITN approach, conditions in many Asian countries have deteriorated since the time when DDT was used in combination with effective drug regimes. Dr. Roberts revealed that many countries were pressured to stop using DDT by WHO in the late 1970s and today other aid agencies, including USAID, continue the pressure.
For the countries of Burma, Sri Lanka, Bhutan and India, the most malarious in Asia, the contrast in rates from the 1960s to today is horrifying. The malaria burden has grown 6.7, 6.4, 17.5 and 807-fold, respectively, since insecticide spraying was stopped or reduced. Even Vietnam, touted as a success story by USAID, was denied its request to purchase DDT in the 1990's by all donors, forcing it to switch to a less effective insecticide. Dr. Roberts, pointed out that malaria rates remain high at 350,000 cases a year in Vietnam even after US investment in malaria control of $28 million.
Asian malaria control policy changed in the 1970s halting the most effective global spraying programs, with the necessary infrastructure for indoor spraying decaying as a result. Dr. Peterson explained her reason for not supporting DDT: "spraying requires major infrastructure, including a high level of organization, geographic coverage, application personnel and financial resources." An ironic and disingenuous response considering USAID was partly responsible for the elimination of the well-developed infrastructure in the first place. Even more questionable, if spraying was possible over forty years ago, why not now?
Drs. Roberts and Desowitz pointed out the undeniable effectiveness of DDT spraying, and Dr. Peterson agreed: "contrary to popular belief, USAID does support use of DDT in its malaria control programs." she said. Puzzled, Sen. Brownback could not understand why USAID claims to support full-heartedly a multi-pronged prevention strategy that includes DDT and combination therapy drugs, but does not use its funds to purchase either?
With an $80 million budget for 2004, Sen. Brownback was interested to know the breakdown of USAID's malaria budget. Peterson, unable to provide the exact numbers, responded that USAID funds the training of personnel, surveillance of drug quality and resistance, research for a malaria vaccine and insecticide-treated nets. USAID does not purchase DDT or drugs.
Wanting only a straight answer to the seemingly simple question of why USAID does not purchase DDT or drugs, the Kansas senator continued to press Dr Peterson. When asked whether or not USAID would buy DDT if funds were provided for that purpose, Peterson refused to say that USAID would indeed make those purchases.
It's becoming pretty obvious that USAID is not coming clean; it must give ongoing policy guidance against the use of DDT. Reports from the field show that they continue to privately advocate against their own public rhetoric of using all tools in the toolbox, pushing an undoubtedly less effective one-pronged approach of only using ITNs. The end result? Other aid agencies, governments and corporations will continue to mimic this deadly approach.
Malaria is a preventable and curable disease. Yet it continues to claim the lives of over one million people each year, with Africa, Asia and the Near East suffering the most losses. USAID must change its policy or its health officials should be replaced by those who will.
Roger Bate is a visiting fellow and Samantha Dovey and Emma Morrison are researchers at the American Enterprise Institute.
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No Aid for AIDS Disease-Prevention Groups Are Still Failing Africans By Roger Bate Posted: Friday, November 19, 2004 ARTICLES National Review Online Publication Date: November 19, 2004 ARUSHA, TANZANIA--The great and the good of the health world, along with at least four African presidents, have descended on Tanzania for the United Nations' Global Fund meeting. The fund, established in 2000 to combat AIDS, tuberculosis, and malaria, has so far received over $3 billion from the wealthy nations. But presidents Yoweri Museveni of Uganda, Paul Kagame of Rwanda, and Mwai Kibaki of Kenya have joined the Tanzanian president, Benjamin Mkapa, in saying that more funds are required.
But the greatest problem in Africa is the lack of political will to both combat disease and--equally important--provide the institutional conditions for growth. Without the former, disease will never be controlled; without the latter, it will always return.
Sub-Saharan Africa has always suffered under the blight of war, famine, and disease. But--with some notable exceptions--there are more democracies and fewer wars today than in the 1980s. Indeed, since 1990 many countries have had peaceful transitions of power--a welcome novelty for the region. Food supply is generally more secure than ever before, such that a particularly bad drought in Southern Africa has led to no more than food shortages in most locations. (Except, of course, for despotic Zimbabwe--where politically driven food allocation is causing widespread starvation.)
Unfortunately, many health indicators are still moving in the wrong direction. The most dangerous diseases are less controlled today than at any time in the past 50 years. Malaria and AIDS are rampant; tuberculosis is increasing from an already high rate. Much of the blame for this lies with the inadequate attention paid to health by African leaders, some of whom have continued to deny that HIV causes AIDS, and many of whom have preferred to bolster their armies against non-existent enemies. A fair bit of the blame can also be heaped on aid and health agencies that have promoted the wrong policies: notably, advocating bed nets for malaria control at the expense of the more effective indoor DDT-spraying. As a result, over the past five years, malaria rates have increased by more than 10 percent at a time when funding for malaria has increased by over 200 percent.
Most of the fund's money is spent on AIDS prevention and treatment, and a lot of this money may be well spent. Unfortunately, we just don't know. If, in the first round of disbursements in 2002, significant health outcome statistics (morbidity and mortality changes in particular) had been collected, then we could know. But unfortunately they weren't, and so we don't. Add to this the fact that the fund was procuring anti-malarial drugs that were useless--and Indian generic AIDS drugs that may be useless and have now been recalled--and its track record is rather a mess. To its credit, however, the fund has listened to criticism, and appears to be building in outcome measurements and buying the right drugs.
And when it comes to malaria, in fact, the fund is doing the best job of all aid agencies. It is actually procuring DDT for countries that ask for it, such as Zambia. Other agencies continue to promote only bed nets and are doing everything they can to obstruct the use of DDT in Uganda. A decision was made over the summer by the Ugandan Ministry of Health to use DDT procured by the fund. But insiders I spoke with, who wish not to be named, say that overseas pressure to drop DDT use means the decision is on hold.
After complaints about the fund's early actions by U.S. Senators Gregg and Feingold, it has improved. As long as this continues and the congressional oversight remains (especially the senators' calls for outcome measurements), then it should continue to expand its work in Africa. Governments could increase funding to deliver what Africans want (drugs, insecticides, and other resources), rather than what Western aid agencies want to give them (mainly seminars and funding of "educational" programs and consultants). If they opt for the former, then we might start to see a reduction in the worst tropical diseases.
The international community has been critical of the Bush administration's decisions to buy only tested AIDS drugs and to promote abstinence for AIDS prevention, but the former certainly--and probably the latter, too--have been shown to be correct. Some critics will continue to press the administration to give more money with no strings attached, but it must keep trying to promote democratic reform--particularly property-rights reform--because without secure entitlement for ordinary people, economic growth is unsustainable.
The links between economic liberty, individual property-rights protection, and health--as demonstrated by the Wall Street Journal-Heritage Freedom Indices--are too strong to be ignored. The historic lessons of malarial control are clear and are of direct relevance to combating HIV today. Those countries that kept malaria away after eradicating it with DDT were those that either had or developed strong property-rights systems (e.g., the U.S., Italy, Singapore). Eradication was not sustained in those without these institutions (e.g., Guyana, Malaysia).
The economic ministries of African countries know this to be the case. But the health specialists dominate the turf war to receive aid, and they naively believe that wealth will miraculously appear if disease is combated. The lesson of history is that they are wrong, but those in Arusha are not listening.
Roger Bate is a visiting fellow at the American Enterprise Institute. --------------------------------------------------------------------

IRAQ
Iraqi Unrest May Delay Elections, Officials Warn (Update3) Nov. 19 (Bloomberg) -- Elections in Iraq, scheduled to take place by Jan. 31, may be postponed by continued widespread violence or a coordinated boycott by Sunni Muslims, U.S. and Iraqi officials said.
``I believe we have a good chance of still meeting the target,'' Iraqi Ambassador Samir Shakir Mahmood Sumaidaie said at the United Nations. ``If, however, at the time it is determined that we need a bit more time, then that situation will be reviewed'' by policy makers.
Under Iraq's interim constitution, voters would cast ballots by the end of January for a national legislature, which would form a permanent government and write a lasting charter.
President George W. Bush said Nov. 13 that successful elections in Iraq would be ``a crushing blow'' to terrorists, and ``inspire'' democratic change throughout the Middle East, ultimately making the U.S. more secure.
Security has worsened in Baghdad and the Sunni Triangle up to the northwestern city of Mosul, one U.S. official said.
``We're worried that in some areas -- again, not all, in some areas -- it would now be difficult to have elections,'' said Bill Taylor, director of the Iraq Reconstruction Management Office. ``And it's that kind of work that we need to do between now and January so that we can have elections in the entire country.''
Sunni Boycott
Asked about the threat by Sunnis in central Iraq to boycott the election of a 275-member national assembly, Sumaidaie said there might be a delay ``if all the Sunnis act as a group.'' He added that such unity is ``unlikely'' because the Sunni leaders who have threatened the boycott don't represent the entire religious minority of Iraq.
Unrest spread just after U.S. and Iraqi forces attacked the insurgent stronghold of Fallujah on Nov. 8.
Air Force Lieutenant General Lance Smith, deputy commander of U.S. forces in the Middle East, today disputed a statement by Marines Lieutenant General John Sattler that the Fallujah siege had ``broken the back'' of the insurgency, saying it was too early to tell.
Mosul Operation
Iraqi soldiers stormed the old section of Mosul today, in a continuing operation to flush out insurgents holed up in Iraq's third-largest city, Captain Angela Bowman, a military spokeswoman, said.
Mosul has been the scene of nine days of clashes that have killed at least 20 Iraqi soldiers, and one U.S. soldier, as well as more than 50 guerrillas.
Iraqi commanders cited by Agence France-Presse said the offensive was aimed at a suspected meeting place of rebels. About 400 Iraqi soldiers took part, and 100 U.S. soldiers were stationed nearby in case reinforcements were needed.
Qubad Talabani, Washington representative for the Patriotic Union of Kurdistan, said the battle for Mosul, a traditional center for Saddam Hussein loyalists and Sunni Arab nationalists, may be the ``Alamo'' of Iraq.
``There's a series of raids going on,'' Talabani said in an interview. ``There's an attempt of Iraqi forces to regain control of major parts of the city, which has been heavily influenced by the insurgents, both former Saddam loyalists and Islamist jihadists.''
Talabani said Iraqi national guard units made up of Kurds were sent to the city to protect Kurdish political offices.
Mosque Raid
U.S.-backed Iraqi forces stormed a Sunni mosque after Friday prayers in Baghdad, killing at least three people, after the government warned Muslim clerics yesterday against inciting violence, the Associated Press reported. The mosque has long been associated with anti-American activity, AP said.
Taylor said rebuilding efforts are easier in most Iraqi provinces, especially in the Kurdish northeast and the Shiite- dominated south.
Sumaidaie said his confidence that elections can be held in January grew after the U.S.-led incursion into insurgent-held Fallujah. UN Secretary-General Kofi Annan's decision to increase the number of the election advisers in Iraq also was a good sign, he said.
Fallujah Outcome
``The position of the Iraqi government is that we should plan on holding the elections on time,'' he said. ``We accept that there continues to be violence in different parts of the country, but the outcome of the recent military operation in Fallujah has been very positive. We clearly have reduced the terrorists' ability to launch an organized campaign. What happens in the next weeks will be important.''
The U.S. plans to spend at least $100 million to rebuild Fallujah once military commanders determine that it is safe for civilians to return. Television pictures show that areas of the city were turned to rubble by coalition ground fire and bombing.
Sumaidaie said the UN is about to increase its staff in Iraq to about 60 workers, double the number there now. That should be enough, he said, for the UN to play an important ``supervisory'' role in the elections.
UN spokesman Fred Eckhard said that, while Annan is deploying more people to Iraq, he was ``not aware of any decision by the secretary-general to raise the ceiling further.''
Sumaidaie said he is confident that next week's international conference on Iraq in Egypt would also improve the security situation by producing new commitments from Iran and Syria to secure their borders to prevent terrorists from entering.
To contact the reporter of this story: Bill Varner at the UnitedNations at wvarner@bloomberg.net
To contact the editor responsible for this story: Edward DeMarcoat edemarco1@bloomberg.netLast Updated: November 19, 2004 18:04 EST

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Picture of insurgency gets clearer By Scott Peterson, The Christian Science MonitorFALLUJAH, Iraq — U.S. troops found a videotape in an insurgent safe house Thursday that shows how the fighters of Fallujah prayed, lived and died as U.S. and Iraqi troops moved in. Insurgent posts are still being investigated across Fallujah. By Patrick Baz, AFP
The videocassette in a Sony Handycam was part of a trove that adds to the intelligence information shedding light on the insurgency in Iraq. The tape was found along with a laptop computer, stacks of CD-ROMs and some telephones.
CNN footage released Thursday showed a suspected command center used by followers of Jordanian terrorist Abu Musab al-Zarqawi. His group, al-Qaeda in Iraq, has been blamed for car bombings, kidnappings and beheadings of hostages, including three Americans.
Those finds followed the discovery Wednesday of a vast weapons cache and safe house operating under the cover of an Islamic medical charity. Flags of Zarqawi's terrorist group also were found.
Controlling the city, which was an insurgent stronghold, is a key part of efforts by the United States and the interim Iraqi government to try to make Iraq secure enough to hold elections in January.
The operation in Fallujah that began Nov. 8 continued Thursday with sporadic firefights. The city echoed with the boom of U.S. military explosives experts destroying weapons stockpiles. "It's going to take a long time (for insurgents) to reconstruct what they had in this city, for command and control," said Col. Craig Tucker, commander of the Regimental Combat Team-7. "They have to re-establish their ratlines."
The video found in the safe house shows young, thinly bearded men — from Saudi Arabia or Yemen, judging from translations. They are first seen mourning a dead comrade whose body lies on a stretcher with a white strip of cloth around his head.
The film shows tanks in Fallujah, apparently U.S. Army tanks from the first day of the assault. And it shows what appear to be suicide bombers preparing for battle.
The weapons cache discovered Wednesday by the Marines' Bravo Company was the largest found here so far. It was stashed in a nondescript collection of buildings that U.S. forces had passed by several times without taking a closer look.
The cache included an estimated 1,000 pounds of explosives, which could have caused damage up to six city blocks away if detonated all at once.
"Not all this stuff was being used for Fallujah. A lot was being exported out and used as IEDs (improvised explosive devices) and car bombs in Ramadi and elsewhere," Tucker said. "This was the central location for planning."
The charity worked under the legal name of the "Islamic Association — Fallujah Branch."
Marines used wheelchairs as wheelbarrows to take shipping containers of ammunition, gas masks and mines to be destroyed.
The suspected Zarqawi command center shown on CNN was in an imposing house with concrete columns and a large sign in Arabic reading "Al-Qaeda Organization."
Inside the building, U.S. soldiers found documents, computers, notebooks, photographs and copies of the Koran, Islam's holy book. Several bodies also were found.
There were two letters discovered inside the house. One from Zarqawi gave instructions to two of his lieutenants. Another sought money and help from Zarqawi.
Lt. Gen. John Sattler, commander of the 1st Marine Expeditionary Force, cautioned Thursday that the insurgent posts were still being investigated. "I cannot stand here and tell you that we found the command and control house or building where Zarqawi went ahead and orchestrated and dealt his (car bombs) ... and the other death and destruction that he has spread throughout the country," he said.
Copyright 2004 The Christian Science Monitor

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Prosecutor in Chavez coup inquiry is murdered
Stephen Ixer in CaracasSaturday November 20, 2004The Guardian
A leading Venezuelan prosecutor investigating the 2002 coup attempt against President Hugo Chavez has been killed in a car bomb attack in Caracas, raising fears of renewed unrest in the country. Danilo Anderson, 38, was driving to his home in the capital on Thursday night when his Jeep exploded. The bomb was activated by remote control and designed to explode upwards, said officials.
"This was a political assassination," said the information minister, Andres Izarra.
Mr Anderson was highly prominent in Venezuela for leading several cases against opponents of Mr Chavez, including an investigation into nearly 400 activists who supported the military coup attempt against him. The president, himself a former coup leader, was ousted for two days in 2002 before loyalist troops returned him to power.
Mr Anderson had also prepared the case against a group of army officers who declared themselves in open rebellion against Mr Chavez. Some of these, now living in exile in America, have been accused of links to last year's bombings at the Spanish and Colombian embassies in Caracas.
Mr Izarra suggested that the same men might be responsible for Mr Anderson's death. "The US government must explain how these terrorist groups can be operating in Florida - US territory," he said yesterday. The US government condemned the bombing and dismissed any links to those involved in the Caracas attack.
The assassination follows regional poll successes last month for Mr Chavez, who also won a referendum on his position in power in August.
"The fight continues. I call on Venezuelans to unite and remain calm," he said, after paying his respects at the office of the public prosecutor, where Mr Anderson's body was laid out in a coffin.

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NATIONAL

McCain: Air Force fixed bids
Senator lashes at Boeing deal
Alan BjergaKnight Ridder NewspapersNov. 20, 2004 12:00 AM
WASHINGTON - Sen. John McCain called Friday for "full accountability" for Air Force officials involved in a controversial contract to acquire tanker aircraft from Boeing, accusing them of incompetence or corruption."Either way, full accountability among Air Force leadership is in order," said McCain, R-Ariz.Reading from previously unreleased internal Air Force e-mails, McCain charged that Air Force Secretary James Roche, who resigned this week, and other Pentagon officials conspired with Boeing to fix the bidding on a $23.5 billion contract that would have added 100 Boeing 767s to the Air Force tanker fleet.
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Roche wrote "Go Boeing!" in one e-mail, McCain said. Roche also disparaged one of Boeing's competitors, European Aeronautic Defense and Space Co., or EADS, and its North American chief executive, Ralph Crosby. EADS owns 80 percent of the European aircraft manufacturer Airbus."Ralphie is the CEO and chairman of a marketing firm, for that's all there is to EADS, North America," Roche wrote.A Roche aide said the secretary was traveling and unavailable for comment.Air Force spokesman Doug Karas said the e-mails are old news. "The e-mails . . . reflect negotiations on an acquisition program that is now behind us," he said.McCain has long criticized the tanker deal. But his speech Friday was unusually harsh, apparently an effort to prevent Roche's resignation from ending the controversy.Former Air Force tanker negotiator Darleen Druyun, who later took a job with Boeing, was sentenced to nine months in prison last month for discussing a job with Boeing while tanker talks were under way. On Monday, former Boeing Chief Financial Officer Mike Sears pleaded guilty for his role in recruiting Druyun. Both were fired from Boeing after an internal probe in 2003.Also, Air Force Acquisitions Chief Marvin Sambur resigned this week.The Justice Department is investigating Roche for possible conflict-of-interest violations. Sambur said last week that an investigation by the Pentagon inspector general had cleared him. The inspector general declined to comment.
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Saudis Pledge up to $20 Million for Clinton Library
Disgraced ex-president Bill Clinton, whose disdain for national security over the last eight years is widely believed to have rendered the U.S. vulnerable to last fall's terrorist attacks, is set to collect millions of dollars from Saudi Arabia, home to 15 of the 19 Sept. 11 hijackers.
Estimates of Clinton's expected Saudi jackpot range from "less than $1 million to $20 million," according to columnist Robert Novak, who cites high-ranking members of the Saudi royal family as the source for the information.
In addition to the hijackers, al-Qaeda terrorist mastermind Osama bin Laden is a Saudi national, and most of his family now live in the country.
Ostensibly U.S. allies, Saudi leaders have refused to allow American pilots to use U.S.-built air bases in the country to fight the war on terrorism, and have been described as uncooperative in 9/11-related investigations.
On Thursday Saudi Crown Prince Abdullah planted a kiss on the cheek of a top Iraqi official during a Mideast Arab summit, in a move widely seen as a slap at the Bush administration, which has identified Iraq as a member of the "axis of evil."
Clinton's Saudi windfall comes in the form of a pledge to his presidential library foundation in Little Rock, Ark. A library spokesman would neither confirm nor deny the donation.
Former senior Clinton adviser Dick Morris has described the library donor account as a "slush fund" that the former first family will divert to their own personal use.
The ex-president was also paid a $750,000 speaking fee when he traveled to Saudi Arabia three months ago, Novak said.
The Saudi pledge follows what Novak describes as "a similar gift to the elder George Bush's presidential library." The Bush library lists the Saudi contribution among "gifts of $1 million and above." The donor is identified as the family of the Saudi ambassador to the U.S., Prince Bandar bin Sultan.
Novak did not say whether the Bush donation was accepted before or after Sept. 11.
--------------------------------------------------Soros, Saudi-Funded Clinton Library &Massage Parlor Honors Dem's Devastator November 18, 2004
Listen to Rush… (…comment on the opening of the Clinton library legacy)
BEGIN TRANSCRIPT
You know, I just don't want to do this. I don't mean the show. I guess I'm going to spend some time on it. I'll make it worth everybody's time, including mine. Have you people had a chance to see some of the pictures coming out of Little Rock today at the Clinton Library and Massage Parlor? This is the Democrats taking another trip down memory lane trying to relive their past as present as they continue to live under a great illustration. It's actually sort of fun to watch this. It's also a little like a waste of time here to watch it and talk about it a lot, which I won't, but some comments nevertheless necessary, ladies and gentlemen.
BREAK TRANSCRIPT
So I'm watching here today the Clinton Library and Massage Parlor opening, and it's just a rush of emotions. First thing that hit me was, they're back in the past again, and they're celebrating a time that never will be again, and they are living in a dream world about what that time was in the first place. They think that was one of the glory periods of America and its history, and as history will record, it wasn't. It wasn't all that bad. No great things were done. No great strides were taken. But if you look at the people, it's raining down there, and these people -- most of them, this motel, I don't think how big it is -- most of them stayed in the now famous Paula Jones hotel in Little Rock and surrounding environs. I'm sure some of the Hollywood elite just flew in today dragging their environmental policies with them on their G4s and G5s. Then they got in their SUVs that burn eight miles to the gallon driving to this place, and they're all sitting out there in the rain, and they've all got umbrellas. Algore is there, Kevin Spacey, Geraldo Rivera is there but he goes back to defending Clinton those years. You've got Barbra Streisand and her husband James Brolin, the whole Clinton crowd from the nineties, Ashley Wilkes, Wesley Clark. And they're all just standing out in the rain under umbrellas just waiting for whatever. Why don't they let 'em in there? Why don't they let 'em in there? I guess there's going to be a flyover of military jets, which nobody is going to be able to see if the ceiling is so low. The jets will be above the clouds. If the jets are below the clouds you'll have a bunch of windows broken in Little Rock and if you want to scatter the homeless like they did for the opening here, fly those jets real low and the homeless will run for cover not knowing what's coming their way. But, you know, you look at this, this whole exhibit, nobody knows who paid for this except, except there has been a partial list. We know that Marc Rich paid a lot of money. We don't know how much George Soros paid, but we also know that the Saudi royal family contributed a great deal of money to the Clinton library. Now, isn't it interesting that you never hear about the Saudi royal family being involved with Democrat presidents. You don't get documentaries and books produced and written about the close ties between Democrat presidents and the Saudi royal family. A dirty little secret, ladies and gentlemen, is that the Saudi royal family has helped to finance most of the presidential libraries probably in my lifetime, and it's one of the reasons that there is such a close bond between presidents and ex-presidents and the Saudi royal family, all presidents, doesn't matter what party. It's not the majority funding or anything of the sort, but it's significant. So look at Gore, Gore can't even get the umbrella over his head. His suit is getting wet, his hair is getting wet, this is incredibly hilarious. Gore is standing out in the rain with an umbrella and still getting wet.
The whole group is all wet here, folks. They're living in the past, they're reliving their dreams, the TV commentators, they're all going back to the mid-nineties and they're all saying, "Oh, if only." But this parade of people on TV, from the Democrat officials to the media assistance, to the Hollywood elite and so forth, this is an endless parade of reasons why John Kerry and the Democrats lost this election. The only thing these people have in common with the red states today is that they're in one, but they're going to get out of it as quickly as they can. When's the last time you think Barbra Streisand was in Arkansas? That we know of, that we know of, Mr. Snerdley. (talking to program observer) By the way, how was Washington yesterday? Did you have a good time up there? I told them that you had to go out and appear on a TV show yesterday. Lark Snerdley was sitting in for you here yesterday. He seemed lost, seemed to really not know what to do. Sat back in the room on his computer all day and just tinkered with e-mail and expects to get paid, I'm certain. But that's all he did. Anyway, folks, I'm having a big laugh over this because while it may be frustrating to watch, what do you expect? The media is going gaga here. This is their hero and they're going to go back and relive the glory days when America had promise, and when America was decent, when America wasn't at war, when America didn't have a president that was causing war.
What we see at this library opening is really a microcosm or a collection of the reasons the Democratic Party remains in big trouble. They can't look forward, they don't have a forward-moving agenda or playbook whatsoever. Everything is wrapped up in the past. The real irony of all of this is that they are there honoring a man and his library who probably single-handedly has done more to destroy the Democratic Party than even I have. Bill Clinton may be riding high, and Hillary may have what they consider a great future, but since Bill Clinton came into office, the Democrats have lost the House of Representatives and not gained it back, they've lost the White House and not gained it back, they've lost the Senate and not gained it back, and they've lost a lot of governorships. And if you look at a county map of this country, you'll find that there are very few Democrat counties, much less Democrat states. All of this was just the opposite prior to Bill Clinton arriving in Washington in 1992. So while this facility honors Clinton and his legacy as they try to rewrite it, and as Clinton continues to prosper and get wealthy as he continues to tell us, and as Hillary's fortunes continue to expand with great opportunity, at the same time those two people are taking the Democratic Party down even further. There's President Bush and his father, President H. W. Bush. President George H. W. Bush is part of the official ceremony there today, which is traditional. The president has had some interesting things to say, President Clinton. He insisted yesterday, this was in the New York Daily News today, he insisted (Clinton impression- paraphrasing) "I never disgraced this country and I never lied to the American people about my job, I never did that. There's not a single example where I ever, ever disgraced this country publicly. I mean, I made a terrible public personal mistake but, hell, I paid for it many times over. In spite of it all, you don't have any example where I ever lied to the American people about my job. I never, ever let the American people down, I never did one thing, not a single time, never, to disgrace this country publicly. I mean, I worked harder than I've ever worked in my life, and I never, ever did that."
Oh, is that right, the selling of the Lincoln Bedroom was not a disgrace? Obstructing justice was not a disgrace? Having his law license suspended while in office was not a disgrace? Being fined $90,000 for perjury was not a disgrace? That was, by the way, a fine ordered by judge Susan Webber Wright three months after she found him guilty of contempt for giving false testimony in the sex harassment case brought against him by Paula Jones. So what does it mean never to have lied to the American people about my job? It's some sort of a badge of honor? The guy wants credit for never having lied about the job. (Clinton impression) "Well, yeah, but see, Limbaugh, you know me better than anybody else does out there who doesn't know me, and you know that I lied all over the place, so I have to come out and say that I didn't lie to the American people about my job." Yeah, but Mr. President, the implication is you lied elsewhere. "Yeah, well, I know that Limbaugh but I'm trying to define my legacy as a commander of the White House and so forth. I never lied about -- well, I lied in there, but I never lied about--" He's twisting here. He didn't lie? I'm so worn out. This is about all I can muster for this, folks. I'm just content to let these people frolic here in the past, and we're going to move on. If you want to talk about it, feel free, but I hope you don't to be quite honest.
BREAK TRANSCRIPT
We figured out here why they're not letting the august attendees, the celebrated guests at the Clinton Library and Massage Parlor inside the facility. I should have known, folks, the massage rooms and steam rooms are in full blast and they're worried about culture clash in there, and until those people finish in the steam rooms and massage rooms, which will happen during the opening ceremonies, then the guests will be allowed in.
BREAK TRANSCRIPT Still sitting here, ladies and gentlemen, watching intermittently coverage of the opening here of the Clinton Library and Massage Parlor as it continues to rain, now raining very hard down there in the august group. I'm sure many in the crowd have never been made to stand out in weather like this for anybody. Who does he think -- whaI just continue to have little observations here. I have PMSNBC on, I'm flicking back and forth, other networks, I'm watching the PMSNBC guys, and, you know, it just struck me, I know this is no great earth-shaking revelation, but it just struck me, I'm watching all these news media people from the Newsweek people ,to the MSNBC people, to wherever they want to go talk to a news commentator. These people just do not realize when they talk about Bill Clinton, it is so obvious to viewers that they have a love and adoration and a respect and an, oh, gosh, I want to be part of his club kind of attitude about him, and when they speak about George W. Bush, it's with pure contempt. I'm not sure they understand just how obvious this is.
Now, you may think I'm being a little naïve on that, but I'm not sure that they are aware just how in the tank for Kerry or Clinton that they were. I mean, remember that story that was in the Washington Post, some guy wrote a story about Clinton out there on Coronado Island off of San Diego, he's crackling with power in his jeans, or his jeans crackle with power as he walks along. It was just a hilarious piece. And we've got a piece by David Hammer here in the AP, "Bill Clinton is hosting a party befitting his role as a political rock star, complete with actual rock stars, Hollywood luminaries, an Air Force flyover, and the whiff of scandal." Yeah, they're all groupies. I know, just a whiff, but they're all groupies. They're all groupies. It's just amazing.
END TRANSCRIPT
--------------------------------------------------Goodbye Colin, Hello Condi From the November 29, 2004 issue: Regime change at the State Department. by Fred Barnes 11/29/2004, Volume 010, Issue 11

PRESIDENT BUSH always believed he would be reelected. So in the weeks before November 2, he repeatedly discussed with White House aides who should replace the departing cabinet members in his second term. And decisions were made, pre-Election Day. Alberto Gonzales, the president's legal counsel, would succeed John Ashcroft as attorney general, and Margaret Spellings, chief White House domestic adviser, would take over for Rod Paige as education secretary. Another decision: Those planning to leave the administration at their leisure over the coming months would be asked to depart immediately. When Secretary of State Colin Powell met with Bush on November 11, he requested to stay a few extra months to tie up loose ends at the State Department. Bush said no, and Powell's resignation was announced the following Monday. The next day, national security adviser Condoleezza Rice was named as Powell's successor.
If anyone thought the president would relax after an arduous campaign--I certainly did--they were wrong. The three prior presidents to win reelection (Nixon, Reagan, Clinton) had relatively skimpy plans for their second terms, but Bush has a breathtakingly ambitious agenda. To achieve it, he wants full control over his administration. He wants cabinet members he knows and trusts. Thus, what an official calls "the Gonzales model" of dispatching White House aides or other loyalists to take over key agencies is being followed. The president also believes the new cabinet officers should be installed as quickly as possible. That way they'll be ready early next year for expected struggles with Congress, recalcitrant federal bureaucracies, and opponents of America and of Bush's drive for democracy around the world.
The president hasn't listed his priorities for 2005, but it's not difficult to figure them out. Winning the war in Iraq and the battle against terrorists is number one. The second priority, given the likelihood of as many as three or four Supreme Court vacancies, is gaining Senate confirmation of conservative justices. Number three: Social Security reform. A bill is now being drafted at the White House to create individual investment accounts and to produce savings aimed at keeping the Social Security system from insolvency. Four, tax reform. Five, tort reform. Six, an energy bill that increases domestic oil and gas production. The list goes on, but I'll stop there.
The most significant decision was to send Rice to the State Department. Presidential aides insist no one else was in the running to replace Powell. The move has many ramifications. For one thing, it means the center of national security policy-making, aside from Bush himself, shifts to the State Department. And things will change there. Powell, reflecting the State bureaucracy, was at odds with the president on Iraq, Israel and the Palestinians, the pursuit of democracy in the Middle East and Arab countries, Iran, North Korea, and who knows what else. Powell allowed at least one senior official to tell European counterparts they should wait for John Kerry to be elected. Then policies they and the American official prefer would be put in place. Rice, on the other hand, reflects Bush's views on all these policies. Her promotion also means the dysfunctional relationship with the Pentagon and State endlessly clashing over policy will cease.
One of Rice's tasks will be to impose these policies on the State Department without touching off a revolt or clandestine efforts to undermine the president, such as occurred at the CIA and is only now being quashed by the new director, Porter Goss. Rice, however, usually acts with a light touch. This has prompted criticism of her as a weak manager. After all, she didn't ride herd on Powell and Defense Secretary Donald Rumsfeld. But, other than the president, who could? In any case, she'll need a strong deputy to run the department day to day, plus a crew of new assistant secretaries in sync with Bush's policies.
Another urgent task for Rice is to begin making the case for Bush's policies around the world, especially in Europe. There's a name for this--diplomacy. The media assumed Powell did this, but in fact he did not. Diplomacy aimed at persuading the wary or the opposed has to be carried out face to face. But Powell rarely visited Europe. On the eve of the invasion of Iraq, several American officials traveled to Turkey in hopes of convincing the Turks to allow the 4th Infantry Division to attack Iraq from the north, from Turkey. Powell would surely have had more influence than the Americans who lobbied the Turks, but he did not go. The Turks barred the use of the territory. It's safe to say Rice will travel.
A big question in Bush's first term was where Rice would come down. Would she side with the more dovish Powell or the hawkish coterie of Vice President Cheney, Defense Secretary Rumsfeld, and Deputy Defense Secretary Paul Wolfowitz? Within months, the answer was obvious. She tilted toward the hawks. Or perhaps she simply followed the president's lead in often discounting Powell's advice and embracing tougher policies destined to divide the United States from some of its European allies. Still, Rice was known for her caution. Some in the Cheney-Rumsfeld camp complained that she was too timid. But Bush didn't think so. He expanded her authority.
The terrorist attacks on September 11, 2001, brought Bush and Rice even closer. Both were traumatized by the event and concluded the world had fundamentally changed. After the fall of Soviet communism, America seemed to face no major threat in the world. But 9/11 persuaded Bush and Rice that America would have to wage war against Islamic jihadists, probably for decades. The reaction at the State Department was not so drastic.
Nor did Powell and State respond enthusiastically to Bush's broadest foreign policy goal, democratization of the Arab world. They are realists who think such goals are unattainable and a distraction from pursuing America's national interest, narrowly construed. That would be fine if Richard Nixon or the elder George Bush were president. But the current President Bush is not a realist. He's a moralist who believes the best route to peace and security is through planting democracy in countries--Iraq, for one--where it doesn't exist. One example: For the Palestinians, it means democracy first, then statehood. This is the opposite of the realist formula.
Rice, too, is a moralist. This makes all the difference. And it's why Bush can't wait for her to take over as secretary of state.
Fred Barnes is executive editor of The Weekly Standard.

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

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Rethinking Libertarian Minimalism By Ryan Sager Published 11/19/2004 TCS

Libertarians need to get serious about foreign policy.
That's the proposition I put forward earlier this week on my blog, Miscellaneous Objections, as part of a broader discussion of the future of libertarianism, and it has drawn a number of interesting -- and often heated -- responses.

Questions of foreign policy have always been difficult for those of us who espouse a philosophy of limited government domestically, and they have only grown more difficult, though at the same time more critical, since September 11, 2001.

Unfortunately, instead of reassessing their minimalist instincts when it comes to intervention abroad, many in the institutional centers of the libertarian movement -- principally at the Cato Institute and, to a lesser extent, at Reason magazine -- have remained mired in a pre-9/11 mindset.

Here, I would like to address some of the key arguments people are making against both the need for a coherent (or at least vaguely cohesive) libertarian foreign policy and the premise that one doesn't exist already.

"We're libertarians, we don't need to agree on anything."

The most common response to any call for libertarians to rethink their stances on foreign policy is that there's no reason that libertarians should all have to agree on one approach. True enough, if libertarianism is a debating club. But that sort of thinking is a bit facile if libertarians hope to have any impact on politics and public policy.

And we should want that. We are not powerless. This year, a Rasmussen survey estimated that libertarians make up roughly 10% of the electorate -- and that's just self-identified libertarians. People who share libertarian beliefs in small government and social tolerance likely make up another 10%-20% of the electorate.

In a 50-50 political landscape -- or even a 51-48 landscape -- that's real power. When libertarians are so united on domestic issues (taxes, Social Security, spending, drug laws, gay marriage, etc.), is it not worth it to begin a serious debate about what libertarians believe about foreign policy and what ideas we can offer in the War on Terror?

Foreign policy, with the focus right now on the war in Iraq, is the primary issue that dilutes the libertarian voting bloc. Since similar issue are likely to define the next few federal elections -- at the very least -- libertarians are going to have to reach a rough consensus of some kind. Otherwise, their votes will perpetually be split between the two parties, lessening their leverage with regard to each.

Libertarianism can, of course, continue to exist in such a state. But it would enjoy less sway within its traditional home, the Republican Party, while at the same time never making a full move to the Democratic Party.

That's why, for those of us who believe in a muscular foreign policy -- or at least a more-than-minimal one -- it is worth engaging our libertarian friends, to at least see how far apart we are.

What will not work is the current attitude in some libertarian circles that the focus can be kept on domestic issues -- where we agree with each other and have more experience -- while the national debate passes by us.

"What exactly do you mean by 'serious'?"

The first response of libertarians accused of not being "serious" about foreign policy is to suspect they are really being called wimps for not supporting the war in Iraq.

The question of Iraq is inextricable from this debate, but it is not central. People of good will and good judgment disagreed about the Iraq invasion before it happened, and we all have our various assessments of how it has turned out so far.

The question now, however, is how are libertarians dealing with the Iraq issue as it stands today? There is a strong temptation for them to say, "Hey, it's not our problem." But that's obviously not very helpful.

Nonetheless, that would be a fairly accurate description of the output of the Cato Institute foreign-policy staff since the war started.

* On Dec. 13, 2003 -- after the March 2003 invasion -- Cato published a policy analysis titled, "Iraq: The Wrong War." ("We told you so!")

* On Jan. 5, 2004, Cato published, "Can Iraq Be Democratic?" (Cato's answer: "No.")

* This June, Cato published the book, "Exiting Iraq." The book calls for a withdrawal date from Iraq of -- wait for it -- Jan. 31, 2005. (That's a little over two months from now.)

* Since the start of the war, Cato has also called for the United States to withdraw all troops from the Gulf region -- even suggesting that we reverse the long-standing policy of deploying a carrier battle group in the Persian Gulf. (Talk about a surrender. But at least terrorists have never taken Western withdrawal as a sign of weakness and an invitation to further attacks -- oh, wait.)

Now, libertarians are free to get all touchy when people think of them as less-than-serious when it comes to defense issues, but there's a reason their opinions are written off almost completely in this area, and have been for some time, by anyone even in proximity to power. And anyone who thinks that libertarian opinions on these matters are not written off in the rest of the Republican Party -- well, they're either out of touch, or they're not paying attention.

So, "serious," in this context, means forward-looking (not fixated on recrimination), based in a plausible reality (with at least some eye to political considerations) and with some appreciation of the nature of the terrorist threat (eschewing the appearance of retreat).

By and large, libertarians, under this definition at least, have been anything but serious when it comes to foreign policy lately.

"Libertarians don't have anything constructive to offer in the War on Terror."

The strangest thing about this argument is that libertarians are the ones making it. Basically, some say, any war -- on terror, in Afghanistan, in Iraq -- costs money and curtails civil liberties. The job of libertarians, then, is simply to whine about spending and assist the ACLU in opposing the governmental bad guys at home.

Now, don't get me wrong, libertarians do have an important roll to play in opposing the infringements on civil liberties that the Bush administration seems to think are allowed for in the Constitution somewhere (they're not, trust me, I've read it).

But libertarians, limiting themselves to the sidelines like this, are really doing themselves -- and not to sound too grand, but the country -- a disservice.

Libertarianism, in and of itself, does not in any way limit its adherents to a minimalist approach to foreign policy -- i.e. using the least amount of force possible to respond only to the most imminent of threats.

While aggressively pursuing empire or invading any country that looks at America funny would certainly not be in accordance with libertarian or classical liberal thinking, there is otherwise quite a bit of flexibility to be had.

Pro-war and anti-war libertarians don't have to get together on Iraq in retrospect. It's not going to happen, and there's not much to be gained by rearguing the last two years. But they should think about how they could congeal going forward.

If anti-war libertarians are as serious about fighting the War on Terror as those who favored the war, they're going to have to come up with a lot better than the John Kerry-esque line that we need to turn our attention back to finding Osama bin Laden and fighting al Qaeda.

Bin Laden is one man whose capture would be nice -- very, very nice -- but likely of little strategic import. And, well, we have been fighting al Qaeda aggressively; we could always kill more of them, but that's more of a truism than a policy proposal.

So, where can libertarians agree and what can they offer?

Where libertarians have a natural advantage, due to their quirky politics, is in being able to think creatively and take a step back from the partisan battles that define much of our public discourse.

* Libertarians could dedicate some of their intellectual firepower to supporting intelligence reform, for instance, and the strengthening of our human assets in the Middle East and the Arab world generally.

* Libertarians could delve into questions of nation-building -- all the better to help us disentangle ourselves from where we're entangled more quickly. What are the prerequisites of a free society? How can they be fostered? How can we turn over power to the people we've liberated? For instance, Cato has put out a few policy papers on how Iraq can set up a monetary system and deal with its debt; that's a start.

* Libertarians could also turn their attentions to the question of how we can help the Arab world liberalize on its own. Charles Paul Freund at Reason has written extensively on the power of Western culture to bring openness and modernity to Arabs hungry for change. Libertarians were knee-deep during the Cold War in efforts to sneak Western, democratic and free-market ideas into Eastern Europe -- something for which the peoples of those countries are deeply grateful today. Why now, with the West facing the threat of Islamofascism and millions of Arabs and others suffering under it, are libertarians suddenly so afraid to look outward?

Libertarians could be spearheading an effort like that during the Cold War to translate and transmit classics of liberal thought, bringing them to democratic-minded people trapped in repressive societies. They could be working to help these people get access to the Internet and to American radio and television broadcasts. They could be pushing for funding of pro-democracy movements. And they could be spearheading a push for an American free-trade initiative to bring economic opportunity to developing Arab nations.

These are, admittedly, just the most rudimentary of thoughts about the way forward for libertarians. We need to see where we're divided and see where we can find common ground. What won't work, however, is a continued attachment to minimalism in terms of our foreign-policy thinking.

Libertarians need more than that.

Ryan Sager edits the blog Miscellaneous Objections. He can be reached at editor@rhsager.com.

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ECONOMY
The untouchable pot of gold Billions got set aside for investors burned by Wall Street, corporate scandals. Where's the dough?November 19, 2004: 6:12 PM EST By Krysten Crawford, CNN/Money staff writer
NEW YORK (CNN/Money) - Three years have passed since Enron Corp. imploded and a tough state attorney general launched the first of many high-profile cases that have rocked Wall Street and captains of industry.
Since then, under the two-year-old law enacted by Congress to help clean up Corporate America, regulators have collected billions of dollars in fines and ill-gotten gains that they plan to return to investors bilked by massive corporate chicanery.
The fines included hundreds of millions of dollars paid by public companies including WorldCom, now called MCI (Research), and Computer Associates (Research), as well as mutual fund management firms.
But so far very little of that money has made its way into investor pockets.
"It's really a period of uncertainty," said Bruce Carton, executive director of Securities Class Action Services, an arm of Institutional Shareholder Services, which advises large investors.
The reasons are complex, but they start with a two year-old regulatory crackdown that has resulted in nearly $5 billion worth of settlements -- at least half of which has been earmarked for burned investors.
They also have to do with government bureaucracy. On top of the usual court delays, the regulatory body that's overseeing the distribution of these so-called Fair Funds has never dealt with such a hefty volume of cases.
Meanwhile, the money sits in interest-bearing accounts.
Splitting $435 million into atomsJust which investors are owed money, how much they're due and when they might expect a check in the mail is anybody's guess.
"You have to have a lot of humility and recognize it's just about impossible to get money back to people who were harmed" by corporate shenanigans, said Nell Minow, co-founder of The Corporate Library, an independent investment research firm.
"It's just about impossible to get money back to them in a way that even indirectly benefits them," she added.
There are too many investors and records are too incomplete for anyone other than large institutional shareholders to recover a sizable chunk of money, experts in securities cases say.
Take, for instance, the $1.4 billion in settlements that the SEC and New York Attorney General Eliot Spitzer brokered with Wall Street banks accused of hyping companies in research reports to help win lucrative investment banking work from those companies.
Of that settlement pool, some $435 million has been set aside for investors who bought stock based on the hype and were left holding the bag when the stock market and Internet bubbles popped in 2000.
The typical class-action takes just over a year and a half from the initial handshake marking a settlement to distribution of the money to investors, according to Barrak, Rodos & Bacine, a law firm that sues companies on behalf of their shareholders.
In the Wall Street research analyst case, the initial deal was struck two years ago and investors still have a long wait ahead of them.
Last month a court-appointed administrator submitted a plan to the New York federal judge overseeing the case for distributing the money. The judge, William Pauley III, has yet to rule on it.
The plan should be publicly available next month, said Francis McGovern, the Duke University law school professor charged with divvying up the $435 million.
While court approval of McGovern's plan is a crucial next step, it's only the beginning. It's likely to take at least another year for claims to be processed.
But this much is known: In cases like this, investors rarely get back more than a small slice of their total losses.
Many Fair FundsCarton, of Institutional Shareholder Services, is not surprised that the distribution of the analyst research fund and other like-sized pools of money has taken this long.
Until two years ago, he said, the biggest civil fine that the SEC had ever levied was $10 million, nowhere near the hundreds of millions of dollars that companies have shelled out in the last few years.
YOUR E-MAIL ALERTS Follow the news that matters to you. Create your own alert to be notified on topics you're interested in.
Or, visit Popular Alerts for suggestions. Manage alerts What is this? What's more, before Congress mandated massive corporate reform two years ago, a big chunk of the money that the SEC got out of corporations for violating securities laws went to government coffers.
Since the 2002 Sarbanes-Oxley corporate reform, nearly all of the money from government enforcement actions goes to a "Fair Fund" set up for each individual case and administered separately.
Given the size of the settlements, the number of Fair Funds now being administered, and the responsibility the SEC has to disburse the money, Carton was not surprised that the process is taking a long time.
"These huge settlements are a new phenomenon for the SEC," said Carton. "I don't know how else you would handle it."

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The U.S. Never Had a `Strong Dollar' Policy: Berry (Correct) The U.S. Never Had a `Strong Dollar' Policy: Berry (Correct)
(Corrects euro's increase to 47 percent in 17th paragraph. Commentary. John M. Berry is a Bloomberg News columnist. The opinions expressed are his own.)
By John M. Berry
Nov. 18 (Bloomberg) -- When Treasury Secretary John Snow yesterday once again indicated the U.S. wouldn't attempt to stem the dollar's slide against the euro, the U.S. currency fell another notch. Analysts and European politicians complained about U.S. indifference to its responsibilities.
Who's kidding whom here? What is it the Europeans would like to see the U.S. do?
A quick glance at the trade statistics shows that the dollar's decline actually hasn't hurt Europe very much so far. The inevitable pain associated with capping and shrinking the huge U.S. current account deficit really is yet to come, and there is nothing the U.S. can or should do to try to prevent it.
Such endless fixation of foreign-exchange markets on whether the U.S. will continue to hew to a ``strong dollar'' policy is bizarre and always has been bizarre, because there has never been such a policy.
Typically, the value of a currency is determined primarily by a nation's monetary policy. However, only on rare occasions --and none of them recently -- has the Federal Reserve given significant weight to the dollar's value in making its interest-rate decisions. Certainly it isn't doing so today, and neither Snow nor any of his recent predecessors have pressed the Fed to act to support the currency.
Fed Is Acting
As for fiscal policy, which can affect national savings and has an indirect impact on the dollar's value, you can be sure that the dollar's value hasn't had any effect on the tax and spending choices made by President George W. Bush or Congress.
In some ways, the puzzle has been why the dollar hasn't fallen faster and further, given the rapid expansion of the U.S. current account deficit to almost 6 percent of gross domestic product and the need to shrink it. That process unavoidably will involve a big drop for the dollar.
For purely domestic reasons, including keeping inflation under control, the Fed is already raising its target for the overnight lending rate. Do the critics of U.S. policy want faster and larger rate increases that could slow economic growth and provide support for the dollar?
European Central Bank
From a European point of view, that wouldn't make much sense because slower U.S. growth would also diminish demand for foreign imports, including those from Europe. After all, the worry on the Continent is that the falling dollar will make the price of euro- zone exports uncompetitive in the U.S. That in turn could leave European economies dead in the water since the bulk of their growth is dependent on those exports.
European Central Bank officials, focused on their 2 percent inflation target, have repeatedly rebuffed pleas from various government leaders to cut interest rates to spur economic growth. They are unlikely to cut rates as part of an attempt to halt the euro's appreciation.
Of course, if for whatever reason European growth were to slow enough to cause inflation to fall significantly, the ECB would respond.
The Europeans have said repeatedly that they would like the U.S. government to reduce its very large budget deficit as a step toward improving national savings and the U.S.'s need for foreign capital inflows.
Account Deficit's Reality
On the other hand, such a reduction in the capital inflow that finances the yawning U.S. current account deficit would go hand in hand with a reduction in the trade deficit -- and once again mean a drop in demand for European exports.
This is the awful reality about the U.S. current account deficit for the rest of the world: Reducing it means that U.S. exports eventually will have to increase much more rapidly than imports. In other words, other countries collectively will have to absorb more U.S. goods and services while exporting relatively less to this country.
The numbers are striking. Through September of this year, the U.S. had imported goods and services worth $1.295 trillion while exports totaled only $850 billion. That means that just to stabilize the deficit, exports would have to increase more than 50 percent faster than imports.
The Numbers
In the first nine months of this year, Western Europe exported $83 billion more in goods and services than it imported from the U.S. That U.S. deficit was $10 billion higher than in the comparable period of 2003 even though the value of the euro was almost 10 percent higher in the same period this year.
According to the Fed's broad trade-weighted dollar index, the currency's value, adjusted for inflation, peaked in February 2002 when the euro was worth just under 87 cents. Last month the euro averaged close to $1.28, about a 47 percent increase. However, the Labor Department's index of prices for imported goods from European Union countries was up less than 14 percent over the same period.
There is usually a substantial lag between changes in relative currency values and changes in traded-goods prices. Nevertheless, it seems clear European exporters have absorbed a substantial share of the increase in the euro's value in order to hold onto their markets.
Japan and China
In the case of Japan, government intervention helped keep the yen from appreciating early this year. Other fluctuations in the yen's value over the past several years have had very little impact on the prices paid by U.S. importers of Japanese goods. Between early 2001 and early 2002, the yen plunged to about 134 to the dollar from 110. It then reversed course and strengthened substantially through the second half of last year.
In contrast, the price index for Japanese imports to the U.S. has changed only slightly and currently is about 5 percent lower - - not higher -- than it was when the dollar peaked in early 2002.
And then there is China with its pegged currency, about which Snow and the Europeans all complain regularly, to no avail.
The Europeans are right to say they shouldn't have to bear all the burden of adjustment as the U.S. current account comes down. China, Japan and other Asian countries with pegged or largely pegged currencies should do their part, though like everyone else, they don't want to lose their export markets.

To contact the writer of this column:John M. Berry in Washington at jberry5@bloomberg.net.
To contact the editor responsible for this column:Bill Ahearn at bahearn@bloomberg.net.Last Updated: November 19, 2004 09:18 EST
-------------------------------------------CommentaryA Tale of Two EconomiesBy Charles Wolf, Jr.
--------------------------------------------------------------------------------This commentary appeared in Asian Wall Street Journal on November 10, 2004. --------------------------------------------------------------------------------
Despite their huge differences, the Chinese and American economies share one common characteristic that is both a short-run problem and a long-run opportunity: rising labor productivity.
In the U.S., election-year political rhetoric was directed at the so-called “jobless recovery” but ignored the fact that this problem, insofar as it exists, is largely due to rising labor productivity rather than to “outsourcing” of jobs abroad. Similarly, much of the criticism of China's limited ability to create sufficient new job opportunities has ignored the fact that these limits are due largely to rising labor productivity.
Both the Chinese and American economies have generated rates of growth in labor productivity (measured as output per employed worker, or per hour worked), substantially above their previous performance. In China, for the period from 1998 to 2003, increases in labor productivity have been nearly 7%, the highest among the world's major economies. In the United States, annual increases in labor productivity in the same period have averaged between 3% and 3.5%, the highest among the major industrialized economies, including Japan and Germany.
Rising labor productivity is a powerful contributor to economic growth and social progress. It drives the demand for labor, tending to boost wages and to raise profitability of capital. In the process, business investment and consumer spending are stimulated, and these in turn contribute to economic growth.
At the same time, rising labor productivity reduces the amount of new employment created by economic growth. For example, if gross domestic product in the U.S. grows at an annual rate of 4% (the current U.S. growth rate) while labor productivity increases at an annual rate of 3%, then the rate of new job creation in the U.S. will not exceed 1%. This 1% increase amounts to approximately 1.4 million net new jobs annually, which is about 500,000 fewer jobs than the normal increase in the number of new entrants into the labor market each year. Higher labor productivity thus reduces the capacity of aggregate economic growth to generate new jobs.
China has an analogous problem. While China's annual rate of GDP growth has averaged between 8% and 9% in the 1998-2003 period, annual growth in labor productivity has also been extraordinarily high: nearly 7%. The result has been to cap creation of new jobs at 1-2% of existing employment, about 10 million new jobs annually. This figure, although substantial, pales when compared with the total number of China's unemployed and underemployed labor. According to China's official statistics, registered unemployment rose to 4% from 3% of the urban labor force in the past five years, rates that are remarkably low compared with other countries. But these figures conceal as much as they reveal. When proper allowance is made for “unregistered” urban unemployment (for example, the number of itinerant migrant workers from rural areas has been estimated as over 100 million) and “disguised” rural unemployment (labor that, while nominally employed, does not add to output), China's actual unemployment soars to 23% of the labor force, about 168 million workers.
In the short run, there is a tension between the goals of raising GDP growth, creating additional jobs, and increasing labor productivity. Notwithstanding the many and major differences between the U.S. and Chinese economies, rising labor productivity in both countries means that fewer new jobs result from any realized rate of economic growth than would result if productivity growth were slower.
In the midterm and long run this tension is mitigated by the self-corrective effects of competitive markets: higher labor productivity generates additional demand for labor, boosting employment and economic growth. Yet these long-term effects provide limited comfort for policymakers and households anxious for employment to be expanded here and now.
While bearing in mind the long-run prospects, both China and the U.S. should formulate policies that reflect the complex interactions among economic growth, labor productivity and new employment opportunities. Although the public-sector bureaucracies of both China and the U.S. — especially those of China — are swollen and should be streamlined, it probably makes sense in the short run to moderate reductions in these relatively low-productivity public-sector jobs. Investments by China in health-services delivery, in preventing and controlling epidemic disease, and in countering the country's serious air- and water-pollution problems can contribute to advancing economic growth and improving quality of life without appreciable effects on labor productivity in the near term.
What is best in the short run may not be best in the long run, and vice versa. This point carries with it a particular message for China's policymakers: a higher rate of aggregate economic growth may not always be preferable to a lower rate. Annual growth of 7%, together with labor productivity growth of 3%, may be preferable to aggregate growth of 9% with accompanying growth in labor productivity of 7%, because the former combination will generate more new employment.
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Mr. Wolf is a senior economic advisor and corporate fellow in international economics at the RAND Corporation and a senior research fellow at the Hoover Institution.

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China likely to untie yuan's dollar peg But market waiting for clues on exactly when and how By Lisa Twaronite, CBS.MarketWatch.comLast Update: 2:05 PM ET Nov. 19, 2004 TOKYO (CBS.MW) -- Seldom do so many finance officials, economists, corporate planners and ordinary investors around the world agree on one point: China's yuan, now pegged to the dollar, should have some freedom to gain in value.
This weekend's Group of 20 meeting might provide some clues as to the timing of the widely expected move to a more flexible yuan exchange system. More hints could be forthcoming after George W. Bush meets Chinese President Hu Jintao on Saturday at the APEC Economic Leaders' meeting. But exactly when the shift will come, and how best to position for it, remain subjects of speculation and debate.
The People's Bank of China, the nation's central bank, has said reviewing its fixed exchange-rate mechanism was one of its priorities for 2004. But Beijing has made no moves so far, and last month seemed immovable in the face of global pressure for a revaluation at the International Monetary Fund and G-7 meetings. See full story.
"Since the G7 meeting in early October, there's been a groundswell of support for the revaluation in the near-term view," said Tim Condon, head of financial markets research at ING in Singapore. "I think that by the end of the first quarter, something will be done."
Condon and other analysts say a more likely development is a widening of the range in which the currency is allowed to fluctuate against the dollar. The yuan is now effectively pegged at about 8.28 to the dollar, but could be allowed to appreciate about 10 percent.
Bank system
Some economists have said that an overly rapid revaluation could undermine the country's bad loan-laden banking system, which is creaking under years of lending that amounted to subsidies to state-run enterprises. Standard & Poor's estimated that about 40 percent of the bank loans were impaired as of the end of 2003, and an immediate bailout of the sector would cost China $656 billion, equivalent to 43 percent of the gross domestic product forecast for 2004.
But despite the possible financial fallout, more and more voices are calling for action sooner rather than later.
Last month, an IMF official said in Washington that the cost of maintaining yuan's fixed regime to the U.S. dollar was mounting, and argued for an immediate widening of the trading range on the yuan by 10 percent to 15 percent.
The peg keeps the yuan undervalued, and therefore cheapens Chinese manufacturers' exports, exacerbating both the trade deficit and current-account deficit problem.
The trade deficit with China accounts for about a quarter of the overall U.S. gap, which in turns makes up the majority of its current-account deficit. If the Chinese currency were allowed to float freely, investors would likely sell some of that surplus against the yuan.
But instead, the yuan's peg means more upward pressure on the euro and the yen, as both Europe and Japan also run trade surpluses with the U.S. This helps explain why the euro is now trading around a record high against the dollar, and the yen at a 7 1/2-month high.
'Symbolic'
J.P. Morgan believes a yuan revaluation will come in the next three to six months, and will be pivotal for Asia at large.
"The revaluation is likely to be modest yet highly symbolic," Adrian Mowat, the bank's chief Asian strategist, wrote in a report. "China's devaluation 10 years ago marked the start of the Asian crisis. Its revaluation will provide other central banks with the comfort to allow their currencies to appreciate."
It also could lead to a more balanced economic policy in Asia, he said. Since Asia's crisis of 1997, policy-makers have kept currencies cheap to support exports and rebuild external balances.
"This policy has been highly successful but it is effectively a tax on the Asian consumer," Mowat said.
While stronger Asian currencies will have some negative impact on exporters' profits, the net economic effect is likely to be positive, said Mowat, as strong currencies attract capital -- and also discourage domestic capital from flowing abroad.
The latter provides more incentive for China to rethink its exchange policy than any amount of pressure from the rest of the world.
"China is not looking for a big realignment of their currency," said ING's Condon. "They're trying to bring flows of hot money that have left the banking system back into the banking system."
A yuan revaluation would compliment China's other administration and monetary actions aimed at cooling the nation's overheating economy.
This week, the central bank raised its benchmark U.S. dollar one-year deposit rate for the first time in four years, by 0.3125 percentage point to 0.875. The move gives investors less of a reason to exchange foreign currency for yuan.
Late last month, the bank also hiked the domestic currency deposit rate by 0.27 percentage point to 2.25 percent, and boosted its benchmark one-year lending rate for the first time since 1995 by 0.27 of a percentage point to 5.58 percent. See full story.
It also decided to ease interest rate controls by removing its cap on financial institutions' lending rate, giving banks the power to assess and price risk themselves, according to market conditions and customers' credit quality
Reflation winners
If china does revalue the yuan, it's likely to benefit the Singapore, Taiwanese and Thai currencies most, according to Claudio Piron, J.P. Morgan's Asian currency strategist.
The biggest negative relative impact of a revaluation could be on HSBC (HBC: news, chart, profile) (UK:HSBA: news, chart, profile), J.P. Morgan said. Between one-fifth and one-quarter of the bank's earnings are in dollars. About 5 percent of its earnings would be affected, with a general 10 percent dollar weakness against sterling.
But there will be winners as well, said Mowat, as some companies are poised to benefit from Asian reflation.
Hong Kong's largest airline, Cathay Pacific (CPCAY: news, chart, profile) (HK:0293: news, chart, profile), would be a beneficiary because of its revenue mix.
In mainland China, utilities, telecoms and financials with yuan-based assets and revenue could also benefit from a revaluation, including China Overseas Land & Investment (CAOVY: news, chart, profile) and insurer China Life (LFC: news, chart, profile) (HK:2628: news, chart, profile), J.P. Morgan said.
Lisa Twaronite is Asia Bureau Chief for CBS MarketWatch, based in Tokyo.
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China readies to pull the pegBy Ying Trong
Interest rate preludeOn October 28, China raised interest rates for the first time in nine years - not exactly enthusiastically: the one-year lending and deposit rates went up just 27 basis points to 5.58% and 2.25%, respectively. The government and the People's Bank of China (PBoC) had long resisted the move. Selective credit controls and restrictions on lending to overheated sectors of the economy (property, autos, steel, cement, aluminum) seemed the better policies to curb over-investment.
One can't blame them. Unlike the 1993/94 overheating episode, which saw consumer price inflation climb to double digits on excess demand, the consumer price index (CPI) this time around has remained tame - 5.2% in September, dropping to 4.2% in October. What we are witnessing since last year is severe supply-side imbalances and infrastructure (energy, transport) bottlenecks caused by excessive investment in some, insufficient capital expenditure in others. The rationale for applying targeted administrative measures to restore equilibrium - for example, no new lending for steel projects, increased expenditure for power production - was that a catch-all interest-rate hike might lead to funding shortages precisely in areas where added investment was most needed.
Such cooling measures, applied with increasing severity over the course of the first half of this year, have had their effect. Since April, investment projects totaling some US$100 billion have been shut down. Funding for numerous others has been cut. As a result, overall growth of fixed asset investment slowed from over 50% year-on-year in the first quarter of 2004 to little more than half that pace in the third quarter. However, with real interest rates (lending rate minus CPI) near zero, a huge black credit market in the tens of billions of US dollars (by some estimates nearer US$100 billion) developed, circumvented the banking system and thwarted state controls. And this, of course, was further exacerbated as real deposit rates were deep in negative territory and savers saw their deposits dwindle in real terms.
Under the circumstances, financial authorities finally bit the bullet and decreed the rate hike that had become inevitable.
Regime changeFor well over a year now, massive foreign pressure has been exerted on China to revalue its currency, the yuan, which has been pegged to the US dollar at the 8.28 level since 1994. The US Treasury Department under Secretary John Snow has been the vociferous protagonist. But calls for yuan revaluation were even shriller on the other side of the US political spectrum. Democratic presidential candidate John Kerry at one point called the yuan a "predatory" currency, which gave Chinese exports an unfair competitive advantage and stole jobs from the US (which was, of course, utter nonsense unless Kerry thought US workers would labor for two dollars a day). The International Monetary Fund, similarly, has called for greater currency flexibility.
China to date has resisted revaluation pressure, has insisted that it is steadily moving toward greater flexibility in its own good time, and will not step prematurely into untested waters. As with the rise in interest rates, there are compelling reasons for reluctance. The Chinese banking system is in bad shape and ill-equipped to cope with added pressure. According to a report by the Standard & Poor's ratings agency, 40% of all loans in the banking system are non-performing. A yuan revaluation would inflate the value of these NPLs and simultaneously deflate the value of the $45 billion in US treasury bonds injected into two major state banks this past January as well as other banks' holdings of foreign reserve assets. Moreover, the financial system overall is ill-prepared to deal with a more flexible exchange rate. Interest rates remain largely state controlled. There exists no on-shore forward (currency derivatives) market to allow exporters to hedge their exchange-rate exposure. Revaluation would disproportionately affect the earnings of foreign-invested exporters that constitute the most dynamic sector of the economy and its principal driver.
And yet there are also excellent reasons why China would want to move to a more flexible currency regime - and probably will take the first small steps in that direction in the relative near term, perhaps as early as around the Chinese New Year next January. If and when the move is made, it will likely come in the form of a widening of the trading band of the yuan against the US dollar from the present minuscule 0.3% to the 3-5% range.
The reasons are these: In the broadest policy terms, a relaxation of the dollar peg would be in line with gradual transformation of the financial system toward greater reliance on market rather than administrative measures as already signaled with the October interest rate rise. More specifically, given that initial band-widening would almost certainly lead to yuan appreciation, such a measure would complement the rate hike's effect on slowing the economy: exporters' earnings would tend to decline, forcing them to cut back on capital investment, the main culprit in the current overheating episode. A yuan appreciation could also discourage, at least slow down the growth rate, of speculative capital inflows to China, which total in excess of US$50 billion this year and have made it difficult to control money supply and bank-lending growth.
Nothing in China's economic and financial policy moves is cast in stone or predictable simply on the basis of economic policy logic. Fast moves in large steps - in particular, in response to foreign pressure - are anathema. But a modest widening of the yuan trading band would conform to the pragmatic, experimental steps former pre-eminent leader Deng Xiaoping took in the early phases of moving toward a market economy with the establishment of special economic zones to test the waters. It would make sense and the risks would be contained. And it would be a stepping stone toward the goal China must aim to attain: a fully flexible currency regime as the precondition for full control over monetary policy unencumbered by a currency peg to another nation's money and policies.
(Copyright 2004 Asia Times Online Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.)

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Jubak's JournalDo the right thing, Mr. Buffett
advertisementThe insurance scandal has rocked an industry, but I don’t think Berkshire will be dragged into the mess. Of course, Buffett could go one better and unwind any questionable contracts.By Jim JubakSchadenfreude. Keep that term, a German word for the joy we take in the misfortunes of others, in mind as you evaluate the impact of the current investigations into the insurance industry on Berkshire Hathaway (BRK.B, news, msgs), the company run by Warren Buffett.The pleasure of seeing a high-profile investment icon like Buffett dragged into a scandal, especially after he’s been so vocal in criticizing the doings in the mutual fund industry, has gotten ahead of the facts, in my opinion. Buffett isn’t perfect in my book; for example, I wish he’d stop playing games with the succession plan at Berkshire Hathaway. But so far, nothing that has emerged from the investigations of the insurance industry by the New York state and Connecticut attorneys general and by the Securities and Exchange Commission worries me as an investor in Berkshire Hathaway, nor will it make me take the company off my Clean Stocks list. (For the rules and membership of that list, see my most-recent Clean Stocks column, “Profit from clean stocks in dirty businesses.”)
Banks and insurerscheck your credit.So should you.But judge for yourself. Following is a description of the politics of Buffett bashing, an account of what we know about Berkshire Hathaway’s involvement in the insurance scandal and a poll for registering your vote on Berkshire Hathaway’s degree of involvement.Buffett bashingTo understand the politics of Buffett bashing, I don’t think you can come up with a better example than the Nov. 12 Wall Street Journal “Heard on the Street” column that ran on the front of the Money & Investing section with the headline “Investors Worry Insurance Probes May Snare Berkshire.” The thrust of the article was that regulators are now scrutinizing “retroactive” and other kinds of “finite-risk” insurance policies (more on what those are later) and that we know, because Buffett told us so in the 2003 Berkshire Hathaway annual report, that Berkshire has sold such policies. Retroactive-insurance premiums made up 11% of General Re, Berkshire’s reinsurance unit, during the first nine months of 2004, the article said. But, the article went on, Berkshire doesn’t break out how much it makes from other types of finite-risk insurance. Two analysts quoted by the article, Gary Ransom and Bill Yankus of brokerage company Fox-Pitt Kelton in Stamford, Conn., believe the total exposure could be huge. In a written report published that week and quoted in the article, the analysts said, “Berkshire Hathaway, partly because of its large balance sheet, is probably the most-active provider of these types of contracts.” The analysts had an “underperform” rating on the stock. “If the controversy expands, we would expect Berkshire Hathaway to take center stage,” the analysts concluded.

L I V E V O T E Voting ends 12/18/2004
How serious are the allegations that have been raised against Berkshire Hathaway and its General Re insurance unit in the ongoing investigations of the insurance industry?
Big problem. Throw Berkshire Hathaway off Jubak's Clean Stocks list.
They're serious and I expect them to hurt the company and its stock.
I'm disappointed, but the allegations don't change my opinion of the stock.
What problems? It's making a mountain out of a molehill.
View results
To buttress its case that investors were worried about the possibility that Berkshire Hathaway’s sale of finite-risk policies would drag the company into the insurance scandal, the Journal article noted that Berkshire shares had “lagged behind the broader market since Oct. 14, when New York Attorney General Eliot Spitzer announced the first charges.” The stock had been down 1% since, compared to a 5.4% gain for the Standard & Poor’s 500 ($INX).Too bad for anyone who sold on that article. (Berkshire shares did drop 58 points, or 2%, on the day it ran.) Because the next edition of the Journal on Monday, Nov. 15, carried a massive correction.Getting the facts not so straightFirst, there was the small problem of who those two analysts with the “underperform” rating worked for. Fox-Pitt Kelton, the correction noted, is owned by Swiss Reinsurance (SWCEY, news, msgs), a major competitor of Berkshire. That connection wasn’t disclosed in the original column. Wall Street analysts have been known to allow such outside factors to influence their research.And, second, the normally very accurate and cautious Journal got some major facts wrong, the correction said. All types of retroactive and other finite-risk policies made up just 1% of net income at Berkshire Hathaway -- so much for that huge exposure. Retroactive-insurance premiums made up 4% of premiums earned by General Re, and not 11%. And that major decline in Berkshire shares as a result of the insurance investigation worrying investors? Turns out that the stock has outperformed the insurance sector since news of the investigation broke, the correction reported.I’d add that any recent decline in Berkshire shares should be seen in the context of the stock’s steady retreat from its April highs and the big losses General Re racked up as a result of the Florida hurricane season.
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I’d chalk up the factual problems to schadenfreude. Good journalists like those who work at the Journal (as well as good analysts) have a very valuable predisposition toward skepticism. Their job is to challenge the “facts” as companies report them. It’s hard to maintain that skepticism when the whole world has gone bullishly mad, as it did in 1999 and 2000. And it’s just as hard to maintain that skepticism when a scandal erupts. Then everybody looks guilty. It’s especially hard, at times like these, to retain that skepticism when examining charges against figures who have set themselves up as oracles above the fray, as Buffett has recently. It’s an impulse at least as old as Greek tragedy: We want to see the great brought low by their own hubris. It’s important as investors to remember that we’re after profits, however, not emotional catharsis. In investing, good profits sometimes happen to bad people and good people sometimes drown in red ink.My take on Berkshire and the scandalSo putting on my best suit of skepticism, here’s how I judge Berkshire’s involvement in the current insurance investigation.It’s important to divide the “insurance scandals” into two parts.First, there are the charges of bid rigging that Attorney General Spitzer has leveled against Marsh & McLennan (MMC, news, msgs) and that have brought guilty pleas on criminal charges from five employees of Zurich American Insurance, American International Group (AIG, news, msgs) and ACE Limited (ACE, news, msgs). Spitzer’s office has brought suit against Marsh & McLennan: The question in this part of the scandal is whether Spitzer will file suit against other companies for bid rigging. Fixing the problems that have resulted in this bid rigging could destroy a company’s entire existing business model. So far, Berkshire has not been named in this part of the investigation and, due to the nature of the company’s insurance business, I don’t think it is likely to be dragged into it.Second, there are the charges of selling finite-risk insurance policies . . .

Do the right thing, Mr. Buffett
advertisement (Continued from page 1)By Jim JubakSecond, there are the charges of selling finite-risk insurance policies designed not as insurance, but to help companies smooth their reported earnings. Insurance policies like these are legal as long as the insurance company assumes real risk in exchange for the premiums it receives. If, however, the policies are actually loans where the insurance company doesn’t take on any risk but gives the purchasing company the ability to shift earnings around, then they are illegal. A company can use a policy like this to manipulate earnings because the accounting rules treat insurance payouts as income, whereas loans are treated like a liability that must be paid off over time. By designing such a policy so that the insurance company forks over a big upfront payout or sets aside premiums to be repaid later if there is no insurance loss, a company can move income from one quarter to the next to smooth out a big loss or hide a huge quarterly profit surge.There’s no doubt that General Re, which Berkshire acquired in 1999, has written policies that are drawing regulators’ attention because they may have violated the rules on a transfer of risk. Regulators in Virginia and Tennessee certainly think so: They’ve filed a civil suit against General Re for selling a policy to insurer Reciprocal of America that required Reciprocal to repay any losses that General Re incurred. General Re has said it was not aware of any inaccuracy in Reciprocal of America’s accounting and was not aware of how the company described the policies to regulators.This part of the scandal is infinitely more tricky than the first. The standards for what constitutes a real transfer of risk have changed in recent years and policies that were perfectly acceptable a short while ago are now drawing scrutiny. And since the charges often hinge on how the buying company accounted for the policy and how it described that accounting to regulators, expanding any lawsuit to include the seller of the policy often requires proving that the seller knew that the buyer was fiddling its books.Practicalities vs. moralityOn a practical level, I think the impact of this part of the investigation on Berkshire is likely to be extremely small. Finite-risk policies are indeed a very minor 1% of net income at the holding company. And the difficult standards of proof in civil suits alleging misleading accounting based on these policies means that General Re stands a good chance of winning a significant portion of the cases. Nothing here suggests the investigation will uncover anything of consequence that will upset the General Re or Berkshire business model. The company will remain a cash-flow machine.It’s on a moral level, however, that the company may be vulnerable because Buffett has built up such a reputation among investors for honesty and straight-shooting. The spectacle of Buffett’s General Re toughing it out by winning suit after suit on technicalities or a lack of provable intent is likely to take some of the sheen off Buffett and his company’s shares.This doesn’t have to happen. Buffett and Berkshire could take the high ground as Platinum Underwriters Holdings (PTP, news, msgs) has done and announce that it will unwind any contracts that might, just might, draw regulators’ eyes, while maintaining that the policies in question are perfectly legitimate. Such a moral stance wouldn’t be especially expensive for Berkshire Hathaway, either, because the finite-risk business makes up such a small percentage of overall income.Berkshire remains a good investment -- and an especially good hedge on the falling dollar since Buffett has gone short the U.S. dollar -- whether or not Buffett takes the high road. I think the company should remain on my Clean Stocks list whether or not Buffett acts, because the transgressions, if there actually are any, are minor blemishes on a strong pro-investor report card.That’s my decision based on my desire as an investor to make a profit rather than a loss.But emotionally, I will be disappointed if Buffett doesn’t take action to put his company on the right side in this investigation. It’s what I and other investors have come to expect. And it would give this story a very satisfying ending.New developments on past columns
Profit from clean stocks in dirty businessesOn Nov.12, Robert Schiff, 81, the co-founder of Cincinnati Financial (CINF, news, msgs), announced his retirement from the company’s board of directors effective immediately. That leaves two second-generation Schiffs, John J. Jr. and Thomas, on the company board. I would have liked to include that news in my Nov. 16 Clean Stocks write-up on the company, but it does not significantly affect my opinion of the company’s board or its corporate governance.5 stocks for a post-election tech rallyEMC Corp. (EMC, news, msgs) got a bump out of strong quarterly earnings and a hike in projected results the next quarter and the fiscal year that ends in April 2005. Network Appliance (NTAP, news, msgs) projected revenue growth for the quarter that ends in January of 35% to 38% year over year. With storage hardware and software looking like one of the few growth areas for technology companies, shares of Network Appliance soared 18% on Nov. 17, the day after the company announced earnings. EMC didn’t get as big a bump, but I’m certainly not about to turn up my nose at the 5% jump in price that the stock took that same day.Changes to Jubak’s Picks
Sell Shell Transport & TradingShares of Shell Transport & Trading (SC, news, msgs) have done a good job at catching up with the rest of the oil sector over the last three months as the stock has recovered from revelations that the company had overstated oil reserves by 20%. But now that the “accounting-scandal discount” is out of the stock, the shares have begun to track the sector. With oil stocks in general facing temporary pressure from a decline in oil prices, I think it’s time to take my profits in Shell Transport & Trading (it’s near the $49.50 target I set for September 2004) and look to re-enter the sector on any future dip in share prices and with a smaller-cap stock with more upside volatility. I have a 15% gain since I added these shares to Jubak’s Picks at $42.36 on March 5, 2004. (Full disclosure: I will sell my personal position in Shell Transport & Trading three days after this column is posted.)Editor's Note: A new Jubak’s Journal is posted every Tuesday and Friday.
E-mail Jim Jubak at jjmail@microsoft.com.
At the time of publication, Jim Jubak owned or controlled shares in the following equities mentioned in this column: Berkshire Hathaway, EMC and Shell Transport & Trading. He does not own short positions in any stock mentioned in this column.
------------------------

The Basics
How Wall Street trumps Social Security
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If you’d invested what you’ve paid in employment taxes over the years, chances are you’d beat what Social Security would pay you in retirement. Here’s how to get a personalized breakdown of the numbers. By Scott BurnsYou've heard "buy term and invest the difference," right?Well, it's time to apply the same logic to social insurance: Skip the employment tax and invest the difference. Had you done it over the last 40 years or so, you might be significantly better off.How much better off? It all depends. A basic analysis for someone about to retire, however, would involve a choice between about $400,000 of your own money -- or $1,798 a month from Social Security.Social Security: not a funded pensionI did this calculation because many retired readers responded to my recent "McJobs/retiree exchange rate" column. They said they weren't dependent on legions of low-wage workers. They believed their employment-tax money had been invested and had grown handsomely. They deserved every dime of the checks they received.Alas, Social Security is not an investment program. It is a spending program. It takes money from people who are working and gives it to people who are retired. It was a good idea a generation ago; it is a poor idea for the next generation. While surplus employment taxes have been used to build the Social Security trust fund since 1983, the trust fund has never been -- and won't ever be -- a funded pension plan.
Regular IRA?Roth IRA?Find out what's best.Still, it would be interesting to know how much those tax dollars might have grown to, had they been invested. Running the numbersHere's how to do the figuring. First, you visit Social Security Online and download the precise benefits calculator. From there, you can put in your own earnings record from your annual Social Security statement. You can also do as I did and create an imaginary taxpayer, John Q. Uppermiddle. John was born in 1938. He will retire in January at 67. He is currently earning around $54,000. The software can backtrack to create a wage record by several methods. I chose to give John an average career, reflecting the wage increases of the average worker back to when he started working in 1960.In 1960, John paid Old Age Security Income (OASI) taxes of $132. His employer paid the same amount. The disability tax portion wasn't included in the calculations, but no adjustment has been made for the life insurance value of survivor's benefits. The hospital insurance tax contributions also were excluded. By 2004, John was paying $2,888 in OASI taxes. Over the entire period, he and his employer paid in a total of $112,828. Calculating the growth of those contributions by assuming an 8% return, I found they would have grown to $417,460. Invest that sum in a life annuity, and WebAnnuities.com tells us John can have a monthly check of $2,886 for his life alone, or $2,481 guaranteed for his life or 20 years, whichever is greater.Social Security, meanwhile, offers a monthly check for $1,798. That check, of course, is adjusted yearly for inflation. But with a running start of $683 a month ($2,481 less $1,798), investing on your own looks like a comfortable alternative. Similarly, you could invest the money and withdraw at a 5.17% annual rate. That would start you with a $1,798 monthly check that you could adjust each year for inflation. While there is a chance you could run out of money, there is a much larger chance that you'll leave an estate.The fine printCould you have gotten an 8% return?History says yes. During that 44-year period, large common stocks provided an annualized return of nearly 10.5%, intermediate government bonds returned 7.5% and Treasury bills returned 5.7%. Inflation took a toll of 4.3% annually.Is this example representative?Yes and no. Social Security is a social insurance program, not an investment program. As a result, your benefits depend on your circumstances as well as your contributions. John Q. Uppermiddle could collect more if he was married and his wife didn't work. For no additional contribution, his wife would get spousal benefits. That beats the investing option cold.It’s getting worseIf John Q. Uppermiddle was older and had retired earlier, his "return" on his employment-tax contributions was higher because he contributed a smaller percentage of his income for more years. Workers born earlier get better "returns" on their employment-tax contributions than workers born later.How did this happen?Simple. This is the fastest-growing and most-regressive tax in America. It rose from a mere 1% on the first $3,000 of income in 1935 to 5.3% of the first $87,900 of income in 2004. For those approaching retirement, this tax has been the fastest-rising cost in their standard of living for their entire adult lives, starting from a small base. For young workers, the tax starts large but the benefits will be smaller -- and far less certain.

NEWS, OPINION, ANALYSISp

2004-11-19T01:01:00.000-05:00

UPDATE

UN staff to make historic vote of no confidence in Annan

http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/theworld/2004/November/theworld_November497.xml&section=theworld

KOFI'S CASH LAUNDRY . . .

http://www.nypost.com/postopinion/editorial/34429.htm

. . AND HIS TURTLE BAY LAND GRAB

http://www.nypost.com/postopinion/editorial/34428.htm
Citigroup Banked for Arafat as He Paid Fighters, Diverted Funds
http://quote.bloomberg.com/apps/news?pid=10000103&sid=akn8SGUnp8oU&refer=news_index

Karzai: Don't Spray Our Poppies

http//www.cbsnews.com/stories/2004/11/18/world/main656576.shtml

LINKS OF THE DAY
ON OPIUM AND AFGHANISTAN
http://www.cato.org/pubs/fpbriefs/fpb84.pdf
NEW IRAN SITE IMAGES
Modern Defensive Readiness and Technology Center
http://www.globalsecurity.org/wmd/world/iran/tehran-mdrtc-imagery.htm
IRAN HOT DOCUMENT
http://www.globalsecurity.org/wmd/library/report/2004/new-nuke-info.htm
Pre-empting Nuclear Terrorism
in a New Global Order
Amitai Etzioni
http://fpc.org.uk/fsblob/314.pdf

BRIEFS
Russia Ready to Sell Weapons to Iraq Again Moscow (CNSNews.com) - Russia is ready to resume arms sales to Iraq once Baghdad makes the request, Defense Minister Sergei Ivanov has announced. "We are ready to restart supplies of Russian arms to Iraq on the basis of request by Baghdad," he said. "Theoretically, we can do this only if the Iraqi government asks us for help." Ivanov added that Russia was also ready to train Iraqi troops, either in Russia or in a third country - but not in Iraq itself. Moscow and Baghdad maintained military ties for decades; between 1958 and 1990, Iraq imported nearly 10,000 Soviet-made tanks and armored vehicles, nearly 1,500 warplanes and helicopters, and 41 naval vessels. The total bill reportedly exceeded $30 billion. Last summer, Russia officially lifted its arms embargo against Iraq. However, Foreign Minister Sergei Lavrov said on Tuesday that Russia did not plan to deliver arms to Iraq "at the moment.""
-------------------------------------------
Mexico: The PRI's Complicated ComebackNov 17, 2004
The Institutional Revolutionary Party is making a comeback in Mexican politics just as the 2006 presidential election comes into view. The party's recent advances, however, only complicate the political picture in Mexico. The current leader in presidential polls is Mexico City Mayor Andres Manuel Lopez Obrador, leader of the leftist Democratic Revolutionary Party. Lopez Obrador's rivals are trying to have him banned from the elections on charges stemming from an obscure land dispute. The outcome will determine Mexico's immediate political future as well as future relations with the United States.
----------------------------------------
China alarmed by U.S. buildup in Asia, fears encirclement China's military is worried by the slow buildup of U.S. military forces throughout the Asia-Pacific region, according to U.S. officials. The Chinese have expressed these fears in recent meetings in Asia. According to the officials, China believes the U.S. strategy is to encircle China and strengthen its naval warfighting posture in Asia. The Chinese have noted that part of this buildup includes deployment of U.S. forces in Afghanistan, which is close to western China.
-------------------------------------------
S. Korea's Roh, in L.A., defends Pyongyang's nukes, opposes use of force in Bush's post-election N. Korea policy . . . In a speech at a meeting of the Los Angeles-based World Affairs Council on Saturday, Roh also said that it is "understandable" for North Korea to seek nuclear deterrence to cope with external threats.
-------------------------------------------
Report: North Korea exported fluorine gas to Iran
Chinese intelligence targets Taiwan arms debate
---------------------------------------------

UNITED NATIONS
The Turtle Bay MafiaTaking the U.N. to court.
http://www.nationalreview.com/babbin/babbin200411180825.asp
TURTLE BAY WATCHYour Tax Dollars at Work The U.N. discovers the cause of anti-Semitism: Jews. http://www.opinionjournal.com/extra/?id=110005908
Official: Russia Not Cooperating in Probe
http://hosted.ap.org/dynamic/stories/U/UN_OIL_FOR_FOOD_INVESTIGATION?SITE=DCTMS&SECTION=HOME
Kofi Annan and the insanity of international law
http://www.townhall.com/columnists/benshapiro/bs20041117.shtml
AFRICA
The Incomplete Triumph of Democracy in Africa
http://www.aei.org/news/filter.foreign,newsID.21567/news_detail.asp
IRAN

U.S. Is Needed to Defuse Iran Kenneth M. Pollack

http://www.brookings.edu/views/op-ed/pollack/20041117.htm
Bush Confronts New Challenge on Issue of Iran
http://www.nytimes.com/2004/11/19/international/middleeast/19diplo.html?oref=login&pagewanted=print&position=

Nuclear Disclosures On Iran Unverified U.S. Officials Checking Evidence Cited by Powell
http://www.washingtonpost.com/ac2/wp-dyn/A61079-2004Nov18?language=printer
Iranian Leader Urges Protests
http://www.foxnews.com/printer_friendly_story/0,3566,139018,00.html
U.S.-Iran nuke talks almost ruled out
http://www.usatoday.com/news/washington/2004-11-18-us-iran_x.htm
NORTH KOREA
N.Korea Denies Removal of Leader Kim Portraits-Xinhua
http://abcnews.go.com/International/wireStory?id=264972
PALESTINE
Hamas demands new Palestinian election system
http://www.haaretz.com/hasen/spages/503578.html
Palestinians saved from collapsed arms tunnel and arrested
http://www.jpost.com/servlet/Satellite?pagename=JPost/JPArticle/ShowFull&cid=1100751971057
France to release Arafat's medical records to his nephew, the UN representative
http://web.israelinsider.com/Articles/Diplomacy/4414.htm
IRAQ
Fallujah Discovery May Be Al-Zarqawi's Headquarters
http://www.foxnews.com/printer_friendly_story/0,3566,138938,00.html
Fallujah captives: Saddam set up insurgency cells in 2001
http://www.worldtribune.com/worldtribune/breaking_13.html
AFGHANISTAN
In Afghanistan, focus on terrorists, not drugsOpium eradication could alienate Afghan farmers
http://www.cato.org/new/11-04/11-10-04r.html

============================================
NATIONAL
Breaking the Siege in the Judge War
New Rules Could End the Long Fights over Nominees
http://www.aei.org/news/filter.social,newsID.21555/news_detail.asp
Bush, Kerry Ignore What's Ailing Health Care: Red Tape
http://www.cato.org/dailys/10-19-04.html

=======================================
ECONOMY
The Current Account Deficit and the Dollar
http://www.aei.org/news/filter.all,newsID.21565/news_detail.asp
WTO has no place for EU's famous-food list
http://www.iht.com/bin/print_ipub.php?file=/articles/2004/11/18/business/food.html

ARTICLES
-------------------------------------------

UN staff to make historic vote of no confidence in Annan(AFP)19 November 2004
UNITED NATIONS - UN employees were readying on Friday to make a historic vote of no confidence in scandal-plagued Secretary General Kofi Annan, sources told AFP.
The UN staff union, in what officials said was the first vote of its kind in the more than 50-year history of the United Nations, was set to approve a resolution withdrawing its support for the embattled Annan and UN management.
Annan has been in the line of fire over a high-profile series of scandals including controversy about a UN aid programme that investigators say allowed deposed Iraqi dictator Saddam Hussein to embezzle billions of dollars.
But staffers said the trigger for the no-confidence measure was an announcement this week that Annan had pardoned the UN’s top oversight official, who was facing allegations of favouritism and sexual harassment.
The union had requested a formal probe into the behaviour of the official, Dileep Nair, after employees accused him of harassing members of his staff and violating UN rules on the hiring and promotion of workers.
Top UN spokesman Fred Eckhard announced on Tuesday that Nair had been exonerated by Annan “after a thorough review” by the UN’s senior official in charge of management, Catherine Bertini.
Annan underlined that he “had every confidence” in Nair, Eckhard said, but UN employees ridiculed the decision and claimed that investigators had not questioned the staff union, which first raised the complaints in April.
“This was a whitewash, pure and simple,” Guy Candusso, a senior member of the staff union, told AFP.
Candusso noted that Eckhard’s declaration to the press had said that “no further action was necessary in the matter.”
But in a letter sent to the union, a copy of which was obtained by AFP, Annan’s chief of staff Iqbal Riza said Nair had been ”advised that he should exercise caution” in future to “minimise the risk of negative perception.”
In a resolution set to be adopted on Friday, the union said Riza’s statement “substantiates the contention of the staff that there was impropriety” and that there exists “a lack of integrity, particularly at the higher levels of the organisation.”
The draft resolution, also obtained exclusively by AFP, calls on the union president to “convey this vote of no confidence to the secretary general.”
Staffers who asked not to be named, afraid that speaking out could damage their future prospects in the United Nations, said the Nair decision was emblematic of widespread corruption by Annan and his senior staff.
They noted that Riza, UN undersecretary general for communications Shashi Tharoor and other top officials had served directly under Annan at least since 1994, when he was head of UN peacekeeping operations.
At the time, the United Nations was widely criticised for failing to stop the Rwanda genocide that left 800,000 people dead, even though UN peacekeepers were on the ground -- a catastrophe for which Annan has publicly apologised.
Annan could not be reached for immediate comment. He is currently in Africa on a high-profile mission aimed at ending the long-running civil war in Sudan.

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

KOFI'S CASH LAUNDRY . . .

November 19, 2004 --
When French bank BNP Paribas was jockeying to win the United Na tions bank account for Saddam's Oil-for-Food program, it's not likely that its sales pitch was: "The job is so easy, a monkey could do it."
But as Congress widens its probe into Oil-for-Food's legacy of global bribery and theft, the bank is fast realizing that a confession of stupidity is its best — maybe its only — defense against what could be a massive financial liability.
As Rep. Henry Hyde (R-Ill.) put it on Wednesday, the U.N. aid program was a closed-end system of "hear no evil, speak no evil and see no evil."
"No one seemed to be in charge of watching Saddam Hussein while he and his government were conducting perhaps the largest financial swindle in history," Hyde observed at a congressional investigatory hearing.
Hyde's International Relations Committee has found that Saddam stole an eye-popping $21 billion from the Iraqi people through Oil-for-Food. The despot diverted money that belonged to Iraqis into his own accounts — then used the cash to buy weapons, bribe officials and journalists and reward terrorists.
Much of that money was first washed through that BNP account — administered by he bank's New York office.
Hyde thinks that BNP may have been "noncompliant" (to put it nicely) with standard banking practices — possibly doling out millions in payments to Saddam's favorite contractors without proof of delivery of any actual goods to the Iraqi people, for example, or authorizing payments to third parties outside of the U.N.'s credit system.
Hyde has pledged to further investigate his early evidence — to find if BNP "facilitated Saddam Hussein's manipulation and corruption of the program."
BNP Paribas' strategy is to play up its "see-no-evil" role. The North American CEO of the bank, Everett Schenk, appeared before Hyde's committee Wednesday to repeat one word over and over: "Non-discretionary."

document.write('');

* BNP's job was to deliver "non-discretionary" banking services to the United Nations, Schenk said.
* "The bank has had no discretion over how money has been spent or invested under the Oil-for-Food program," he repeated.
* "The responsibilities of the bank [were] non-discretionary banking services," he repeated once more.
Translation: It wasn't our job to make sure that Saddam wasn't laundering moneythrough these accounts at the expense if his people (the supposed beneficiaries of the UN account). -RD>
BNP was just doing what the United Nations told it to do, Schenk has testified — because BNP desperately needs Congress to accept that it was paid millions of dollars just to process paper.
And that's because the Treasury Deptartment has been bandying about a much scarier word lately: "repatriation."
Assistant Treasury Secretary Juan Carlos Zarate told a second congressional committee this week that Treasury's mission is to "hunt to find and repatriate stolen Iraqi assets to the Iraqi people."
And BNP knows that — in the absence of aggressive U.N. co-operation with U.S. investigators — the bank will remain the last traceable stop for so many of those plundered billions.
BNP was paid, essentially, to be Saddam's sole financial gateway to the world. If the Treasury can't find a huge chunk of Saddam's money because it was washed through an opaque system administered by the United Nations — with BNP serving, at best, as silent enabler —it's becoming clear that BNP must bear some responsibility for the lost cash.
Clearly there is a need to reclaim as much of the cash as possible for the Iraqi people. That goes without saying.
At the same time, BNP needs to be clear about the role U.N. higher-ups played in the rip-off.
The overriding question is: What did Kofi Annan know, and when did he know it?
We bet BNP can help with answers.
It is Congress' responsibility to see that they come quickly, and publicly.

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

. . . AND HIS TURTLE BAY LAND GRAB

November 19, 2004 -- Expand the United Nations?
In New York?
Ha!
The Post's Ken Lovett reported yesterday that Albany was planning to give the United Nations an early Christmas present — a chunk of the East Side for an expansion.
Sunshine being the best disinfectant, Lovett's story caused the state Senate to put the brakes on.
For the time being, anyway.
Under terms of the deal, the United Nations was to take what is now the Robert Moses playground for renovation and expansion of its Turtle Bay complex.
The bill would have allowed U.N. officials to begin environmental and land-use studies preparatory to the takeover.
Manhattan Democrat Steven Sanders took time off from his usual duties — looking out for the United Federation of Teachers — to sponsor the scheme in the Assembly; Senate Majority Leader Joe Bruno was responsible for it in the Senate.
Moreover, the Bloomberg administration strongly backs the plan.

Which makes us wonder:
What are those people thinking?
New Yorkers give up prime real estate — a park! — to accommodate an institution whose membership virtually without exception doesn't even try to disguise its contempt for the United States?
Which has thrown every possible obstacle into the way of the liberation of Iraq; which institutionally despises Israel; which ignored Rwanda and Bosnia and now abets genocide in Sudan, and which is up to its greedy armpits in the $21-billion-plus Oil-For-Food ripoff?
Let's be clear: The United Nations may once have had a claim on the good wishes of freedom-loving people.
No longer.
As Brooklyn Sen. Marty Golden put it yesterday, with uncharacteristic — and wholly unwarranted — restraint:
"The United Nations has been non-responsive to legitimate questions raised about its recent activities with respect to Iraq, human rights and other abuses and activities that led to massive human suffering," Golden said.
No kidding.
Former Sen. Roy Goodman, now head of the United Nations Development Corp., said that if the expansion falls through, the United Nations could leave New York.
With all due respect to Sen. Goodman — a gentleman in every respect — Kofi & Co. can pack up and scoot.
If the United Nations wants to expand, how about building more offices in France?
For that matter, just move the entire complex onto the Champs Elysee?
Consider it an even trade for the Statue of Liberty.

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

Citigroup Banked for Arafat as He Paid Fighters, Diverted Funds
Nov. 19 (Bloomberg) -- Citigroup Inc., the world's biggest financial services company, invested $6.8 million for Yasser Arafat, Palestinian Authority documents show. At the same time, the late Palestinian leader was paying militants and channeling authority funds into his personal accounts.
The funds were invested through Citigroup's private bank before Arafat began turning over $799 million to the Palestinian Authority in 2002, said Andreas Martin, a Standard & Poor's analyst who helped value the assets. The unit's policies prohibit the acceptance of public figure clients without approval of the head of the private bank and company lawyers.
Citigroup's failure to conduct proper checks on its clients to prevent money laundering led Japanese regulators to close the company's private banking offices there in September. New York- based Citigroup in October fired the head of the private bank and the vice chairman who ran the company's international businesses.
``Citibank rears its ugly head again,'' said Jeremy Pope, co- director of London-based Tiri Network and former executive director of Transparency International. Both organizations advocate global standards to fight corruption.
Citigroup compliance officers have begun an examination of records related to the Palestinian account, Citigroup spokesman Jeremy Apfel in London said. He declined to comment further. The private bank manages money for wealthy clients.
The private banking unit's ``know-your-customer'' policy requires it to identify the source of an account holder's income.
Not Named
Arafat didn't hold accounts in his name, said James Prince, president of Los Angeles-based Democracy Council, the outside governance monitor for the Palestine Investment Fund, the agency to which Arafat transferred his assets. Arafat and the Palestine Commercial Services Co., a Ramallah-based company he controlled, invested abroad by giving funds to money managers who set up accounts under other names, he said.
``Arafat didn't have any account in his name -- no bank in the world would open one,'' said Prince, who didn't know what name the Citibank account was opened under. ``There's nothing wrong legally, but it's a question of how strong are Citibank's know- your-customer policies.''
Arafat, who died last week in Paris at age 75, controlled about $1.3 billion through his positions as president of the Palestinian Authority and chairman of Palestine Liberation Organization, according to Israeli intelligence estimates.
Donations, Taxes
He amassed the fortune by soliciting donations, channeling tax revenue into personal accounts and converting aid dollars into Israeli shekels at below market rates before paying Palestinian Authority workers, according to interviews with Colonel Miri Eisin, an Israeli army intelligence officer, and Mohammad Shtayyeh, managing director of the Palestinian Economic Council for Development and Reconstruction.
Shtayyeh, whose agency administers international aid received by the Palestinian Authority, said the investments and accounts controlled by Arafat belong to all Palestinians. They were simply held by Arafat until the Palestinian Authority could build institutions capable of managing them, Shtayyeh said.
``Arafat's money is for the people,'' said Shtayyeh, an economics professor at Birzeit University in the West Bank. ``Arafat is not a man who was looking to accumulate personal money.''
Palestinian Authority Finance Minister Salam Fayyad didn't respond to e-mailed requests for comment on this story. Phone calls to the ministry weren't answered this week as Palestinians celebrated the Eid holiday marking the end of Ramadan and mourned Arafat's death.
Paying Militants
Phone numbers for Mohamed Rachid, chief executive of the Palestine Investment Fund, and Ellam Tam, the firm that handles public relations for the Palestinian Authority, also went unanswered, as did e-mail messages to both. No one answered the phone at the PLO's embassy in Washington.
At the same time he was investing with Citigroup, Arafat used Palestinian Authority money to pay members of his Fatah guerrilla movement, according to documents the Israeli army seized at Arafat's compound in the West Bank city of Ramallah in April 2002. Palestinian negotiator Saeb Erekat at the time said the documents were forgeries.
In January 2002, Arafat received a letter from the West Bank chief of Fatah, Marwan Barghouti, requesting $1,000 each for a dozen fighters. ``Please allocate $350 to each,'' Arafat scribbled at the bottom of the letter. Arafat then signed his name, and sent the paper to the finance ministry for payment.
An Israeli court in June sentenced Barghouti to five consecutive life prison terms after he was convicted of planning terrorist attacks.
PLO Funds
Arafat's funds included about $500 million held by the PLO, Eisin told Bloomberg in July 2002. Israeli officials this week declined to comment on Arafat's finances.
In addition, the Palestine Investment Fund listed $799 million of assets in its 2003 annual report, released in May. The fund was created when Arafat's money managers turned over many of his holdings to the Palestinian Authority finance ministry after international aid donors demanded more transparency in how the authority handled its money.
The fund includes a $25 million stake in Egyptian mobile- phone company Orascom Telecom Holding SAE and about $20 million in private equity stakes, according to the annual report.
Citigroup opened the account for Arafat's money managers before the fund was created in 2002, according to a valuation of the investments conducted for the Palestinian Authority by Standard & Poor's. The Citigroup account was held by Palestine Commercial Services, the valuation said.
Private Equity
The account today holds investments in three private equity funds, including an Asia fund and a real estate fund, along with some cash and shares of a Citigroup-run European mutual fund, according to the S&P valuation.
``It's an account at the private banking group within Citigroup,'' said Martin, who is based in S&P's Los Angeles office. An adviser to Palestinian Commercial Services at Jordan- based Cairo Amman Bank made investment decisions for the account, he said.
At the time the account was opened, Arafat handled Palestinian Authority finances outside the authority itself. From 1995 through 2000, he diverted $900 million of the authority's tax and business income to personal bank accounts, the International Monetary Fund said in a September 2003 report. Most of that money was invested through Palestine Commercial Services.
Before Arafat turned the money over to the finance ministry, the Palestinian Authority lacked financial accountability, said Joel Toujas-Bernate, the IMF's mission chief for the West Bank and Gaza Strip.
Transparency Improved
``It was not a very transparent system,'' he said. ``We can more or less trace the use of this money now.''
Citigroup Private Bank, with 90 offices in 31 countries, had net income of $551 million last year, accounting for 3 percent of Citigroup's profit, according to the company's 2003 annual report. Its clients include 127 billionaire families who keep an average of $7.1 million with the bank, according to a February presentation to investors.
The unit has been a flashpoint for criticism of the company's money-laundering controls, Pope at Tiri Network said.
``It would seem to suggest that Citibank hasn't learned very much after being burned,'' he said.
After Japanese regulators shut down Citigroup's private bank there, the company in October ousted Deryck Maughan, vice chairman for international strategy, Thomas Jones, who ran investment management, and Peter Scaturro, who ran global private banking.
Citigroup Policies
The bank strengthened its policies in 1998 as its dealings with ``public figures'' attracted probes by the U.S. General Accounting Office and other Congressional investigators. Citigroup defines public figures as people who occupy senior positions in politics, and applies the policy to businesses controlled by such figures, according to a Citibank Web site.
``Public figures are not part of the private bank's target market,'' John Reed, Citigroup's co-chairman at the time, said during testimony to Congress in November 1999.
In 1998, the GAO, now known as the Government Accountability Office, said Citibank's private bank bypassed safeguards against fraud and helped Raul Salinas de Gortari, brother of former Mexican President Carlos Salinas de Gortari, move as much as $100 million from Mexico to Switzerland and London through shell companies and multiple accounts.
In November 1999, a report by the staff of the Senate's investigations subcommittee criticized Citibank's relationships with political figures ranging from the sons of Nigeria's former military leader, General Sani Abacha, to El Hadj Omar Bongo, president of Gabon.
To contact the reporter on this story:
Vernon Silver in Rome at vtsilver@bloomberg.net
To contact the editor responsible for this story:
Anne Swardson at aswardson@bloomberg.net
Last Updated: November 18, 2004 22:01 EST
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Karzai: Don't Spray Our PoppiesKABUL, Afghanistan, Nov. 19, 2004
An Afghan girl plays in a poppy field in the village of Essazai Kili. (Photo: AP)The U.N. Office on Drugs and Crime says the poppy crop in Afghanistan rose by 64 percent last year, producing opium valued at about $2.8 billion - over 60 percent of Afghanistan's gross domestic product.
Afghan President Hamid Karzai is expressing concern about reports that some people living near targeted poppy fields may already be experiencing side effects from exposure to herbicides. (Photo: AP)
(AP) A U.N. survey released this week showed Afghanistan this year supplied 87 percent of the world's opium - the raw material for heroin - following record-high cultivation that has skyrocketed since the fall of the Taliban in 2001. The heroin industry undermines Afghanistan's democracy and puts money into the coffers of terrorists, the U.N. report said, adding that the "fear that Afghanistan might degenerate into a narco-state is slowly becoming a reality." President Hamid Karzai said fighting the booming opium trade is a top priority, following a U.N. report warning that Afghanistan risks becoming a "nacro-state." But he rejected a U.S. proposal to spray poppies with herbicides, citing health risks. Afghan and Western counter-narcotics officials have said that U.S. experts are looking at using crop dusters to spray opium poppies with herbicides - a key weapon in the disputed U.S.-backed war against coca farmers in South America. But Karzai said he opposes aerial spraying because of concerns over side effects among residents in farming communities close to the fields. "While emphasizing its strong commitment to the eradication of poppy fields, the government of Afghanistan opposes the aerial spraying of poppy fields as an instrument of eradication," Karzai's office said in a statement following Thursday's U.N. report. The U.S.-backed leader expressed alarm at reports from the key poppy-growing province of Nangarhar, close to the Pakistani border, that planes had already sprayed fields planted with poppy. "The president is deeply concerned about complaints from the region pointing to possible side effects of the aerial spraying on the health of children and adults," the statement said. Officials will travel to the area to investigate, it said. The United States and Britain are training small paramilitary units to smash laboratories and arrest drug suspects. Nangarhar has been earmarked for vigorous crop eradication. But it is unclear whether officials already have begun experimenting with herbicides, which critics say can wipe out legal crops planted nearby as well as harming villagers and livestock. Officials in Kabul could not be reached immediately for comment, but Mohammed Daoud, the Afghan deputy interior minister for counter-narcotics, told AP recently that the planes "could be useful, and would frighten people" - but said they should only be used as a last resort. One Western official involved in Afghan drug policy said in an interview last month that spraying was "not going to be imposed on anybody" without Afghan government support. In recent years, Afghanistan has used squads of laborers to thrash down poppy crops, but that has had little impact on drug output. The annual survey released Thursday by the U.N. Office on Drugs and Crime found poppy cultivation rose 64 percent to a record 323,700 acres in 2004, producing an estimated 4,200 tons of opium. It valued the trade at $2.8 billion, or more than 60 percent of Afghanistan's 2003 gross domestic product. On Wednesday, U.S. drug enforcement agencies asked Congress for an additional $780 million to fund both the crackdown and provide alternative crops or livelihoods for farmers. Pressure is also mounting to snatch big smugglers - believed to include a string of government officials - and officials say judges have already been recruited for a special court to try suspected drug kingpins. Mirwais Yasini, the head of Afghanistan's Counter-narcotics Directorate, said Thursday that this year's surge in production only added to the urgency. "It is undermining our national security, it is undermining our good name in the international community," he said. "We cannot live with this dragon any more." ©MMIV, The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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The Turtle Bay MafiaTaking the U.N. to court.

You have to hand it to the Turtle Bay crime family: They have turned the art of stonewalling congressional investigators into a science. And while the evidence of the largest financial scam in history drips out in bits and pieces, the U.N.'s only answer is "trust us." It's time to take a harder line on the U.N.'s Oil-for-Food-for-Bribes-for-Terrorism program.
Can you imagine what would have happened to Kenny Boy and the rest of the Enron crowd if they'd told the Justice Department it couldn't see the corporate books or interview the employees? If they had said, "Trust us, we'll take a look into the problem and tell you what we think you need to know"? At this moment, that's exactly what Kofi Annan and his chief inspector, Paul Clouseau Volcker, are telling Sen. Norm Coleman, chairman of the Senate Permanent Subcommittee on Investigations. Coleman is neither a hothead nor an anti-U.N. radical. But Annan's conduct, and Volcker's, may yet turn him into both.
The Senate PSI is not a body to be trifled with. Its jurisdiction is comprehensive, and its powers of subpoena and public hearings are enough to compel cabinet members and heads of Fortune 100 companies to view a PSI investigation as something akin to being skinned alive. But Kofi and Clouseau take a different view — and for very good reason.
On November 9, Coleman and ranking minority member Carl Levin sent a letter to Kofi Annan asking for access to the documents in U.N. possession on Oil-for-Food (including some 55 internal audit reports) and interviews of key U.N. staffers. Among the staffers listed in the request were Benon Sevan, head of the Oil-for-Food program; John Almstrom, chief of its contracts-processing section; and Stephanie Scheer, who had been Sevan's deputy. That letter followed Annan's refusal of a similar request last September.
On Tuesday, Volcker replied for Annan, turning Coleman and the PSI down flat. Volcker said that the U.N. wouldn't release any of its papers or make its people available to the Senate, effectively blocking Coleman's investigation. In a letter to Coleman, Volcker said, "The clear purpose is to avoid potentially misleading and incomplete information that could impair ongoing investigation, distort public perceptions and violate simple concerns of due process." He objected to U.N. officials' appearing before the Senate committee, writing, "For a U.N. official to appear before the subcommittee in the current highly charged environment would plainly risk ending prospects for their cooperation with our committee and with subsequent potential criminal investigations."
Equally bad are the U.N.'s extreme efforts to block any of the involved companies, and any involved people who are not U.N. employees, from cooperating with the congressional investigations. (There are four other committees investigating the Oil-for-Food scam in addition to Senate PSI.) Coleman's letter to Annan enclosed a letter from Lloyd's Register, one of the companies responsible for inspecting the goods purchased by Saddam with Oil-for-Food funds. Lloyd's wrote to the PSI staff that it had been instructed by the U.N. to not comply with any U.S. subpoenas unless they were made effective through English courts. Lloyd's is only one of hundreds of companies that should be complying but have been instructed by the U.N. to resist.
The U.N. can get away with this because it has immunity from U.S. law, and its employees (at least in the conduct of their U.N. duties) have diplomatic immunity. But those immunities aren't an insurmountable obstacle. And the way around them has just come to light.
Rep. Henry Hyde's House International Relations Committee is releasing documents and information that show how some of the Oil-for-Food money was used by Saddam to pay bounties to the survivors of Palestinian homicide bombers. In my book Inside the Asylum: Why the UN and Old Europe are Worse than You Think, I revealed that many of the documents found by the Israelis in their 2002 incursion into Arafat's Ramallah compound showed that Saddam was paying these bounties:
Among the documents the Israelis found were copies of checks paid through the Palestinian Authority to the families of the terrorist bombers. Typical, in the words of the Israeli [Defense Forces] report, is a check for $25,000, drawn on the Palestinian Investment Bank, payable to, "Khaldiya Isma'il Abd al-Aziz al-Hurani, the mother of Hamas terrorist Fuad Isma'il Ahmad al-Hurani, who carried out a suicide attack on 9 March 2002 in the Moment café in Jerusalem. 11 Israelis were killed and 16 wounded in the attack.
Alan Gerson, an international-law expert, has been a leader in the litigation of antiterrorist cases. He told me that when a person or an entity — even a government — has aided and abetted terrorism, its immunity can be bypassed in legal proceedings. When someone violates the "commitment to peremptory norms" — i.e., when it helps fund terrorism — it effectively gives up its immunity from legal action. The president can and should act on this idea.
The president could determine — and issue an order saying — that the U.N. Oil-for-Food program, according to the available evidence, violated that "commitment to peremptory norms" and thus waived its immunities to congressional and other U.S. legal proceedings. At that point, Coleman's PSI could issue enforceable subpoenas against the U.N., its staff, and the companies that participated in the program. The U.N. would then be in a position such that it had to either cooperate with the investigation or be held in contempt of Congress. (Which it manifestly is right now.)
The American system of government is based on the principles of checks and balances, and accountability. The U.N. is now unaccountable to anyone but its members. We give about $7 billion a year to the U.N. and its agencies. If the U.N. remains contemptuous of Congress — and the American people — it should suffer the loss of those funds until it decides to cooperate fully. There is no reason to trust the U.N. to investigate and punish those who abused the program, or to recover any of the funds that were looted by Saddam through the U.N.'s program. Congress should use its power of the purse to compel the U.N. to cooperate. And the president could make that much easier by declaring the U.N.'s immunities waived by its involvement in terror.
See you in court, Kofi.
— NRO contributor Jed Babbin is the author of Inside the Asylum: Why the UN and Old Europe are Worse than You Think.
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Your Tax Dollars at Work The U.N. discovers the cause of anti-Semitism: Jews.
BY ANNE BAYEFSKY Thursday, November 18, 2004 12:01 a.m. EST
Yesterday the House International Relations Committee revealed that money from the United Nations Oil for Food program, which was supposed to provide humanitarian assistance to the Iraqi people, helped pay the families of Palestinian suicide bombers. This shouldn't come as a surprise. The U.N. has a problem with anti-Semitism: It doesn't know what it is.
In order to figure it out, the Office of the U.N. High Commissioner for Human Rights and Unesco invited a group of experts to Barcelona last week. Their mission: to provide the U.N. special rapporteur on contemporary forms of racism, racial discrimination, xenophobia and related intolerance, Doudou Diéne, with advice on anti-Semitism as well as "Christianophobia and Islamophobia."
From whom did the U.N. get advice? There was Tariq Ramadan of Switzerland's Fribourg University, who was denied entry to the U.S. in August on the basis of a law concerning aliens who have used a "position of prominence within any country to endorse or espouse terrorist activity" or are considered a "public safety risk or a national security threat." But apparently the U.N. thought it was worth listening to the views on racism of someone who said on Sept. 25, 2001, that "[Osama] Bin Laden is perhaps a useful straw man, like Saddam Hussein, whose diabolical representation perhaps serves other geo-strategic, economic or political designs."
Then there was anti-Semitism expert Esther Benbassa from the Sorbonne. She wrote in September 2000, "Today, especially in the United States, Jewish philanthropy is exerted in the name of the perennization of the memory of the Shoah [Holocaust]. The money flows to create pulpits on anti-Semitism and the genocide, to finance museums, and research. As if nothing else were significant or had ever existed."
In her written contribution to the meeting, she artfully refers to "merging the image of the extermination with the might of Israel against the Palestinians, the one image reducing the significance of the other, and the Jew as both victim and executioner." Maybe the U.N. tapped her for her expertise at encouraging anti-Semitism?
Also in Barcelona were two Israelis who sit on the board of the same nongovernmental organization, the Alternative Information Center, a perennial U.N. favorite though it is on the fringes of Israeli society. The Center's co-chairman Michael Warshawski wrote in a 1996 newsletter: "Ethnic cleansing is a basic Zionist principle and policy." Fellow board member and Tel Aviv University professor Yossi Schwartz presented a paper at the center's workshop this past May "with the support of the Basque Government" entitled "Anti-Zionism Not Anti-Semitism." Calling for the elimination of the Jewish state is not new to Mr. Schwartz, who has written--after quoting from Trotsky's "epoch": "The solution of the working class to the national question in Israel/Palestine is not one or two or three capitalist states but a socialist federation of the Middle East."
Some invited Jews canceled their participation in the Barcelona conference, though some did attend, including another Israeli. They were compelled to spend their time taking exception to contributions from experts such as "superimposing the Jewish symbol of the Magen David on the Nazi swastika is not anti-Semitism."

At the end of the meeting a draft report, prepared with the assistance of U.N. staffers, was shared with participants, who now have a few days to confirm the outcome. The report will become a U.N. document, and it will be disseminated around the world. Here are some excerpts from the U.N.'s contribution to combating anti-Semitsm:
In practice, it is often difficult for an anti-Zionist type of expression not to be seen as simultaneously anti-Semitic. Nevertheless, several participants maintain that it is necessary to conserve the distinction between anti-Semitism and anti-Zionism, whilst defending the right to be anti-Zionist without being branded an anti-Semite and also bearing in mind that most Jews were anti-Zionists before 1935. . . .The genuine Zionism of many Jews helps to explain the fact that many people wrongly feel that most Jews lend their unconditional support to Israeli policies. That is why we have seen attacks on synagogues, arson attacks on schools, desecration of cemeteries, for reasons that have nothing to do either with religion, or education, or the peaceful rest of the deceased, but that have a great deal to do with a political and a territorial conflict. . . .
In the past, anti-Semitism as a phenomenon was absent from the Arab-Muslim world. Here, the Arab-Israeli conflict plays an essential role, but another important element is the perception of the State of Israel as the "Trojan horse" of the West in the Middle East. Anti-Semitism would therefore be a particular manifestation of the hatred felt for the West, partly for financial reasons. . . .
Recommentations:
. . . The leaders of Jewish communities should also act to distinguish defence of the State of Israel from the fight against anti-Semitism. . . .
Contextualising the memory of the Holocaust with that of other genocides and serious events in contemporary history in order to make sure that at the end of the day everyone can feel the Holocaust as their own tragedy, both Jews and non-Jews.
In other words, according to the U.N. experts' draft report, discrimination against individual Jews is bad, while "anti-Zionism"--the denial to the Jewish people of an equal right to self-determination--is not. Since it is the perception of unconditional Jewish support for Israel that leads people to attack a Jewish cemetery, and anti-Semitism was absent from the Muslim world prior to the Arab-Israeli conflict (the mufti of Jerusalem and his friend Hitler notwithstanding), the way to defeat anti-Semitism is for Jews to cut loose defense of the state of Israel. And by the way, anti-Semitism will diminish if only we stop emphasizing the unique horror of the Holocaust.

It may not be surprising to learn that Mr. Diéne seems to have had pretty fixed ideas about anti-Semitism before the meeting even began. In his October 2004 report to the General Assembly, he wrote: "The cycle of extreme violence triggered by the dynamics of occupation . . . has fuelled profound ethnic antagonism and hatred. . . . The Palestinian population . . . is . . . suffering discrimination. Even if Israel has the right to defend itself . . . a security wall . . . constitutes a jarring symbol of seclusion, erected by a people . . . marked by the rejection of the ghetto. One . . . effect of this conflict is its . . . contribution to the rise of . . . anti-Semitism." Simply put, Jews are responsible for anti-Semitism. Or, if it weren't for Israel's annoying insistence on defending itself, on the same terms as would be applied to any other state faced with five decades of wars and terrorism aimed at its obliteration, Jews would be better off.
It is interesting to compare the U.N. expert's incisive analysis of the underlying hatred in Sudan. After noting in the same report that two million Sudanese have died and four million have been displaced, he muses that "massacres, allegedly ethnically motivated, are continuing to claim victims in the Darfur region. . . . The Special Rapporteur therefore proposes to give greater priority to this region with a view to conducting . . . an investigation . . . of the ethnic dimension of the conflicts ravaging it."
Another day, another U.N. meeting, another UN report, and another serious step backward in combating anti-Semitism.
And don't forget, another American taxpayer dollar.
Ms. Bayefsky is an international lawyer and a senior fellow at the Hudson Institute.

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Official: Russia Not Cooperating in Probe
By EDITH M. LEDERERAssociated Press Writer
UNITED NATIONS (AP) -- Russia is refusing to provide witnesses or information to the independent investigation into alleged corruption in the multibillion-dollar U.N. oil-for-food program in Iraq, an official close to the investigation said Wednesday.
The official, speaking on condition of anonymity, said Russian diplomats "dug in their heels" during a meeting in Moscow this week with members of the independent inquiry.
Russia is a veto-wielding member of the U.N. Security Council which approved Secretary-General Kofi Annan's recommendation in April to set up an independent panel headed by former U.S. Federal Reserve Chairman Paul Volcker to probe all aspects of the oil-for-food program, including actions of U.N. member states.
Under the program, Russian companies were major recipients of contracts from Saddam Hussein's government for the sale of Iraqi oil and the supply of humanitarian goods to Iraq.

Launched in December 1996 to help Iraqis cope with U.N. sanctions imposed after Saddam's 1990 invasion of Kuwait, the program allowed the former Iraqi regime to sell unlimited quantities of oil provided the money went primarily to buy humanitarian goods and pay reparations to victims of the 1991 Gulf War. Saddam's government decided on the goods it wanted, who should provide them, and who could buy Iraqi oil - but the U.N. committee overseeing sanctions monitored the contracts.
Russia's Foreign Ministry said in a statement earlier Wednesday that Russian exporters operating under the program did not violate sanctions.
"In particular, it was noted that during the humanitarian operation in Iraq, Russian exporters strictly adhered to the sanctions regime," the ministry said in a statement.
The resolution supporting Volcker's investigation called on the U.S.-led coalition in Iraq, the Iraqis themselves, and all 191 U.N. member states and their regulatory authorities "to cooperate fully by all appropriate means with the inquiry."
Russia had initially opposed Volcker's request for a Security Council resolution on grounds that a council statement was enough and its members should not look backward and "stir up the old issue" of oil-for-food. But it relented and supported the resolution.
The official close to the Volcker inquiry said, however, that "the Russians have been reluctant to provide witnesses and information."
"They are being problematic and they are digging in their heels. They're not handing over materials," the official said.
A report by top U.S. arms inspector Charles Duelfer, released last month, alleged that Saddam issued secret vouchers for purchase of oil to an array of officials and political figures from various countries, dominated by Russia, France and China. That oil could then be resold at a profit.
Saddam allegedly issued the vouchers with the aim of currying favor among U.N. Security Council members.
U.S. Congressional investigators on Monday estimated that Saddam had raised more than $21.3 billion in illegal revenue, using the oil-for-food program and other schemes, like the illegal smuggling of oil.
In Russia, the recipients allegedly included the presidential administration's office, top oil companies Yukos and Lukoil, and ultranationalist lawmaker Vladimir Zhirinovsky, the report said.
At a news conference last month, Volcker said his investigators had received good cooperation from the U.S. and Iraqi governments, and a promise of cooperation from France.
But he said there had been "a little resistance here and there," citing the French bank BNP Paribas, where the oil-for-food program had its account, and the American accounting firm Ernst & Young which was hired by the Iraqi Board of Supreme Audit to review more than 20,000 files from Saddam's regime related to the oil-for-food program.
© 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy.

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-Kofi Annan and the insanity of international lawBen Shapiro (archive)
November 17, 2004 Print Send

It must be nice to be Kofi Annan, the Secretary General of the United Nations. You’re from Ghana, a country with an annual gross domestic product per capita of approximately $2,200, and yet you have a world-class educational background after attending college in Minnesota, graduate school in Geneva, and a Masters program at MIT. You make $227,253 per year simply for blathering against the United States and Israel, and writing perturbed letters to homicidal dictators. You get to pretend moral superiority while providing aid and comfort to terrorists. Plus you get to eat in the finest restaurants in New York. Kofi Annan deserves all that because he has a busy job. It’s not everyone who runs the most corrupt organization on the planet. It’s a busy lifestyle. This week, Annan had his hands full praising Yassar Arafat and condemning America. After Arafat died, improving the world through his absence, Annan ordered UN flags lowered to half-staff to commemorate the terrorist leader. “By signing the Oslo accords in 1993 he took a giant step towards the realization of this vision,” Annan said in a statement delivered by a spokesman. “It is tragic that he did not live to see it fulfilled.”
Perhaps Mr. Annan forgot to look up the word “tragic” in his dictionary before writing his statement. Most people would probably consider the genocide in Rwanda, ignored by Kofi Annan, “tragic.” Most people would probably consider the continuing genocide perpetrated by Arab Muslims against black Christians in Sudan, ignored by Kofi Annan, “tragic.” And anyone with a smidgen of morality would consider suicide bombings against civilians in Israel “tragic.” No one but a savage would describe Arafat’s death as “tragic.”
After hailing a mass murderer as a hero, Annan’s UN turned to condemning true heroes: the American troops in Iraq waging a war against murderers and thugs. In particular, the UN is complaining about alleged war crimes committed by US soldiers. UN High Commissioner for Human Rights Louise Arbour, released a statement: “The High Commissioner considers that all violations of international humanitarian law and human rights law must be investigated and those responsible for breaches -- including deliberate targeting of civilians, indiscriminate and disproportionate attacks, the killing of injured persons and the use of human shields -- must be brought to justice, be they members of the Multinational Force or insurgents.”
Moral equivalence is the hallmark of the United Nations. Equating American troops with Arab terrorists is child’s play for an organization that places Sudan on the Human Rights Commission. Listening to a human rights organization that includes Sudan lecturing American troops on war crimes is somewhat like listening to Ted Bundy lecturing Mother Teresa on acts of violence.
Mr. Annan and his brethren do not rely on simple statements of moral equivalence. They back them up by citing international law. While Saddam Hussein slew thousands of his own people, supported terrorists throughout the Middle East, and routinely violated the terms of his 1991 cease-fire agreement, the United Nations did nothing except coquettishly lisp at him occasionally. Yet when America invaded Iraq with the help of over 30 countries, Annan denounced the action as “illegal.” His latest charade? He sent an angry letter to President Bush, Tony Blair, and Iyad Allawi complaining that the “threat or actual use of force not only risks deepening the sense of alienation … but would also reinforce perceptions … of a continued military occupation.”
That’s the beauty of international law: it means whatever Kofi Annan wants it to mean. For some strange reason, many Americans buy into the concept of international law because it supposedly provides “consensus.” But consensus is no indication of whether a policy is worth following. Anyone who believes American foreign policy should be bound by the imperious, faux-moralistic dictates of nations like France should be forced to contemplate the meaning of consensus morality from the middle of Saudi Arabia.
International law isn’t just foolish, it’s dangerous. This week an American soldier shot an apparently unarmed, wounded Iraqi terrorist in a mosque in Fallujah after the terrorist pretended he was dead. Only the day before, the soldier’s comrade had been killed by a dead, booby-trapped terrorist. The UN will undoubtedly call for the American soldier’s head. Meanwhile, Iraqi terrorists murdered aid worker Margaret Hassan. The UN will undoubtedly call for restraint by American military forces.
In April 2003, I wrote: “international law consists of nice-sounding sentiments, which, when carried out, contradict basic moral sense. International law might mean more deaths in Iraq than otherwise would have occurred.” If Kofi Annan has his way, innocents and American troops will pay a terrible price.
©2004 Creators Syndicate, Inc.

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The Incomplete Triumph of Democracy in Africa AEI Newsletter Posted: Thursday, November 18, 2004 ARTICLES December 2004 Newsletter Publication Date: December 1, 2004 On November 1, Jeffrey I. Herbst, professor of politics and international affairs at Princeton University, delivered the third of the 2004-2005 Bradley Lectures. Edited excerpts follow.
As of yet, there has been little democratic theory developed in Africa. Many countries, especially in Francophone Africa, are using the same basic institutional structures that they originally inherited in the 1960s. Anglophone countries have moved further, especially since many have adopted an executive presidency, but this usually occurred during the period of authoritarian rule. There have been a few exceptions. Although Ethiopia can in no way be considered a democracy at the moment, its formal recognition of group (since the provinces are defined by ethnic identity) rights to self-determination was a monumental step on a continent where almost all efforts have been directed to shoring up state integrity.
The first constellation of issues raised by democracy concerns the nature of the polity itself. In a rather audacious legal maneuver that demonstrates how the weak can mold the international legal agenda, the Africans and others in the developing world had the right to self-determination redefined so that it only applied to "blue-water" rule--that is, independence from a power separated from its colony by an ocean. Groups ruled by a capital several hundred miles away could not rely on the same right to self-determination.
This was a clever maneuver but not one that will survive democratization. Already, we are beginning to see some groups reassert themselves when given the democratic right to organize. For instance, it is questionable how long Nigeria can survive given the profound splits that are developing between the Islamic north, where many states now say that they are adhering to sharia law, and the rest of the country. The right democratic formula might bind the disparate groups in Nigeria together in a more profound union but, at the moment, the groups that seek to undermine federal rule have the freedom to organize but not the need to commit to the federation.
Most African countries will not face secessionist pressures, and it may well be that most countries will become more viable if the right institutions are developed. However, it does not seem unreasonable to predict that, in a minority of countries, efforts to finally define the polity will lead to profound pressures to change the arrangements that were inherited from the colonialists.
Reforms may have progressed further if African countries had a more solid material base undergirding them before diving into democratization, but it is also the case that many economic reforms could not be attempted until the old authoritarian leaders were overthrown. Kenya is a good example of a country where democratic pressures to oust the old regime also jump-started economic reform. More generally, the best predictor of economic reform is that it will not occur under long-standing regimes because leaders that have developed a particular way of ruling and rewarding specific constituencies through patronage cannot be expected to adopt reforms that will lead them to political suicide.
One sign that African governments are advancing is that they are finally compelled to explain what they are doing to their citizens economically. Democracy, despite its profound western origins, has a good name in Africa, and leaders are quick to indicate that they want to belong to the worldwide democratic club. Capitalism does not have a good name in Africa because the tremendous ideological baggage from the slave trade and colonialism is still too great. Thus, even leaders who have taken enormous risks implementing market-based reforms do not frame those initiatives in a way that can be more generally communicated to the population.
The early democracies in Africa often failed because the militaries took over. Professionalizing militaries so that the norm of civilian supremacy is clear would be helpful to Africa's democrats. More importantly, however, African democracies are threatened by lawlessness, crime, the spillover of rebel activity from neighboring countries, and terrorists. It is imperative that the security services work better so that the security situation of individual countries can be improved.
Roles for Outsiders
Westerners should expect that African democratization will take a long time and that there will be many twists in the road. Western countries should also expect political and economic reform to be asynchronous. The United States should continue to engage and support African countries as long as they are making important progress somewhere, either in economics or politics, or security.
What is important is to sift through the inevitable setbacks to see if some progress is being made on the critical issues that will allow for institutionalized democracies to emerge in future decades. The United States cannot decisively affect the democratic trajectories of countries, but we can try, in suitably modest ways, to help foster democracy and be appreciative of what is being accomplished under extraordinarily difficult circumstances.
--------------------------------------------
U.S. Is Needed to Defuse IranLos Angeles Times, November 17, 2004 cont occurs here -->Kenneth M. Pollack, Director of Research, Saban Center for Middle East Policy

mailhide2('feedback', 'brookings', 'edu', 'U.S. Is Needed to Defuse Iran')

Kenneth M. Pollack
The new agreement worked out between Iran and Germany, France and Britain could be the first step toward solving the problem of Iran's efforts to develop a nuclear weapons capability, but there is still a very long road ahead before the United States can declare the issue resolved.
Iran has shown itself quite adept in the past at concealing illicit nuclear activities and evading its agreements, and the Europeans have shown a distressing unwillingness to hold Iran's feet to the fire whenever it has done so. That's why it is imperative that the U.S. take a bigger leadership role.
The problem with the new agreement lies in three bundles of uncertainties. The first is that Iran has agreed to suspend its uranium enrichment activities only until the Europeans provide a formalized package of economic incentives. The Iranians have reiterated that this is not a permanent suspension. Yet we do not know when these negotiations will be complete, nor do we have any guarantee that Iran will accept the new incentives.
Second, even if Tehran does accept the new incentives, we do not know how long it would continue to suspend its nuclear activities. In the past, the Europeans repeatedly tried to give Iran ever bigger carrots in the misguided hope that this would dissuade it from continuing to pursue nefarious activities. It never worked. What guarantee will we have that once Iran has reaped the benefits from this deal it will not break its promise (overtly or covertly), given the well-demonstrated reluctance of the Europeans to hold Tehran accountable for doing so?
Finally, it is unclear how Iran's continued suspension of its nuclear activities would be monitored and verified. The Iranians have shown that they can hide very substantial nuclear activities from the International Atomic Energy Agency. Until an Iranian resistance group revealed their presence in 2002, the world was unaware of Tehran's massive uranium enrichment plant at Natanz or its plutonium separation plant at Arak. Similarly, during the 1980s, Iraq concealed at least four vast nuclear weapons plants from the IAEA and Western intelligence until a far-more intrusive inspection program uncovered them after the 1991 Persian Gulf War.
Because of the poor track record of Europeans and Iranians on these issues, it is vital that the U.S. take a more active role. Washington should not simply try to usurp or wreck the negotiations, as the Bush administration has had a bad habit of doing. Washington's presence is desperately needed.
The U.S. should be amenable to the notion of providing Iran with economic incentives if Tehran is willing to accept the kind of agreement that would have a reasonable prospect of guaranteeing Iranian disarmament. However, positive inducements cannot be the entirety of the policy.
Because Iran has typically pocketed all of the benefits offered by Europe for good behavior without actually changing course, it is crucial that there be a clear threat of negative incentives—economic and political sanctions—should Iran refuse or renege on such a deal. On something as important to Iran as its desire for a nuclear deterrent, it is not enough to assume that economic benefits will be enough to hold Tehran to any agreement.
Of equal importance, the U.S. must push for a far more comprehensive and intrusive inspections regime. Iran has agreed to sign the additional protocol of the Nuclear Non-Proliferation Treaty, which allows the IAEA to conduct "challenge inspections" of sites Iran has not declared to be part of its nuclear energy program. This is important but hardly adequate. It merely allows the IAEA to inspect a facility it considers suspicious, but before 2002, no one considered Arak and Natanz suspicious.
What we need in Iran is something closer to what we had in Iraq: a much larger inspection regime that has a considerable presence on a regular basis. None of this is going to be easy. The Europeans have steadfastly refused to countenance even the threat of sanctions against Iran, despite the fact that their nothing-but-carrots approach has so consistently failed, while the mere whiff of multilateral sanctions has often caused Iran to reverse course immediately. Similarly, we should expect that the Iranians will fight any expansion of the IAEA inspection program. But none of this is impossible either. It ought to be the first challenge taken up by Condoleezza Rice's State Department.
The U.S. cannot afford to continue to ignore the problem of Iran's pursuit of nuclear weapons, nor can it continue to outsource dealing with it to the Europeans. It has to be a player.
© Copyright 2004 Los Angeles Times

---------------------------------------------
Bush Confronts New Challenge on Issue of IranBy STEVEN R. WEISMAN ANTIAGO, Chile, Nov. 18 - While assembling a new national security team, President Bush is confronting what could become the biggest challenge of his second term: how to contain Iran's nuclear program and what some in the administration believe to be Tehran's support of violence in Israel and insurgents in Iraq.
In an eerie repetition of the prelude to the Iraq war, hawks in the administration and Congress are trumpeting ominous disclosures about Iran's nuclear capacities to make the case that Iran is a threat that must be confronted, either by economic sanctions, military action, or "regime change."
But Britain, France and Germany are urging diplomacy, placing their hopes in a deal they brokered last week in which Iran agreed to suspend its uranium enrichment program in return for discussions about future economic benefits.
Secretary of State Colin L. Powell thrust himself into the debate on Wednesday by commenting to reporters that fresh intelligence showed that Iran was "actively working" on a program to enable its missiles to carry nuclear bombs, a development he said "should be of concern to all parties."
The disclosures alluded to by Mr. Powell were seen by hard-liners in the administration as another sign of Iranian perfidy, and by Europeans as nothing new.
Although Mr. Powell has praised the negotiations between the Europeans and Iran, one administration official said that his comment suggested that there was "a steady tightening of outlook between hawks and doves" that Iran will use the negotiations as a pretext to continue its nuclear program in private.
Leading the charge for a tough line on Iran has been John R. Bolton, under secretary of state for arms control and international security. At the moment, administration officials say there are no prominent members of Mr. Bush's inner circle enthusiastic about the European approach of negotiating with Iran; most of the moderates are lower-level areas specialists in the State Department. But only last week Prime Minister Tony Blair persuaded Mr. Bush to endorse the European approach.
Though Mr. Powell will soon leave Mr. Bush's administration, he is about to face a tough choice on Iran - whether to have an extensive conversation with the Iranian foreign minister, Kamal Kharrazi, or to avoid any contact when the two men attend a conference in Egypt next week.
"The simple fact is the secretary doesn't want to meet with Kharrazi," said an administration official, adding that that he saw little opportunity for dialogue and that Mr. Powell may have been signaling his pessimism when he made the disclosure about Iran's missile capability.
The possible Powell-Kharrazi meeting could occur Tuesday at Sharm el Sheik, Egypt, where European, Middle Eastern and other envoys are attending a conference on the future of Iraq. A top aide to Mr. Powell said the secretary would go with talking points to discuss ways to improve Iranian-American relations, but that it was up to the Iranians whether the conversation would take place.
A European diplomat familiar with the British-French-German initiative said they were also pessimistic that Iran would back off its nuclear ambitions, but that they had no choice but to engage Iran because military options were distasteful or impractical after the troubled invasion and occupation of Iraq.
"America clearly understands that Iran will be one of its greatest threats in the second administration," this diplomat said. "But the Europeans understand that even the greatest threats also present a great opportunity to resolve problems."
Richard Haass, the president of the Council on Foreign Relations and a former policy and planning director under Secretary Powell, said he favored a major effort to offer incentives to moderate Iran's behavior, combined with threats of tough action if it does not.
European leaders say they want the United States to join with them in offering economic incentives to Iran, such as working to get Tehran to join the World Trade Organization - a step that could not occur without active American support.
Mr. Haass said it made no sense for the Europeans to offer incentives and for the United States to make threats. Both must be done together, he said.
The Iranian issue has vexed the Bush administration for so long that plans to produce a major policy paper within the administration simply ground to a halt last year and have not been revived. American contacts with Iran were cut off last May, when Iran was linked to groups that carried out bombings in Saudi Arabia.
Administration officials said there was fresh evidence that Iran supported insurgents in Iraq and had stepped up its support of the militant organization Hezbollah, which Israel now says is helping to subsidize organizations like Hamas and Islamic Jihad who have carried out suicide bombings there.
Indeed, an administration official said that Americans believed that Iran was supporting suicide bombers and insurgents in response to the pressure over its nuclear program - and specifically to warn Israel not to consider the kind of airstrike on a nuclear reactor that it carried out in Iraq more than two decades ago.
Officially, administration officials say that a military option like the one employed by Israel in 1981 against Iraq, when it bombed a reactor near Baghdad, is unrealistic because the Iranians have buried their most important nuclear facilities and can rebuild anything that is destroyed.
But an administration official said that a military strike or sabotage was not out of the question - "you never take the military option off the table," he said - and that in any case it was "money in the bank" for Iran to be concerned about such an option, because it might be goaded into a more conciliatory approach to the United States.
On the other hand, many in the administration say that Iran is not likely to enter into talks with the United States, as the Europeans want, because the revolutionary clerics who control the government are unalterably opposed to engaging with a country it considers the enemy.
"You can't call yourself a revolutionary regime and also negotiate with the Great Satan," said an administration official.
For months the United States's position has been not to threaten war but to force the issue to the United Nations Security Council, where sanctions - including a ban on oil imports and technology transfers - could be considered. But the European initiative has brought such talk to a halt.
But the thinking among many administration officials is that if the European deal to get Iran to suspend its uranium enrichment activities falls apart in coming months - if, for example, inspectors are unable to verify compliance - administration hawks will surely enlist others in a campaign to confront Iran with threats.
The decision, said European and American diplomats, will be made by Mr. Bush with his new secretary of state, Condoleezza Rice, who is said by aides to be of two minds about the problem just as Mr. Powell is - willing to try diplomacy, not sure that it will work and ready to look at other possibilities if it does not.

Copyright 2004 The New York Times Company---------------------------------------------------------------Nuclear Disclosures On Iran Unverified U.S. Officials Checking Evidence Cited by Powell By Dafna LinzerWashington Post Staff WriterFriday, November 19, 2004; Page A01
Secretary of State Colin L. Powell shared information with reporters Wednesday about Iran's nuclear program that was classified and based on an unvetted, single source who provided information that two U.S. officials said yesterday was highly significant if true but has not yet been verified.
Powell and other senior Cabinet members were briefed last week on the sensitive intelligence. The material was stamped "No Foreign," meaning it was not to be shared with allies, although President Bush decided that portions could be shared last week with British Prime Minister Tony Blair, officials said.
According to one official with access to the material, a "walk-in" source approached U.S intelligence earlier this month with more than 1,000 pages purported to be Iranian drawings and technical documents, including a nuclear warhead design and modifications enabling Iranian ballistic missiles to deliver an atomic strike. The official agreed to discuss the information on the condition of anonymity and only because Powell had alluded to it publicly.
But U.S. intelligence officials have been combing the information carefully and with a wary eye, mindful of the mistakes made in trusting intelligence information alleging that Iraq possessed weapons of mass destruction. Powell, who announced earlier this week that he would not stay on for a second term, presented that intelligence in a February 2003 speech to the U.N. Security Council that was meant to convince the world that Saddam Hussein needed to be forcefully removed from power. Much of his presentation turned out to be based on information provided by unreliable sources.
If the information on Iran were confirmed, it would mean the Islamic republic is further along than previously known in developing a nuclear weapon and the means to deliver it. The documents included a specific warhead design with an implosion device on the tip and adjustments aimed at outfitting the warhead on existing Iranian missile systems.
U.S. intelligence has known since at least 2002 that Iran was capable of enriching uranium, the key ingredient in a nuclear bomb. Iran also has a successful missile program. But U.N. nuclear inspectors who have been investigating Iran for nearly two years have found no evidence that Tehran possesses a nuclear warhead design or is conducting a nuclear weapons program.
The Islamic republic, which on Sunday entered into a new deal with France, Britain and Germany to suspend its nuclear program, has denied it is trying to build atomic weapons and insists its work is part of a budding energy effort.
Western intelligence estimates of Iran's capabilities vary. But U.S. officials believe Iran could be three to five years from completing a bomb if it is successful at constructing and operating thousands of highly sophisticated centrifuge parts for enriching uranium.
The information provided by the source, who was not previously known to U.S. intelligence, does not mention uranium or any other area of Iran's known nuclear program, according to the official with access to the material. It focuses instead on a warhead design and modifications to Iran's long-range Shahab-3 missile and a medium-range missile in its arsenal. The Shahab-3 has a range of 800 miles and is capable of hitting Israel.
The official said the CIA remains unsure about the authenticity of the documents and how the informant came into their possession. A second official would say only that there are questions about the source of the information.
Officials interviewed by The Washington Post did not know the identity of the source or whether the individual is connected to an Iranian exile group that made fresh accusations about Iran at a news conference Wednesday in Paris. The National Council for Resistance in Iran charged that Iran was still enriching uranium and will continue to do so despite the pledge made Sunday to European foreign ministers.
The group also claimed that Iran received blueprints for a Chinese-made bomb in the mid-1990s from the global nuclear network led by Pakistani scientist Abdul Qadeer Khan. The group, which is considered a terrorist organization by the State Department, exposed a secret Iranian enrichment facility in 2002, but many of its claims since have been inaccurate.
The lack of certainty about the source who approached U.S. intelligence had kept officials from talking publicly about the information, and Powell's comments caught the small group of informed officials by surprise and angered some of them.
Powell's remarks also drew expressions of concern from European allies who just days earlier had entered into an agreement with Iran to suspend work on its nuclear program. Even if the documents are authentic, Iran's possessing them would not by itself violate international law, officials said. And the information was not enough to stop British officials from signing the agreement with Iran.
Yesterday, in an effort to assuage European concerns, the administration told diplomats from those countries that Powell misspoke in releasing information that had not yet been verified, sources said. During a conversation about Iran with reporters accompanying him on a trip to Chile on Wednesday, Powell said he had "seen some information that would suggest that they have been actively working on delivery systems. I'm not talking about uranium or fissile material or the warhead, I'm talking about what one does with a warhead."
Powell's spokesman said yesterday that the secretary stood by those remarks. "The secretary did not misspeak," said State Department spokesman J. Adam Ereli, who added that Powell's deputy, Richard L. Armitage, "saw the same information."
Ereli did not elaborate on the nature of Powell's comments at his daily briefing. White House spokesman Scott McClellan said only that "Powell was talking about intelligence that we have seen, that's what he was referring to."
Meanwhile, senior State Department officials traveling with Powell in Santiago, Chile, said yesterday that President Bush will appeal to Asian leaders this weekend to intercede with North Korea to return to deadlocked talks on its nuclear weapons program.
Bush will press allied leaders of China, Japan, South Korea and Russia -- partners with the United States for more than a year in negotiations to disarm Pyongyang -- on the sidelines of the annual Asia-Pacific Economic Cooperation forum in Chile. The Bush administration believes North Korea may be more willing to reconsider rejoining the six-party talks now that the U.S. presidential election is over, the officials said.
With limited alternatives, U.S. officials hope the president's personal intervention will impress allies to try once again to prod North Korea. "Bush's meetings with leaders are going to be quite significant in stating his own commitment to the six-party process," said a senior State Department official who spoke on the condition of anonymity because of the sensitive diplomacy.
The diplomatic effort has been in trouble since Kim Jong Il's government boycotted a planned session of the six-party talks in September. The Bush administration believes North Korea was waiting to see the fate of Democratic candidate John F. Kerry, who had proposed the kind of direct talks the Clinton administration tried in 2000.
Japan and South Korea have offered economic and energy incentives as part of the package to win North Korea's compliance. But North Korea had been holding out for additional incentives, including the prospect of one-on-one talks with the United States, as conditions to resume negotiations.
Staff writers Robin Wright in Santiago, Chile, and Glenn Kessler in Washington contributed to this report.

© 2004 The Washington Post Company
----------------------------------Iranian Leader Urges Protests
Thursday, November 18, 2004

TEHRAN, Iran — Iran's supreme leader on Thursday criticized Arab and Muslim silence over the U.S. attack on Fallujah (search), and he urged the region's governments to help the Iraqi people.
"How can Muslim and Arabic governments accept playing the role of an indifferent observer? We can hear the voice of the needy coming from Iraqi families. Doesn't this voice deserve a protest by governments and the people against the arrogant Western powers?" Ayatollah Ali Khamenei (search) was quoted as saying by state-run Tehran radio.
U.S. troops led a major assault on Fallujah last week, seizing the city from insurgents suspected of using it as a base for carrying out bombings and kidnappings.
Khamenei said the silence over the offensive would encourage the Americans to carry out similar operations in other parts of Iraq.
"Killing thousands of civilians, executing the injured, arresting the innocent and destroying houses and mosques in Fallujah makes the eyes and hearts restless," he said.
American estimates of the number of insurgents killed in the offensive range from about 1,000 to about 1,200.
Tehran approved the toppling of Saddam Hussein (search), who fought a 1980-88 war with Iran, but it has opposed the U.S.-led occupation of Iraq, fearing U.S. troops on its doorstep will pose a security threat.
Washington has accused Tehran of interfering in Iraq and sending money and infiltrators to foment the insurgency there. Iran has denied the charges but said it didn't rule out the possibility that some infiltrators might have crossed its border illegally.
----------------------------------------U.S.-Iran nuke talks almost ruled outWASHINGTON (AP) — The Bush administration is not considering talks with Iran on developing nuclear weapons even though Secretary of State Colin Powell will attend a conference next week with diplomats from Iran and other countries. Already suspicious that Iran is developing such weapons, the administration now has intelligence provided by a resistance group that Iran is trying to adapt missiles to deliver the weapons, Powell said Wednesday.
"I have seen some information that would agree that they have been actively working on delivery systems," Powell said en route to an Asia-Pacific economic summit meeting in Chile.
Powell plans to attend a conference on Iraq on Monday and Tuesday at Egypt's Red Sea resort of Sharm el-Sheik. Representatives from Iran are expected, too.
A State Department spokesman, Adam Ereli was asked about the possibility that Powell would raise his concerns directly with Iranian diplomats. "This is a purely speculative question," Ereli said Thursday. "I am not aware that that possibility is being considered."
Joseph Cirincione, senior associate at the Carnegie Endowment for International Peace, said "many people assumed this was the perfect opportunity for Secretary Powell to informally negotiate with the Iranians."
Britain, France and Germany have struck a deal with Iran that is designed to stop the nuclear enrichment program. If the United States does not join in the agreement, "the deal is dead," he said. "Only the U.S. can give Iran the security guarantees it needs," Cirincione said.
The deal is supposed to take effect Monday.
Anthony Cordesman, a defense analyst at the Center for Strategic and International Studies, said he did not believe the United States thinks it can stop a covert nuclear weapons program by Iran.
He noted that Powell, who is leaving the administration, is a lame duck. "He cannot speak for the president" if he were to meet with the Iranians in Egypt, Cordesman said, and Iran "must perceive him as distant from the president on this and other issues."
White House spokesman Scott McClellan renewed demands that Iran stop enriching uranium, a key ingredient of nuclear weapons production. "They have spent quite a bit of time over the years hiding their program and their intentions," he said.
The United States intends to take the nuclear issue to the U.N. Security Council after the governing board of the International Atomic Energy Agency meets Nov. 25.
It is unclear whether the United States can win approval for economic and diplomatic penalties against Iran.
"We have seen this thing before," Ereli said. "They (the Iranians) have had a deal with the European Union to suspend enrichment. They broke it."
--------------------------------------------------------------------------------Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
---------------------------------------N.Korea Denies Removal of Leader Kim Portraits-XinhuaNov 18, 2004 — BEIJING (Reuters) - Reports that portraits of North Korean leader Kim Jong-il had been removed were a "groundless fabrication," China's Xinhua news agency quoted a Foreign Ministry official on Friday as saying in Pyongyang.
The one-sentence report gave no other details.
Some diplomats in the North Korean capital and experts in the South said this week portraits of Kim had been removed from some public places, starting as far back as August, in an apparent bid to soften the personality cult surrounding Kim.
Portraits of Kim are ubiquitous in homes, offices and public buildings across North Korea, where they have hung prominently for years beside a picture of his late father, the reclusive communist state's founder Kim Il-sung.
U.S. May Have Found Fallujah Militant Base N.Korea Denies Removal of Leader Kim Portraits-Xinhua Leader Accused of Sudan Massacre Says 'Bad Things Happen' It was not clear how widespread the portrait removals, if any, have been or what they might mean.
Kim has poked fun at the cult of personality pervasive in North Korea, and analysts said removal of portraits could be an indication he wanted to tone it down in line with incremental economic reforms.

Copyright 2004 Reuters News Service. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
-----------------------------------Hamas demands new Palestinian election system By Arnon Regular Hamas is demanding changes to the election system employed by the Palestinian Authority (PA) in the 1996 elections to the Palestinian Legislative Council (the parliament).
Palestinian sources reported yesterday that Hamas representatives who met repeatedly over the past few days with Palestine Liberation Organization Chairman Mahmoud Abbas (Abu Mazen) presented him with several demands regarding the elections. Among other things, Hamas wants elections held simultaneously for PA chairman, the parliament, and local authorities.
However, since it became clear that Abu Mazen's position is that it cannot be done, technically speaking, and that parliamentary elections will be held in the middle of next year, the Hamas representatives have been focusing their demands on changing the regional election system used in the `96 elections, in which 16 voting districts were established in the West Bank and Gaza, each with a given number of seats. Hamas wants to introduce a system of proportional representation, under which the entire West Bank and Gaza Strip would constitute a single voting precinct.
The Hamas representatives are now seeking to change the system in such a way that the relative strength of the movement in the Gaza Strip, which increased in the course of the intifada, will impact its overall electoral gains.
Five far-left Palestinian organizations, including the Popular Front for the Liberation of Palestine, the Democratic Front for the Liberation of Palestine, and the People's Party (formerly the communists), announced yesterday that they plan to run an agreed-upon candidate for the post of PA chairman. The leftist groups did not say which candidate they intend to endorse.
Also yesterday, Talal Sidr, one of the founders of Hamas in Hebron who crossed the lines in 1998 to become sports minister in the PA government, announced he will run for office as PA head.
Registration of candidates for the elections, scheduled for January 9, 2005, will begin next week.
Fatah has not yet announced its candidate or the method by which he will be selected, but Abu Mazen will apparently win the nomination.
Palestinian Prime Minister Ahmed Qureia (Abu Ala) came to the Gaza Strip yesterday and joined Abu Mazen in his marathon of meetings with Fatah officials there to carve out agreements on managing the Strip and on dividing up authority for it among rival Fatah camps.
Also yesterday, the Bush administration said it was talking to Congress about resuming direct U.S. assistance to the Palestinian Authority that he headed.
"It's an idea that is under consideration," the State Department deputy spokesman Adam Ereli said. "No decision has been made," the U.S. official said in declining to say how much aid the administration intended to give to the Palestinian Authority.
"We are interested in ways that we can help support the Palestinian people and the Palestinian leadership as they try to emerge from the past years of conflict and violence," Ereli said. ---------------------------------------Palestinians saved from collapsed arms tunnel and arrestedBy MARGOT DUDKEVITCH IDF soldiers pull out Palestinians from an arms-smuggling tunnel, which they were digging when it suddenly collapsed trapping them insidePhoto: IDF
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Three Palestinians were rescued Thursday evening, after an apparent weapons smuggling tunnel they were digging on the Egyptian border near the Gaza Strip collapsed in the afternoon, burying them under mounds of sand.
An IDF doctor and medics helped treat the Palestinians, who were evacuated to a hospital in Barzilai Hospital in Ashkelon and placed under arrest.
The tunnel was being dug toward an IDF outpost near Rafah, close to the Philadelphi Route.The IDF received a request for help from the Palestinians via the District Coordinating Office, and acceded to the request.
Palestinian Authority officials said heavy rains in the area Wednesday night caused the tunnel to collapse.
The army permitted Palestinian rescue teams and two bulldozers to reach the site, even though the area is a restricted military zone. The army also dispatched its own bulldozers to assist in the rescue effort.
The rescued Palestinians are reportedly members of one family who live in the Yabne refugee camp.
-----------------------------------------France to release Arafat's medical records to his nephew, the UN representativeBy Associated Press November 18, 2004
Creating an out from a sticky diplomatic problem, French authorities said Thursday they would release Yasser Arafat's medical records to his nephew, which could help demystify the cause of the Palestinian leader's death.
Officials here insist that French law prevents them from making Arafat's medical records public, and they have refused to announce the cause of his death in a Paris-area military hospital on Nov. 11.
The lack of information has proved fertile ground for widespread rumors in the Arab world that Arafat was poisoned, despite official denials. It also left the quality of care that Arafat received in France open to question and charges that perhaps not everything was done to save him.
The mystery and rumors also risk complicating life for Arafat's successors as they take over the reins of power. That, too, goes against France's wishes, which says it wants a smooth transition for the Palestinian Authority.
Because Arafat's nephew Nasser al-Kidwa is also the Palestinian representative to the United Nations, giving him the records offers France a way out, allowing it to abide by medical privacy laws that restrict information to family members while also responding to the Palestinian Authority's efforts to determine the cause of Arafat's death. Giving al-Kidwa the medical records would also put the onus on him to explain the causes of death.
Gen. Christian Estripeau, a spokesman for the French military's health wing, said in a telephone interview that al-Kidwa could have access to Arafat's medical records if he asks.
"His case has already been studied. I think that if he makes a demand it would be accepted," said Estripeau. He was the first French official to announce on Nov. 11 that Arafat had died after two weeks of treatment at the Percy Military Training Hospital southwest of Paris.
Estripeau added, however, that he was unaware of any request from al-Kidwa for access to the dossier. Foreign Ministry spokesman Herve Ladsous also said that, "at this hour, I know of no request from Mr. al-Kidwa to French authorities."
But another French official, speaking on condition of anonymity, said that although al-Kidwa has not made a formal request, "it is something in the air" _ suggesting that a demand from the nephew is just a matter of time.
French Defense Ministry spokesman Jean-Francois Bureau said that Arafat's widow, Suha, also intends to formally request his medical dossier. But she proved unwilling during his treatment in France to release much information about his ailments.
Al-Kidwa, on the other hand, has publicly called for an investigation into Arafat's death although he also has said there is no evidence that Israel poisoned his uncle.
On Wednesday, Palestinian Prime Minister Ahmed Qureia ordered an inquiry to determine the cause of Arafat's death. The commission will take testimony from Palestinian and other Arab doctors and a delegation will go to France for the investigation, Palestinian officials said.
Ladsous, the French Foreign Ministry spokesman, said he had no details about when the delegation might be received in Paris.

--------------------------------------
Fallujah Discovery May Be Al-Zarqawi's Headquarters
Thursday, November 18, 2004

BAGHDAD, Iraq — U.S. forces on Thursday said they believe they have found the main Fallujah headquarters of the terrorist group headed by Al Qaeda-linked Jordanian terrorist Abu Musab al-Zarqawi (search).
Meanwhile, a group attacked U.S. Marines and Iraqi government forces from a house inside the terror hotbed city on Thursday, killing one Marine and one Iraqi soldier, a U.S. military official said. One Marine and one Iraqi soldier also were wounded.
U.S. and Iraqi forces also arrested 104 suspected guerrillas in an insurgent neighborhood in central Baghdad, including nine who are believed to have fled Fallujah, Interior Ministry spokesman Sabah Khadim said. Most were Iraqis, although Syrians and non-Iraqi Arabs were among the group, he said.
And four people were killed when guerrillas detonated a car bomb near a U.S. military convoy in Baghdad and a roadside bomb exploded at a job-recruiting center in Kirkuk.
As for the supposed Zarqawi headquarters, soldiers walked through an imposing building with concrete columns and with a large sign in Arabic on the wall reading "Al Qaida Organization" and "There is no God but Allah and Muhammad is his messenger." The video footage was shot by an embedded CNN cameraman.
Inside the building, U.S. soldiers found documents, old computers, notebooks, photographs and copies of the Quran.
Al-Zarqawi last month renamed his group Al Qaeda in Iraq, and his followers have been blamed for a number of deadly bombings and beheadings of foreign hostages, including three Americans and a Briton. The United States has offered a $25 million reward for his capture or killing - the same amount as for Usama bin Laden.
In neighboring Jordan, authorities detained al-Zarqawi's nephew near the border with Iraq, a distant relative and a clergyman close to the family said Thursday.
Also, the senior U.S. Marine commander in Iraq said the U.S.-led offensive launched last week in Fallujah has "broken the back of the insurgency" by seizing their main base of operations.
"We feel right now that we have, as I mentioned, broken the back of the insurgency. We've taken away this safe haven," Lt. Gen. John Sattler told reporters at the Pentagon in a video teleconference from Fallujah.
Sattler cautioned, however, that insurgents remained a threat and that Fallujah is not yet completely in U.S. and Iraqi government control.
"The town is not quite secure at this point," Sattler said. He later changed his assessment, saying, "The town of Fallujah is secure, but we're in the search-and-clear phase that will make it safe — relatively safe is the best word."
Sattler said the total U.S. death toll so far in the Fallujah offensive, which began Nov. 7, stands at 51, with about 425 wounded in action.
Bomb-making materials and improvised explosive devices need to be recovered or disarmed, he said, and the Marines are still looking for remaining insurgents who may be lying low with the intention of disrupting efforts to reconstruct the city.
He said U.S. forces have found a number of documents from the insurgents' command posts inside the city that lists the names of some of their fighters, including some from outside of Iraq.
Elsewhere, insurgents fired mortars at the provincial administration offices in the northern city of Mosul (search), wounding four of the governor's guards, the U.S. military said.
Governor Duraid Kashmoula was unhurt in the attack, said spokesman Lt. Col Paul Hastings. Initial reports said the mortar attack landed near a fuel truck, setting it ablaze, Hastings said.
The rest of Mosul, Iraq's third largest with more than a million residents, remained calm for a second day since the U.S.-led offensive operation began on Tuesday to wrest control of the western part of the city from insurgents.
Meanwhile, condemnation of the apparent killing of kidnapped British aid worker Margaret Hassan continued to be heard. Marines found the mutilated body of what they believe was a Western woman on a street in Fallujah recently but the body has not yet been identified, although it is believed to be that of Hassan.
In western Baghdad, a car bomb exploded near the Yarmouk police station as a U.S. armored vehicle drove by, said police Capt. Ahmed Shihab. Two people were killed and five wounded by the blast, he said. The U.S. military had no immediate information on casualties.
In Kirkuk, two civilians were killed and three injured Thursday when a roadside bomb exploded near a job recruiting center and a bus terminal in the city's center, said Gen. Anwar Mohammed Amin with the Iraqi National Guard. Kirkuk is 180 miles north of Baghdad.
Last week in Mosul, gunmen stormed police stations, bridges and political offices, overwhelming police forces who, in many places, failed to even put up a fight. Some officers also allegedly cooperated with insurgents.
The U.S. military said that up to 2,500 U.S. and Iraqi troops met "little resistance" during operations to re-secure police stations and key bridges in Mosul from the insurgents.
Thursday's attacks came a day after a wave of violence in Iraq's Sunni Muslim (search) heartland killed at least 27 people and U.S. forces pursued the remaining holdouts in the former insurgent bastion of Fallujah.
While U.S. and Iraqi forces have retaken insurgent strongholds in Fallujah and Mosul, violence continues to erupt in Sunni Muslim-dominated areas of Iraq.
Gen. John Abizaid, the commander of all U.S. forces in the Middle East, said during a visit to Iraq this week that the Fallujah offensive was a major blow to the insurgents, and he said the only way the U.S. forces and their Iraqi allies can be defeated is if they lose their will.
"But we are also under no illusions. We know that the enemy will continue to fight," he said.
Hassan's Supposed Death Condemned
Australian Prime Minister John Howard said Thursday a body found in the strife-torn Iraqi city of Fallujah was likely that of Hassan - repeating the belief of British officials and Hassan's family.
"The body found in Fallujah appears to have been Margaret's and the video of the execution of a Western woman appears on all the available information to have been genuine," Howard told Parliament but did not say which body he was referring.
Hassan, 59, director of CARE International's operations in Iraq, was a British citizen born in Ireland and married to an Iraqi man.
The body, clothed in what appeared to be a purple, velour dress, was wrapped in a blanket, with a blood-soaked black cloth nearby. As of Thursday, the U.S. command said the body had not been identified.
When questioned outside Parliament about his comments, Howard did not confirm which body he was talking about and said no remains had been yet returned to authorities.
"This latest example of cruelty and brutality reminds us that there can be only one answer to terrorism and that is the completely uncompromising and unconditional one," he said.
The Arab satellite station Al-Jazeera said early this week it had received a videotape showing the murder of a woman believed to be Hassan, a British-Irish national who had lived in Iraq for three decades.
The White House released a statement voicing sympathy for Hassan's family.
"We strongly condemn the abduction and murder of this prominent humanitarian," the statement read.
"Mrs. Hassan worked tirelessly and with great compassion for more than 25 years to assist the poor and disadvantaged in Iraq, particularly children. As a humanitarian she directed programs to serve the neediest through independent, non-governmental organizations and was not involved in the political process or military activity in Iraq. Her death is a great loss to the Iraqi people and the world."
The Associated Press contributed to this report.
---------------------------------Fallujah captives: Saddam set up insurgency cells in 2001
SPECIAL TO WORLD TRIBUNE.COMThursday, November 18, 2004BAGHDAD — Insurgents captured in Fallujah have told Iraqi military interrogators that most of those fighting in Fallujah were former security officers for the regime of Saddam Hussein.
The insurgents said Saddam organized special operations units, starting in 2001, to counter any foreign invasion in Iraq. Most of those units, the insurgents said, are still active in the Sunni Triangle.
Officials said the Sunni insurgency was being directed from Syria. They said Saddam loyalists were receiving funding and orders from senior aides of the former Saddam regime based in Damascus, including ex-Vice President Izzet Ibrahim Al Douri.
"The battle for Fallujah has become the test for Saddam loyalists," an Iraqi official said. "Fallujah was the center of the terrorism and the symbol of the terrorists."
Iraqi Interior Minister Faleh Hassan Al Naqib said his government and the U.S.-led coalition faced a revolt throughout the Sunni Triangle. Al Naqib said the revolt was being directed by a unified command and control network led by Saddam loyalists. He said the insurgents sought to prevent or disrupt national elections scheduled for Jan. 27.
The uprising in the Sunni Triangle has included insurgents who had been based in Fallujah. Officials said Sunni insurgents, including Abu Mussib Al Zarqawi, and up to 2,000 fighters left Fallujah over the last two months to launch a revolt in other cities.
At a news conference in Baghdad, on Nov. 16, Al Naqib said the great majority of insurgency casualties in Fallujah were Iraqi nationals. He said only 24 foreigners were found dead among the more than 1,250 reported killed in 10 days of fighting in Fallujah.
Al Naqib identified Mohammed Yunus Ahmad as the key liasion and coordinator between Saddam loyalists in Syria and Iraqi insurgents. Ahmad had been a minister and a senior official in Iraq's ruling Baath Party.
Al Naqib also said Saddam formed an Islamic insurgency group Jaysh Mohammed, composed of former special operations officers. The minister said the leader of the group, identified as Moayad Yassin Ahmed, was arrested on Nov. 15. Ahmed, also known as Abu Ahmed, was identified as a former officer in the Iraqi Air Defense Command.
Ahmed was said to have met former Iraqi minister Al Ahmed in Syria to coordinate the Sunni insurgency in Iraq. Al Naqib said Saddam established Jaysh Mohammed as the military wing of the Baath Party in April 2003 after the fall of the regime.
Officials said the Iraqi resistance appears to have changed tactics and no longer seeks a head-on clash with the U.S. military for the control of major cities. Instead, Saddam loyalists and foreign volunteers have launched attacks on police stations and other facilities meant to intimidate security forces and seize weapons and material.
"This ultimately is not going to be won in the kinetic sense — in battle," U.S. Army Chief of Staff Gen. Peter Schoomaker, told the House Armed Services Committee on Wednesday. "It's going to be won in having Iraqis taking ownership and investing their own personal sweat and blood." Iraq's interim government has been bracing for an insurgency throughout the Sunni Triangle.
Iraqi officials said the U.S.-led invasion of Fallujah has sparked a revolt in cities throughout the Sunni Triangle. They cited insurgency campaigns in Baghdad, Baiji, Baqubah, Hadith, Mosul, Ramadi, Samara and Tikrit.

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In Afghanistan, focus on terrorists, not drugsOpium eradication could alienate Afghan farmers
WASHINGTON -- U.S. initiatives in Afghanistan to eradicate the opium crop threaten to undermine the anti-terrorism campaign as they could drive Afghan farmers, who have assisted in the war on terror, against the United States and into the arms of anti-American terrorists, a new Cato study argues.
In "How the Drug War in Afghanistan Undermines America's War on Terror," Ted Galen Carpenter, vice president for defense and foreign policy studies, writes that the U.S. military must not become the enemy of Afghan farmers whose livelihood depends on growing opium poppy.
"If zealous American drug warriors alienate hundreds of thousands of Afghan farmers, the Karzai government's hold on power, which is none too secure now, could become even more precarious," he writes. "Washington would then face the unpalatable choice of letting radical Islamists regain power or sending more U.S. troops to suppress the insurgency."
About 20 to 30 percent of the Afghan population is involved directly or indirectly in the drug trade. Further, Afghan farmers can earn between 10 and 30 times as much growing opium as they can growing other legal crops. Also, uprooting the opium crop would cut Afghanistan's GDP by 40 to 60 percent.
"For many of those people, opium poppy crops and other aspects of drug commerce are the difference between modest prosperity and destitution," he writes. "They will not look kindly on efforts to destroy their livelihood."
While Carpenter concedes that terrorist and other anti-government forces profit from the drug trade, the connection between drug trafficking and terrorism is a direct result of making drugs illegal and, therefore, extremely profitable.
Foreign Policy Briefing Paper no. 84
Contact:Ted Galen Carpenter, vice president for defense and foreign policy studies, 202-789-5235, tcarpenter@cato.org
Jonathan M. Block, media manager, 202-789-5263, jblock@cato.org
Evans Pierre, director of broadcasting, 202-789-5204, epierre@cato.org

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NATIONALBreaking the Siege in the Judge WarNew Rules Could End the Long Fights over Nomineeshttp://www.aei.org/news/filter.social,newsID.21555/news_detail.aspBreaking the Siege in the Judge War Print Mail New Rules Could End the Long Fights over Nominees By John R. Lott Jr., Sonya D. Jones Posted: Tuesday, November 16, 2004 ARTICLES Los Angeles Times Publication Date: November 16, 2004 It's hard to find anyone these days who wouldn't agree that the judicial nomination process is broken.
A few years ago, Democrats bitterly complained about the difficulties that President Clinton faced in confirming judges; now Republicans are complaining about the "inexcusable" delays faced by President Bush. In the wake of the 2000 election, some Democrats argued that an arguably illegitimate president such as Bush didn't have the right to put his stamp on the courts. But Bush's clear-cut win over Sen. John Kerry two weeks ago has not solved the problem.
Democrats now say that nothing has changed, and that they will continue filibustering to block judicial nominees whose politics, they believe, are out of the "mainstream."
The tit-for-tat battle is spiraling out of control. On Friday, Senate Majority Leader Bill Frist, speaking for a newly expanded Republican majority, told the Federalist Society that the damage from judicial filibusters now "must be undone." One option he discussed would gradually reduce the number of votes required to end a filibuster and to move a nominee to an up-or-down vote on the Senate floor.
Other Republican senators are pushing for an even more radical solution: the so-called nuclear option, in which Vice President Dick Cheney, the presiding officer of the Senate, would rule that filibusters against judicial nominees violate the separation of powers and are unconstitutional.
Democrats, for their part, are threatening a Senate shutdown if the rules change. But without some change, they risk even longer and more bitter confirmation fights when they retake the presidency. Unbelievably, the long judicial battles fought in the wake of Robert Bork's watershed Supreme Court confirmation fight in 1987 pale in comparison to what occurs today.
Consider the following: The confirmation rate for presidential nominees to federal appeals courts has fallen steadily over the last 30 years, from 93 percent under President Carter to 89 percent under President Reagan, 78 percent under George H.W. Bush, 74 percent under Clinton and 69 percent under President Bush.
And the length of time it takes to confirm has gotten longer too. During the Carter and Reagan administrations, it took fewer than 70 days to confirm an appeals court judge. (About 33 percent of Reagan's nominees were confirmed within a month.) Under Bush's father, the length rose to 92 days, but Clinton saw the total soar to 230 days. Now, under Bush, it has risen again, to 263 days.
Even more startling is how long it takes to confirm nominees to the District of Columbia Appeals Court, the second most powerful federal court (and long considered a training ground for future Supreme Court justices). During the Carter, Reagan and first Bush administrations, it took fewer than 87 days on average to go from nomination to confirmation. Under Clinton, this grew to 242 days and under George W. Bush to 426 days--nearly five times longer than under his father. Although almost 80 percent of Clinton's nominees to this court were confirmed, Bush got only 33 percent confirmed.
During the Clinton administration, Democrats made explosive claims about the slowed-down confirmation process, alleging, according to the Washington Post, that "delays in approving Clinton's minority and female judges showed racist and sexist tendencies in the Senate."
USA Today quoted Democrats as saying that the "appointment system continues to favor white men significantly."
Yet Bush's African American nominees are taking even longer to confirm than Clinton's did--151 days on average versus 141--and his female nominees are taking the same amount of time, 172 days on average.
Even as it has become increasingly difficult to confirm nominees, the quality of the nominees appears to be improving over time. The percentage of appeals court nominees graduating from a top 10 law school (as rated by U.S. News & World Report) or who served as clerks to a federal or state high court judge after graduation has risen consistently since the Reagan administration. Both Clinton's nominees and George W. Bush's scored better in terms of quality than those of either Reagan or George H.W. Bush--but both still faced much longer delays.
Sen. Arlen Specter (R-Pa.) spent last week explaining his comment that President Bush will have problems appointing judges who oppose abortion, but the problem really goes deeper than that. Longer delays, lower confirmation rates and bitter partisan battles create backlogs as the vacancies build up. And they make it harder to find highly qualified nominees, because no one wants to turn his or her life upside down in return for a humiliating rejection.
Adopting new rules--such as ending filibusters on judicial nominations to help tone down these bitter confirmation battles--is only likely to occur when the same party controls the Senate and presidency, as it does now. But even today, the Democrats in the minority can still make such reform difficult. The question is whether they'll be willing to give up their short-term benefits from blocking nominees for a system that better serves everyone's interests in the long run.
John R. Lott Jr. is a resident scholar at the American Enterprise Institute, and Sonya D. Jones is a student at Texas Tech University Law School. ----------------------------
October 19, 2004
Bush, Kerry Ignore What's Ailing Health Care: Red Tapeby Michael F. Cannon
Michael F. Cannon is director of health policy studies at the Cato Institute.
When it comes to differences between presidential candidates George W. Bush and John F. Kerry, it's difficult to find an area where the two are farther apart than health care reform.
Kerry accuses President Bush of doing too little to reduce the number of Americans who lack health insurance. Bush accuses Kerry of doing too much, claiming that in the name of expanding coverage, Kerry would impose a government-run health care system on all Americans, where a government bureaucrat would be making your health care decisions rather than you and your doctor.
Even if partisans disagree about what government should do to expand health coverage, we should at least be able to agree that government should stop doing things that make health care unnecessarily expensive.
One prime example is the many outmoded and questionable federal regulations that riddle our health care system. On Oct. 4, the Cato Institute released a study by Duke University professor Chris Conover that demonstrates that the costs of health care regulation outweigh the benefits by 2-1.
After studying 47 different types of health care regulations, Conover estimates those regulations cost Americans $169.1 billion on net in 2002 alone. The total costs are actually $339.1 billion, but the regulations provide about $170.1 billion in benefits.
For the typical American, this translates into a hidden tax of more than $1,500 per household per year. And because that cost is built into medical prices, it makes health coverage unaffordable for about 7.5 million people.
So how do the candidates address this issue? Bush has made a gesture toward deregulation, but neither has a serious plan for reducing this enormous barrier to medical care.
Conover estimates the single greatest regulatory cost is the medical liability system, which imposes a net cost of $80.6 billion annually. (That's after subtracting the benefits of compensating injured patients and preventing medical errors.) A reasonable way to curb those unnecessary costs would be to let patients and doctors negotiate a mutually acceptable level of negligence protection prior to treatment.
Instead of adopting that sensible reform, Bush would have Congress impose damage caps and other substantive rules of tort law on the states, despite its having no constitutional authority to do so. It is doubtful that Kerry or his running mate -- former personal injury lawyer Sen. John Edwards -- would support anything that allows patients to reveal how much they value the services of the trial bar.
The next greatest regulatory cost, according to Conover, is imposed by the Food and Drug Administration, which regulates medicines and medical devices. The FDA has long been criticized for delays in approving new medicines and for preventing patients from trying new therapies. Conover estimates those delays impose a net annual cost of $41.8 billion.
A sensible way to cut down on unnecessary delays would be to let independent private agencies certify the effectiveness of new medicines, just as they now certify effectiveness for new uses of existing medicines. Yet neither Bush nor Kerry has issued a proposal that would reduce the lives lost to the FDA's delays or reduce the costs the FDA builds into the prices of prescription drugs.
Nor has either candidate proposed serious efforts to deregulate hospitals and other health facilities (net cost: $25.1 billion) or doctors and other health professionals (net cost: $7.1 billion).
To his credit, Bush has proposed allowing consumers to avoid expensive health insurance regulations by purchasing coverage from out-of-state insurers. In essence, this means your average Minnesotan would not have to purchase coverage for hairpieces (yes, hairpieces) or the 59 other types of coverage required by Minnesota law. Instead, he could purchase coverage from whatever state imposes regulatory costs that are more to his liking. If applied to all types of health insurance regulation, Bush's proposal could go a long way toward eliminating the net cost of such health insurance regulation ($14.4 billion).
There's more than just affordable coverage on the line here. Conover notes the more money people have, the better able they are to purchase greater health and safety. He estimates that by depriving Americans of $169 billion annually, health care regulations lead to 22,205 unnecessary deaths each year. The Institutes of Medicine estimate 18,000 Americans die each year from a lack of health insurance, making over-regulation a bigger problem than the uninsured.
It would be nice if our politicians saw it that way.
This article originally appeared in the Chicago Sun-Times on October 16, 2004.

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ECONOMY
The Current Account Deficit and the Dollar Print Mail AEI Newsletter Posted: Thursday, November 18, 2004 ARTICLES December 2004 Newsletter Publication Date: December 1, 2004 John Taylor The U.S. current account deficit this year will rise to nearly $600 billion or approximately 5.75 percent of gross domestic product, up from roughly 1 percent in 1990 and 4 percent in 2000. Some commentators warn that the dollar could collapse as a consequence, with dire repercussions for the U.S. and world economies. At a November 4 AEI conference, economists examined what is driving the current account deficit, how much this deficit should concern policymakers, and what can or should be done to reduce it.
John Taylor, U.S. Treasury under secretary for international affairs, explained that the current account deficit measures the degree to which the United States invests more than it saves domestically and the corresponding amount of the investment that must be financed with funds from abroad.
For those concerned about a shock to markets if this deficit persists, Taylor contended, "there's no reason . . . to think that there's going to be problems financing or adjusting the current account in a smooth and adequate way."
To reduce the current account deficit, Taylor recommended policies that increase savings domestically and foster greater economic growth abroad. He added that the Bush administration is working to encourage savings through newly implemented health savings accounts, retirement savings accounts, and proposed personal accounts for Social Security.
Taylor also emphasized the value of bilateral agreements in promoting global economic growth, including America's Partnership for Growth with Japan, the Group for Growth initiative with Brazil, and the administration's Millennium Challenge Account, which is aimed specifically to raise economic growth and living standards in the poorest countries. He remarked that the G7 should encourage China to adopt a flexible exchange rate, which would reduce the deficit by leading to more balanced trade flows between the United States and China.
In the panel that followed Taylor's remarks, Thomas Byrne of Moody's, the investment rating agency, countered that China will not likely undertake any action that will help the U.S. current account deficit. David DeRosa of DeRosa-Research and Trading argued that the G7 should not get involved in this issue and that the present situation could continue for an extended period without a necessary devaluation of the dollar that some fear.
AEI's Allan H. Meltzer considered the effects of the current account deficit for the dollar and on savings. He stressed the simple fact that the United States receives valuable imports and in exchange exports the dollar-even though we and our trade partners expect the dollar to depreciate. He predicted that the agreement enabling China to join the World Trade Organization will increase U.S. investment in China and further boost the current account deficit. He also warned that incremental steps toward protectionism for domestic firms will most likely occur as the dollar loses value.
Yusuke Horiguchi of the Institute of International Finance emphasized the potential harm to world growth from a sharp drop in the dollar. He argued that the U.S. current account deficit will remain high because of America's domestic demand levels and the reluctance of Asian countries to allow their currencies to appreciate. Although he is rather pessimistic that any of these policies will be adopted, Horiguchi recommended that, first, European countries and Japan should pursue a demand-management policy to close the gap between their potential and actual GDPs; second, Asian countries should allow their currencies to appreciate; and third, the United States should tackle its budget deficit far more aggressively. ----------------------------------------------WTO has no place for EU's famous-food list By Paul Meller International Herald Tribune Friday, November 19, 2004
BRUSSELS The World Trade Organization on Thursday criticized the European Union's desire to protect the identity of famous foods and drinks like Italian Parma ham and French Champagne, ruling in a preliminary report that the EU had failed to grant similar protection to non-European products with a geographical identity.
The United States and Australia had complained to the Geneva-based trade body about Europe's system of geographical indicators, which, for example, bars anyone outside the region of Champagne from using the name to sell sparkling wine.
The Union has drawn up a list of 41 products that it says justify such protection. The list includes cheeses like Manchego from Spain, Roquefort from France and Parmesan from Italy, as well as Budvar beer from the Czech Republic and Madeira fortified wine from Portugal.
The European Union has argued that it will consider registering non-European products under the geographical indicators system only if the countries seeking such protection reciprocate by registering European products in their own countries.
The WTO said the Union was wrong to make such a demand, according to a person who has seen the report.
Apart from failing to grant non-European products the ability to register on the list of protected names, the United States also complained that the geographical indicator system was harming European sales of the best-selling U.S. beer, Budweiser.
Anheuser-Busch, which produces Budweiser, has fought a long battle with the brewery that makes Budvar, whose name in German is Budweiser. It wants exclusive use of the names Budweiser and Bud in the European Union, but the WTO's preliminary report dismissed the complaint, according to a person who has seen the confidential report.
The Union says the 41 products on its list are being abused and parroted by producers in other countries. Parma ham from Italy, for example, cannot be sold in Canada under that name because a local ham producer has trademarked the name there.
Arancha González, a European Commission spokeswoman, said Thursday that the Union remained confident it could persuade the WTO that its system complies with international trade rules.
"We are pretty confident of the arguments we have put forward," she said. The Union maintains that geographical indicators are a quality guarantee for consumers, rather than protectionism for producers.
But a person close to the WTO in Geneva said that the organization had never changed its position after issuing an interim report. A final decision is due by next spring.

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