Nuclear Security Cooperation Between the United States and Pakistan A Survey from 2000-2009

Nuclear Security Cooperation Between the United States and Pakistan
A Survey from 2000-2009

http://www.americanprogress.org/issues/2009/06/pakistan_nuclear_survey.html

The Economic Benefits of Investing in Clean Energy How the Economic Stimulus Program and New Legislation Can Boost U.S. Economic Growth and Employment

Taking Global Warming Seriously

The Economic Benefits of Investing in Clean Energy
How the Economic Stimulus Program and New Legislation Can Boost U.S. Economic Growth and Employment

Report from Robert Pollin, James Heintz, and Heidi Garrett-Peltier outlines how the economic stimulus program and new legislation can boost U.S. economic growth and employment.
Report: The Economic Benefits of Investing in Clean Energy

http://www.americanprogress.org/issues/2009/06/clean_energy.html

Budgeting for national security By Gordon Adams

Budgeting for national security
By Gordon Adams | 25 June 2009

When taking into account the costs of military operations in Iraq and Afghanistan, the U.S. defense budget has more than doubled since fiscal year 2001. And yet, despite this growth, the appetite for more defense funding has continued unabated, and our security dilemmas appear to grow.

Last year, Adm. Michael Mullen, Chairman of the Joint Chiefs of Staff, argued that the Pentagon should be guaranteed 4 percent of the U.S. gross domestic product, a figure roughly consistent with today's defense spending. He offered no strategic justification for this spending level. Along these lines, at the height of last year's presidential campaign, the Chiefs led a Pentagon budget-planning exercise that sought to increase the defense budget by 14 percent in one year. They seemed to think that if they put out that number as what they absolutely needed, the next president would be vulnerable to attacks that he was "soft on defense" if he proposed anything less.

Assuming that our national security is the same thing as the size of our defense budget and military forces is a fundamental mistake."

To his credit, President Barack Obama didn't take the bait, holding the defense spending line at 4-percent growth for fiscal year 2010. Equally to his credit, Defense Secretary Robert Gates agreed to that level of spending for next year. Even more surprisingly, Gates eliminated programs with growing costs and performance problems such as the army's Future Combat System vehicles and the VH-71 helicopter. He also agreed to accept defense-budget projections for the future that would only grow with inflation, rather than the additional $450 billion the Chiefs wanted.

Less noticed, but equally important, Gates stepped into the messy, informal "unfunded requirements" budget process, which the services use to seek increases to their budgets outside of the formal budget-planning system. Every year since the Gingrich Revolution of 1994, the Armed Services Committees have invited the service chiefs to submit a separate letter telling the committees what the services wanted but didn't get in the regular budget. In years past, the defense secretary and White House didn't stop this permissive leak in the budget system because neither wanted to be accused of "muzzling" the uniforms.

Per usual, this spring, the Republican minorities on the Armed Services Committees, eager for an opportunity to hammer Obama on defense, called for the unfunded requirement letters. Gates didn't stop them per se; he simply announced that he would review them first. And lo and behold, air force "unfunded requirements," which had reached more than $20 billion in 2008, suddenly became less than $2 billion in 2009.

These are truly minimal, if important, gestures toward greater discipline in defense budgeting. But they have angered defense hawks. The Republican members of the Armed Services committees, for instance, are lambasting Obama and Gates for weakening national security. Meanwhile, the defense industry is quietly lobbying for more. Eager outside analysts are jumping in, too. Two weeks ago in a Washington Post op-ed, Michael O'Hanlon at the Brookings Institution called the Obama-Gates defense budget projections a "significant mistake" that would leave defense $150 billion short of what it needs between now and fiscal year 2014.

The critics conveniently forget that the defense budget has doubled in the last eight years. They still don't seem to think we're spending enough on national security and more for defense seems to be their answer. More largely, the national security debate in the United States takes place exclusively in the defense box, keeping it defined by defense logic and a static view of defense issues. But assuming that our national security is the same thing as the size of our defense budget and military forces is a fundamental mistake. And until Washington escapes from this circular reasoning, defense budgets and forces will continue to grow at a staggering rate, with declining security to show for it.

The Pentagon's logic is compelling on the surface: Forces were stressed in Iraq so we need more forces. Operating those forces continues to cost more than we predicted, so we must add funding to accommodate that cost increase. This is the logic O'Hanlon is stuck in, and it's the logic of defense budgeting as seen by the Congressional Budget Office (CBO) when it looks at the costs of military forces. The CBO merely assumes the current force and projects what that force might cost in the future. It doesn't ask whether it's the right force with the right mission for the future of national security. Nor does it price out new missions. And it certainly doesn't explore the alternatives or examine overall U.S. strategy.

Thinking about national security this way is a tail-chasing exercise that cannot discipline defense planning or budgeting, and it neglects the underlying truth: Defense is a "support function" for U.S. statecraft; it is not U.S. statecraft itself.

Thus, it's time to ask two main questions about our national security strategy: What role do we choose to play in the world, and what is the right mix of tools to play that role? Sadly, there is little evidence that the administration is asking this question. Instead, they seem to be accepting things as they are.

In fact, the only strategy planning exercise going on today, the Pentagon's Quadrennial Defense Review (QDR), has a defense orientation. Obviously then, the QDR will follow currently articulated defense missions and needs, using the current force as the starting point for its plan. Its assumptions will become the administration's strategic assumption as well.

In other words, the forces will stay large; program and budget trade-offs will be made at the margins; and, if the QDR articulates new missions for those forces (counterinsurgency, overseas contingency operations, stabilization and reconstruction), as Gates wants, they will be pasted on top of existing missions and force requirements.

And you can rest assured that the Pentagon won't engage the more basic question about the military's proper role in maintaining national security. They will blindly accept the logic of counterinsurgency, post-conflict reconstruction, and overseas contingency operations--more or less, fighting the last war, i.e., Iraq and Afghanistan. And so, the forces will grow; the military missions will expand; and the budgets will follow.

Meanwhile, we will do little or no planning for the other major contingencies that undoubtedly will shape the future--a weakening global economy, poverty, climate change, infectious diseases, religious strife, and so on. Military force won't solve these problems and has, at best, a peripheral role in dealing with any of them. Even worse, leaving the solutions to the Defense Department through some kind of a "constabulary" force creates the very conditions that make the force seem necessary.

Worse yet, our statecraft is so dysfunctional and over-militarized now that it's almost impossible to correct the imbalance. Today, we assume that none of our civilian tools (i.e., the State Department and foreign-assistance agencies) are able to provide U.S. security, advance our interests, or build international cooperation. The federal budget reflects this sentiment, with an inordinate amount of money going to defense spending. And so, increasingly, we turn to the Pentagon and uniformed military to do the things that we should be building a civilian strategy and the civilian capacity to accomplish.
Copyright © 2009 Bulletin of the Atomic Scientists. All Rights Reserved.

UK ‘deluded’ in relying on US for defence, warns thinktank

UK ‘deluded’ in relying on US for defence, warns thinktank
Richard Norton-Taylorr, The Guardian
Assumptions that the US will always come to Britain's rescue are complacent and it is "delusional" to believe that the UK can act alone without closer European defence co-operation, a leading thinktank warns today. A root and branch review of Britain's security interests, including options to avoid renewing the Trident nuclear missile system, is urgently needed, the Institute for Public Policy Research says.

http://www.guardian.co.uk/politics/2009/jun/30/uk-defence-policy-trident-us

* House of Commons Report, "Global Security: Non-Proliferation"
http://www.publications.parliament.uk/pa/cm200809/cmselect/cmfaff/222/222.pdf

* Trident nuclear deterrent replacement under review
http://www.telegraph.co.uk/news/newstopics/politics/defence/5661301/Trident-nuclear-deterrent-replacement-under-review.html

Politicus- Sanctions on Iran: Will Europe act? John Vinocur, The International Herald Tribune

Politicus- Sanctions on Iran: Will Europe act?
John Vinocur, The International Herald Tribune
Sanctions: a word that rises to the surface and shimmers for a deceptive moment before it bursts. It’s having its hour again, bubbling up confusingly from Iran’s witches brew.

http://www.nytimes.com/2009/06/30/world/europe/30iht-politicus.html

Ex-top official: Japan, U.S. had nuke deal The Yomiuri Shimbun

Ex-top official: Japan, U.S. had nuke deal The Yomiuri Shimbun

A former Foreign Ministry administrative vice minister told The Yomiuri Shimbun on Monday that Japan and the United States had a secret deal to tacitly allow U.S. forces to bring nuclear weapons into the nation.

http://www.yomiuri.co.jp/dy/national/20090630TDY01303.htm

Envoy to Coordinate North Korean Sanctions Mark Landler, The New York Times

Envoy to Coordinate North Korean Sanctions
Mark Landler, The New York Times
Hoping to give more teeth to international sanctions against North Korea, the Obama administration has named a senior diplomat to lead a task force coordinating Washington’s political, military and financial measures against its government.

http://www.nytimes.com/2009/06/27/world/americas/27diplo.html?_r=1&scp=1&sq=envoy%20sanctions%20north%20korea%20june%202009&st=cse

Our Decaying Nuclear Deterrent Jon Kyle and Richard Perle, The Wall Street Journal

Our Decaying Nuclear Deterrent
Jon Kyle and Richard Perle, The Wall Street Journal

IAEAA bipartisan congressional commission, headed by some of our most experienced national security practitioners, recently concluded that a nuclear deterrent is essential to our defense for the foreseeable future. It also recommended that urgent measures be taken to keep that deterrent safe and effective.

Unfortunately, President Barack Obama has adopted an agenda that runs counter to the commission's recommendations.

http://online.wsj.com/article/SB124623202363966157.html#mod=WSJ_topics_obama?mod=rss_topics_obama

Privately run checkpoint stops Palestinians with 'too much food' By Amira Hass

http://www.haaretz.com/hasen/spages/1096322.html

Privately run checkpoint stops Palestinians with 'too much food'

By Amira Hass

A West Bank checkpoint managed by a private security company is not allowing Palestinians to pass through with large water bottles and some food items, Haaretz has learned.

MachsomWatch discovered the policy, which Palestinian workers confirmed to Haaretz.

The Defense Ministry stated in response that non-commercial quantities of food were not being limited. It made no reference to the issue of water.
The checkpoint, Sha'ar Efraim, is south of Tul Karm, and is managed for the Defense Ministry by the private security company Modi'in Ezrahi. The company stops Palestinian workers from passing through the checkpoint with the following items: Large bottles of frozen water, large bottles of soft drinks, home-cooked food, coffee, tea and the spice zaatar. The security company also dictates the quantity of items allowed: Five pitas, one container of hummus and canned tuna, one small bottle or can of beverage, one or two slices of cheese, a few spoonfuls of sugar, and 5 to 10 olives. Workers are also not allowed to carry cooking utensils and work tools.

MachsomWatch told Haaretz that Sunday, a 32-year-old construction worker from Tul Karm, who is employed in Hadera, was not allowed to carry his lunch bag through the checkpoint. The bag contained six pitas, 2 cans of cream cheese, one kilogram of sugar in a plastic bag, and a salad, also in a plastic bag.

The typical Palestinian laborer in Israel has a 12-hour workday, including travel time and checkpoint delays. Many leave home as early as 2 A.M. in order to wait in line at the checkpoint; tardiness to work often results in immediate dismissal. Workers return home around 5 P.M. The wait at the checkpoint can take one to two hours in each direction, if not longer.

The food quantities allowed by Modi'in Ezrahi do not meet the daily dietary needs of the workers, and they prefer not to buy food at the considerably more expensive Israeli stores.

MachsomWatch informed the Israel Defense Forces about the new bans but received no response, the organization said. Modi'in Ezrahi issued a statement saying questions should be directed to the Defense Ministry's crossings administration.

MachsomWatch activists said a security guard on duty told them the food restrictions were imposed due to "security and health risks." However, at the nearby Qalqilyah checkpoint, which is still run directly by the IDF, workers have been allowed to carry through all the food items banned at Sha'ar Efraim.

However, responsibility for the Qalqilyah checkpoint is supposed to be transferred to a private company this week, and workers voiced concerns that similar restrictions might be imposed there.

The IDF Spokesman's office said in a statement: "There are no limits on food quantities. They may take through food necessary for personal consumption during a day's work. When a worker arrives with a large quantity of goods intended for sale rather than for personal use, he is asked to pass through the goods crossing instead, where the goods are handled appropriately and with the appropriate customs checks. This crossing is intended for pedestrians and not for goods."

The Pentagon's Wasting Assets The Eroding Foundations of American Power

The era of American dominance of the global commons defined by World War II and the Cold War may be coming to an end! This piece reviews the military challenges of sustaining such dominance and implicitly raises once again the question of how much dominance is enough.

(http://www.foreignaffairs.com)

Foreign Affairs
July/August 2009

The Pentagon's Wasting Assets
The Eroding Foundations of American Power

Andrew F. Krepinevich Jr.

ANDREW F. KREPINEVICH, JR., is President of the Center for Strategic and Budgetary Assessments and the author of Seven Deadly Scenarios.

The military foundations of the United States' global dominance are eroding. For the past several decades, an overwhelming advantage in technology and resources has given the U.S. military an unmatched ability to project power worldwide. This has allowed it to guarantee U.S. access to the global commons, assure the safety of the homeland, and underwrite security commitments around the globe. U.S. grand strategy assumes that such advantages will continue indefinitely. In fact, they are already starting to disappear.

Several events in recent years have demonstrated that traditional means and methods of projecting power and accessing the global commons are growing increasingly obsolete -- becoming "wasting assets," in the language of defense strategists. The diffusion of advanced military technologies, combined with the continued rise of new powers, such as China, and hostile states, such as Iran, will make it progressively more expensive in blood and treasure -- perhaps prohibitively expensive -- for U.S. forces to carry out their missions in areas of vital interest, including East Asia and the Persian Gulf. Military forces that do deploy successfully will find it increasingly difficult to defend what they have been sent to protect. Meanwhile, the U.S. military's long-unfettered access to the global commons -- including space and cyberspace -- is being increasingly challenged.

Recently, Secretary of Defense Robert Gates argued in these pages for a more "balanced" U.S. military, one that is better suited for the types of irregular conflicts now being waged in Afghanistan and Iraq. However, he also cautioned, "It would be irresponsible not to think about and prepare for the future." Despite this admonition, U.S. policymakers are discounting real future threats, thereby increasing the prospect of strategic surprises. What is needed is nothing short of a fundamental strategic review of the United States' position in the world -- one similar in depth and scope to those undertaken in the early days of the Cold War.

A DANGEROUS GAME

The term "wasting asset" became common among U.S. policymakers in the early days of the Cold War. At the end of World War II, the United States possessed an incalculable strategic advantage: a monopoly on nuclear weapons. So when the Soviet Union tested its first atomic bomb in August 1949, it triggered a sense of panic in the United States, as the U.S. nuclear arsenal had become a wasting asset.

The United States responded with a major effort to bring together the nation's best strategists to devise a new approach. That effort yielded the Truman administration's National Security Council report NSC-68 and, later, the Eisenhower administration's Solarium Study and NSC-162/2. These became the foundation of a new U.S. strategy to counter a nuclear Soviet Union.

To help offset the loss of its nuclear monopoly, the United States sought to develop new advantages while sustaining certain old advantages. It exploited its continuing technological edge to maintain a highly effective nuclear deterrent. Shortly after the Soviet nuclear test of a fission weapon, President Harry Truman approved plans to develop thermonuclear, or fusion, weapons, which have far greater destructive power. Equally important were efforts to sustain the U.S. military's unsurpassed ability to project and sustain large forces around the globe, as demonstrated during the wars in Korea, Vietnam, and the Persian Gulf, when the United States transported large field armies overseas.

This force projection was made possible by the U.S. military's ability to access the global commons, principally on the seas and in the air but increasingly in the space and cyberspace domains as well. And with the Soviet Union's collapse in December 1991, the United States' ability to project military power was effectively unconstrained. There were large-scale deployments to Panama, Haiti, and the Balkans during the late 1980s and 1990s, and these were later eclipsed by the dispatch of large expeditionary forces to Afghanistan and Iraq.

But this long record of military successes masks major geopolitical and technological trends that are rapidly eroding the advantages the U.S. military has long enjoyed. This was dramatically illustrated by a major exercise conducted earlier this decade. In the summer of 2002, the Pentagon conducted its largest war-gaming exercise since the end of the Cold War. Called Millennium Challenge 2002, it pitted the United States against an "unnamed Persian Gulf military" meant to be a stand-in for Iran. The outcome was disquieting: what many expected to be yet another demonstration of the United States' military might turned out to be anything but.

The "Iranian" forces, led by retired Marine Corps Lieutenant General Paul Van Riper, successfully countered the U.S. forces at every turn. The U.S. fleet that steamed into the Persian Gulf found itself subjected to a surprise attack by swarms of Iranian suicide vessels and antiship cruise missiles (ASCMs). Well over half the U.S. ships were sunk or otherwise put out of action in what would have been the United States' worst naval disaster since Pearl Harbor. Meanwhile, Van Riper kept his Iranian cruise and ballistic missile forces on the move, frustrating the U.S. commanders' efforts to track and destroy them. Rather than turn his air-defense radars on and expose them to prompt destruction from U.S. aircraft armed with antiradiation missiles, Van Riper left his units' systems turned off. Since no one could be sure of where the Iranian defenses were positioned, it was risky for U.S. cargo aircraft to land and resupply the U.S. ground forces that had deployed on Iranian soil.

Exasperated and embarrassed at the success of the mock Iranian force, the senior U.S. commanders overseeing the war game's progress called for a "do-over." They directed the U.S. fleet to be "refloated" and compelled the enemy forces to turn on their radars and expose themselves to attack. The enemy missile forces were ordered to cease their evasive maneuvers. Recast in this manner -- and with Van Riper "relieved" of his command, apparently for having executed it too well -- the game proceeded to a much more agreeable conclusion.

The official results of Millennium Challenge may have validated the military's own ideas about its ability to project forces into contested areas. But Van Riper's success should have served as a warning: projecting power into an area of vital interest to the United States using traditional forces and operational concepts will become increasingly difficult. Indeed, these means and methods are at great risk of experiencing significant, perhaps even precipitous, declines in value.

The Millennium Challenge exercise was a harbinger of the growing problems of power projection -- especially in coastal zones, maritime chokepoints (such as the Strait of Hormuz), and constricted waters (such as the Persian Gulf). As the initial success of Van Riper's "Iranian" forces demonstrated, the risks in such areas are becoming progressively greater, especially when the United States is facing a clever adversary. In the real world, Iran and other states can buy high-speed, sea-skimming ASCMs in quantity. In confined waters near shore, U.S. warships would have little warning time to defend against these weapons. The same can be said of high-speed suicide boats packed with explosives, which can hide among commercial vessels. Widely available modern sea mines are far more difficult to detect than were those plaguing the U.S. fleet during the 1991 Gulf War. Quiet diesel submarines operating in noisy waters, such as the Strait of Hormuz, are very difficult to detect. Iran's possession of all of these weapons and vessels suggests that the Persian Gulf -- the jugular of the world's oil supply -- could become a no-go zone for the U.S. Navy.

WESTERN TECHNOLOGIES, EASTERN STRATAGEMS

In East Asia, an even more formidable challenge is emerging. China's People's Liberation Army is aggressively developing capabilities and strategies to degrade the U.S. military's ability to project power into the region. The PLA's buildup is being guided by the lessons drawn by the Chinese military from the two Iraq wars and the 1999 war in the Balkans. The Chinese were particularly impressed by the effectiveness of U.S. precision-strike capabilities and the role played by space systems, which provided reliable navigation and communications, as well as weather, targeting, and missile-warning data. The effort is also being driven by the Chinese experience during the 1995-96 Taiwan Strait crisis, when a U.S. aircraft carrier, the U.S.S. Nimitz, entered the Taiwan Strait to compel China to stand down from its threats to Taiwan. This display of U.S. naval power bolstered China's determination to curb the United States' access to East Asia.

Senior Chinese political and military leaders decided it would be foolhardy to challenge the U.S. military head-on. Instead, China is working to combine Western technology with Eastern stratagems, aiming to be able to seize the initiative in the event of a conflict by exploiting the element of surprise. The Chinese approach would entail destroying or disrupting the U.S. military's communications networks and launching preemptive attacks, to the point where such attacks, or even the threat of such attacks, would raise the costs of U.S. action to prohibitive levels. The Chinese call the military capabilities that support this strategy "assassin's mace." The underlying mantra is that assassin's mace weapons and techniques will enable "the inferior" (China) to defeat "the superior" (the United States).

Chinese efforts are focused on developing and fielding what U.S. military analysts refer to as "anti-access/area-denial" (A2/AD) capabilities. Generally speaking, Chinese anti-access forces seek to deny U.S. forces the ability to operate from forward bases, such as Kadena Air Base, on Okinawa, and Andersen Air Force Base, on Guam. The Chinese are, for example, fielding large numbers of conventionally armed ballistic missiles capable of striking these bases with a high degree of accuracy. Although recent advances in directed-energy technology -- such as solid-state lasers -- may enable the United States to field significantly more effective missile defense systems in the next decade, present defenses against ballistic missile attacks are limited. These defenses can be overwhelmed when confronted with missile barrages. The intended message to the United States and its East Asian allies and partners is clear: China has the means to put at risk the forward bases from which most U.S. strike aircraft must operate.

Area-denial capabilities are aimed at restricting the U.S. Navy's freedom of action from China's coast out to "the second island chain" -- a line of islands that extends roughly from the southeastern edge of Japan to Guam. The PLA is constructing over-the-horizon radars, fielding unmanned aerial vehicles, and deploying reconnaissance satellites to detect U.S. surface warships at progressively greater distances. It is acquiring a large number of submarines armed with advanced torpedoes and high-speed, sea-skimming ASCMs to stalk U.S. carriers and their escorts. (In 2006, a Chinese submarine surfaced in the midst of a U.S. carrier strike group, much to the U.S. Navy's embarrassment.) And it is procuring aircraft equipped with high-speed ASCMs and fielding antiship ballistic missiles that can strike U.S. carriers at extended ranges. Advanced antiship mines may constrain U.S. naval operations even further in coastal areas.

The implications of these efforts are clear. East Asian waters are slowly but surely becoming another potential no-go zone for U.S. ships, particularly for aircraft carriers, which carry short-range strike aircraft that require them to operate well within the reach of the PLA's A2/AD systems if they want remain operationally relevant. The large air bases in the region that host the U.S. Air Force's short-range strike aircraft and support aircraft are similarly under increased threat. All thus risk becoming wasting assets. If the United States does not adapt to these emerging challenges, the military balance in Asia will be fundamentally transformed in Beijing's favor. This would increase the danger that China might be encouraged to resolve outstanding regional security issues through coercion, if not aggression.

DEADLY IRREGULARS

Irregular forces are also gaining greater access to advanced weaponry. As they do, they are increasingly capable of presenting serious threats to U.S. military operations on levels hitherto reserved for state adversaries. These, too, threaten to turn the U.S. military's forward bases and other key infrastructure into wasting assets.

Since the Korean War, the U.S. military has become used to operating with secure rear areas. Large U.S. bases, such as that in Cam Ranh Bay, South Vietnam, and, more recently, Camp Victory, in Iraq, and Bagram Air Base, in Afghanistan, have been sanctuaries in the midst of conflict. Even insurgent attacks on the Green Zone in Baghdad have failed to do significant harm. This happy state of affairs is almost surely coming to an end.

The Second Lebanon War, waged between Hezbollah and Israel during the summer of 2006, was the proverbial canary in the coal mine. It suggested that a new, more deadly form of irregular conflict -- known as "irregular warfare under high-technology conditions" -- may be emerging. The war showed how difficult it is becoming for conventional military forces to defend key fixed targets, such as military bases, critical economic infrastructure, and densely populated areas, against irregular forces, which are increasingly armed with rapidly proliferating "RAMM" (rocket, artillery, mortar, and missile) capabilities. During the 34-day conflict, Hezbollah fired some 4,000 rockets into Israel. Most of these were short range, and all of them were unguided. Yet more than 300,000 Israeli citizens had to be evacuated from their homes. Israel's Haifa oil refinery had to dump much of its stored oil for fear that a rocket attack could spark a major explosion and fires in the city. The war's economic impact was considerable.

Some of Hezbollah's rockets, although short range by modern military standards, could be fired over 50 miles. Compare this to the mortars and rockets used by Vietcong guerrillas against U.S. bases in South Vietnam. To combat that threat, U.S. forces simply patrolled to keep the enemy beyond his four-mile mortar range. Applying this approach against an enemy whose rocket range extends out to 50 miles is simply not possible.

The growing range of RAMMs available to irregular forces is not the only, or even the deadliest, problem. The U.S. military has long enjoyed a near monopoly on the use of guided, or "smart," munitions, which offer the enormous benefit of high accuracy independent of a weapon's range. But now guided RAMMs (or "G-RAMMs") are proliferating from powers such as China and Russia. Once these are in the hands of irregular forces, those forces will be able to hit targets with great precision and reliability. Moreover, such weapons do not require a high degree of operator training. As a harbinger, during the Second Lebanon War, Hezbollah irregulars hit an Israeli warship with an Iranian-made guided ASCM and destroyed or disabled over 50 Israeli tanks with sophisticated Russian-made guided antitank missiles. The ability of irregular forces to precisely hit critical points, such as airfields, harbor facilities, and logistics depots, will pose serious problems for the U.S. military's way of operating.

VIRTUAL WARFARE

Cyberspace is another domain in which the U.S. military may face rapidly growing risk. Information technology (IT) permeates every aspect of its operations, from logistics and command and control to targeting and guidance. As this dependence on IT has grown, so, too, has vulnerability to disruptions -- especially disruptions of battle networks linking U.S. forces.

This vulnerability also affects the United States' economic infrastructure, where everything from transportation to electricity and finance depends on cybernetworks. Attacks on both military and civilian IT networks have been increasing for at least a decade. Russia has been accused of conducting cyberwarfare campaigns against Estonia in 2007, Georgia in 2008, and Kyrgyzstan in 2009. China is reputed to have been behind cyberattacks that disabled computer systems at the Pentagon, as well as cyberattacks against France, Germany, and the United Kingdom. Cyberwarfare could enable other countries -- or even disaffected groups -- to inflict crippling damage on the U.S. economy.

Moreover, U.S. military operations are very dependent on commercial land-based information infrastructure. If cyberattacks inflicted substantial damage on them or disrupted them, not only would great economic turmoil ensue; much of the military capability of the United States could prove to be the modern equivalent of the Maginot Line.

The United States' armed forces also rely heavily on military and commercial satellites. In recent years, the Chinese military has shown that it can neutralize or destroy satellites in low-earth orbit (where most satellites are located) by launching antisatellite ballistic missiles or firing ground-based lasers. As China's lunar exploration program matures, the PLA will likely acquire the ability to destroy the Global Positioning System (GPS) constellation, which is essential for guiding many "smart" weapons to their targets. If China continues to develop and field antisatellite capabilities, the U.S. satellite architecture may also become a wasting asset, one highly dependent on Chinese sufferance for its effective operation.

THE IMPERATIVE TO ADAPT

If history is any guide, these trends cannot be undone. Technology inevitably spreads, and no military has ever enjoyed a perpetual monopoly on any capability. To a significant extent, the U.S. military's wasting assets are the direct consequence of the unavoidable loss of its near monopoly on guided weapons. This monopoly simply cannot be regained.

This raises troubling questions. For example, will the United States accept that several areas of vital interest are becoming no-go zones for its military, or will it take steps to address the challenge? Will the United States accept a posture of vulnerability in regard to its satellite architecture and cyberinfrastructure, or are alternatives available to redress the problem? How must U.S. strategy adapt in a world of rising powers and spreading technologies? Are there cost-effective alternatives to accepting growing vulnerability, or must the United States adopt a more modest strategy?

Analogous kinds of problems have been encountered and overcome in the past by the United States and other preeminent nations. During World War II, new U.S. carrier operations were so effective in projecting power that they rendered battleships obsolete. In addressing the Soviet Union's nuclear buildup, the United States developed early warning systems (satellites and distant early warning radars) and forces centered on a triad of delivery systems (bombers and land- and sea-based missiles) to enable deterrence.

Just as the Truman and Eisenhower administrations were faced with the need to confront difficult and complex strategic choices nearly 60 years ago, so, too, is the Obama administration today. The United States can either adapt to contemporary developments -- or ignore them at its peril. There is, first of all, a compelling need to develop new ways of creating military advantage in the face of contemporary geopolitical and technological trends. That means taking a hard look at military spending and planning and investing in certain areas of potential advantage while divesting from other assets. And Washington must keep in mind that efforts to field new capabilities and put in place new ways of operating typically take time, often a decade or more, to come to fruition.

But before questions about how to adapt military capabilities to future requirements can be considered coherently, there must be a new strategic framework. In the face of growing Soviet competition, Presidents Truman and Dwight Eisenhower made decisions about U.S. military capabilities in the context of an overall strategy built around the objective of containing Soviet power and deterring aggression -- both enabled by a strong U.S. economy, robust alliances with like-minded countries and other powers, and a technically advanced U.S. military operating within the framework of a global network of bases. Given the similar scale of today's challenges, the Obama administration's choices regarding the future U.S. military posture must be informed by an overarching strategy as ambitious as the one during the first decade of the Cold War. This strategy must take into account geopolitical factors, rapid advances in military technologies, and the United States' weakened economic standing. It must address the major challenges posed by radical Islamist groups (and by the related campaigns to defeat them in Afghanistan and Iraq). It must also address the prospect of nuclear proliferation. Should Iran become a nuclear-armed state, it could well spur a round of proliferation in the Arab world, further complicating the U.S. military's ability to project power into the Middle East in defense of key interests. Finally, there is China, a key U.S. trading partner and potentially a strong force in support of well-established international norms of behavior. At the same time, however, China's military buildup suggests that it may be tempted to pursue its aims through coercion, if not aggression, unless deterred from so doing.

The strategy must also recognize two wasting assets of a nonmilitary kind: the erosion of the United States' financial position and the reality that the United States' allies will not shoulder a larger share of the collective-security burden. With few exceptions, long-standing allies' continued refusal to do more for the common defense stems from a lack of agreement on future threats, underlying economic weakness, and a willingness to be free riders, benefiting from U.S. efforts and expenditures. This is unlikely to change even with a popular new administration in Washington. Even absent the global economic crisis, U.S. allies such as France, Germany, Japan, and the United Kingdom are saddled with aging populations and burdensome social welfare systems, leaving ever fewer resources available for contributing to collective security.

All this suggests that the United States must pursue a more modest strategy than that advanced by the Bush administration in the wake of 9/11 -- one that reflects a better balance between goals and resources, features a reduced emphasis on wasting military assets, and involves the vigorous identification, development, and exploitation of new areas of advantage.

SOME MODEST PROPOSALS

There are a number of initiatives that can and should be undertaken now. Investments in specific new capabilities may be premature given both the current economic circumstances and the absence of a clear strategy. However, it seems indisputable that divestment from what are clearly wasting assets should be heavily emphasized in order to avoid both substantial monetary costs and opportunity costs -- particularly in an era of growing budgetary and economic constraints.

For one thing, the United States should adopt an indirect approach to addressing instability in the developing world, conserving the bulk of its resources for meeting other strategic priorities. This means exploiting the U.S. military's advantage in highly trained manpower by emphasizing the training, equipping, and advising of indigenous forces of countries threatened by subversion, especially states confronting radical Islamist groups, rather than direct combat operations. In Afghanistan and Iraq, where U.S. forces are already deployed in large numbers, Washington should continue its efforts to field indigenous forces and withdraw U.S. combat units. The U.S. military will need to maintain a capacity to "surge" forces should a state of vital interest begin to fail, but such deployments should be a last resort. What is especially important is that the lessons learned by the U.S. military and the capabilities developed in waging irregular warfare be institutionalized.

Some of the resources thereby freed up should be invested in developing new ways to cope with the G-RAMM challenge. Any solution will most likely be found in a combination of existing and emerging capabilities, and in new ways of employing them. Several possibilities are worth exploring. Loitering "hunter-killer" reconnaissance and strike aircraft -- both manned and unmanned -- could be used to search for enemy G-RAMM-equipped forces and, once identified, engage them quickly before the enemy can fire or disperse. Another option is to harden targets against such attacks, although doing so is an expensive proposition and thus feasible only for the highest-priority targets. There are active defenses that can intercept G-RAMM projectiles, although price remains a major problem here, since interceptors tend to cost far more than G-RAMM projectiles. Rapid advances in solid-state lasers may, however, enable defense systems that have a projected cost-per-shot ratio that is far less than that of traditional interceptors.

Regarding traditional power projection, the United States should adopt an offsetting strategy whose objective is to parry efforts by China and Iran to deny the U.S. military access to East Asia and the Persian Gulf. The United States should make it clear that although it does not view Beijing as an enemy, it intends to continue reassuring its allies and friends in the region that they will not become victims of coercion or aggression. The same can be said of Iran, which is fielding a more modest version of China's capabilities. The offsetting strategy would be designed to preserve a stable balance, not generate a threat.

Maintaining the United States' ability to project power in an A2/AD environment will require multifaceted responses. The growing threat to U.S. forward air bases from Chinese assassin's mace capabilities might be handled in several possible ways. Bases could be hardened against attack by missiles with conventional warheads, perhaps combined with missile defenses. An excessive reliance on vulnerable bases could be reduced by developing long-range reconnaissance and strike systems. To offset the growing vulnerability of its major surface ships, the U.S. Navy could acquire more large submarines armed with conventional cruise missiles. To avoid operational irrelevance, carriers should reduce their reliance on short-range manned aircraft in favor of much longer-range unmanned aircraft, some of which are now in development. Advances in missile and air defenses could also play a key role in protecting the fleet. Since primacy in undersea warfare is a prerequisite for other naval operations, priority must be given to expanding the navy's edge in antisubmarine warfare. The current plans to increase submarine production must be sustained, and design work on unmanned underwater vehicles and a new class of submarines should also be initiated.

Several options to preserve U.S. access to space seem worth exploring. The government should support and exploit advances in IT, nanotechnology, and enhanced forms of propulsion in order to shift from relying on a relatively small number of large "mainframe" satellites to using micro- and nanosatellites that might be configured in less vulnerable and more easily repaired networks. Alternatively, it may be possible to use land-based clusters of unmanned aerial vehicles to substitute, at least on a limited basis, for damaged or destroyed satellites.

The cyberwarfare competition is so shrouded in secrecy that it is difficult to determine the United States' level of vulnerability, let alone options for addressing it. It may be that a defensive strategy cannot be successfully pursued and that the United States will be forced to develop its own cyberweapons and rely on deterring the worst sorts of cyberattacks. In short, the potential for a surprise of the worst sort in this realm remains a real possibility.

Significant resources may be liberated by reducing the military's emphasis on capabilities whose value will likely diminish greatly in the future. Defense Secretary Gates has recently taken some initial positive steps in this direction. For example, the navy's new Zumwalt-class destroyers are too expensive to address the challenges posed by irregular warfare and too vulnerable to operate in East Asia or the Persian Gulf; Gates is moving forward with plans to terminate their production. The army has proposed spending over $150 billion on its constellation of Future Combat Systems. Yet the FCS are optimized for traditional conventional warfare rather than the persistent irregular warfare the army now confronts. The defense secretary's decision to terminate the eight FCS combat vehicles is on the mark, as is his cancellation of the tactical satellite program. Large satellites that are highly effective so long as space is a sanctuary must be reconsidered in recognition of the fact that this condition no longer obtains.

Much more needs to be done to free up defense resources. The military plans to spend hundreds of billions of dollars on several thousand short-range strike aircraft that must operate from forward land bases or carriers, both of which are increasingly vulnerable. These programs should be scaled back in favor of greater investment in longer-range systems, such as a next-generation bomber and the navy's long-range unmanned strike system. The U.S. Marines are planning to field a new amphibious vehicle, the Expeditionary Fighting Vehicle, that is able to swim ashore and then fight as a land combat vehicle. Yet the fleet that would launch these is being forced to operate ever further from the shore, far beyond the distance for which the EFV was designed. The EFV is also highly vulnerable to the roadside bombs that are now proliferating throughout the developing world. The system should be canceled. It simply makes no sense to spend so many defense dollars on new systems that are essentially wasting assets before they even reach the field.

MORE THAN JUST A MILITARY PROBLEM

Security, of course, involves more than just defense policy. For one thing, Washington must do much more than it has in recent years to attract capable and willing allies. After the Cold War, during its "unipolar moment," the United States seemed to have no need for allies, save perhaps for legitimizing its use of force so that it could fulfill its role as the primary guarantor of the international system.

There are states that live in increasingly dangerous neighborhoods that may, with competent U.S. diplomacy, emerge as important allies in this new age. Muslim democracies, such as Indonesia, Pakistan, and Turkey, should be engaged. India, the world's largest democracy, has one of the world's largest Muslim populations and shares U.S. concerns over China's military buildup. Despite its demographic decline and economic difficulties, Japan could shoulder significantly more responsibility than it has in the past -- and has increasing reason to do so. South Korea is capable of assuming full responsibility for defending itself against a land assault from the North. Australia remains a highly valued ally, always punching well above its weight. The European allies, although diminished in stature and military capability, can still provide significant support, as demonstrated by the United Kingdom's strong showing in both Afghanistan and Iraq. Nor should engaging China and Russia be discounted. Despite the obvious difficulties involved, their security cannot be isolated from instability in the developing world or from nuclear proliferation.

Even more important, the United States must get its own house in order. The nation's economic might has long been a critical source of competitive advantage. U.S. relative advantage may erode over time, but there is much to suggest that it can be sustained for several generations. Compared with the other great powers, the United States has by far the best demographic profile. China, Europe, Japan, and Russia are all aging more rapidly than the United States, and India confronts a youth bulge that may prove difficult to manage. The United States also boasts a skilled manpower base (although preserving it will require reforming the educational system, which is lagging in key areas). The United States is blessed with a superior store of natural resources, which only Russia can possibly match. It also boasts the world's most dynamic free-enterprise system. But Americans must learn once again to invest in their future and live within their means. The United States entered the Cold War as the world's leading producer nation; now it is the world's leading consumer and debtor nation.

Just as it took over half a decade of effort to address the United States' loss of its nuclear monopoly, a strategy to address the United States' current wasting assets will not be crafted overnight. What is needed is a sense of urgency similar to that which animated policymakers at the start of the Cold War, as well as persistent attention from the president and his top advisers. Yes, the nation confronts a severe financial crisis. But President Barack Obama may take some inspiration from President Franklin Roosevelt, who had to deal with a prolonged, severe depression even while storm clouds gathered overseas.

A decade ago, the debate in defense circles centered on whether or not the U.S. military needed to undertake a "transformation" -- that is, to field a substantially different kind of military to address the challenges of a new era with new rivals and rapidly spreading technologies. The idea faced stiff resistance from many in the military. But the price for such willful ignorance can be steep. Confronted with modern irregular warfare in the wake of the invasions of Afghanistan in 2001 and Iraq in 2003, the United States found itself engaging in reactive transformation (as did the Israelis following the Second Lebanon War). Today, despite growing evidence that a wide array of U.S. military capabilities are depreciating in value, many remain reluctant to engage in the hard thinking necessary for anticipatory transformation -- preparing for emerging challenges by identifying new capabilities to offset or replace those that are progressively wasting.

Ignoring growing challenges to the United States' ability to project and sustain military capability overseas will not make those challenges go away. Sooner or later, they -- and their implications for U.S. security -- must be confronted. A decline in the U.S. military's ability to influence events abroad may be inevitable; however, it should not be the result of indifference or lack of attention. There are important strategic choices that the United States must make. To avoid those choices now is simply to allow the United States' rivals to make them instead.

Copyright © 2002-2009 by the Council on Foreign Relations, Inc.

SPEAKING FREELY South Korea in a new Asia initiative

SPEAKING FREELY
South Korea in a new Asia initiative
President Lee Myung-bak is pushing his ambitious "New Asia Initiative", which aims to boost South Korea's role as a regional powerbroker. Lee will likely face the same roadblocks and critics as the late Roh Moo-hyun, who tried to make South Korea an honest broker between China and Japan and the United States and China. - Zhiqun Zhu (Jun 29,'09)

http://www.atimes.com/atimes/Korea/KF30Dg01.html

A classic revolutionary dilemma

A classic revolutionary dilemma
The events of recent weeks in Iran can be viewed against the backdrop of a regime that wants to return to its glory days of fervor and idealism. The young, in particular, have been alienated, and demographically and in other ways the present version of the Islamic Republic, which may have postponed its date with destiny, is struggling against the tide of history. - Dilip Hiro (Jun 29,'09)

http://www.atimes.com/atimes/Middle_East/KF30Ak01.html

THE ROVING EYE Requiem for a revolution

THE ROVING EYE
Requiem for a revolution
In the end, the sound and fury of the "Tehran spring" led to neither reform nor revolution. The army didn't support the people, and the merchants and workers didn't go on strike. Still, to believe that Iran's national interest and the aspirations of its disenchanted masses will be defended by the new dictatorship of the mullahtariat is to completely miss the point. - Pepe Escobar (Jun 29,'09)

http://www.atimes.com/atimes/Middle_East/KF30Ak03.html

Obama creates a deadly power vacuum

Obama creates a deadly power vacuum

President Barack Obama has not betrayed the interests of the United States to any foreign power, but he has done the next worst thing, namely, to create a void by withdrawing American power. By removing America as a referee, he will provoke more violence than the United States ever did. A very, very dangerous period is about to begin, and it could start with Iran. (Jun 29,'09)

http://www.atimes.com/atimes/Middle_East/KF30Ak02.html

Subsidies for Israel, Sanctions for Iran

Subsidies for Israel, Sanctions for Iran

Grant Smith on nuclear hegemony and hypocrisy

http://original.antiwar.com/smith-grant/2009/06/28/subsidies-for-israel-sanctions-for-iran/

The 2009 Failed States Index By FOREIGN POLICY and The Fund for Peace

The 2009 Failed States Index
By FOREIGN POLICY and The Fund for Peace

It is a sobering time for the world's most fragile countries—virulent economic crisis, countless natural disasters, and government collapse. This year, we delve deeper than ever into just what went wrong—and who is to blame.

http://www.foreignpolicy.com/articles/2009/06/22/the_2009_failed_states_index

Backgrounder: A guide to Israeli settlements

Backgrounder: A guide to Israeli settlements: How and when did they start, why are they spreading, what are the concerns and should anything be done about them? - Gershom Gorenberg, Los Angeles Times:

In principle, the U.S. has consistently opposed all settlements, including the Jewish neighborhoods of East Jerusalem. However, most administrations have avoided confrontations over the issue, especially when peace negotiations were underway. In the meantime, settlements kept growing. Public diplomatic tussles during the Carter and George H.W. Bush administrations were exceptions.
http://www.latimes.com/news/opinion/commentary/la-oe-gorenberg28-2009jun28,0,6704423.story

Want to Stop Israeli Settlements? Follow the Dollars- Ronit Avni, Washington Post: This month, both at Cairo University and from the Oval Office, President Obama has called on the Israeli government to stop the expansion of settlements in the occupied Palestinian territories. He should send the same message to the Americans who are funding and fueling them.

Backgrounder: A guide to Israeli settlements

The two-state chimera - Arnaud de Borchgrave, Washington Times: Nine U.S. presidents have asked Jerusalem to cease and desist expanding settlements. Reassured by a friendly U.S. Congress, even a wink and a nod from President George W. Bush, successive Israeli governments have ignored gentle slaps on the hand - and expanded.

http://www.washingtontimes.com/news/2009/jun/19/the-two-state-chimera/print/

Mishal’s Luck Adam Shatz

Mishal’s Luck
Adam Shatz

* Kill Khalid: The Failed Mossad Assassination of Khalid Mishal and the Rise of Hamas by Paul McGeough
In early September 1997, Danny Yatom, the head of Mossad, arranged a special screening for Binyamin Netanyahu, who was then prime minister. The film, shot on the streets of Tel Aviv, presented the plan for the assassination of Khalid Mishal, the head of Hamas’s political bureau in Amman. Twenty-one Israelis had died in Hamas suicide attacks in the previous two months, and Netanyahu was eager for revenge. The peace process might be undermined, but that would be just as well: Netanyahu shared Hamas’s hostility to Oslo, and had compared trading land for peace to appeasement with Hitler. Mishal, Paul McGeough writes in Kill Khalid, his gripping account of the plot, was selected from a list of targets by Netanyahu not only because he was suspected of orchestrating the suicide bomb campaign, but because he made an articulate case for Hamas’s position, in a suit rather than clerical robes: ‘he was too credible as an emerging leader of Hamas, persuasive even. He had to be taken out.’


It was an extremely sensitive operation. Israel had signed a peace treaty with King Hussein in 1994, and the murder of a Palestinian leader in Amman would be sure to fuel speculation that Mossad had got the green light, and perhaps some helpful tips, from Jordan’s General Intelligence Department (GID). This was no way to treat a friend – at least not one you respected – and the Israelis knew it. Unlike the flamboyant assassinations of the PFLP spokesman Ghassan Kanafani (killed in 1972 in a car bomb in Beirut) and Arafat’s top aide Khalil al-Wazir (gunned down in 1988 in his home in Tunis by Israeli commandos), Mishal’s murder had to be discreet and, if possible, invisible.

The attack would take a matter of seconds – so quick he wouldn’t know it was happening. One agent would shake a can of Coke and pop it open to distract Mishal while another would spray levofentanyl, a chemically modified painkiller, in his ear. He would feel as if he’d been bitten by an insect; 48 hours later the drug would kill him, leaving no trace. Mossad agents rehearsed the assassination using water instead of poison on unsuspecting pedestrians in Tel Aviv. Netanyahu liked what he saw, and gave Yatom the go-ahead. He was not dissuaded by Hamas’s proposal for a 30-year hudna (truce), relayed by King Hussein on 22 September in a letter delivered by hand to the secret Mossad station at the Israeli embassy in Amman. Three days later, a pair of Mossad agents disguised as Canadian tourists – they were carrying passports borrowed from Canadian Jews living in Israel – waited for Mishal at 10 a.m. outside his office, where his driver was due to drop him off.


The plot unravelled almost as soon as it began. Mishal’s driver suspected that he’d been followed by a green Hyundai. When he saw a blond, bearded man in sunglasses approaching his boss as he stepped out of the car, with a ‘bizarre instrument’ in his hand, he pounced on him – though not before the poison had been squirted into Mishal’s ear from that instrument, a nebuliser. The attackers piled into the Hyundai, but they didn’t know their way around Amman, and were chased by Mishal’s bodyguard, who did. Eventually they jumped out of their car, but got stuck in a crowded marketplace, where Mishal’s bodyguard wrestled them into a taxi and took them to the nearest police station. Mishal seemed fine at first, but a few hours later he realised that something was wrong: his ear was ringing, he was shivering; he suddenly felt exhausted and nauseous. As his aides rushed him to hospital, he lost consciousness altogether.

Hamas’s claim that Mishal had been the target of an assassination attempt might have been squelched by the Jordanians, and Mishal might have died, had it not been for Randa Habib, a Lebanese journalist who broke the story to Agence-France Presse. General Samih Batikhi, head of the GID, insisted that nothing more than a fight between locals and tourists had taken place; another official suggested that Mishal’s driver had sparked the row by making unwelcome advances to the Canadians. The absence of a weapon wasn’t the only reason the Jordanians were sceptical. Why would Mossad place its special relationship with the GID at risk? Only a week earlier Danny Yatom had stopped by the headquarters in Amman – after a family holiday at the royal palace on the Red Sea – to chat with Batikhi. Now here was Hamas, accusing Israel of violating the peace treaty: a serious charge which, if true, would require a response.

Batikhi, who viewed Hamas as troublemakers, was inclined to dismiss the Agence-France Presse report until he received credible information that two men involved in the fight were seen running into the Israeli embassy (they would be joined by two other accomplices). When Netanyahu called King Hussein to say that Yatom was flying to Amman on urgent business that ‘could have bearing on the peace process’, Hussein assumed the visit was a response to Hamas’s offer of a hudna; but Batikhi knew better. He ordered the army to surround the Israeli embassy in Amman, and asked the Canadian ambassador to quiz the two men in Jordanian custody – ‘Shawn Kendall’ and ‘Barry Beads’ – on their ‘Canadian-ness’. It didn’t take long for them to be exposed as impostors.


‘We did it . . . We sprayed him with a chemical,’ Yatom confessed to Batikhi after landing in Jordan: ‘There’s nothing you can do about it . . . He’s been poisoned and all his bodily functions will deteriorate. There’ll be no apparent cause of death . . . We’d better deal with the consequences.’ But Hussein wasn’t prepared to deal with the consequences. He felt, he said, as if the Israelis had ‘spat on my face’. Despite – and partly because of – his friendship with Israel, Hussein had allowed Hamas to operate out of Amman. Hamas gave him leverage in negotiations with Israel and the US, and, as McGeough points out, they also ‘gave back something that Arafat and the PLO threatened – Hussein’s legitimacy’. The Jordanians had no love for Mishal: Batikhi regarded him as ‘shallow, brittle and unbending’, and Hussein had gone to great lengths to replace him, securing the release to Jordan four months earlier of the more pliable Mousa Abu Marzook, the former head of the Hamas political bureau, who had spent two years in an American prison awaiting extradition to Israel. But Marzook’s cosiness with Jordan’s security services, and his reputation for moderation (which had earned him the nickname Mr CIA), had cost him support inside Hamas; and he wasn’t helped now by rumours that the Jordanians had conspired with Israel to return him to his old job. Suddenly Hussein’s honour – if not his political survival – depended on saving Mishal.


The crisis offered Hussein a chance to settle scores with Netanyahu, who had treated him with undisguised contempt, and whom he suspected of seeking to ‘destroy all I have worked to build between our peoples’, as Hussein had written to Netanyahu in March. Netanyahu had approved a tunnel underneath the al-Aqsa Mosque, which led to rioting in which dozens of Palestinians and a number of Israelis died; he had also betrayed his promise to Hussein not to build new settlements in East Jerusalem, with his plan to encircle the neighbourhood of Jabal Abu Ghneim with Jewish apartment complexes. In Hussein’s view, the assassination was part of Netanyahu’s plan to sabotage Oslo and to destabilise his own regime, so that a Palestinian state could be established in Jordan – the old fantasy of the Israeli right. Refusing to speak to Netanyahu, he placed a call to Clinton. ‘If Mishal dies, peace dies with him,’ Hussein warned. The embassy would be stormed, the Israelis in Jordanian custody would hang, and relations would be broken off. Clinton agreed to pressure the Israelis to hand over the antidote to the poison used on Mishal, along with the formula. Forty-eight hours after Yatom landed in Amman, an Israeli doctor arrived at the same airport with the goods, just in time to save Mishal. Netanyahu even flew to Jordan to apologise to the king in person.


Hussein’s humiliation of Netanyahu did not end there. As the ‘father of the treaty’ with Hussein, Efraim Halevy, Israel’s envoy to the EU and Mossad’s former deputy director, recognised, the king needed a deal, not just the antidote; and if he didn’t get one, the Israelis now held in Jordan would never come home. The price, Halevy argued, should be the release of Sheikh Ahmed Yassin, the paraplegic cleric who had founded Hamas in Gaza, and was now serving his eighth year of a life sentence. This was ‘political dynamite’, in the words of an American official: Yassin’s return to Gaza was bound to raise the standing of Hamas among Palestinians, and to weaken Arafat, Israel’s ‘peace partner’. Arafat made an operatic display of joy over Yassin’s release, but privately he was furious: not only would King Hussein get the credit, but the sheikh would threaten his control of the national movement, and undermine his negotiations with Israel. ‘Why should I pay a price for this?’ he moaned to Clinton’s Middle East envoy, Dennis Ross.


Shortly after Mishal’s life was saved, a group of Jordanian officials discussed the affair with Clinton. ‘Though he was not present, the meeting was an extraordinary moment in the life of Khalid Mishal,’ McGeough writes: ‘Mishal and his movement had been acknowledged as key players.’ It was also an extraordinary reversal of fortune. Hamas, in the words of a senior American official, had been having ‘its worst year’ until ‘Mossad’s balls-up in Amman’. Marzook and Yassin had been behind bars, and hundreds of Hamas leaders had been jailed by Arafat’s Preventive Security Service, headed in Gaza by Mohammed Dahlan, whose methods had made some Hamas prisoners nostalgic for their Israeli jailers. Now Marzook was back in Amman, and Yassin was back in Gaza, a symbol of Palestinian defiance whose authority even Arafat found difficult to challenge.


The greatest beneficiary of the failed assassination, however, was its intended victim, whom Mossad had turned into a star of the Islamic resistance. Marzook campaigned to get his old job back but didn’t stand a chance against the ‘martyr who would not die’. Mishal’s insistence that only armed resistance would end the occupation, and that Arafat had nothing to show for his renunciation of violence (‘Where did it get him? Where’s his independent state?’), prevailed in Hamas’sshura, or decision-making council. ‘The day they tried to kill him was the day Mishal the leader was born,’ a Jordanian journalist told McGeough. ‘The man who died that day was Abu Marzook. Nobody wanted to talk to Abu Marzook after that – it was Mishal, Mishal, Mishal.’


McGeough tells the story of the Amman plot in the gritty, unsentimental style of a hard-boiled thriller. Kill Khalid is a reporter’s book, drawing plentifully on interviews with the important players, including Mishal. The Mishal affair may not be as much of a turning point in the conflict as McGeough claims, but its wider resonances are striking. More than a decade later, Mishal is Hamas’s political chief in Damascus, and Netanyahu, the man who ordered his assassination, is back in power in Jerusalem. The Islamic resistance movement, Harakat al-Muqawamah al-Islamiyah (hamas means ‘zeal’ in Arabic), now controls the Gaza Strip, having survived the prisons of the IDF and the Palestinian Authority, a pitiless blockade, international isolation, the ‘targeted’ assassinations of many of its leaders, an American-backed putsch and an Israeli invasion. And though neither the US nor the EU will speak to Mishal, on the grounds that Hamas is a ‘terrorist’ organisation, he has won the respect of a growing number of politicians in the West, including Jimmy Carter.

Mishal was born in 1956, into a peasant family in the Jordanian-ruled West Bank village of Silwad, 16 miles north of Jerusalem. His father, Abd al-Qadir, was a sheikh who had fought in the 1936 Arab Revolt and in the 1948 war with Israel; he had also been a member of the Muslim Brotherhood, the militant Islamist group founded in Egypt in 1928. Mishal, during his childhood in Silwad, saw little of his father: in 1957, Abd al-Qadir had taken a second wife and moved with her to Kuwait, where he established a new family. Ten years later, however, the Israeli army occupied Silwad, and Fatima Mishal and her children fled to Amman, then to Kuwait, where they were reunited with Abd al-Qadir.


The emirate was not without its difficulties for Palestinian refugees, who couldn’t buy property without a Kuwaiti partner, and were collectively viewed as a potential fifth column. But since in most of the Arab world Palestinians had a choice between the heroism of guerrilla warfare and the misery of the refugee camps, Kuwait offered the hope of a more or less normal life. Palestinians staffed Kuwait’s schools and civil service, and took great pride in their contribution to the country’s economy. Mishal’s father befriended a senior member of the royal family who admired his sermons, and rose to the position of mullah, no small achievement for a country preacher. Kuwait’s comparatively liberal ambience had also made it a centre of Palestinian politics. It was in Kuwait that Arafat and his comrades had founded Fatah; it was there, too, that young Palestinians in the national movement’s various factions – secular-nationalist, Marxist, Islamist – would fight over its future.


Khalid Mishal joined the Muslim Brotherhood at the age of 15. As McGeough emphasises, this was not a fashionable choice in the early 1970s, when the armed resistance to Israel was led by secular nationalists, and Islamists faced accusations of complacency, if not cowardice, for standing on the sidelines. But Mishal, like a growing number of pious Muslims in the diaspora, was convinced that the Palestinian struggle had to be grounded on Islamic principles; it was, they believed, the Arabs’ deviation from those principles that had led them to defeat in 1948 and 1967. They thought that Arafat was repeating the same error when, in the mid-1970s, he began to express support for a ‘transitional’ Palestinian state in the West Bank, the Gaza Strip and East Jerusalem – and hinted, implicitly, at an eventual rapprochement with the Jewish state.


For Mishal and his comrades, who called for the creation of an Islamic state in all of historical Palestine, this was treason; at a stroke Arafat was lending legitimacy to the state that had caused the Palestinian ordeal, and selling out the refugees. At Kuwait University, where he studied physics, Mishal founded the Islamic Association of Palestinian Students, a rival to the Arafat-controlled General Union of Palestinian Students, and became its president. When he graduated, he asked his mother to say ‘amen’ to his wish to become ‘a martyr for Palestine’. ‘My son, I can’t say “amen” to that,’ she replied. ‘It’s too difficult.’


She needn’t have worried: Khalid, a contemplative, bookish young man, a reader of Camus and Dostoevsky, was not in a hurry to become a martyr. Not only had he joined an organisation that had until this point kept its distance from the armed struggle; unlike many of his classmates, who were slipping out of Kuwait to join the fedayeen in southern Lebanon, he had decided that he could better serve the national cause by remaining a student. In McGeough’s words, he ‘was opting to live to fight another day’.


Mishal soon acquired the trappings of a quiet, middle-class life: a stable job as a high-school physics teacher, a wife and children. But in his spare time he was meeting behind closed doors with a group of Palestinian Muslim Brothers to develop what he called his ‘project’, the creation of an Islamic alternative to Fatah. The time had come, they believed, for Islamists to take part in the armed struggle, and to wrest control of the movement. They belonged to a new generation of Islamists who drew inspiration from the Iranian Revolution and the Afghan holy war; they pointed to the failure of secular Arab nationalists to govern effectively (or to confront Israel), and wanted to fuse the energies of nationalism and Islam. For them ‘there was no contradiction between fighting for Palestine and conducting a religious life.’ Mishal drew selectively on Palestinian history – including his father’s story – to argue that the Muslim Brotherhood, not Fatah, had launched the national resistance: ‘We’re the root; Fatah is a mere branch.’


To most observers, Mishal’s early efforts couldn’t have looked promising. Supporters of Fatah and the left far outnumbered Palestine’s Islamists, and Arafat controlled the purse strings of the PLO. But Arafat had little to show for his leadership of the PLO, apart from its survival. He had held it together thanks to his charisma and his flair for cutting deals, but he had involved the Palestinian movement, to disastrous effect, in Arab politics, above all in the Lebanese civil war. Though spartan in his own habits he had allowed corruption in the PLO to fester, since compromised allies were more easily controlled. And he governed in the style of the region, making decisions capriciously and without consulting anyone, as if his nickname, Mr Palestine, entitled him not to. Islamic opposition movements combining piety with political militancy were excoriating nationalist leaders throughout the region; what grounds were there for seeing the Palestinian movement as an exception? The main surprise, perhaps, is that it took so long.


In 1983, Mishal and his Kuwaiti allies presented their ‘project’ to a meeting of the Muslim Brotherhood in Amman. Arafat and his soldiers had recently been expelled from Lebanon, and the PLO, exiled to Tunis, had never seemed so far from achieving independence, or so directionless. Mishal, McGeough writes, gave a daring speech that amounted to a ‘full-frontal assault on the supremacy of Yasir Arafat’. His recommendations were adopted, and Mishal was made head of the Kuwait-based Jihaz Filastin – the Palestine Apparatus that would pay for military operations in the Occupied Territories. (McGeough, drawing uncritically on Mishal’s account, makes rather too much of this conference, claiming that it marks the founding of Hamas; in fact, Hamas was established four years later, at the Gaza home of Sheikh Yassin on 9 December 1987, the day the intifada broke out.) Mishal’s first assignment, as head of the Palestine Apparatus, was to raise money in the Gulf so that Yassin’s followers could undergo weapons training in Jordan. Tipped off by an informer, Israel jailed Yassin for plotting to destroy the Jewish state.


Yassin’s involvement in weapons training came as a shock to many Israelis; even today there are figures in Israeli intelligence who insist that his guns were pointed at Fatah. Ever since they occupied Gaza, the Israelis had been cultivating Yassin – a Muslim Brother who’d been jailed by Egypt – in their struggle against Palestinian nationalism, much as the Americans had supported the Afghan mujahedin. (McGeough suggests that some of the money raised by Muslims abroad in support of the mujahedin may have found its way to Palestine.) Yassin made no secret of his hatred of Israel, but, as a Muslim Brother, he believed that before taking up arms to recover their land, Palestinians would first have to undergo ‘ideological, spiritual and psychological re-education’. While secular nationalists mobilised against the occupation, in strikes and guerrilla attacks, Yassin promoted social works and religious instruction. Overlooking his belief that ‘re-education’ was only preparation for the impending jihad, the Israelis regarded him as a tactical ally against the PLO. In the early 1970s, while Israel repressed any stirrings of nationalist resistance, Yassin was permitted to open up the Islamic Centre, an umbrella organisation that included a mosque, a clinic, a kindergarten, a festival hall and a headquarters for an alms committee; with the occupier’s approval he was soon receiving considerable funds from the Gulf.


In the mid-1980s, the military governor of Gaza gave a succinct summary of Israel’s relationship to Yassin: ‘The Israeli government gives me a budget and the military government gives it to the mosques.’ After a trip to Gaza in 1985, Daniel Kurtzer, an official at the US embassy in Tel Aviv, barged into a meeting of Shimon Peres’s advisers and asked them: ‘Have you guys lost your minds? Do you ever learn from history? Do you know what you’re doing in Gaza as we speak? . . . You really think you can tame these guys?’ When Gazan Islamists wanted to cross over to the West Bank in support of their comrades in clashes with Fatah, the Israelis let them through. As one official explained to McGeough, ‘they’ll only be beating each other up.’


In fact, Yassin and other Islamists inside the Occupied Territories were drawing the same lessons from the revolutionary Islamic struggles in Iran, Afghanistan and Lebanon as Mishal and his comrades were in the diaspora: that the gradualist philosophy of the Brothers should give way to the rifle. In its 1988 charter, Hamas proclaimed its desire to ‘raise the banner of Allah over every inch of Palestine’ and depicted the Zionist project as the latest chapter of a Jewish conspiracy for world domination that had begun with the French Revolution, and continued with the Russian Revolution and two world wars. Yet the Israelis continued to indulge Hamas during the first few years of the intifada, focusing their repression on the secular National Unified Leadership of the Uprising, and allowing the Islamists to receive substantial funds from abroad. With this money – raised by Hamas-affiliated charities in Europe, the US and the Gulf – Hamas expanded its influence, building a vast network of schools, daycare centres, hospitals and athletic clubs.


Mishal relocated to Amman in 1990, when he and his family were forced to flee Kuwait after Arafat gave his blessings to Saddam Hussein’s invasion, thereby jeopardising the security of the 400,000 Palestinians who’d made a decent life for themselves in the emirate – not to mention his ties to the Gulf Arabs who bankrolled the PLO. Arafat’s mistake was Hamas’s good fortune: Gulf rulers who had paid for the PLO’s operating budget now wrote their cheques to Hamas, which had denounced Saddam’s attack. Drained of funds and desperate to come in from the cold, Arafat scurried to Madrid and then to Oslo; ignoring the warnings of Palestinian leaders from the Occupied Territories, he signed a deal in September 1993 that made him Israel’s policeman, while providing no guarantee of a freeze on Israeli settlements, or the creation of a sovereign Palestinian state. In no small part thanks to disappointment with Oslo – and frustration with Arafat and the ‘Tunisians’ who returned to govern the PA – Hamas became the main opposition party in Palestine, attracting support not primarily for its Islamic piety, but for its lack of corruption, and its willingness to stand up to Israel. It also developed a substantial military wing, the Qassam Brigades, which would launch a ferocious campaign of suicide attacks inside Israel in 1994, following Baruch Goldstein’s massacre of 29 Palestinian worshippers at the Cave of the Patriarchs mosque in Hebron. There could be no balance of power with Israel, but perhaps, Mishal and his men reasoned, there could be a balance of fear. Arafat won praise from the US and Israel as a ‘partner in peace’ for his brutal crackdown on Hamas. But he soon discovered that he could repress Hamas only at prohibitive cost to his own legitimacy.


Working under Mousa Abu Marzook in Hamas’s political bureau, Mishal kept a low profile during the first intifada: ‘A little obscurity is good. My comrades and God know what I have been doing.’ But according to regional intelligence agencies, he had established an increasingly influential position inside Hamas, overseeing ‘funds, weapons and military infrastructure’; some Israeli officials referred to him as Hamas’s prime minister. Agents observed that he avoided public highways in Lebanon, preferring roads used by the Syrian army, and that he travelled frequently to Singapore, Pakistan and other Muslim countries. Though he did not make an official appearance as a leader of Hamas until 1995, he was now, as head of the Palestine Apparatus and a member of the three-man military committee which directed the Qassam Brigades, Hamas’s single most powerful figure.


Mishal had a stroke of luck when, brushing aside the warnings of his colleagues, Marzook travelled to the US only six months after the Clinton administration declared Hamas a ‘terrorist’ organisation – and only a day after a suicide attack near Tel Aviv. He was arrested by the FBI at JFK airport and spent the next two years in prison, leaving Mishal to take over the political bureau. Marzook continued to think of himself as Hamas’s natural leader, but his visit to the US had infuriated his colleagues, and Mishal proved himself an adroit operator in the shura council. The rivalry between Mishal, a Kuwaiti Palestinian who’d never lived a day under occupation, and Marzook, a protégé of Yassin from a poor family in Gaza, was partly a reflection of the old tensions between Palestinians from the ‘inside’ and those from the diaspora. But matters of style and personality were just as important. Marzook was a gregarious, impulsive man who enjoyed an audience; Mishal was a careful, patient listener who won over his colleagues with his seriousness and with his rigorous adherence to the principles of shura. And so when Marzook returned to Jordan in 1997, he found himself out of a job.

The failed assassination gave Mishal a renewed sense of purpose: ‘I’ve been given a new life for a new role,’ he said. Two years later, he was deported by Hussein’s heir, King Abdullah, but soon found a home in Damascus, where, like Hizbullah, Hamas has given the Syrians a card to play in their efforts to recover the Golan Heights. In return, Syria has provided him with protection from Israel, which has assassinated dozens of Hamas militants since the second intifada, including Sheikh Yassin, killed by a helicopter gunship in March 2004. After Yassin’s death Mishal became Hamas’s undisputed leader. And in November of that year, another obstacle to Mishal – and to Hamas’s eclipse of Fatah – vanished when Arafat died. Without Arafat, and under Abbas’s impotent, feckless leadership, Fatah was rudderless. Hamas now dominated Palestinian politics.


Mishal is often portrayed as the ‘hardliner in Damascus’, in implicit (and unfavourable) contrast with Hamas ‘moderates’ in the Occupied Territories. But McGeough, who spent many hours talking to Mishal, situates him at Hamas’s ‘pragmatic centre’. He is a militant, but not a fanatic; a nationalist, not a proponent of transnational jihad. (An American analyst told McGeough: ‘I’ve met him three times now and I still have not heard him say the word “Islam”.’) It’s true that Mishal led the opposition inside the shura to participating in the 1996 parliamentary elections, arguing that to do so would be to admit the legitimacy of the Oslo Accords. But he also argued in favour of taking part in the 2006 elections, inspired by the example of Hizbullah in Lebanon, and led Hamas to a decisive victory. As McGeough points out, Hamas ran on a platform of reform, promising clean governance and transparency; it made no mention of an Islamic state in its electoral manifesto, and hardly spoke of violence, leaving Fatah to boast of its contribution to the armed struggle. During the campaign Mishal spoke to rallies from Damascus, through a mobile phone held to the microphone of a loudspeaker. Hamas’s victory was greeted with a diplomatic boycott by the powers that had urged democracy on the Palestinian people, along with efforts to ‘bolster’ Abbas and, ultimately, to foment civil war between Hamas and Fatah.


The West responded this way to the elected government of Hamas because it refuses to renounce violence, abide by previous agreements between Israel and the PA, and recognise the state of Israel. Mishal’s view is that if Hamas were to satisfy the Quartet’s three demands, there would be little to distinguish Hamas from Fatah, which renounced violence, repudiated its claim to 78 per cent of historical Palestine and accepted Israel’s legitimacy – and got very little in return except an interminable ‘peace process’. Israel, in Mishal’s view, would never have removed the settlers from Gaza had it not been for the Qassam rockets fired at Sderot. Hamas, he insists, will continue the armed struggle until the occupation ends. Yet his movement does not use force indiscriminately, and, as many Israeli officials acknowledge, he has honoured ceasefires more faithfully than Arafat did.


Mishal does not accept Israel’s ‘right to exist’ – this would be tantamount, in Hamas’s eyes, to legitimising their own dispossession – but de facto recognition is another matter, and he has on several occasions advocated a hudna of 20 to 30 years. At a summit in Mecca on 7 February 2007 he expressed Hamas’s support for continued negotiations based on a two-state deal along the 1967 border, a position that, McGeough suggests, brings him closer to Washington’s official position than Netanyahu, who advocates only a vague ‘economic peace’. Until a Palestinian state is established, and there is some parallel recognition by Israel of Palestinian rights to national self-determination – and some resolution of the refugees’ plight – Mishal is not going to recognise the Jewish state. And in Mecca he agreed only to ‘respect’ – not ‘abide by’ – earlier agreements with Israel. But he has also indicated that Hamas’s stated positions are far less important than its actions: ‘Watch what we do, not what we say.’


What this means is that Hamas is likely to continue calling for the liberation of Palestine from the river to the sea, while at the same time seeking an end to the occupation and the establishment of a Palestinian state in the West Bank, Gaza and East Jerusalem. Mishal and his associates don’t view the two-state arrangement as anything like a long-term solution to the conflict, but they are realists, and they are willing to live with it – provided it doesn’t result in the cantonisation of Palestinian land, and provided it’s not a way of shutting them out, as Abbas and the West intend it. Hamas wants to be a part of the deal, and, as it demonstrated during the Oslo years, is in an ideal position to play the role of spoiler if it’s not.


As for the 1988 charter, with its luxuriant borrowings from the Protocols of the Elders of Zion, Hamas isn’t likely to repudiate it, particularly if it comes under pressure to do so: it was precisely Western calls for repudiation that led Hamas to suspend its efforts to revise it, and to eliminate the offending passages. But Mishal and other Hamas officials have indicated on several occasions that the charter is a historical document that long ago ceased to reflect their thinking. Mishal is reported to consider it an embarrassment, and has insisted that the conflict with Israel ‘is a political issue between us; it is not theological.’ Although he has authorised – and indeed praised – the use of suicide attacks against Israeli civilians, he has also emphasised that ‘we do not fight you because you belong to a certain faith or culture . . . We have no problem with Jews who have not attacked us.’ Unlike most of the secular nationalist factions, including Fatah, Hamas has never struck at targets outside the zone of conflict.


Mishal is not a charismatic leader in the mould of Arafat, or even of Yassin. He’s a good speaker, yet he has arrived at his position not by giving speeches, but rather, McGeough suggests, by patiently fielding the views of his colleagues inside Hamas’s shura. By promoting discussion and consensus, he’s been able to steer Hamas towards an implicit acceptance of coexistence with Israel. Despite his commitment to the armed struggle, he is not a hothead, and he is far less interested in martyrdom than in lifting the blockade, securing the release of Palestinian prisoners, and achieving recognition for Hamas on the international stage. Unlike some of Hamas’s leaders, particularly those who have spent their lives under occupation, Mishal has travelled widely, and he understands the way things work in the outside world. The world, in turn, has begun to take notice of him. He may be a ‘Specially Designated Global Terrorist’ in the eyes of the US Treasury, but he has been receiving an increasing number of visitors from the West, as well as a handful of Jewish leaders.


As the director of Hamas’s foreign policy, Mishal has forged a close alliance with Syria and Iran, the so-called resistance bloc; he has been a frequent guest in Tehran, which is reported to smuggle weapons to Gaza through Sudan and Cyprus. But he has been careful to preserve his movement’s independence, and has developed cordial relations with Saudi Arabia, Qatar and, increasingly, Turkey. ‘Hamas is not an Iranian tool,’ a former senior Israeli official told McGeough. ‘Hamas needs Tehran and Damascus, but it’s a balance that Mishal manages well.’ As Mishal points out, he wouldn’t have gone to Mecca in February 2007 or supported the Saudi peace plan – or backed the Sunni insurgents in Iraq – if he were simply a client of Tehran.


Will the Obama administration talk to Hamas? In a recent interview with La Repubblica, Mishal said that it was just ‘a matter of time’. In American think tanks close to the administration (and, one imagines, in the State Department), it’s understood that Hamas will have to be engaged sooner or later: Abbas simply does not command enough support among Palestinians to reach a deal on his own, and if Hamas is destroyed, it’s likely to be replaced not by Fatah, but by jihadi extremists. In March, a bipartisan group of senior American officials – including Paul Volcker, an economic adviser to Obama, the former Republican senators Chuck Hagel and Nancy Kassebaum, the former World Bank president James Wolfensohn and the former UN ambassador Thomas Pickering – urged Obama to talk to Hamas. But the power of the Israel lobby makes any direct overture risky. Legal restrictions, too, would have to be overcome: three years ago, the US Congress passed a law banning the use of funds for diplomatic contact with Hamas, and ended assistance to any Palestinian ministry connected to Hamas. Although Hamas has never attacked American interests, Obama may find it hard to authorise talks with the ‘specially designated global terrorists’ in its leadership. And while the administration is pursuing a thaw with Damascus, George Mitchell isn’t likely to stop by Mishal’s bunker. Just how Mitchell expects to reach a deal without talking to Hamas isn’t clear. As Mishal remarked to McGeough in a recent interview, ‘Would he have succeeded in Belfast if he was ordered to ignore the IRA?’


Isolating Hamas, however, remains the order of the day, and it was the unspoken subtext of the recent ‘donors conference’ at Sharm el-Sheikh, where leaders from the West and the Arab world came to pledge £3.2 billion in aid to the Palestinians. Hamas was not invited, since the purpose was to bolster Abbas and the PA. And though it was Gaza, not the West Bank, that was devastated during Israel’s offensive, most of the funds will go to the PA in Ramallah. (Of the $900 million the US has pledged, $600 million has been earmarked for the PA to ‘reorganise itself’.)

In an implicit concession to Hamas, Hillary Clinton recently said that Washington would not oppose the formation of a unity government between Fatah and Hamas, but she added that the US ‘will not deal with nor in any way fund’ a Palestinian government that fails to meet the Quartet’s three conditions: a demand it hasn’t imposed on the coalition government in Lebanon, in which Hizbullah has veto power; or indeed on such pro-Western Arab governments as Saudi Arabia that have yet to make peace with Israel. Meanwhile, Israel has prevented construction materials from entering Gaza, partly because of their alleged ‘dual use’ in arms production – but also as a means of pressuring Hamas to release Corporal Gilad Shalit – and even pasta and lentils have been turned away at the crossing.


None of this is going to turn Palestinians against Hamas, any more than America’s arming of Fatah or Israel’s attack on Gaza did. Hamas is part of the fabric of Palestinian politics, and neither force nor diplomatic isolation will make it go away. Its history is one of tenacity in the face of enormous odds: it has been nourished by the efforts to destroy it. No one is in a better position to appreciate this than Israel’s new prime minister who, once again, finds himself facing the martyr who would not die.
=

Magazine: G.M., Detroit and the Fall of the Black Middle Class By JONATHAN MAHLER

Magazine: G.M., Detroit and the Fall of the Black Middle Class
By JONATHAN MAHLER
The Powell family left the South in the 1960s, seeking
better opportunities up North in the auto industry. Now the
life they built is in danger of slipping away.

Full Story:
http://www.nytimes.com/2009/06/28/magazine/28detroit-t.html?emc=tnt&tntemail1=y

Opinion: Invent, Invent, Invent By THOMAS L. FRIEDMAN

Opinion: Invent, Invent, Invent
By THOMAS L. FRIEDMAN
The country that endows its people with more tools and
basic research to create new goods and services is the one
that will not just survive this crisis but thrive down the
road.

Full Story:
http://www.nytimes.com/2009/06/28/opinion/28friedman.html?emc=tnt&tntemail1=y

The End of the Beginning? BY TRITA PARSI, REZA ASLAN | JUNE 26, 2009

The End of the Beginning?
http://www.foreignpolicy.com/articles/2009/06/26/the_end_of_the_beginning
BY TRITA PARSI, REZA ASLAN | JUNE 26, 2009

Iran's popular uprising, which began after the June 12 election, may be heading for a premature ending. In many ways, the Ahmadinejad government has succeeded in transforming what was a mass movement into dispersed pockets of unrest. Whatever is now left of this mass movement is now leaderless, unorganized -- and under the risk of being hijacked by groups outside Iran in pursuit of their own political agendas.

In 1999, students in Iran demonstrated against the closing of reformist newspapers. The unrest lasted a few days and was brutally suppressed. The demonstrators were almost exclusively students. No other segments of society joined their ranks in any meaningful numbers. With their limited appeal to other segments of society, the demonstrators failed to grow in numbers and attain their political objectives.

The demonstrations following the Iranian election on June 12 share few if any characteristics of the student uprising of 1999. What we have witnessed taking place in Iran is a mass movement attracting supporters from all walks of life, all demographics, all classes, and even all political backgrounds. Even supporters of Mahmoud Ahmadinejad have expressed discomfort with the developments in Iran, arguing that they voted for Ahmadinejad because they thought he would be a better president, and not because he would be a better dictator.

Indeed, the post-election demonstrations have neither been an uprising of intellectuals and students nor die-hard anti-regime elements from northern Tehran. Instead, the masses that poured in the streets included large numbers of people who often have been loyal to the Iranian government and who in many ways have a stake in its survival. (We can call them Iran's political middle, or its swing voters.) This is precisely why this movement has constituted such a threat to the Iranian government -- not once since 1979 has such an alliance of Iranians come together.

Knowing very well that the opposition's ability to attract Iranians of all backgrounds constituted a major threat to the government, the Iranian authorities moved quickly to peel away layer after layer of people from the movement to reduce it to a much smaller and more manageable core of regime -- not Ahmadinejad -- opponents. The Ahmadinejad government's tactics were predictable: It combined a most brutal clampdown on protesters with propaganda alleging that the opposition movement was orchestrated by foreign elements and exiled opposition groups.

The Mousavi camp sought to counteract these measures and retain its ability to attract a diverse array of Iranians by grounding its slogans and resistance in the language and symbolism of the revolution itself. Mousavi, in a direct challenge to Ayatollah Ali Khamenei, presented himself and the movement as the guardians of the revolution, and protesters in the street recycled slogans from the 1979 era, including the chant "Allahu Akbar."

Although successful at first, the discipline has clearly broken down. This should be no surprise -- the movement is by now in effect leaderless. A source close to Mousavi says that the first and second circle of people around Mousavi have all been arrested or put under house arrest. Mousavi himself has limited ability to communicate with his team and his followers. The lack of leadership is visible on the streets, where demonstrators exhibit unparalleled will and courage, but lack direction and guidance.

Indeed, the lack of organization and execution is perhaps the most convincing evidence that the anti-Ahmadinejad movement is completely homegrown and void of any attempt to emulate the velvet revolutions of Central Asia and Eastern Europe. What is driving people to the streets is their sense of frustration and anger -- not a well-devised plan and training in clever nonviolent resistance techniques.

The leadership vacuum does not bode well for the movement's prospects of success, particularly when it comes to attracting those Iranian swing-voters to its side once more. And this creates openings for external meddling -- just not the kind you think.

Exiled opposition groups, whose political agenda sharply differs from that of the protesters in Iran -- indeed, many of these groups urged people not to vote in the elections -- have sought to fill the vacuum left by a beheaded and directionless indigenous movement. Though the outrage of these exiled groups against the Iranian government’s brutal violence is genuine, their efforts to impose themselves on the political scene have caused great frustration among opposition elements inside Iran. At a time when the movement in Iran is paralyzed, efforts by exiled groups -- groups that scorned the protesters only weeks ago for choosing to participate in the elections -- to fill the leadership vacuum are viewed as nothing less than a maneuver to hijack the movement.

This is playing right into the hands of the Ahmadinejad government, precisely because it would weaken, if not eliminate, the indigenous movement's trump card: its ability to attract the Iranian swing-voters back to its side. If the exiled opposition groups and their neo-conservative backers in the United States prevail in aiding the Ahmadinejad government, what started out as the largest Iranian mass movement since 1979 may end up as little more than the student demonstrations of 1999. Which is to say, an instance of hopes raised, then dashed.



Trita Parsi is president of the National Iranian American Council and author of Treacherous Alliance: The Secret Dealings of Israel, Iran and the U.S. Reza Aslan is the author of How to Win a Cosmic War: God, Globalization, and the End of the War on Terror.

Fixing Global Finance by Robert Skidelsky: Book Review

The current (July 16) New York Review of Books contains a brilliant review (http://www.nybooks.com/articles/22898) of Martin Wolf's latest book, Fixing Global Finance, by Robert Skidelsky, Emeritus Professor of Political Economy at Warwick University, England. The concluding section, reproduced below, is a succinct description of the relationship of the dollar to American hegemonic power that bears close reading.

Begin Text

... Wolf's book offers important pointers to the way ahead. But his story is only half-told. He has very little to say about America's responsibility for both creating and ending the system of global imbalances. For the fact is that the present system has suited the United States—specifically the power holders in the United States—just as much as it has those in China. The phrase "it has enabled the Americans to live beyond their means" is too vague to be useful. One needs to ask: which Americans? Certainly many middle- and low-income American households have been given opportunities to borrow beyond their means.

But secondly, the American–Chinese symbiosis has been excellent for US business profits. American businessmen have been complicit in Chinese "super-competitiveness" by arranging for manufacturing jobs to be moved to China from the US in order to cut costs. The decline in US manufacturing and the growth in nontradable services, and the financial operations that secured this restructuring, have enabled financiers and businessmen to earn huge profits that should have been shared with their workers. Morally, the financial community has been living well beyond its means. But perhaps above all, by getting other countries to finance its imperial pretensions, the US government has been able to live beyond its means. Wolf refers in several places to the "exorbitant privilege" of the US dollar, but omits entirely to discuss the political benefits that this privilege buys.

This points to the main weakness of Fixing Global Finance: the lack of a historical perspective. The history of the overprivileged dollar, after all, goes all the way back to the 1960s. Its roots lie in the failure of John Maynard Keynes's plan for a Clearing Union, which he worked out during World War II. The Keynes plan was specifically designed to prevent creditor countries from hoarding reserves by trading at undervalued currencies. If they did not spend their surpluses, the surpluses would be confiscated and redistributed among debtor countries. In this way a global balance between saving and investment would be secured through a balanced trade position, which would in turn allow fixed, but adjustable, exchange rates.

The Bretton Woods agreement of 1944 adopted the proposal for fixed but adjustable rates, but failed to provide a remedy against countries with trade surpluses accumulating, or hoarding, reserves. In practice, the problem was solved by the United States taking the place of nineteenth-century Britain as the chief supplier of foreign investment funds. The outflow of American savings helped reconstruct Europe after the war, and kept global demand buoyant throughout the Bretton Woods era. The dollar replaced gold as the world's chief reserve currency. This allowed the US to print dollars to cover its growing trade deficit. The arrangement suited both the Europeans and the United States, because it not only enabled the Europeans to export to America at undervalued exchange rates, but it also covered the cost of America defending Western Europe and non-Chinese East Asia against communism. In other words, the "exorbitant privilege" of the dollar allowed the US to pursue an imperial mission that, in the era of the cold war, was greatly to the satisfaction of its partners and allies.

The privileged position of the dollar survived the collapse of the Bretton Woods regime of fixed-exchange rates in 1971. In theory, the resulting system of floating exchange rates removes the need for any reserves at all, since adjustment of current account imbalances was supposed to be automatic. But the need for reserves unexpectedly survived, mainly to guard against speculative movements of short-term investment—"hot money"—that could drive exchange rates away from their equilibrium values. Starting in the 1990s, East Asian governments unilaterally erected a "Bretton Woods II," linking their currencies to the dollar, and holding their reserves in dollars. This reproduced both the benefits and faults of Bretton Woods I: it avoided global deflation, but undermined the long-run credibility of the dollar as the global reserve currency.

The new arrangement allowed the United States to continue to enjoy the political benefits of "seigniorage"—the right to acquire real resources through the printing of money. The "free" resources were not just unpaid-for imported consumer goods but the ability to deploy large military forces overseas without having to tax its own citizens to do so. Every historian knows that a hegemonic currency is part of an imperial system of political relations. Americans acquiesced in the unbalanced economic relations initiated by East Asian governments in their undervaluation of their currencies because they ensured the persistence of unbalanced political relations.

A willingness by the US government to end macroeconomic imbalances thus depends on its willingness to accept a much more plural world—one in which other centers of power in Europe, China, Japan, Latin America, and the Middle East assume responsibility for their own security, and in which the rules of the game for a world order that can preserve the peace while effectively tackling the challenges posed by terrorism, climate change, and abuse of human rights are negotiated and not imposed. Whether, even under Obama, the US is willing to accept such a political rebalancing of the world is far from obvious. It will require a huge mental realignment in the United States. The financial crash has disclosed the need for an economic realignment. But it will not happen until the US renounces its imperial mission.

End Text (dated June 17)

No Way Out of the Settlement Conflict? by Wiliam Pfaff

No Way Out of the Settlement Conflict?

Wiliam Pfaff

Paris, June 25, 2009 – The Obama administration’s confrontation
with Israel over its colonies inside the Palestine territories began
as a test of Prime Minister Benjamin Netanyahu’s willingness to enter
serious negotiations on a Middle Eastern settlement. It actually
possesses potential dimensions that few today imagine.

Netanyahu first counted on the Likud and settlement lobbies
in Washington to produce, as always in the past, a disingenuous
formula that would allow the colonies to continue to expropriate
Palestinian land and expand the settlements, while the American
government oversaw essentially meaningless negotiations with the
Palestinians.

The prime minister was just in Europe, and told
RAI, Italian state radio, that after President Barack Obama had
declared in his Cairo speech that the construction of new settlements
must stop, he – Netanyahu – had replied “No,” but had accepted
Obama’s call for a two-state solution with the Palestinians, which he
previously had refused, provided that it took place under specified
conditions.

The conditions would deny a prospective Palestine state of
full sovereignty, control of its frontiers or of its security,
economy and trade, airspace, and water and other natural resources.
The conditions are obviously unacceptable, as they are meant to be.

Netanyahu’s proposal constituted a message to the Palestinians that
they should expect nothing from his government, and to Barack Obama
that Israel expects the United States to ask nothing further from it,
and to resume the meaningless negotiations that have gone on since
the first George Bush tried and failed to confront Israel on
extension of the settlements.

The Israeli president went on to say, “I think the more we
spend time arguing about [the settlements] the more we waste time
instead of moving towards peace.”

On Wednesday he paid an official visit to France, expecting
congratulations on his agreement to the creation of a Palestinian
state. Instead, President Nicolas Sarkozy told him that France
“would no longer accept Israeli subterfuges meant to disguise colony
construction by the pretext of ‘natural growth’ in the settlements.”

This position already had been characterized by Israeli Foreign
Minister Avigdor Lieberman as making it “impossible for Israel to
build synagogues or kindergartens, or to add rooms for expanding
families in the settlements.”

Lieberman, who immigrated to Israel from Moldavia, wishes Israel’s
Arab citizens – survivors of the original Arab population of what is
now Israel -- issued with special identity documents and encouraged
to quit Israel. One might think that if they did they would leave
real estate vacancies that could accommodate expanding Jewish settler
families.

Prime Minister Netanyahu was scheduled to meet on Thursday in Paris with
former U.S. Senator George Mitchell, President Obama’s special envoy
on Middle Eastern affairs, but the meeting was canceled by the
American side (according to the Israeli newspaper Yedioth Ahronoth),
and Mitchell stayed in Washington. The White Houses unofficially
made it known that there would be no further meetings with Netanyahu
until there was a real settlement freeze. (The Israeli denial of the
newspaper report, and the Washington statement that the cancellation
was mutual, were obvious flimflam.)

Now this is all very well, in principle a long-overdue restoration
of justice and realism to American policy on Israel and Palestine,
but what follows? Would the American position on a settlement freeze
be enforced with financial or political sanctions if the Netanyahu
government refused to yield?

Netanyahu was elected in order to defy the United States on the
colonies and on Palestinian statehood. Since few sensible people in
Israel wish to alienate Washington, the Netanyahu government, again
in principle, might be brought down by American sanctions.

What then? The settlement movement, which has gone on now for some
four decades, has become integral to the Israeli perception of
national destiny and national security. The number of Israeli
settlers in the West Bank and the Palestinian sector of Jerusalem now
approaches a half-million. The settlements with their connecting
roads, security installations and outposts dominate some 40 percent
of the West Bank Territories.

Geoffrey Aronson of the Foundation for Middle East Peace in
Washington, sympathetic to the Palestinians, writes in the
Foundation’s most recent newsletter that merely a freeze in
settlement construction would require Israel to “undo the system by
which the military establishment, the legislative and executive arms
of the state, settlers, and public, private, and supranational
communal organizations collaborate in the encouragement and expansion
of settlements.”

Major elements in the state administration, defense forces,
planning and budget agencies, and security programs and practices,
plus the incentives to individuals and business to develop the
settlements, would have to be undone.

He concludes that even a real freeze would require “an undertaking
so complex and requiring an Israeli political decision so profound
that no Israeli government would undertake [it] except as a result of
a broader decision to terminate [the entire occupation of the
Palestinian territories].”

That is wholly impossible without a huge, internationally-
guaranteed reconstruction of the security relationships of
Palestinians, Israelis, and the surrounding Arab states, which is all
but unimaginable. But then what is imaginable? Going on as things
are? Clarification of Obama administration policy is essential.

© Copyright Tribune Media Services International. All Rights Reserved.



This article comes from William PFAFF
http://www.williampfaff.com
The URL for this article is:
http://www.williampfaff.com/article.php?storyid=411

Pakistani and North Korean Stockpiles; Gordon Prather on nuclear double standards

Pakistani and North Korean Stockpiles

Gordon Prather on nuclear double standards


http://original.antiwar.com/prather/2009/06/26/pakistani-and-north-korean-stockpiles/

The Great American Bubble Machine by Matt Taibbi

http://www.scribd.com/doc/16763183/TaibbiGoldmanSachs

The Great American Bubble Machine by Matt Taibbi

Nixon administration pressured Israel on nukes

Nixon administration pressured Israel on nukes: The memorandum, part of a collection of memos and tape recordings released Tuesday by the Nixon Presidential Library, shows efforts to get Israel to sign the 1968 Nuclear Nonproliferation Treaty. This would have required Israel to open itself to international inspection and dismantle any nuclear weapons program it had.

http://www.kansascity.com/437/story/1276898.html

The Prescience of Protest - Natan Sharansky, Los Angeles Times opinion.

The Prescience of Protest - Natan Sharansky, Los Angeles Times opinion.

Once again, the world is amazed. As with the seemingly sudden appearance of the Solidarity movement in Poland in the 1980s, or the gaudy, grand-scale collapse of the Soviet empire at the end of that decade, the massive revolt of Iranian citizens has elicited the unmitigated surprise of the free world's army of experts, pundits and commentators. Who would have known? Who could have predicted this eruption of protest in a system so highly repressed, where a generally quiescent populace lives under such a deeply entrenched revolutionary regime? And yet, just as in the Soviet Union and Eastern Europe, there were those in Iran who did know all along, who foresaw and even foretold today's events. These were Iran's democratic dissidents, some at home, some in exile, some having served long sentences in Iranian prisons or on their way to those prisons right now. At various Western conferences and forums in recent years, some of these dissidents even succeeded in gaining the ear of leaders of the free world. They were greeted with sincere expressions of sympathy and support - but also with silent skepticism. Surely their assessments of the Iranian situation were unreliable at best. Heroic they undoubtedly were, but objective? After all, they lacked access to classified information, to satellite photography and the other tools of modern intelligence-gathering. They could not see the whole picture.
http://www.latimes.com/news/opinion/la-oe-sharansky26-2009jun26,0,4086358.story

Obama, the Neocons and Iran - Robert McFarlane, Wall Street Journal opinion

http://online.wsj.com/article/SB124597229537457063.html

Obama, the Neocons and Iran - Robert McFarlane, Wall Street Journal opinion. One casualty of the Iraq war has been the confusion among politicians about the proper place of democracy promotion in American foreign policy. Iran's recent election - which evoked a very vocal, frustrated opposition - brings into sharp focus the urgent need for clarity concerning this issue. Do we support those seeking freedom from oppression? And if so, how? It may do well to recall how we got into this confused state. Sixteen or so years ago a small circle of cold warriors, flush with victory, concluded that with the dissolution of the Soviet Union democracy and free enterprise had been vindicated. To these neoconservatives, the task of future American presidents would be to spread the gospel of democracy - using force if necessary - so that governments everywhere would become accountable to their people and thus less likely to wage war. In 2003, it was arguably democracy promotion, rather than the threat of weapons of mass destruction, which triggered the US invasion of Iraq. Throughout his two terms in office, President George W. Bush was an indefatigable advocate of democracy, even when it resulted in the victories of such un-Jeffersonian parties as Hezbollah and Hamas. Thus began the neocon versus realist battle. The current situation in Iran offers an opportunity to turn this debate in a less doctrinaire, more coherent direction.

Other Options Haven’t Worked: Let’s Try Diplomacy by Haviland Smith

Other Options Haven’t Worked: Let’s Try Diplomacy

June 25, 2009

By Haviland Smith

Since the Second World War, the Republicans have said consistently that the Democrats’ main foreign policy problem is that they are either unable or unwilling to successfully and purposefully project American power abroad. In this context, there are three means by which we can project power abroad: We can do it with military operations, we can do it with covert, regime change/intelligence operations and we can do it with diplomatic operations.

Over those sixty-odd years, American administrations are said to have been involved in 32 cases of either military or covert intelligence projections of power in which we have attempted to overthrow sitting governments. They range from Korea through Iran and Cuba to Bosnia and Afghanistan. Democrat administrations have been involved in 10 of those operations where Republicans have supported 22. Some, like Korea, Cuba, Afghanistan and Iraq have been supported by both Republican and Democrat administrations.

Thus, it would appear that, successful or not, Republicans are better than twice as likely to project power through military or intelligence operations than are the Democrats.

Just what have all those operations really done for America? Let’s examine alleged US Intelligence or regime change operations first. Consider Iran (1953), Guatemala (1954), Costa Rica (1955), Syria (1957), Indonesia (1958), Dominican Republic (1960), Peru (1960), Equador (1960), Congo (1960), Cuba (1961), Brazil (1964), Chile (1972), Angola (1975) and Nicaragua (1981). Our “success” in installing Shah Reza Pahlavi in Iran haunts us to this day. Cuba helped solidify Castro in power. The remaining Latin America operations left us with a “big brother”, negative legacy that still infuriates our Latin neighbors. Ditto those in Africa and Islam.

Our military projections of power can be examined in Korea (1950-53), Viet Nam (1961-73), Lebanon (1982-84), Grenada (1983), Panama (1989), Iraq (Gulf) (1991), Somalia (1993), Bosnia (1994-95), Kosovo (1999), Afghanistan (2001-date) and Iraq (2003-date). With the possible exception of Bosnia and Kosovo where we have dampened ethnic hatred at least for the moment (a positive outcome) and maybe Panama, all of which were of relatively minor international importance, it is really hard to see the benefits of our other, larger scale, military adventures. Korea remains divided and leaves a nuclear North Korea. Viet Nam was a loss. Afghanistan and Iraq do not look likely to be wins.

So, in relation to the amount of US national treasure poured into these military and intelligence adventures, the return seems pretty meager. That was obvious from the start in Korea and Viet Nam where we were motivated by a largely imagined communist threat. Yet, we went ahead, repeating the same behaviors for over sixty years, always finding a questionable, illusory threat, now terrorism, to justify our actions. And we still haven’t stopped. Or have we?

Surprisingly, President Obama has chosen to prolong the Iraq and Afghanistan operations, yet it would seem from his recent statements that a really basic change is underway in our foreign policy. He says we are not at war with Islam. He speaks of “respect” for Islam and of talking with Iran and perhaps even with the Taliban. It seems likely this new president is going to employ the most underused tool of power projection in our national arsenal, one that has not seen the light of day for almost eight years. – Diplomatic power.

And what happens? President Obama is attacked immediately by a cross-section of the press and the entire political spectrum as soft on terror, soft on Iran, soft on Islam, and soft on our enemies whoever they may be. Comfortable with the clearly unsuccessful past, these critics see anything other than confrontation with our adversaries as appeasement at best and capitulation at worst.

Today’s Republicans have come full circle. They have had their fling at projecting power through military and intelligence operations at the expense of coalition building and diplomacy. By any reasonable standard, they have come up empty. There is really nothing left for them to do but paint today’s Democrats as capitulators and appeasers who are soft on everything and unwilling or unable to appropriately project American power abroad!

If we read history, which most politicians and many of our most prolific media commentators apparently do not, then it is time to put our old military and intelligence projections of power aside, if only because they have not served our interests in the post-WWII world. We have not employed diplomatic power as a primary weapon for years. We really need to give it a chance, It is our best if not only option in today’s new, confusing and increasingly complicated world.

Haviland Smith is a retired CIA Station Chief who served in Eastern and Western Europe, the Middle East and as chief of the counterterrorism staff. A longtime resident of Brookfield, he now lives in Williston.

US Nuclear Umbrella: Double-Edged Sword for S. Korea From The Korea Times:

US Nuclear Umbrella: Double-Edged Sword for S. Korea

From The Korea Times:

Amid growing concern about North Korea's high-stake nuclear gamesmanship, the United State has vowed to provide an ``extended'' nuclear umbrella to South Korea, where no tactical nuclear weapons are present.

Debates are under way, however, on the effectiveness of this in the case of conflict on the Korean Peninsula.

Proponents say the U.S. commitment to providing extended nuclear deterrence capabilities will help prevent the North from ``miscalculating'' that it would gain anything from missile and nuclear tests.

Opponents argue the U.S. nuclear deterrence pledge could only provoke the communist North and send the wrong message that Pyongyang is a recognized nuclear state.

Read more ....http://www.koreatimes.co.kr/www/news/nation/2009/06/120_47427.html

NEFA Foundation: Transcript of Shaykh Mustafa Abu al-Yazid's Al-Jazeera Interview By Evan Kohlmann

NEFA Foundation: Transcript of Shaykh Mustafa Abu al-Yazid's Al-Jazeera Interview
By Evan Kohlmann

nefayazid.jpgThe NEFA Foundation has obtained a transcript of an Arabic-language interview Shaykh Mustafa Abu al-Yazid (a.k.a. “Shaykh Saeed”) gave to Al-Jazeera television on June 22, 2009. Asked about Pakistani nuclear weapons, Abu al-Yazid replied, "Allah-willing the nuclear weapons will not fall in the hand of the Americans, and the Muslims take them [weapons] and use them against the Americans Allah-willing.” Commenting on Hezbollah, he said, “Hezbollah, we do not consider it an Islamic Party and it is a rejectionist party as you know, and its loyalty is towards Iran…a complete loyalty. There is no relationship between us and them, and what we mean is the mujahideen from the people of Sunna like Fatah al-Islam in Lebanon; they are the ones we commend and the likes of them.” And addressing Iran, he stated, "Regarding Iran, we consider it a state of hypocrisy and schism, and it is the state that appears Muslim and claims Islam but in fact it fights the Muslims."

The English transcript can be downloaded from the NEFA Foundation website.
June 26, 2009 09:07 AM Link http://www.nefafoundation.org/documents-aqstatements.html#abuyazidqa0609

Obama's Used Green Team Meet the Retreads By JEFFREY ST. CLAIR

Obama's Used Green Team
Meet the Retreads
By JEFFREY ST. CLAIR

Of all of Barack Obama's airy platitudes about change none were more vaporous than his platitudes about the environment and within that category Obama has had little at all to say about matters concerning public lands and endangered species. He is, it seems, letting his bureaucratic appointments do his talking for him. So now, five months into his administration, Obama's policy on natural resources is beginning to take shape. It is a disturbingly familiar shape, almost sinister.

It all started with the man in the hat, Ken Salazar, Obama's odd pick to head the Department of Interior. Odd because Salazar was largely detested in his own state, Colorado, by environmentalists for his repellent coziness with oil barons, the big ranchers and the water hogs. Odd because Salazar was close friends with the disgraced Alberto Gonzalez, the torturer's consigliere. Odd because Salazar backed many of the Bush administration's most rapacious assaults on the environment and environmental laws. Odder still because Salazar, in his new position as guardian of endangered species, had as a senator repeatedly advocated the weakening of the Endangered Species Act.

Salazar never hid his noxious positions behind a green mantle. Obama certainly knew what he was buying. And the president could have made a much different and refreshing choice by picking Rep. Raul Grijalva, the Arizona Democrat, a Hispanic, a westerner and a true environmentalist who had helped to expose the cauldron of corruption inside the Bush Interior Department. Yes, Obama could have picked a western environmentalist; instead he tapped a prototypical western politician with deep ties to the water, oil, timber, ranching and mining industries. So the choice was deliberate and it presaged the deflating policies that are now beginning to stream out of his office, from siding with Sarah Palin against the polar bear to greenlighting dozens of Bush-era mountaintop removal mining operations across Appalachia. (As CounterPunch pointed out last fall, Obama and Palin have long since established symbiotic harmony on God's Pipeline, the proposed $30 billion natural gas pipeline that, if constructed, will slice across the tundra and boreal forests from Prudhoe Bay through Canada to Chicago.)

Salazar wasted no time in turning the Interior Department office into a hive of his homeboys. This group of lawyers and former colleagues have already earned the nickname the Colorado Mafia, Version Three. It's Version Three because Colorado Mafia Version One belonged to James Watt and his Loot-the-West zealots from the Mountain States Legal Fund. The Version Two update came in the form of Gale Norton and her own band of fanatics, some of whom remain embedded in the Department's HQ, just down the hall from Salazar's office.

Beyond a perverse obsession with Stetson hats, Salazar and Watt share some eerie resemblances. For starters, they look alike. There's a certain fleshy smugness to their facial features. Who knows if Salazar shares Watt's apocalyptic eschatology (Why save nature, Watt once quipped, when the end of the world is nigh.), but both men are arrogant, my-way-or-the-highway types. Watt's insolent demeanor put him to the right even of his patron Ronald Reagan and ultimately proved his downfall. Salazar may well meet the same fate—if Obama, knock-on-wood, doesn't nominate him for the next Supreme Court vacancy first. Most troubling, however, is the fact that both Watt and Salazar hold similar views on the purpose of the public estate, treating the national forests and Bureau of Land Management lands not as ecosystems but as living warehouses for the manufacture of stuff: lumber, paper, wedding rings, meat, energy.

With this stark profile in mind, it probably comes as no big shock that the man Salazar nominated to head the Fish and Wildlife Service, the agency charged with protecting native wildlife and enforcing the Endangered Species Act, has viewed those responsibilities with indifference if not hostility. For the past twelve years, Sam Hamilton, whose nomination to head the agency is now pending before congress, has run the Southeast Region of the Fish and Wildlife Service, a swath of the country that has the dubious distinction of driving more species of wildlife to the brink of extinction than any other.

From Florida to Louisiana, the encroaching threats on native wildlife are manifest and relentless: chemical pollution, oil drilling, coastal development, clearcutting, wetland destruction and a political animus toward environmental laws (and environmentalists). And Sam Hamilton was not one to stand up against this grim state of affairs.

A detailed examination of Hamilton's tenure by Public Employees for Environmental Responsibility reveals his bleak record. During the period from 2004 through 2006, Hamilton's office performed 5,974 consultations on development projects (clearcuts, oil wells, golf courses, roads, housing developments and the like) in endangered species habitat. But Hamilton gave the green light to all of these projects, except one. By contrast, during the same period the Rocky Mountain Office of the Fish and Wildlife Service officially consulted on 586 planned projects and issued 100 objections or so-called jeopardy opinions. Hamilton has by far the weakest record of any of his colleagues on endangered species protection.

There's plenty of evidence to show that Hamilton routinely placed political considerations ahead of enforcing the wildlife protection laws. For example, in the agency's Vero Beach, Florida office Fish and Wildlife Service biologists wrote a joint letter in 2005 complaining that their supervisors had ordered them not to object to any project in endangered species habitat—no matter how ruinous.

Take the case of the highly endangered Florida panther. One of Hamilton's top lieutenants in Florida has been quoted as telling his subordinates that the big cat was a "zoo species" doomed to extinction and that to halt any developments projects in the panther's habitat would be a waste of time and political capital.

"Under Sam Hamilton, the Endangered Species Act has become a dead letter," says PEER's Executive Director Jeff Ruch, noting that the White House announcement on Hamilton touted his "innovative conservation" work. "Apparently, the word 'no' is not part of 'innovative' in Mr. Hamilton's lexicon. To end the cycle of Endangered Species Act lawsuits, the Fish and Wildlife Service needs a director who is willing to follow the law and actually implement the Act. Hamilton's record suggests that he will extend the policies of Bush era rather than bring needed change."

Now this man has the fate of the jaguar, grizzly and northern spotted owl in his compromised hands. Feel the chill?

Over at the Agriculture Department Obama made a similarly cynical pick when he chose former Iowa governor Tom Vilsak to head the agency that oversees the national forests. Vilsak resides to the right of Salazar and not just in the sitting arrangement at Cabinet meetings. He is a post-Harken Iowa Democrat, which means he's essentially a Republican who believes in evolution six days a week. (He leaves such Midwestern heresies at the door on Sundays.) Think Earl Butz—minus the racist sense of humor (as far as we know).

Vilsak is a creature of industrial agriculture, a brusque advocate for the corporate titans that have laid waste the farmbelt: Monsanto, Archer Daniels Midland and Cargill. As administrations come and go, these companies only tighten their stranglehold, poisoning the prairies, spreading their clones and frankencrops, sucking up the Oglalla aquifer, scalping topsoil and driving the small farmers under. It could have been different. Obama might have opted for change by selecting Wes Jackson of the Land Institute, food historian Michael Pollan or Roger Johnson, president of the National Farmers Union. Instead he opted for the old guard, a man with a test tube in one hand and Stihl chainsaw in the other.

Through a quirk of bureaucratic categorization, the Department of Agriculture is also in charge of the national forests. At 190 million acres, the national forests constitute the largest block of public lands and serve as the principal reservoir of biotic diversity and wilderness on the continent. They have also been under a near constant state of siege since the Reagan era: from clearcuts, mining operations, ORV morons, ski resorts and cattle and sheep grazing.

Since 1910, when public outrage erupted after President William Taft fired Gifford Pinchot for speaking out against the corrupt policies of Interior Secretary Richard Ballinger, the chief of the Forest Service had been treated as a civil service employee and, much like the director of the FBI and CIA, was considered immune from changes in presidential administrations. This all changed when Bill Clinton imperiously dismissed Dale Robertson as chief in 1994 and replaced him with Jack Ward Thomas, the former wildlife biologist who drafted Clinton's plan to resume logging in the ancient forests of the Pacific Northwest. Thomas' tenure at the agency proved disastrous for the environment. In eight years of Clinton time, the Forest Service cut six times as much timber as the agency did under the Reagan and Bush I administrations combined. The pace of logging set by Thomas continued unabated during the Bush the Younger's administration.

So now Vilsak has given the boot to Gail Kimbell, Bush's compliant chief, and replaced her with a 32-year veteran of the agency named Tom Tidwell. Those were 32 of the darkest years in the Forest Service's long history, years darkened by a perpetual blizzard of sawdust. You will search Google in vain for any evidence that during the forest-banging years of the Bush administration, when Tidwell served as Regional Forester for the Northern Rockies, this man ever once stood up to Kimbell or her puppetmaster Mark Rey, who went from being the timber industry's top lobbyist to Bush's Undersecretary of Agriculture in charge of the national forests. (Point of interest: Rey, once known as the Skeletor of the Timber Industry for the hundreds of thousands of acres of clearcuts on his rapsheet, has now been retained as a fixer by WildLaw, an environmental law firm in Alabama -- retained without ever having issued a single mea culpa for his career as a top rank ecocider. You just can't make this stuff up, anymore.) No, Tidwell was no whistleblower. He was, in fact, a facilitator of forest destruction, eagerly implementing the Kimbell-Rey agenda to push clearcuts, mines, oil wells and roads into the heart of the big wild of Montana and Idaho.

Despite this dismal resumé, Tidwell's appointment received near unanimous plaudits, from timber companies, ORV user groups, mining firms and, yes, the Wilderness Society. Here's the assessment of Cliff Roady director the Montana Forest Products Association, a timber industry lobby outfit: "His appointment keeps things on a fairly steady course. He reported to Gail Kimbell, and they worked together really well. He's somebody we'd look forward to working with."

And here, singing harmony, are the tweets of Bob Eckey, a spokesman for the Wilderness Society, which some seasoned observers of environmental politics consider to be yet another timber industry lobby group: "Tidwell understands the American public's vision for a national forest has been changing."

During his tenure in Montana, Tidwell specialized in the art of coercive collaboration, a social manipulation technique that involves getting environmental groups to endorse destructive projects they would normally litigate to stop. Yet, when copiously lubricated with the magic words "collaboration" or "climate change" most environmentalists can be enticed to swallow even the most ghastly of clearcuts in the most ecologically sensitive sites, such as in grizzly habitat on the Middle Fork of the Flathead River near Glacier Park or in the fast-dwindling ponderosa pine forests of eastern Oregon.

One of Tidwell's highest priorities will, it seems, be turn the national forests into industrial biomass farms, all in the name of green energy. Under this destructive scheme, forests, young and old alike, will be clearcut, not for lumber, but as fuel to be burned in biomass power generators. Already officials in the big timber states of Oregon and Washington are crowing that they will soon be able to become the "Saudi Arabia" of biomass production. Did they run this past Smokey the Bear?

Of course, Smokey, that global icon of wildfire suppression, and Tidwell will, no doubt, find common ground on another ecological dubious project: thinning and post-fire salvage logging. We've reached the point where old-fashioned timber sales are a thing of the past. Now every logging operation will an ecological justification — specious though they all certainly turn out to be.

The Alliance for the Wild Rockies, one of the few green outfits to consistently stand up against Democratic Party-sponsored depredations on the environment, sued Tidwell at least 20 times during his time as regional forester in Missoula. There's no record of Tidwell being sued even once by Boise-Cascade, Plum Creek Timber or the Noranda Gold Mining Company.

Yet by and large, the mainstream environmental movement has muzzled itself while the Obama administration stocks the Interior Department with corporate lawyers, extraction-minded bureaucrats and Clinton-era retreads. This strategy of a self-imposed gag order will only serve to enable Salazar and Vilsak to pursue even more rapacious schemes without any fear of accountability.

The pattern of political conditioning has been honed to perfection. Every few weeks the Obama administration will drop a few meaningless crumbs--such as the reinstitution of the Clinton Roadless Area rule—toward the enviro establishment, which will greedily gobble them up one after the other until, like Hansel and Gretel with groupthink, they find themselves hopelessly lost in a vast maze of Obama-sanctioned clearcuts. After that, they won't even get a crumb.

On the environment, the transition between Bush and Obama has been disturbingly smooth when it should have been decisively abrupt.

Where will the administration meet its first roadblock? Who will erect it?

Jeffrey St. Clair is the author of Been Brown So Long It Looked Like Green to Me: the Politics of Nature and Grand Theft Pentagon. His newest book, Born Under a Bad Sky, is just out from AK Press / CounterPunch books. He can be reached at: sitka@comcast.net.


http://www.counterpunch.org/stclair06262009.html

Consumer spending in Asia Shopaholics wanted Jun 25th 2009 | HONG KONG From The Economist print edition

Economist.com Web Bug from http://www.economist.com/images/blocks/spacer.gif





Consumer spending in Asia

Shopaholics wanted
Jun 25th 2009 | HONG KONG
From The Economist print edition


Illustration by S. Kambayashi
Illustration by S. Kambayashi


Can Asians replace Americans as a driver of global growth?

ASIA’S emerging economies are bouncing back much more strongly than any others. While America’s industrial production continued to slide in May, output in emerging Asia has regained its pre-crisis level (see chart 1). This is largely due to China; but although production in the region’s smaller economies is still well down on a year ago, it is rebounding in those countries too. Taiwan’s industrial output rose by an annualised 80% in the three months to May compared with the previous three months. JPMorgan estimates that emerging Asia’s GDP has grown by an annualised 7% in the second quarter.


Asia’s ability to decouple from America reflects the fact that the region’s downturn was caused only partly by the slump in American activity. In most Asian economies falling domestic demand was more important than the drop in net exports in explaining the collapse in GDP growth. The surge in food and energy prices in the first half of 2008 squeezed profits and spending power. Tighter monetary policy aimed at curbing inflation then further choked domestic demand.

The recent recovery in industrial production reflects the end of destocking by manufacturers as well as the large fiscal stimulus by most governments. But the boost from both of these factors will fade. Meanwhile, export markets in developed economies are likely to remain weak. So the recovery in Asian economies will stumble unless domestic spending, notably consumption, perks up.

Consumers’ appetite to spend varies hugely across the region. In China, India and Indonesia spending has increased by annual rates of more than 5% during the global downturn. China’s retail sales have soared by 15% over the past year. This overstates the true growth rate because it includes government purchases, but official household surveys suggest that real spending is growing at a still-impressive rate of 9%. In the year to May, sales of household electronics were up by 12%, clothing by 22% and cars by a stunning 47%.

Elsewhere in the region, spending has stumbled, squeezed by higher unemployment and lower wages. In Hong Kong, Singapore and South Korea real consumer spending was 4-5% lower in the first quarter than a year earlier, a much bigger drop than in America. But Frederic Neumann, an economist at HSBC, sees tentative signs that spending is picking up. Taiwan’s retail sales rose in May for the third consecutive month. Department-store sales in South Korea rose by 5% in the year to May.


It is often argued that emerging Asian economies have large current-account surpluses—and are thus not pulling their fair weight in the world—because consumers like to save rather than spend. Yet this does not really fit the facts. During the past five years consumer spending in emerging Asia has grown by an annual average of 6.5%, much faster than in any other part of the world. It is true that consumption has fallen as a share of GDP, but that is because investment and exports have grown even faster, not because spending has been weak. Relative to American consumer spending, Asian consumption has soared (see chart 2).

In most Asian economies, private consumption is 50-60% of GDP, which is not out of line with rates in countries at similar levels of income elsewhere. China, however, is an exception. Private consumption there fell from 46% of GDP in 2000 to only 35% last year—half that in America. In dollar terms, spending is only one-sixth of that in America. (Singapore’s consumption is also low, at just under 40% of GDP.)

This explains why China’s government has recently taken bolder action than others to boost consumption. Over the past six months the government in Beijing has introduced a host of incentives to encourage households to open their wallets. Rural residents get subsidies for buying vehicles and other goods such as televisions, refrigerators, computers and mobile phones; urban residents get a subsidy if they trade in cars and home appliances for new goods; tax rates on low-emission cars have also been cut. There is huge potential for higher consumption in the countryside as incomes rise: only 30% of rural households have a refrigerator, for example, compared with virtually all urban households.

The government has also introduced several measures this year to improve the social safety net, such as spending more on health care, pensions and payments to low-income households. On June 19th it ordered all state-owned firms that had listed on the stockmarket since 2005 to transfer 10% of their shares to the National Social Security Fund to shore up its assets. The short-term impact is likely to be modest but if such measures ease households’ worries about future pensions and health care, it could in the long term encourage them to save less and spend more.

Another way to boost consumption is to make it easier to borrow. In most Asian economies household debt is less than 50% of GDP, compared with around 100% in many developed economies; in China and India it is less than 15%. South Korea is the big exception: households have as much debt relative to their income as Americans and their saving rate has fallen over the past decade from 18% of disposable income to only 4%. In many other Asian economies financing for consumer durables is virtually nonexistent. Promisingly, the Chinese bank regulator announced draft rules in May to allow domestic and foreign institutions to set up consumer-finance firms to offer personal loans for consumer-goods purchases.

These measures are a modest step in the right direction. But a bigger test of Asian governments’ resolve to shift the balance of growth from exports towards domestic spending is whether they will allow their exchange rates to rise. A revaluation would lift consumers’ real purchasing power and give firms reason to shift resources towards producing for the domestic market. But so far, policymakers have been reluctant to let currencies rise too fast.

Asian spending is already an important engine of global growth. Even before the crisis, emerging Asia’s consumer spending contributed slightly more (in absolute dollar terms) to the growth in global demand than did America’s. But it could be even bigger if Asians enjoyed the full fruits of their hard labour, rather than subsidising Western consumers through undervalued currencies. It is time for an even greater shift in spending power from the West to the East.

Hillary Is Wrong About the Settlements The U.S. and Israel reached a clear understanding about natural growth. By ELLIOTT ABRAMS

Abrams fuzzes the fact that the Bush Administration and the Israeli Government abandoned any effort to define settlement boundaries, so there was no agreement on where a settlement's borders ended. Ambassador Dan Kurtzer reports this in a recent article on settlements.

WSJ/Opinion
Hillary Is Wrong About the Settlements
The U.S. and Israel reached a clear understanding about natural growth.
By ELLIOTT ABRAMS

Despite fervent denials by Obama administration officials, there were indeed agreements between Israel and the United States regarding the growth of Israeli settlements on the West Bank. As the Obama administration has made the settlements issue a major bone of contention between Israel and the U.S., it is necessary that we review the recent history.

In the spring of 2003, U.S. officials (including me) held wide-ranging discussions with then Prime Minister Ariel Sharon in Jerusalem. The "Roadmap for Peace" between Israel and the Palestinians had been written. President George W. Bush had endorsed Palestinian statehood, but only if the Palestinians eliminated terror. He had broken with Yasser Arafat, but Arafat still ruled in the Palestinian territories. Israel had defeated the intifada, so what was next?


We asked Mr. Sharon about freezing the West Bank settlements. I recall him asking, by way of reply, what did that mean for the settlers? They live there, he said, they serve in elite army units, and they marry. Should he tell them to have no more children, or move?

We discussed some approaches: Could he agree there would be no additional settlements? New construction only inside settlements, without expanding them physically? Could he agree there would be no additional land taken for settlements?

As we talked several principles emerged. The father of the settlements now agreed that limits must be placed on the settlements; more fundamentally, the old foe of the Palestinians could -- under certain conditions -- now agree to Palestinian statehood.

In June 2003, Mr. Sharon stood alongside Mr. Bush, King Abdullah II of Jordan, and Palestinian Prime Minister Mahmoud Abbas at Aqaba, Jordan, and endorsed Palestinian statehood publicly: "It is in Israel's interest not to govern the Palestinians but for the Palestinians to govern themselves in their own state. A democratic Palestinian state fully at peace with Israel will promote the long-term security and well-being of Israel as a Jewish state." At the end of that year he announced his intention to pull out of the Gaza Strip.

The U.S. government supported all this, but asked Mr. Sharon for two more things. First, that he remove some West Bank settlements; we wanted Israel to show that removing them was not impossible. Second, we wanted him to pull out of Gaza totally -- including every single settlement and the "Philadelphi Strip" separating Gaza from Egypt, even though holding on to this strip would have prevented the smuggling of weapons to Hamas that was feared and has now come to pass. Mr. Sharon agreed on both counts.

These decisions were political dynamite, as Mr. Sharon had long predicted to us. In May 2004, his Likud Party rejected his plan in a referendum, handing him a resounding political defeat. In June, the Cabinet approved the withdrawal from Gaza, but only after Mr. Sharon fired two ministers and allowed two others to resign. His majority in the Knesset was now shaky.

After completing the Gaza withdrawal in August 2005, he called in November for a dissolution of the Knesset and for early elections. He also said he would leave Likud to form a new centrist party. The political and personal strain was very great. Four weeks later he suffered the first of two strokes that have left him in a coma.

Throughout, the Bush administration gave Mr. Sharon full support for his actions against terror and on final status issues. On April 14, 2004, Mr. Bush handed Mr. Sharon a letter saying that there would be no "right of return" for Palestinian refugees. Instead, the president said, "a solution to the Palestinian refugee issue as part of any final status agreement will need to be found through the establishment of a Palestinian state, and the settling of Palestinian refugees there, rather than in Israel."

On the major settlement blocs, Mr. Bush said, "In light of new realities on the ground, including already existing major Israeli populations centers, it is unrealistic to expect that the outcome of final status negotiations will be a full and complete return to the armistice lines of 1949." Several previous administrations had declared all Israeli settlements beyond the "1967 borders" to be illegal. Here Mr. Bush dropped such language, referring to the 1967 borders -- correctly -- as merely the lines where the fighting stopped in 1949, and saying that in any realistic peace agreement Israel would be able to negotiate keeping those major settlements.

On settlements we also agreed on principles that would permit some continuing growth. Mr. Sharon stated these clearly in a major policy speech in December 2003: "Israel will meet all its obligations with regard to construction in the settlements. There will be no construction beyond the existing construction line, no expropriation of land for construction, no special economic incentives and no construction of new settlements."

Ariel Sharon did not invent those four principles. They emerged from discussions with American officials and were discussed by Messrs. Sharon and Bush at their Aqaba meeting in June 2003.

They were not secret, either. Four days after the president's letter, Mr. Sharon's Chief of Staff Dov Weissglas wrote to Secretary of State Condoleezza Rice that "I wish to reconfirm the following understanding, which had been reached between us: 1. Restrictions on settlement growth: within the agreed principles of settlement activities, an effort will be made in the next few days to have a better definition of the construction line of settlements in Judea & Samaria."

Stories in the press also made it clear that there were indeed "agreed principles." On Aug. 21, 2004 the New York Times reported that "the Bush administration . . . now supports construction of new apartments in areas already built up in some settlements, as long as the expansion does not extend outward."

In recent weeks, American officials have denied that any agreement on settlements existed. Secretary of State Hillary Clinton stated on June 17 that "in looking at the history of the Bush administration, there were no informal or oral enforceable agreements. That has been verified by the official record of the administration and by the personnel in the positions of responsibility."

These statements are incorrect. Not only were there agreements, but the prime minister of Israel relied on them in undertaking a wrenching political reorientation -- the dissolution of his government, the removal of every single Israeli citizen, settlement and military position in Gaza, and the removal of four small settlements in the West Bank. This was the first time Israel had ever removed settlements outside the context of a peace treaty, and it was a major step.

It is true that there was no U.S.-Israel "memorandum of understanding," which is presumably what Mrs. Clinton means when she suggests that the "official record of the administration" contains none. But she would do well to consult documents like the Weissglas letter, or the notes of the Aqaba meeting, before suggesting that there was no meeting of the minds.

Mrs. Clinton also said there were no "enforceable" agreements. This is a strange phrase. How exactly would Israel enforce any agreement against an American decision to renege on it? Take it to the International Court in The Hague?

Regardless of what Mrs. Clinton has said, there was a bargained-for exchange. Mr. Sharon was determined to break the deadlock, withdraw from Gaza, remove settlements -- and confront his former allies on Israel's right by abandoning the "Greater Israel" position to endorse Palestinian statehood and limits on settlement growth. He asked for our support and got it, including the agreement that we would not demand a total settlement freeze.

For reasons that remain unclear, the Obama administration has decided to abandon the understandings about settlements reached by the previous administration with the Israeli government. We may be abandoning the deal now, but we cannot rewrite history and make believe it did not exist.

Mr. Abrams, a senior fellow for Middle Eastern Studies at the Council on Foreign Relations, handled Middle East affairs at the National Security Council from 2001 to 2009.

A rebuttal from Lara Friedman on Americans for Peace Now Policy Blog.

25 Jun 2009 09:13 am

The Settlers’ Lawyer (or, Elliott Abrams Is At It Again)

June 25, 2009, posted by Lara Friedman

On May 23, 2005, the Washington Post ran a an incisive op-ed by former State Department negotiator and Middle East advisor Aaron Miller, entitled “Israel’s Lawyer,” in which Aaron argued “For far too long, many American officials involved in Arab-Israeli peacemaking, myself included, have acted as Israel’s attorney…” I was reminded of that article when I read today’s piece by Elliott Abrams in the Wall Street Journal, which should, I believe, have been entitled “The West Bank Settlers’ Lawyer.”


Before anyone accuses me of casting aspersions on Mr. Abrams’ honor or motivations, let me be clear: I have no doubt he has taken the case pro bono. For him, advocating for the settlers is clearly a labor of love. And the settlers are fortunate to have Elliott volunteering for the job. He brings a unique combination of expertise and experience, combined, it would seem, with a shameless willingness to cherry-pick the facts and, when the facts don’t support his argument, to fall back on the “I was there and I know what happened.”


An interesting approach from a man who does not have a spotless record when it comes to truth-telling and foreign policy (for anyone who has forgotten the history: “Elliott Abrams — Pleaded guilty October 7, 1991, to two misdemeanor charges of withholding information from Congress about secret government efforts to support the Nicaraguan contra rebels during a ban on such aid. U.S. District Chief Judge Aubrey E. Robinson, Jr., sentenced Abrams November 15, 1991, to two years probation and 100 hours community service. Abrams was pardoned December 24, 1992.”)


But that was a long time ago. Let’s forgot the ugly and embarrassing Iran-Contra history and focus on the “facts” in the current case, as Elliott sees them:


In today’s WSJ article, Elliott offers an almost completely unverifiable history of what he says transpired between June 2003 and August 2005 (the date of Israel’s “disengagement” from Gaza). Predictably, he focuses on the letter President Bush gave to Prime Minister Ariel Sharon on April 14, 2004. In that letter, Elliott notes (correctly), Bush wrote: “In light of new realities on the ground, including already existing major Israeli populations centers, it is unrealistic to expect that the outcome of final status negotiations will be a full and complete return to the armistice lines of 1949.”


What Elliott neglects to mention is that in the letter Bush also re-stated his commitment to the Roadmap (”the United States remains committed to my vision and to its implementation as described in the roadmap”), which in stage I states that “Consistent with the Mitchell Report, GOI freezes all settlement activity (including natural growth of settlements).”


Elliott then goes on to assert that “On settlements we also agreed on principles that would permit some continuing growth.” His evidence of such an agreement? Exhibit A: A statement by Prime Minister Sharon, not President Bush: “Mr. Sharon stated these clearly in a major policy speech in December 2003: ‘Israel will meet all its obligations with regard to construction in the settlements. There will be no construction beyond the existing construction line, no expropriation of land for construction, no special economic incentives and no construction of new settlements.’”

Is this extremely experienced lawyer and foreign policy professional seriously arguing that a statement by Sharon should be understood as an accurate articulation of US policy, even in the absence of any corroborating statement by the US President? Even when that lengthy policy speech went into a range of issue where - at least officially - there was public disagreement with the US? (for example, in this same speech Sharon makes clear Israel views the Roadmap commitments as sequential - the Palestinians do everything they have to do, and only then does Israel act. ) Apparently so.


But it gets better. For further evidence, Elliott asserts that, really, the US agreed with everything Sharon was saying. His evidence? Exhibit B: Aletter from Ariel Sharon’s Chief of Staff, Dov Weissglas, Secretary of State Rice.

It is like saying “your honor, I swear my client did not sideswipe that car in the parking lot. I was there and I saw the whole thing. And as proof I give you my statement and a statement from my client and his wife, written to the owner of the damaged car, making clear that they were not the ones who hit his car. I rest my case.”

So there are not quotes from President Bush or Secretary Rice to support Elliott’s narrative - only statements by Israeli officials.


But Elliot has more proof to bring before the court: media reports. Exhibit #C: Elliott notes that “Stories in the press also made it clear that there were indeed ‘agreed principles.’ On Aug. 21, 2004 the New York Times reported that ‘the Bush administration . . . now supports construction of new apartments in areas already built up in some settlements, as long as the expansion does not extend outward.’”


Interesting. So if the NYT reported it, it must be true, right? Or rather, what must be true is that they were reporting what someone told them, at the time. And according to the first paragraph of the article Elliott cites, the source is: “American and Israeli officials.” Who could these officials be? Could they be Abrams himself (who at this point can no longer deny that he is personally invested in such a policy), and maybe Dov Weissglas? There is no way to know, but regardless, this is clearly not definitive proof of anything, other than the fact that there were Israeli and US officials spinning the story this way.


The rest of Elliott’s article is simply hearsay and innuendo, speculation, and conjecture - not a single “fact” that can be examined, let alone refuted. Elliott rests his case on statements by two Israeli officials who never hid their desire to do everything possible to keep building West Bank settlements, and press reports based on un-named US and Israeli officials.


With this kind of evidence, it is hard to see why the jury is still debating this case at all. Clearly the settlers’ have a really excellent lawyer.

———

And since some of us prefer to rely on facts, rather than clever argumentation and bombastic statements, here are some actual statements by President Bush about settlements, from the same period Elliott is addressing:


President Bush 9/21/04: “…Israel should impose a settlement freeze, dismantle unauthorized outposts, end the daily humiliation of the Palestinian people and avoid any actions that prejudice final negotiations…”


President Bush, 11/27/07: “…Israel must demonstrate its support for the creation of a prosperous and successful Palestinian state by removing unauthorized outposts, ending settlement expansion, and finding other ways for the Palestinian Authority to exercise its responsibilities without compromising Israel’s security.”


President Bush, 1/9/2008: “…The second track is to help both parties deal with road map issues. Settlements is a road map issue…”


President Bush, 1/10/2008: “…Each side has got obligations under the road map. Settlements are clearly stated in the road map obligations for Israel. We have made our concerns about expansion of settlements known, and we expect both parties to honor their obligations under the road map.”

Bitterlemons Middle East Roundtable The events in Iran: Arab reactions June 25, 2009

Edition 24 Volume 7 - June 25, 2009

The events in Iran: Arab reactions • The dilemma of Arab nationalists - Rime Allaf

Iran's problem is everyone's problem in so many ways. • Amman maintains calculated stance - Rana Sabbagh-Gargour

Jordanian officials, politicians and security analysts agree that Iran's election has exposed deep divisions within Iran, which they welcome. • Regional political effects, inspiration to opposition forces - Riad Kahwaji

The Iranian riots must have grabbed the attention of active opposition forces in Syria, Egypt and Bahrain. • Iran is in crisis; so is the Middle East - Gamal A. G. Soltan

Escalation on the Lebanon and/or Gaza front is likely.



The dilemma of Arab nationalists
Rime Allaf


While the entire word is gripped with the political turmoil in Iran, its closest neighbors have been collectively pretending not to notice there really is a problem at all. At first unable to contain their enthusiasm with the opposition to a regime they've collectively hated for 30 years, various official media outlets have mellowed their tone and practically reverted to the "domestic Iranian matter" line.

And yet Iran's problem is everyone's problem in so many ways. Since the advent of the Islamic Republic in a revolution that swept the Shah from power, most Arab countries have at best been uneasy neighbors to Iran, and at worst aggressors. The Iranians had barely begun to come to terms with the fact of having dismissed the Shah when the proxy wars against them began in earnest.

Fighting the dirty war of the bloc of superpowers arming him, Saddam Hussein attacked Iran and bled both countries dry for eight years, especially once the full impact of the US's dual containment policy was felt. No wonder the Iranians didn't warm to their neighborhood. Apart from Syria, which particularly enjoyed the fall of one of Israel's greatest allies and was united with Iran in a common hatred of Saddam Hussein, Arab countries were predominantly hostile.

Arab wariness stemmed less from the fact of the Iranian revolution than the banner under which it was fought. That the powerful, well-armed and internationally supported Shah could fall so easily was one thing: that the revolutionaries did it in the name of Islam was another. For the first time in centuries, two rival blocs faced off to claim leadership of a huge global Muslim community. Both also sat on large oil resources that helped finance their new activism, supporting numerous groups with political and religious agendas. These confronting alignments have now endured for decades, creating a complex set of relations, that it is crucial to understand as an introduction to the way forward, when some Arabs are now more pro-Iranian regime than before, in direct opposition to the critics siding with the "moderate" group.

The mutual animosity between the competing Iranian and Arab regimes, seeping through their respective media outlets, has been evident for years, especially since the invasion of Iraq. Unfortunately, the animosity has filtered down to the popular level, fuelled by inflammatory rhetoric (mostly from the anti-Iranian side) and turning anti-Iranian positions into anti-Shi'ite ones, exacerbated by Iraq and Lebanon and the ongoing Arab-Israel conflict or, more correctly, the Palestinian cause.

There is no doubt that Israel plays a role in this divide, being in fact the lowest common denominator. With the Iranian regime (alongside Syria) openly supporting the so-called radical elements of the Palestinian resistance, and with Saudi Arabia having sided with the so-called moderate Palestinian Authority, Arabs actively opposing Israel have made their choice. The situation is even more pronounced in Lebanon, where the resistance to Israel is the sole domain of Hizballah, a militant group whose umbilical tie to Iran seems to trump most other considerations.

Today, tens of thousands of Iranians are protesting against their regime, officially because of a dubious election which even authorities admit had irregularities, and unofficially because many of them are vying for a relaxation of the strict rules that govern their lives. Importantly, many have expressed their specific distaste for Mahmoud Ahmadinezhad's needlessly confrontational stances, his foreign policy and his absurd habit of putting into doubt the history of the Holocaust--all of which has only made their isolation more pronounced.

For many Iranians, popular Arab support for Ahmadinezhad remains unpalatable and unforgivable. It makes little sense to them that people who support freedom and self-determination for one people (the Palestinians, for instance) would also support a leader whose domestic rule has been controversial to say the least. Increasingly, young Iranians are expressing anti-Arab sentiments based mostly on their regime's support of Hizballah (and to a lesser extent Hamas).

Arab nationalists, and Arab liberals to a certain extent, have a serious problem. With the noble causes they espouse, they should technically be equally critical of such regimes. And yet, because of the Iranian regime's staunch support for Palestinian groups and for the Palestinian cause in general, many Arabs have spared Ahmadinezhad and his regime from the stinging reproaches they extend to other rulers.

Is the enemy of our enemy necessarily our friend, regardless of other factors? Have we become so desperate for support for the Palestinian cause that we would become bedfellows with the least savory of characters? This is not the first time this would have happened. Saddam Hussein, the tyrant who oppressed his own people for decades, acted so magnanimously with Palestinians that Yasser Arafat chose to side with Iraq after its invasion of Kuwait, with disastrous consequences for Palestinians. Likewise, the farcical Muammar Qadhafi remained a vocal supporter of the Palestinian cause while his own people suffered. Many critics of Arab regimes also fall silent on Syria, precisely because of its vocal support for the various militant groups.

Arab nationalists have often explained themselves on this thorny issue, arguing that the choice of allies was dictated by the magnitude of the Palestinian problem and all the issues still touching on Israel. Unfortunately, this position has created huge resentment from the people ruled by the likes of Saddam Hussein, and anti-Palestinian sentiment was common for a long time. Similarly, the antics of Ahmadinezhad have been completely counterproductive, detrimental to the Palestinian cause and resented by many Iranians.

There must come a point when supporters of freedom for Palestinians, under a brutal military occupation and living in much worse conditions than most people, must take the same stand for others, even if the latter live in relatively milder conditions. Until then, we must not be surprised when Iranians, like Iraqis before them, stop caring about fundamental causes, no matter how righteous.- Published 25/6/2009 © bitterlemons-international.org


Rime Allaf is an associate fellow at Chatham House, London.

Amman maintains calculated stance
Rana Sabbagh-GargourTwo weeks into Iran's post-election intifada, official Jordan is maintaining a low profile to make sure Amman stands on the right side of history. In a situation so delicate, King Abdullah II, who has long viewed Iran as a main source of instability in the region, prefers to keep Jordan out of the momentous internal Iranian drama that has been unfolding since the June 12 vote.

Taking its cue from the United States, its key western ally, Amman will not acknowledge the results of the heavily contested vote, which brought back hardline President Mahmoud Ahmadinezhad. But unlike Washington, Amman is also not ready to condemn the heavy security crackdown on pro-reform supporters of Mir Hossein Mousavi, who is challenging the election result.

For now, Jordan's calculated position is sparing the government criticism from the influential Islamic-led opposition, which says it backs "Ahmadinezhad's Iran". The opposition feels indebted to him mostly because he backs its Palestinian ally, Hamas, now controlling the Gaza Strip and challenging the legitimacy of the Jordanian-backed Palestinian Authority President Mahmoud Abbas in the West Bank.

Political ties between Amman and Tehran have ebbed and flowed since Jordan sided with Iraq in the 1980-1988 war with Iran. Amman has often accused Tehran of attempts to destabilize the kingdom by supporting militant groups to sabotage Amman's 1994 peace treaty with Israel or inciting hatred against the regime.

Iranian leaders, meanwhile, have not forgiven the king for warning, shortly before the start of the US-led war on Iraq in 2003, that the collapse of Saddam Hussein's Sunni-controlled regime would give rise to an Iranian-led "Shi'ite crescent" sphere of influence, stretching from Iran to Iraq, Lebanon and the Gaza Strip.

Jordanian officials, like representatives of the relatively moderate, pro-western governments in Ramallah, Cairo, Beirut, Riyadh and elsewhere, fear any overtures of support to Mousavi might undermine the very forces they and the US would like to see strengthened. In private, however, they say they would have liked to see him replace Ahmadinezhad, who will have difficulty engaging with President Obama or changing his childish political rhetoric that appeals to the lowest common denominator on the Arab street.

Jordanian media, like many politicians, remain divided over the intentions of Mr. Mousavi, a former prime minister, and the powerful counter-elite behind him. Journalists are asking if it is better to reform the system or overthrow it. Many in Jordan had hoped that a weakened, if not changed, regime led by Mousavi, the "soft" alternative to Ahmadinezhad, would gradually yield an easier approach to Middle East peace, thus softening the positions of Iran's regional strategic allies, Syria, Hamas and Islamic Jihad in Palestine and Hizballah in Lebanon. This in turn would have boosted Obama's multi-track approach for comprehensive peace in the region: the creation of an independent Palestinian state living side by side with Israel, closing the Iraq file and attaining a peaceful resolution to Iran's stand-off with the West over its nuclear power.

It remains to be seen if the upheaval will be a turning point for Iran, destabilizing the revolutionary establishment enough in favor of moderation and pluralism to bring long-term stability at home and across the region, and if new, internationally supervised presidential elections would tip the balance in favor of Mousavi. Perhaps the ongoing bloody confrontations between the state security apparatus and pro-democracy protestors will fizzle out after the Guardian Council, the country's top legislative body, said earlier this week there were no signs of serious electoral fraud in the ballot despite conceding that in 50 cities more than 100 per cent of the electorate was officially recorded as turning out to vote.

In the latter case, the leadership that forcefully quelled street unrest after stealing a "rigged" election will continue to push its aggressive domestic and foreign agenda even if it is not recognized by much of the international community, as happened in some East European countries. A weakened regime, however, could become nervous and offensive to cover up for perceived weakness, instigating tension with Israel, which is unhappy with Obama's Middle East peace drive and would not mind derailing it. Such a crisis would force Washington to focus on Iran rather than the Arab-Israel conflict.

For now, Jordanian officials, politicians and security analysts agree that Iran's election has exposed deep divisions within Iran, which they welcome. The regime in Tehran now needs to consolidate its grip on power through compromise and consensus building. Nearly half of the Iranian population will continue to push for reform, including separating politics from religion. This could weaken the popular appeal of hardline Muslim parties challenging the region's despotic rulers, who remain concerned that their constituencies would follow the Iranian example and demand for reforms.

But when it comes to strategic foreign policy, there appears to be consensus between Ahmadinezhad and Mousavi on the need to continue developing Iran's nuclear program to ensure a greater say in a changing regional and global order. The difference between them would not go beyond tactics and tone, at least in the medium term.

"What is happening in Iran is the clearest indication that the revolution is aging, and rather fast because it failed to modernize itself over the past 30 years," said a senior Jordanian politician recently. "There are new dynamics in favor of modernization. But these dynamics are being exaggerated by most western media and the enemies of Ahmadinezhad".

Such exaggeration even touches on what Mousavi could achieve, whether he continues to lead the opposition or is elected under a new vote.

"Mousavi will push for steps to ensure political pluralism and economic reform, but he will not introduce drastic changes to reform the Islamic regime beyond recognition like Mikhail Gorbachev's perestroika did to the USSR" in the late 1980s. "He has no choice but to keep building the Iranian empire, which is on the rise, while introducing gradual change," the senior official said.

"He will dismantle neither the Islamic state nor its nuclear program, and he will not reduce Iranian influence in the region by curbing Tehran's role in Iraq, Lebanon and Palestine. He needs to use all these cards to make Tehran's voice heard in the region and abroad."- Published 25/6/2009 © bitterlemons-international.org


Rana Sabbagh-Gargour is a journalist and former chief editor of the Jordan Times.

Regional political effects, inspiration to opposition forces
Riad KahwajiThe Arab world has been closely watching events unfold in Iran with a mixture of shock, interest and some anxiety. Most of the Arab media has directly or indirectly supported public demonstrations by opposition supporters in Iran. The media in general have portrayed the struggle in Iran as one between moderate forces that aspire to cancel the results of the elections, which they claim to be fraudulent, and the hard-line forces led by Supreme Leader Ayatollah Ali Khamenei, who has endorsed President Mahmoud Ahmadinezhad and asked Iranians to accept the results and quit the demonstrations.

For their part, Arab leaders and officials have opted to remain quiet and maintain that this is a domestic Iranian affair. In some cases, the media in the Arab world have adopted the perspective of the host government based on the latter's relations with Ahmadinezhad. Thus, while the Doha-based Al-Jazeera news channel has shown more sympathy toward the regime in Tehran, other media outlets in the Arab Gulf states like the Dubai-based and Saudi-owned Al-Arabiya news channel have tilted toward the opposition camp led by Mir Hossein Mousavi and former presidents Mohammed Khatami and Hashemi Rafsanjani.

However the conflict ends in Iran, the perceived image of the Islamic Republic has changed in the region. The mere fact that Iran's Supreme Leader is now openly challenged by prominent Iranian figures and a large section of the people has been a shock to many Arabs and an indication that Tehran could be on the verge of a major change of regime or change within the regime. Even if Ahmadinezhad holds onto power as a result of harsh measures taken by the Revolutionary Guards and the Basij militias, the legitimacy of the Islamic regime has become questionable and its infallible divine image undermined. Iran's main allies, like Syria, Hizballah and Hamas, are most likely reconsidering the situation and readying themselves for the possibility of a major shift within the Iranian regime or even its collapse.

The high moral ground on which the Supreme Leader is placed by many Shi'ites in the Arab world has also likely been shaken by the recent events. This opens the way for prominent Shi'ite leaders who have disputed the welayat al-faqih theory and feel it has stripped them of their influence domestically. As for countries that were readying themselves to better engage Iran in political discussion, like Washington and its allies, they too will have to consider the new realities unveiled since election day.

Alongside these near-term consequences for Iran and its relations with the world, the Iranian uprising has also left a long-term impact on some states in the region. The Iranian riots must have grabbed the attention of active opposition movements in countries like Syria, Egypt and Bahrain. They have likely learned valuable lessons about the use of cyberspace in organizing and rallying support domestically and internationally. The age of internet-driven revolutions has reached the Middle East and will probably be around effectively for a while.

The most significant factor is the efficient use of new media technologies like the internet, YouTube, Facebook, Twitter and cellular functions like SMS and Bluetooth in mobilizing the masses, communicating with the outside world and denying the government the capability to control the flow of information within as well as to and from the country. Although this was not the first time the new media technology was used in public demonstrations in the region, as was the case in recent incidents in Egypt, the Iranian experience has revealed new techniques that regional opposition forces could use in future anti-government actions.

One should expect to see future public rallies in authoritarian countries better covered internationally via these new technologies. Modern information, communication and media technologies have literally stripped remaining dictatorships of their monopoly on the flow of information and could eventually play a major role in their downfall.

Another cause of concern to some Arab observers is the possibility of the Iranian government heightening tensions in the Middle East region in order to divert attention from the domestic scene to the outside. Friction with the West would also serve the current strategy of blaming all the unrest on foreign intervention. The surprise announcement of military maneuvers by Iranian air force and navy units in the Gulf area was mostly seen as a way to shift both domestic and international public attention to the question of regional security. Rising threat perceptions in Tehran regarding the domestic as well as the regional scene could drive the regime to make hasty decisions or miscalculations that could conceivably spark a regional military confrontation.

Authoritarian regimes are most dangerous and adventurous when their survival is threatened and they feel they have little to lose. Hence caution is the word.


Riad Kahwaji is CEO of the Institute for Near East and Gulf Military Analysis - INEGMA, in Dubai.

Iran is in crisis; so is the Middle East
Gamal A. G. SoltanFor months, major regional and international actors were waiting for the conclusion of Iran's presidential elections. The prevalent feeling was that a new beginning in Middle East politics should follow those elections. US President Barack Obama's overture toward Iran was thought to be effective in bringing about changes in Iranian foreign policy. Even many of those who had doubts about the usefulness of Obama's initiative thought it should at least be tested before being discarded. Thus both believers and skeptics were looking forward to the conclusion of Iran's presidential election campaign so that Obama's Iran and Middle East policy could be assessed.

While interested parties were getting ready to deal with either a radical Iran under the renewed leadership of Mahmoud Ahmadinezhad or a moderate Iran under the leadership of one of the reformist candidates, it seems that now we have to deal with an unstable Iran, a scenario that was never seriously contemplated. While attempts to reconcile the Iranian political factions have not yet been abandoned, developments indicate that a break between the two main factions is the likely outcome of the current crisis. Coexistence between conservatives and reformists in Iran's politics is finally coming to an end. The Iranian regime that is likely to take shape in the aftermath of the current crisis will be a narrow-based conservative regime. Reformists are likely to be turned into a permanent opposition in Iranian politics that seeks the transformation rather than the reform of the regime of the Islamic Republic.

The image of the Iranian regime has been badly hurt as a result of the events that have unfolded since the beginning of the electoral campaign. In particular, the ten days that followed election day have deeply undermined Iran's stature and reputation. The portrayal of Iran as the country that was able to reconcile the prolonged conflict between Islam and democracy was among the most effective assets employed by Iranian elites to mobilize support for the Islamic Republic among Muslims all over the world. The current crisis in Iran indicates that the time for a divorce between the Islamic and the republican elements of the Iranian model has arrived.

Electoral fraud and brutal suppression of protesters are undermining Iran's image among Muslims in the Middle East and beyond. The Iranian regime can no longer claim the legitimacy and integrity it professed for decades. Erosion of the legitimacy of Iran's model of Islamic republic will now definitely affect the balance of power between moderates and radicals in the Middle East--and not in favor of the latter.

The balance of power among the Muslim countries of the Middle East is more about soft than hard power. "Balance of legitimacy" might be a more useful term to explain Middle East politics. Undermining the legitimacy of the Iranian regime denies Iran a significant part of the mobilizing force it used to enjoy all over the Middle East. It limits Iran's ability to inspire and manipulate masses in the Middle East and beyond.

Iranian politics is entering a new era characterized by a shattered national consensus, a limited regime support base and full control by extreme religious conservative forces. Dealing with Iran in this new era is like walking uncharted terrain. During the months, maybe years to come, the Iranian ruling elite will be more concerned than ever about self legitimization and regime consolidation. The irony of the current situation is that a shaky Iranian regime could be a destabilizing force in the Middle East. Foreign adventures could be the strategy of Iran's ruling elite to reestablish its grip on power at home. It could be useful in the uncertainty of the current days to revisit the 30 year-old tragedy of the American hostages in Tehran for lessons learned.

Hitherto, the combination of an Islamic Republic at home and a defiant power abroad has proved to be extremely effective in the consolidation of Iran's regional influence. Losing a significant part of legitimacy at home is likely to reorient the attention of Iran's ruling elite outward. Emphasizing Iran's image as the leading defiant power in the Middle East is likely to be Iran's strategy in response to the current crisis. Operationalizing such a strategy could entail an escalation of violence and instability in the region. Proxy conflicts in Lebanon and Gaza during the past three years proved instrumental for the consolidation of Iran's regional influence. Escalation on either or both fronts is likely in the aftermath of Iran's presidential elections.

The current crisis in Iran has brought to an end a short-lived relaxation in Iranian-western relations. The recent tension between Iran and the western powers, including the US, renders the long-awaited rapprochement between the two sides unlikely, at least in the short run. Dialogue with Iran has become a costly option for President Obama as well as for other western leaders. The US now needs to come up with new alternatives to Obama's policy of engaging Iran.


Gamal A. G. Soltan is a senior research fellow in Al-Ahram Center for Political and Strategic Studies in Cairo and a visiting professor of political science at The American University in Cairo.

Deparment Without a Cause The Department of Energy's Nuclear Albatross By ROBERT ALVAREZ

Deparment Without a Cause
The Department of Energy's Nuclear Albatross

By ROBERT ALVAREZ

Last month, the Obama administration rolled out the details of the Department of Energy's (DOE) budget for fiscal year 2010. "The president's budget for energy reflects his commitment to ending our dependence on foreign oil, restoring our scientific leadership and putting Americans back to work through investments in a new green energy economy," DOE Secretary Steven Chu said.

This pledge to transform our energy future will not likely be fulfilled if it's based on the DOE's current budget request. A lot depends on economic stimulus money, which runs out next year. Unless a major restructuring occurs, this won't be enough. Even with stimulus funding, though, DOE's actual energy functions continue to take a backseat to propping up the nation's large and antiquated nuclear infrastructure. Despite the president's rhetoric about reshaping America's energy future, the DOE budget for FY 2010, minus stimulus spending, looks a lot like that of George W. Bush and several presidents before him.

For instance, nearly two-thirds of the budget will support the government's nuclear weapons complex. Only 18.5% of spending will go to actual energy activities. Of that portion, nuclear power gets more than a third, which flows primarily to DOE sites, followed by coal at 20% and conservation at 16%. DOE proposes to spend ten times more on nuclear weapons that on saving energy.

In other words, the nuclear complex remains the biggest obstacle between us and the new energy economy that we've been promised.

Department Without a Cause

Created in 1977 by President Jimmy Carter to set America's energy agenda in response to oil disruptions, the DOE has remained on the sidelines while the nation's energy and environmental problems have worsened. When Ronald Reagan took office in 1981, one of his first goals was to abolish the DOE and eliminate the government's role in the energy sector. The department, however, survived. Reagan and his supporters simply couldn't figure out what to do with the county's sprawling nuclear weapons complex, a dominant element of Energy's mandate since its creation.

By the late 1980s, with the Cold War in its final stage, the U.S. nuclear weapons production complex collapsed in the wake of scandalous revelations of about its massive environmental problems. Since the Reagan presidency, the policy of "least interference" in private enterprise, shared by the Republicans and Democrats alike, further disconnected DOE from energy markets.

But this all changed with the economic stimulus package enacted by Congress in late February. For the first time in 30 years, DOE is suddenly being pressed into service to help rescue the economy and restructure America's priorities.

Stimulating DOE

Four months into its term, the Obama administration is asking DOE to spend $38.7 billion for the next two years to reduce energy use, cleanup DOE sites, increase renewable energy sources, develop carbon capture technologies, help spawn electric vehicles, modernize the electrical grid, and advance energy research and development. It's a huge agenda.

The lion's share of the stimulus package funds goes to conservation. Energy conservation gets $11.6 billion of the pie, followed by $4.5 billion for electric transmission, $3.4 billion for fossil energy, and $2 billion for advanced battery manufacturing. An additional $6 billion is set aside to cover government costs for $60 billion in loan guarantees for renewable energy and electric grid improvements. Stimulus funds will be added to the annual budgets for DOE for fiscal years 2009 and 2010.

Also, public power utilities supplying 19 western states, including the Bonneville Power and Western Marketing Administrations (BPA), will receive $3.35 billion in loan authority — with an eye toward beefing up electrical grids for wind and solar generation. BPA is already starting on a 500-kilovolt transmission line to carry 700 megawatts of new wind power capacity in the northwest.

The role of the federal government in the energy market place is no more apparent that in the DOE's loan guarantee programs. This year, DOE will provide $130 billion in federal loan guarantees to aid the ailing auto industry and help finance nuclear, coal, and renewable energy projects. It's also tasked to restructure and modernize the nation's electric grid system.

DOE's Environmental Mess

The stimulus package also includes $6 billion to cleanup DOE weapons sites. According to Senator Patty Murray (D-WA), one of the provision's authors, this additional spending is needed "to reduce the size of the sites." The cleanup of DOE sites will take decades, not including the many centuries of institutional controls for the most severely contaminated areas, and is estimated at around $330 billion.

Reducing a nuclear footprint larger than the states of Rhode Island and Delaware combined is no small feat. DOE's 579 square-mile Hanford facility in Murray's home state of Washington, one of the most polluted sites in the Western Hemisphere, poses perhaps the largest challenge to downsizing. Last year Hanford received $2 billion for cleanup, nearly twice as much as the entire EPA Superfund cleanup program. But this is proving to be not enough and has prompted Washington State to sue DOE, not over downsizing but because of the slow pace of processing radioactive detritus that threatens the Columbia River.

DOE has a decades-long history of failed nuclear projects and cost overruns. Since 1990, Energy remains prominent on the U.S. Government Accountability Office (GAO) list of federal "high-risk" agencies vulnerable to waste, fraud, and abuse. In 2007, the GAO reported that "DOE performed little or no review" of billions of dollars in contractor monthly invoices over a two-year period for construction of a large waste-processing plant at DOE's Hanford site (which is at the center of the lawsuit filed by Washington State). The cost of this project has sky-rocketed to nearly $70 billion and is several years behind schedule.

The Trouble with Nukes

Even in wake of the decisions by the Congress and the Obama administration to eliminate spending for new weapons, the weapons complex is still spending at rates comparable to that during the height of the nuclear arms race in the 1950s.

The single largest expenditure in DOE's FY 2010 budget is to maintain some 9,200 intact nuclear warheads and thousands of weapons parts ($6.4 billion). During the Bush years, warhead dismantlement dwindled to the lowest number since the 1950s. As a result there is currently a 15-year backlog of some 4,200 retired nuclear warheads awaiting dismantlement. Thousands more will be added if President Obama follows through on his pledge to cut nuclear arms. Yet, according to DOE's budget, funding for weapons dismantlement is expected to drop by 50% over the next five years. Elimination of nuclear weapons continues to have a low priority in the DOE budget.

Adding to this burden is President Obama's goal to reduce global stockpiles of nuclear weapons, which will require some basic and difficult changes. Since the early 1990s, when the last major downsizing of the DOE weapons complex took place, the Republican-controlled Congress along with weapons bureaucrats successfully resisted establishing an infrastructure to carry out elimination of nuclear weapons. Instead, billion of dollars poured into the weapons labs and moribund weapons production sites in order to keep the hope alive of resuming production of new weapons.

When stimulus money runs out at the end of FY 2010, the Energy's department's nuclear weapons mandate will continue to place budgetary handcuffs on the Obama administration (unless another stimulus package in enacted).

This structural impediment isn't lost on the White House, which launched an interagency review in late January with the goal of transferring DOE's nuclear weapons program to the Pentagon possibly as early as FY 2010. Although I have advocated such a transfer, and The New York Times subsequently endorsed the move, the New Mexico congressional delegation has hotly opposed the idea. At stake is the state's status and the huge amount of funding that supports the weapons labs that dominate its economy. In response to the outcry from the weapons labs and their supporters, Secretary Chu has offered public reassurances that this won't happen.

DOE faces a brave new world in which, for the first time, it is being called on to employ millions of Americans to create a new energy future for the United States. Because of decades of neglect, the department is not equipped to meet this challenge. Will the Obama administration fundamentally restructure DOE and jettison its nuclear weapons millstone? We'll know the answer after stimulus funds run out next year.

Robert Alvarez is a senior scholar at IPS, where he is currently focused on nuclear disarmament, environmental, and energy policies.

This article was originally published by Foreign Policy in Focus.

http://www.counterpunch.org/alvarez06242009.html

The Obama Adminstration is Helping to Upgrade Pakistan's Nuclear Weapons How the U.S. Has Secretly Backed Pakistan's Nuclear Program From Day One By

A CounterPunch Exclusive Report

The Obama Adminstration is Helping to Upgrade Pakistan's Nuclear Weapons
How the U.S. Has Secretly Backed Pakistan's Nuclear Program From Day One

By ANDREW COCKBURN

"If the worst, the unthinkable, were to happen,” Hillary Clinton recently told Fox News, “and this advancing Taliban encouraged and supported by Al Qaeda and other extremists were to essentially topple the government … then they would have keys to the nuclear arsenal of Pakistan.” Many will note that the extremists posing this unthinkable prospect were set up in business by the U.S. in the first place. Very well buried is the fact that the nuclear arsenal that must not be allowed to fall into the hands of our former allies has been itself the object of U.S. encouragement over the years and is to this very day in receipt of crucial U.S. financial assistance and technical support.

Back in 1979, Zbigniew Brzezinski, intent on his own jihad against the USSR, declared that the “Afghan resistance” should be supplied with money and arms. That, of course, required full Pakistani cooperation, which would, Brzezinski underlined, “require a review of our policy toward Pakistan, more guarantees to it, more arms aid, and, alas, a decision that our security policy toward Pakistan cannot be dictated by our nonproliferation policy.” In other words, Pakistan was free to get on with building a bomb so long as we could arm the people who have subsequently come back to haunt us. Asked for his views on Pakistan’s nuclear ambitions, Ronald Reagan replied “I just don’t think it’s any of our business.” During the years that the infamous A.Q. Khan was peddling his uranium enrichment technology around the place, his shipping manager was a CIA agent, whose masters seem to have had little problem with allowing the trade to go forward.

Now comes word from inside the Obama government that little has changed. “Most of the aid we’ve sent them over the past few years has been diverted into their nuclear program,” a senior national security official in the current administration recently told me. Most of this diverted aid -- $5.56 billion as of a year ago – was officially designated “Coalition Support Funds” for Pakistani military operations against the Taliban. It may be that this diversion came as a terrible shock to Washington, but the money has been routinely handed over essentially without accounting being required from the Pakistanis. The GAO has huffed at items such as the $30 million shelled out for non-existent roads, of the $1.5 million for “naval vehicles damaged in combat” but that was as far as public complaints went. In the meantime, as Joint Chiefs Chairman Admiral Mullen confirmed recently, the Pakistanis have been urgently increasing their nuclear weapons production.

A former national security official with knowledge of the policy explained this insouciance to me. “We want to get in there and manage [their nuclear program]. If we manage it, we can make sure they don’t start testing, or start a war.” In other words, the U.S. is helping the Pakistanis to modernize their nuclear arsenal in hopes that the U.S. will thereby gain a measure of control. The official aim of U.S. technical support, at an estimated cost of $100 million a year, is to render the Pakistani weapons safer, i.e., less likely to go off if dropped, and more “secure”, meaning out of the reach of our old friends the extremists.

However, in pursuit of this objective, it is inevitable that the U.S. is not only rendering the warheads more operationally reliable, we are also transferring the technology required to design more sophisticated warheads without having to test them, a system known as “stockpile stewardship.”

Conceived after the U.S. forswore live testing in 1993 as a means to “test” weapons through computer simulations, this vastly expensive program not only ensures the weapons’ reliability (at least in theory) but also the viability of new and improved designs. In reality, the stewardship program has been as much a boondoggle for the politically powerful nuclear laboratories at Livermore and Los Alamos as anything else, so outreach in the form of assistance to the Pakistanis in this area can only gratify our own weaponeers.

“If you’re not confident that weapons are safe to handle, you’re more likely to keep them in the basement,” says nuclear command and control expert Bruce Blair, President of the World Security Institute. “The military is always pressuring to deploy the weapons, which requires an increase in readiness.” In 2008 Blair himself was approached by the Pakistani military seeking advice on means to render their weapons more secure. Their aim, he says, was clearly to render their nuclear force “mature,” and “operational.” In the same way, says Blair, a few years ago an Indian military delegation turned up at the Russian Impulse Design Bureau in St. Petersburg, to ask for help on making their weapons safer to handle. “They said they wanted to be able to assure their political leadership that their weapons were safe enough to be deployed.”

Pakistan’s drive to build more nukes is an inevitable by-product of the 2008 nuclear cooperation deal with India that overturned U.S. law and gave the Indians access to US nuclear technology, not to mention massive arms sales, despite their ongoing bomb program.

The deal blew an enormous hole in the Non-Proliferation Treaty, but initial protests from congressional doves were soon smothered under human-wave assaults by arms company and nuclear industry lobbyists. The Israelis lent additional and potent assistance on Capital Hill. Not coincidentally, Israeli arms dealers, promised a significant slice of the action, have garnered at least $1.5 billion worth of orders from Delhi. (The respected Israeli daily Haaretz has highlighted Indian media reports that the bribes involved totaled $120 million.) Nuclear power’s handmaiden, the global warming lobby, was also a wellspring of ardent support, led by Rajendra Pachauri, the Indian railroad engineer who is Chairman of the Intergovernmental Panel on Climate Change which shared Al Gore’s Nobel prize.) Even the Dalai Lama was drafted in to use his influence with impressionable members of congress.

The consequent success in overturning a longstanding arms control treaty, which in turn has led to the U.S. extending a helping hand to India’s nuclear rivals in Pakistan, should only be seen as the wave of the future. Instead of foaming at the Iranian nuclear program, we should be standing at the ready to oversee their design of safer, more reliable nukes, and after that, who knows? North Korea’s bomb probably need work too.

Andrew Cockburn writes about national security and related matters. His most recent book is Rumsfeld: His Rise, Fall and Catastrophic Legacy. He is the co-producer of American Casino, the feature documentary on the ongoing financial collapse. He can be reached at amcockburn@gmail.com.
http://www.counterpunch.org/andrew06242009.html

Pakistan Rules Out Test Ban Treaty Endorsement

Pakistan Rules Out Test Ban Treaty Endorsement

http://www.globalsecuritynewswire.org/gsn/nw_20090619_9389.php

Disarmament Lessons from the Chemical Weapons Convention

Disarmament Lessons from the Chemical Weapons Convention
Mikhail Gorbachev and Rogelio Pfirter, Bulletin of the Atomic Scientists
http://www.thebulletin.org/web-edition/op-eds/disarmament-lessons-the-chemical-weapons-convention


The recent joint declaration by U.S. President Barack Obama and Russian President Dmitry Medvedev to negotiate a new treaty reducing their countries' nuclear stockpiles as a first step toward "a nuclear-weapon-free world" has spurred hopes for renewed progress in global disarmament after a decade of gridlock. An excellent example of how nations can work together effectively within a multilateral framework to eliminate weapons of mass destruction is the Chemical Weapons Convention (CWC).

* WMD Threats and International Organizations
http://www.carnegieendowment.org/events/?fa=eventDetail&id=1362&prog=zgp&proj=zdrl

U.S. Scrambles for Information on Iran

U.S. Scrambles for Information on Iran
Mark Landler and Mark Mazzetti, The New York Times
http://www.nytimes.com/2009/06/23/world/middleeast/23diplo.html?_r=1&hp

As President Obama and his advisers watch the drama unfolding in Tehran, they are having to cope with a frustrating lack of reliable information — about the clashes between the police and protesters, about the strength of the opposition movement and, most of all, about the divisions within the ranks of Iran's powerful clerics.

* Iran Buying More from US in Spite of Tensions
http://www.google.com/hostednews/ap/article/ALeqM5gUg-I6_iSl9-azPuAad_QeXVGm2QD98V86U03

Iran's Elections: The International Implications Shahram Chubin, Proliferation Analysis

Iran's Elections: The International Implications
Shahram Chubin, Proliferation Analysis
http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=23310&prog=zgp&proj=znpp


IranIran's nuclear ambitions and behavior regionally have generated concerns, internationally, eliciting EU and UN Security Council reactions. The conventional wisdom in the West has been that Iranians support these policies and that there is at best only a difference of "tone" between the various factions in this area. This is mistaken. Recent events underline how much foreign policy has been used by hardliners for partisan purposes and how much scope there is for meaningful change in this area.

* Text of President Obama's June 23 Press Briefing
http://www.nytimes.com/2009/06/23/us/politics/23text-obama.html?_r=1

Stopping the Bomb is What Counts - Wesley Pruden, Washington Times

Stopping the Bomb is What Counts - Wesley Pruden, Washington Times

http://washingtontimes.com/news/2009/jun/23/stopping-the-bomb-is-what-counts/?feat=home_headlines

Russian, US negotiators line up for arms control talks

Russian, US negotiators line up for arms control talks
Geneva (AFP) June 22, 2009
US and Russian negotiators arrived in Geneva on Monday to resume talks on cutting their nuclear weapons arsenals, diplomats said. The third round of talks on replacing the Cold War-era Strategic Arms Reduction Treaty (START) are officially to be held on Tuesday and Wednesday, a US official said. However, a Russian diplomatic source said the delegations met on Monday at the US Mission. ... read more

http://www.spacewar.com/reports/Russian_US_negotiators_line_up_for_arms_control_talks_999.html

Economic Meltdown Delays Dismantling of Many Nuclear Reactors

Economic Meltdown Delays Dismantling of Many Nuclear Reactors
Thursday, June 18, 2009

The fallout from the global financial crisis might create security threats by delaying decommissioning of many U.S. nuclear reactors, the Associated Press reported yesterday (see GSN, Feb. 12, 2008).

Firms that own nearly half the country's nuclear power plants took such a hit on the stock market and other investments that they have stopped saving the funds necessary to disassemble aging reactors on time. Billions of dollars in losses, combined with a similarly dramatic spike in dismantlement costs, have left them without cash to spare for the work.

It costs roughly $450 million to take apart a nuclear reactor, while plant operators today on average have $300 million set aside for that work.

Owners of 19 sites have acquired permission to wait up to 60 years before dismantling mothballed facilities, while scores of others have received or are seeking 20-year license extensions to help them meet eventual shutdown costs.

This situation could pose not only environmental risks but security dangers as well, as decommissioned plants would still store spent fuel rods that could be stolen by terrorists and mined for weapon-grade plutonium.

"Our concern is that they'll just walk away," said Greenpeace nuclear policy analyst Jim Riccio said. "It's like a sitting time bomb. The notion that you can just walk away from these sites and everything will be hunky-dory is just not true" (Bass/Gram, Associated Press/Google News, June 17).
http://gsn.nti.org/gsn/nw_20090617_4353.php

South Korea Signs Nuclear Deal With UAE

South Korea Signs Nuclear Deal With UAE
Tuesday, June 23, 2009

A deal signed yesterday would open the door for the United Arab Emirates to import nuclear technology from South Korea, Reuters reported (see GSN, May 22).

The deal "stipulates that the government of South Korea would help the UAE in building its peaceful nuclear program ... over 20 years." Abu Dhabi has signed similar deals with France and the United States as it prepares to establish a nuclear energy program encompassing multiple reactors.

A number of Middle Eastern nations have indicated their intent to develop nuclear energy. Western nations have expressed hope that the UAE program might serve as an example of a nation pursuing a successful nuclear program without posing a proliferation threat (Reuters, June 22).
http://gsn.nti.org/gsn/nw_20090623_9322.php

Pakistan Demands Universal Policy on Nuclear Technology Trade

Pakistan Demands Universal Policy on Nuclear Technology Trade
Tuesday, June 23, 2009

Pakistani Prime Minister Yousuf Raza Gilani yesterday urged international organizations and nuclear-equipped countries to establish consistent requirements for other nations seeking civilian nuclear technology, the Press Trust of India reported (see GSN, May 27).

The 45-nation Nuclear Suppliers Group last year endorsed a U.S.-backed proposal to permit nuclear trade with India even though New Delhi has maintained a nuclear arsenal outside the Nuclear Nonproliferation Treaty (see GSN, Sept. 8, 2008). The Bush administration ruled out making a similar exception for Pakistan, home to one-time nuclear scientist and proliferator Abdul Qadeer Khan (see GSN, July 31, 2007).

A new, universal policy on nuclear technology transfers should respect the right of all nations "to use nuclear technology for peaceful purposes," a key principle of the Nuclear Nonproliferation Treaty, Gilani said. "It should not remain a privilege and prerogative of a chosen few."

"While supporting the objectives of nonproliferation, it is our firm belief that the developing and small nations must be given unhindered access to nuclear energy for civilian purposes because they need it more than the developed nations to grapple with the issues of poverty, deprivation and backwardness," Gilani said.

Pakistan only pursued nuclear weapons in response to the nuclear activities of longtime rival India, he added, stressing that Islamabad's nuclear program is "purely of defensive nature" (Press Trust of India/Indian Express, June 22).
http://gsn.nti.org/gsn/nw_20090623_8664.php

Experts Debate Effect of Iranian Protests on Nuclear Policy

Experts Debate Effect of Iranian Protests on Nuclear Policy
Tuesday, June 23, 2009



U.S. officials and experts disagreed on whether the large-scale protests ripping through Iran could encourage the nation to negotiate a halt to its disputed nuclear activities, the Washington Times reported today (see GSN, June 22).

(Jun. 23) - Supporters of former Iranian presidential candidate Mir Hossein Mousavi ignite barricades on a street in Tehran on Saturday. U.S. experts disagreed over whether the ongoing demonstrations were likely to affect Iranian nuclear policies (Getty Images).

The Obama administration yesterday defended its cautious tone on the Iranian demonstrations that followed President Mahmoud Ahmadinejad's disputed re-election on June 12.

"Our long-term security interests haven't changed," White House spokesman Robert Gibbs said. "Our interests, as it relates to our grave concern about the help that's provided to terrorists, the grave concern that we have about the pursuit of a nuclear weapon, remain unchanged." U.S. efforts to engage Iran diplomatically are not "on hold," the State Department added.

Since taking office in 2005, Ahmadinejad has shown little interest in halting his nation's uranium enrichment program in exchange for political and economic benefits from the West. The United States and its allies suspect the enrichment effort is geared toward generating nuclear-weapon material, but Tehran has insisted the program would only produce nuclear power plant fuel.

"The [Iranian] government's domestic political capital has been seriously eroded" by the recent protests, one high-level Obama administration official said. "That may lead to willingness on their part to engage more."

Independent analysts expressed doubts, however.

"I can understand the argument intellectually, but it seems very unlikely," said Suzanne Maloney, an Iran expert with the Brookings Institution. "When push comes to shove, it's not going to be that easy for us or for them" to break the nuclear stalemate.

U.S. President Barack Obama's administration "wants the best out of the situation, but I'm not sure they will get it," added Trita Parsi, head of the National Iranian American Council.

Iran has not responded to an Italian invitation to meet this week with high-level officials from the United States and other members of the Group of Eight industrialized nations.

"With three days to go, I still do not have a reply. I must consider that Iran has declined the invitation," said Italian Foreign Minister Franco Frattini. "Iran has lost an opportunity by not participating in the conference" (Nicholas Kralev, Washington Times, June 23).

Russia, though, expressed optimism that Iran would soon agree to enter nuclear talks with the five permanent U.N. Security Council member states and Germany, Interfax reported yesterday.

"There are all the necessary conditions today to launch a negotiating process with Iranians" based on the six powers' offer of nuclear cooperation benefits, a Russian Foreign Ministry spokesman said. He added that the powers were still willing to halt moves toward new sanctions if Iran suspended the expansion of its nuclear program while the sides negotiated an agenda for future talks.

"We hope that Tehran's recent statements regarding its readiness to cooperate with the sextet will turn into practical steps, and Iran will take advantage of the existing opportunities and will give a concrete response to the sextet's proposal on talks without any further delays," he said.

"When trust in the peaceful nature of the Iranian nuclear program is restored, it will be treated as similar programs of any other non-nuclear member of the [Nuclear Nonproliferation Treaty]," the spokesman added (Interfax, June 22).

Israeli Prime Minister Benjamin Netanyahu was set to begin a tour of European nations today in an effort drum up support for new economic penalties against Iran, Agence France-Presse reported.

Netanyahu is expected to meet in Rome with Italian Prime Minister Silvio Berlusconi and then travel to Paris for talks with French President Nicolas Sarkozy and U.S. envoy George Mitchell.

"Above all, the prime minister is planning to bring up the Iranian dossier," a high-level Israeli official said. "With what is happening now in Iran, words and condemnations are not enough, the world must decide to take much harder measures to prevent the Iranian regime from acquiring nuclear arms" (Jean-Luc Renaudie, Agence France-Presse I/Google News, June 22).

Jerusalem and Tehran might be able to co-exist peacefully if Iran had new leadership, the Israeli leader yesterday told the German newspaper Biild.

"If the people were free to decide, then I have no doubt there would be a different government," he said, according to the Associated Press. "This is a theocratic, totalitarian and brutal state."

Israeli wants an Iranian government that does not seek nuclear weapons or support international terrorism, Netanyahu said (Associated Press/Taiwan News, June 22).

Meanwhile, the son of deposed Iranian monarch Mohammad Reza Pahlavi warned that Iran might eventually trigger a nuclear war if its government suppressed the election demonstrators, AFP reported.

"Their defeat will encourage extremism from the shores of the Levant to the energy jugular of the world," Reza Pahlavi said in Washington. "At worst, fanatical tyrants who know that the future is against them may end their present course on their terms: a nuclear holocaust" (Agence France-Presse II/Google News, June 22).

http://gsn.nti.org/gsn/nw_20090623_9634.php

North Korean Ship Not Seen Carrying Missiles

North Korean Ship Not Seen Carrying Missiles
Tuesday, June 23, 2009

A North Korean cargo ship being monitored for potentially violating a recent U.N. arms embargo is not likely to be carrying missiles or other sophisticated technology, the Christian Science Monitor reported yesterday (see GSN, June 22).

(Jun. 23) - The North Korean ship Kang Nam 1, shown at port in 2007, is not likely to be transferring missiles or related technology, reports indicated (Khin Maung Win/Getty Images).

While a South Korean media outlet earlier reported that the Kang Nam 1 might be ferrying missile technology, others have argued the cargo is probably more basic. The ship is believed to be bound for Myanmar, an impoverished nation with a modest place in the world. "Myanmar -- they're not a missile-buyer," said James Schoff, an Asia-Pacific studies scholar with the Institute for Foreign Policy Analysis.

The ship's cargo more probably includes artillery, rifles or other small arms, according to the Monitor.

A U.N. Security Council resolution passed earlier this month, in response to the North's May 25 nuclear test, prohibits Pyongyang from exporting or importing any weapons. It calls on U.N. states to intercept any ships believed to hold illicit material.

A U.S. Navy destroyer might still intercept the Kang Nam. However, the United States could also wait to see if the ship attempts to refuel in Singapore.

Singapore is a U.S. ally and has said it would respond should the North Korean vessel attempt to dock there while transporting weapons illegally. "Singapore does not want to be thought of as a contributor to the illicit arms trade," Schoff said.

Under the resolution, ports are urged not to provide fuel or other material to ships believed to be carrying weapons unless the captain permits the vessel to be checked out (Peter Grier, Christian Science Monitor, June 22).

The ship today passed by the Chinese city of Shanghai, the Associated Press reported (Hyung-Jin Kim, Associated Press I/Yahoo!News, June 23).

A South Korean intelligence source yesterday also said he believes the Kang Nam is bringing small arms to Myanmar, AP reported.

Myanmar, like North Korea, is viewed as a pariah by the United States and the European Union, which have sought to block its access to weapons. It has bought North Korean arms before.

A coalition of journalists exiled from Myanmar, who run a well-reputed online magazine called Irrawaddy, reported that the ship is scheduled to call at the port of Thilawa sometime in the next few days.

If the U.S. Navy tries to intercept the Kang Nam before it reaches Myanmar, an armed conflict is not likely to follow, said Korean defense expert Baek Seung-joo. While the North Korean sailors probably have rifles, "It's still a cargo ship," Baek said. "A cargo ship can't confront a warship" (Hyung-Jin Kim, Associated Press II/Google News, June 23).

The USS John McCain, which has been shadowing the Kang Nam as it has made its way down the Chinese coast, has not made any moves to engage the North Korean vessel, the Wall Street Journal reported today.

"Right now, we're just watching," said one Pentagon official.

Some analysts told the Journal that fears about unconventional weapons proliferation to Myanmar are not totally unfounded.

"Given North Korea's nuclear trade to Syria, its attempts to sell Scuds to Myanmar, and its ongoing sales of conventional arms, there's reason to be worried about a WMD relationship," said Michael Green, a Myanmar expert and former adviser to then-President George W. Bush.

Analysts at Yale University several weeks ago released photographs of workers constructing a network of tunnels beneath Myanmar's capital city of Naypyitaw with North Korean collaborators, and some Burmese expatriates have spoke of plans for an offensive nuclear program. Still, U.S. and U.N. officials said there is no "smoking gun" indicating Myanmar would be in the business of purchasing anything but basic munitions from the North (Solomon/Dreazen, Wall Street Journal, June 23).

Meanwhile, North Korea has warned boats away from a sector off its east coast due to military exercises expected to continue through July 10, Agence France-Presse reported.

Observers have taken this as a sign that the North is planning a series of short- and medium-range missile trials.

There is also suspicion that the North might send an ICBM in the direction of Hawaii. A Japanese newspaper reported last week that Pyongyang is planning to test a Taepodong 2 missile sometime between July 4 and July 8 (Agence France-Presse I/Spacewar.com, June 23).

Elsewhere, a U.S. delegation visited Beijing to discuss China's crucial role in helping enforce the recent U.N. sanctions against North Korea, AFP reported.

"China and the U.S. discussing the situation on the Korean Peninsula is a natural thing and we take this consultation very seriously, and hope that we can get positive results from it," said Qin Gang, a spokesman for Chine's Foreign Ministry (Agence France-Presse II/SinoDaily.com, June 23).

North Korean Ship Might Be Holding Missile Technology

North Korean Ship Might Be Holding Missile Technology
Monday, June 22, 2009

The U.S. Navy destroyer USS John S. McCain, shown in 2003, has been following a North Korean ship suspected of transporting missile technology (U.S. Navy photo/Getty Images).

A North Korean cargo vessel being monitored for possible violation of a U.N. arms embargo might be carrying missile technology to Myanmar, Agence France-Presse reported (see GSN, June 19).

The Kang Nam 1 is believed to have previously transported materials related to Pyongyang's missile program. The United Nations this month prohibited the North from importing or exporting any weapons technology, after Pyongyang conducted its second nuclear test.

A U.S. Navy destroyer is following the ship as it sails south along the coast of China.

See Full Article...
http://gsn.nti.org/gsn/nw_20090622_4788.php

Boost in IAEA Intelligence Capability Looks Unlikely in Near Term

Boost in IAEA Intelligence Capability Looks Unlikely in Near Term
Monday, June 22, 2009

By Elaine M. Grossman

Global Security Newswire

One former U.S. official believes that the International Atomic Energy Agency needs stronger intelligence capabilities to battle nuclear smuggling operations, such as the network once led by former top Pakistani scientist Abdul Qadeer Khan, shown in February (Farooq Naeem/Getty Images).

WASHINGTON -- A former U.S. official's concept for expanding intelligence functions at the International Atomic Energy Agency is garnering some interest but appears unlikely to be implemented anytime soon, according to several nonproliferation experts (see GSN, April 2).

Intelligence issues were not on the agenda at an IAEA Board of Governors meeting last week in Vienna, Austria, and do not appear high on the Obama administration priority list for revamping the nuclear nonproliferation regime.

Still, a lukewarm reception has not deterred Rolf Mowatt-Larssen, who until January headed the Energy Department's intelligence branch. He argues that the U.N. nuclear watchdog agency must build its own intelligence unit if terrorists are to be prevented from acquiring a weapon of mass destruction.

See Full Article...
http://gsn.nti.org/gsn/nw_20090622_4368.php

Ahmadinejad Re-elected: Israel and Obama’s Iran Puzzle by Ramzy Baroud

Ahmadinejad Re-elected: Israel and Obama’s Iran Puzzle

by Ramzy Baroud / June 22nd, 2009 (0)

The election victory of Iranian President Mahmoud Ahmadinejad is likely to complicate US President Barack Obama’s new approach to his country’s conflict with Iran. The reason behind the foreseen obstacle is neither the US nor Iran’s refusal to engage in future dialogue but rather Israel’s insistence on a hard-line approach to the problem.

Iran’s presidential elections on June 12 were positioned to represent another fight between Middle Eastern ‘moderates’ vs. ‘extremists’. That depiction, which conveniently divided the Middle East — according to the prevailing US foreign policy discourse — to pro-American and anti-American camps was hardly as clear in the Iranian …
(Full article …)
http://dissidentvoice.org/2009/06/ahmadinejad-re-elected-israel-and-obama%E2%80%99s-iran-puzzle/

How the Wall Street Bankers Bought Congress by Petrino DiLeo

How the Wall Street Bankers Bought Congress

by Petrino DiLeo / June 22nd, 2009 (0)

You would think that causing the worst financial crisis since the Great Depression might have repercussions. You would think being a major factor in the destruction of around 40 percent of the world’s wealth might get you in trouble. You would think being the cause of the worst housing crisis in history — with millions of people losing their homes because of you — might force a restructuring of how Wall Street does things.

You would think that. But you’d be wrong.

For Wall Street’s lobbyists in Washington, it’s business as usual. Since Barack Obama took office, the bankers have succeeded in …
(Full article …)
http://dissidentvoice.org/2009/06/how-the-wall-street-bankers-bought-congress/

McChrystal Looks to Spin Afghan Civilian Deaths Problem by Gareth Porter

McChrystal Looks to Spin Afghan Civilian Deaths Problem

by Gareth Porter / June 22nd, 2009 (3)

WASHINGTON — At his confirmation hearings two weeks ago, Gen. Stanley McChrystal said reducing civilian deaths from air strikes in Afghanistan was “strategically decisive” and declared his “willingness to operate in ways that minimize casualties or damage, even when it makes our task more difficult.”

Some McChrystal supporters hope he will rein in the main source of civilian casualties: Special Operations Forces (SOF) units that carry out targeted strikes against suspected “Taliban” on the basis of doubtful intelligence and raids that require air strikes when they get into trouble.

But there are growing indications that his command is preparing to deal with …
(Full article …) http://dissidentvoice.org/2009/06/mcchrystal-looks-to-spin-afghan-civilian-deaths-problem/

What Obama must do now on Iran Condemn violence, without picking sides. By Trita Parsi

What Obama must do now on Iran
Condemn violence, without picking sides.
By Trita Parsi

from the June 22, 2009 edition

Christian Science Monitor

Washington - Tehran is being rocked. Convinced that the landslide victory of President Mahmoud Ahmadinejad June 12 was a fraud, hundreds of thousands of Iranians have taken to the streets. Clashes with security forces have left at least 19 dead, according to the official count.

Meanwhile, some lawmakers have turned Iran's seemingly stolen election into a political football with little regard for the repercussions their rhetoric may have for protesters in Iran.

"The president of the United States is supposed to lead the free world, not follow it," Republican Sen. Lindsey Graham said Sunday, echoing the sentiments of many senators and pundits. "He's been timid and passive more than I would like."

Accusing President Obama of weakness may generate some headlines, but it misses the point. A closer look reveals that the president's approach has paved the way for the current stand-off in Iran and that he is supported by those seeking their rights in Iran.

Many have argued that the president shouldn't side with any particular faction in Iran since doing so could backfire. Having the US on your side is not necessarily a good thing in Iran. Washington neither wants to make itself the issue in Iran, nor is it eager to help Mr. Ahmadinejad stage a comeback.

But two more salient points have been lost in the American debate. First, who makes the decision to help – the US, or the people America wishes to help?

Some neoconservatives and Republican lawmakers have called on Mr. Obama to side with Mir Hossein Mousavi, the centrist presidential candidate who ran on a reformist ticket. The recommendation was done, it appears, without consulting Mr. Mousavi to see if he believes that Obama's endorsement is needed or helpful. This kind of reckless arrogance partly explains why political groups in Iran view America's explicit support as a source of delegitimization.

America is viewed by many Iranians as only having its own interest in mind and as being incapable of providing genuine support.

With Obama, this pattern has changed. The wishes of Iranians are now suddenly center stage. On Monday, even as its election authority reportedly acknowledged that the number of ballots cast in dozens of cities exceeded the number of eligible voters in those areas, Iran accused the West of "meddling." Rather than listening to neoconservative critics or Republican lawmakers, White House staff say that they've been listening to signals from the Iranians themselves.

Those signals have been clear, and on most counts, the White House's position has been on mark.

"The last thing that I want to do is to have the United States be a foil for those forces inside Iran who would love nothing better than to make this an argument about the United States," Obama said in an interview broadcast Monday on CBS's "The Early Show."

The Iranians want to make sure that the world knows and sees what is happening on the streets of Tehran and other cities. And they want the US to stay out of the fight – at least for now.

But here is one legitimate criticism , the Iranians are missing two words from Obama: "I condemn." Protesters and political leaders I've spoken to in Iran want the US to speak out forcefully against the government's human rights abuses and condemn the violence. Philosophical formulations about respecting the wishes of the Iranian people aren't enough: The president should clearly condemn the Iranian government's violations and use of brutal force against its own people.

After all, condemning violence is different from taking sides in Iran's election dispute. Not only would it be compatible with American values, it would also reduce pressure on the president to entangle the US in Iranian politics. Clarity on the human rights front strengthens the president's ability to avoid siding with any political faction in Iran.

Second, few in the US debate have taken note that Obama's pro-engagement, anticonfrontation approach may have directly contributed to the developments in Iran. President George W. Bush sought to destabilize and bring about regime change in Iran for eight years through isolation, threats, and financial support for anti-Tehran groups. For all its labors, the Bush administration failed. The Iranian elite closed ranks, and hard-liners used the perceived threat from the US to clamp down on human rights defenders and pro-democracy activists.

Obama's diplomatic outreach and removal of this threat perception has not necessarily created fissures among the Iranian elite in and of itself, but it has weakened the glue that created unity among Iran's many political factions.

Imagine if the Bush administration still governed. Had they continued to issue threats and provoke confrontation with Iran Mousavi would probably not have disputed the voter fraud and called on his supporters to take to the streets. Due to the perceived national security threat, he would have swallowed his pride and anger, and asked his followers to do the same.It is because of the absence of an external threat that internal differences have been able to drive Iran's political developments to the current standoff. Internally driven political change could neither have been initiated nor come about under the shadow of an American military threat. If America's posture returns to that of the Bush administration, these indigenous forces for change may be quelled by the forces of fear and ultranationalism.

Obama should remain steadfast in his refusal to pick sides and to project a threat toward Iran that could be unifying for the Iranian government. The only change he needs to make is to add the word "condemn" to his vocabulary.

Trita Parsi is president and cofounder of the National Iranian American Council and author of "Treacherous Alliances: The Secret Dealings of Israel, Iran, and the United States."

Six years after Saddam Hussein, Nouri al-Maliki tightens his grip on Iraq

Six years after Saddam Hussein, Nouri al-Maliki tightens his grip on Iraq
The Iraqi prime minister arrives in Britain today seeking UK investment. Ghaith Abdul-Ahad reports on how a leader once seen as weak is now being compared to his infamous predecessor
Ghaith Abdul-Ahad

* The Guardian, Thursday 30 April 2009
* Article history

Baghdad has always produced more than its fair share of surreal conversations, but few can match the one I had with three Iraqi intelligence officers in the garden of a newly opened restaurant a few weeks ago. The three were former members of Saddam's notorious Mukhabarat. Now "reformed", they worked for the newly established Iraqi National Intelligence Service (INSI), a highly independent security service which some in the Iraqi government accuse of being too close to the US.

After a few pleasantries, which included frisking my shirt for wire-tapping devices, we sat around a plastic table while the most senior officer told me that his men were actively monitoring intelligence and military activities inside the government of Nouri al-Maliki. The two other officers looked in opposite directions as their colleague spoke.

"We have our own eyes and follow what they are doing there," the senior officer said. "Maliki is running a dictatorship - everything is run by his office and advisers, he is surrounded by his party and clan members. They form a tight knot that is running Iraq now. He is not building a country, he is building a state for his own party and his own people."

As a waiter in a white shirt and black trousers approached, the senior officer fell silent and his colleague ordered tea. Only when the waiter moved away, the senior officer continued: "We compile reports on their activities, generals' and military units' movements, and their corruption, the positions they are taking in the government and the contracts they are obtaining. But we don't know what to do with these reports because we don't trust the government."

The charges voiced by the INSI officers are heard, in hushed tones, more and more around Baghdad these days. Critics say Maliki is concentrating power in his office (the office of the prime minister) and his advisers are running "a government inside a government", bypassing ministers and parliament. In his role as commander in chief, he appoints generals as heads of military units without the approval of parliament. The officers, critics say, are all loyal to him. He has created at least one intelligence service, dominated by his clan and party members, and taken two military units - the anti-terrorism unit and the Baghdad brigade - under his direct command. At the same time he has inflated the size of the ministry of national security that is run by one of his allies.

Maliki, who many say was chosen because he was perceived to be weak and without a strong grassroots power base, has managed to outflank everyone: his Shia allies and foes, the Americans who wanted him removed at one time, even the Iranians.

In Beirut I met an Iraqi Shia cleric who settled in Syria in the 80s to escape Saddam's persecution. Maliki was the head of the Dawa party there and the two met frequently. "Unlike other opposition figures he [Maliki] didn't build wealth, he is very honest and very organised," he told me. The sheik, who spent more than 25 years involved in the opposition to Saddam, explained the conspiratorial mentality of his fellow opposition figures.

"The Dawa party in its methods and way of working is very similar to the Communist party. They don't trust anyone. They surround themselves with people they know. Maliki, like all of us, is the product of exile. They have suffered for so long in exile so now they trust no one."

A senior official in the council of ministers offered a less sympathetic view of Maliki's growing monopoly on the levers of power. "Iraq is ruled by institutions that are not covered by the law or the constitution, they have their own prisons and intelligence service, working for the benefit of the government, not the state."

Shifting animatedly on his chair, he counted off the elements of Maliki's security apparatus. "Constitutionally we have intelligence units in the ministry of defence and the ministry of information, but then we have the ministry of state for national security, run by Maliki's ally Sherwan al-Wa'ili. According to the constitution it should have staff of no more than 26 people, now they are more than 1,000. Maliki has his own intelligence unit, and military units that work directly under his command as the commander in chief. The prime minister is running everything through his advisers and nothing happens without his approval or his office, the office of the prime minister."

The official kept adjusting his jacket nervously and after a long silence, he continued: "They changed their rhetoric. They talk now about law and nationality but the reality is the same, they are the same sectarian people." Then, after a pause, he added: "No, it's not about sects any more its about the party, the interest of the party."

Observers not steeped in Iraqi history might be bemused to find that six years after the toppling of a dictator, after the death of several hundred thousand Iraqis, a brutal insurgency, trillions of wasted dollars and more than 4,000 dead US soldiers, the country is being rebuilt along very familiar lines: concentration of power, shadowy intelligence services and corruption.

"Political imagination in Iraq is still attached to the past 30 years," an Iraq analyst based in Beirut told me. "Credibility of the ruler is connected somehow to the old order." After reflecting on the time she spent in Iraq before the war she added: "Saddam Hussein is not dead."

Guns and steel

One morning, I watched the Iraqi prime minister visit the newly opened Baghdad archaeological museum. Hundreds of armed men stood guard around the concrete buildings, while armoured vehicles blocked roads miles away. A helicopter buzzed in the dusty sky overhead. Outside the gates, dozens of black SUVs waited like faithful dogs and women pressed their black shrouded bodies against the metal railing waiting for a glimpse of the leader. In the centre of this bubble of men, guns and steel walked Maliki, surrounded by a further three rings of bodyguards, dressed respectively in dark grey suits, khaki outdoor outfits and commando fatigues.

He moved between glass display cabinets, inspected Sumerian seals and Islamic bowls, and listened to the accompanying museum official explaining the stone Assyrian motif. After inspecting each cabinet, he moved his eyes from the artefact into the lens of the accompanying Iraqi TV camera, beaming his confident image live to the nation. Then his tour would resume and his halo of bodyguards, journalists and foreign dignitaries move with him.

It's a scene Iraqis would be very familiar with. It has been played out numerous times through Iraq's modern history, as its leaders have sought to borrow legitimacy from the nation's history. In the lobby of the museum, newspaper clippings show the dictator Abdul Salam Arif making a similar visit for the museum's inauguration in 1963, though with significantly fewer guards. Saddam visited too, although the newspaper clippings are not afforded the same prominence for obvious reasons.

Even Maliki's critics admit he is giving Iraqis what they crave. All over Baghdad, people tell you that Abu Israa, as the prime minister is fondly known, is the strong leader the country needed after the chaos of civil war, insurgency and occupation. His success in the recent local elections was one measure of this popularity.

An Iraqi veteran politician, who attended a tribal meeting with Maliki two weeks ago, told me it was very similar to a meeting he had attended with Saddam. "The tribesmen cheered for him, they chanted: 'Yes, yes to Maliki the leader.' Some unfolded banners and, just like Saddam, he went on talking for hours, without a coherent message." Half giggling, he added: "These are all the signs of The Day ... the day when the dictator emerges."

Mahmoud Othman, an independent Kurdish member of parliament, talked in a similar vein. "The problem is the people, they want a strong person.

People are used to that image, because Iraq went through decades of centralised authority and because people who want electricity, water and sewerage think that the authority of a strong man can solve all these problems."

Loyalty

Any self-respecting Iraqi politician who wants to build his own power base must first establish or acquire his own intelligence service. After a couple of weeks in Baghdad talking to politicians, members of parliament and intelligence officials I came to the conclusion that Iraq has seven separate intelligence units. Or maybe eight. No one could agree on the precise number.

An Iraqi journalist with links to some government officials explained. "People shouldn't blame Maliki. The security situation creates from the leader a dictator, and that's normal and logical, to surround yourself by people you trust; your friends and family, because you don't trust the others.

"Maliki and the leadership of Dawa [Maliki's party] managed to obtain the loyalty of military and civilian institutions and commanders and now those officers are loyal to Dawa and moved their alliances from other parties.

"Officers, even if they are not part of Dawa, want to kiss the hand that feeds them they become part of the matrix because they are appointed by Maliki. For example, officers attached to the supreme council changed their loyalties to that of Dawa."

Faryad Rawandousi, a member of the security committee in the Iraqi parliament, said: "There are a lot of appointments of officers, brigade commanders and above - 140 ranks that come directly from the prime minister without obtaining the approval of the parliament. These appointments are done without going back to the constitution, using existing laws of the former regime without taking into consideration that we are in a very different political system."

"The big commanders are loyal to whoever puts them in power," an official in the ministry of defence said. "They support Maliki because he is not imposing on them difficult conditions and some moved their alliances from other parties."

All these signs are not enough to make Maliki a dictator in the mould of Saddam, says the Iraq analyst. "There is no return to the days of Saddam - this is at most a shaky dictatorship. Now we have many small dictatorships, not one strong one, and that will create checks and balances."

Charles Tripp, a professor of politics in the Middle East at the School of Oriental and African Studies and a leading Iraq historian, said: "Dictators didn't come out of nowhere, they didn't come by a great explosion. They come by capturing small things bit by bit. Small things are very telling - they tell you the nature of things to come. One day people will wake up and ask how did we come here, it must be an awful conspiracy."

Back in the Baghdad restaurant garden, the waiter returned with tea and sugar and the intelligence officer immediately changed the subject. "It's nice weather to sit outside in the gardens," said one of the other men.

"Yes, but the sound of the generators is too loud," replied the other.

When the waiter had left I asked the senior officer if he feared he was being watched. "We are all being monitored," he said. "We monitor each other." Then he laughed. "But Maliki's people are too young. In the world of Mukhabarat they are just learning."

How the Financial Reform Plan Protects the Status Quo Obama's (Latest) Surrender to Wall Street By MICHAEL HUDSON

How the Financial Reform Plan Protects the Status Quo
Obama's (Latest) Surrender to Wall Street
By MICHAEL HUDSON

http://www.counterpunch.org/hudson06222009.html

Kids Martyrdom Videos Get New Sophistication, Huge Audience By The Investigative Project on Terrorism

Kids Martyrdom Videos Get New Sophistication, Huge Audience
By The Investigative Project on Terrorism (IPT)

The little girl's dark brown eyes look heavenward as she sings,

When we seek martyrdom, we go to heaven.

You tell us we're small, but from this way of life we have become big.

Without Palestine, what does childhood mean?


This is not a song from Hamas television in Gaza, nor is it a Hizballah anthem. "When We Seek Martyrdom" is the latest hit from a production house called Birds of Paradise. It is racking up millions of hits on Arabic and worldwide websites. Birds of Paradise, which appears to be based in Jordan, is quickly becoming one of the most popular children's groups in the Arab world.

My country and my blood are like its sands

Without Palestine, what does childhood mean?

Youtube, has dozens of editions and edits of the video, ranging from Arab parents having their children parrot the lyrics to Jihadists using it as background music in terrorist videos. "[Birds of Paradise] is one of the most widely distributed children's songs group in the Arab world, and it seems to have crossed the ocean to Canada and Britain," wrote journalist Fawzia Nasir al-Naeem in the Saudi Arabian newspaper, Al-Jazirah.

"Birds of Paradise" represents a new wave in Jihadist youth indoctrination. It is far more professional, better edited, and presented in a much more kid-friendly style than previous Jihadist children's programming. The themes are easily digestible even for toddlers. Child actors portray Israeli soldiers, all wearing yarmulkes, who ruthlessly gun down other children shown playing and dancing. Minutes later, the kids exact revenge and kill the soldiers.

See our report, and the video, here.
June 19, 2009 10:43 AM Link http://www.investigativeproject.org/1072/birds-of-paradise-martyrdom-recruitment-as

Maybe North Korea wants to get bombed

Maybe North Korea wants to get bombed


After a Japanese newspaper reported last week that the North Korean government is planning a July 4th launch of a Taepodong-2 intercontinental ballistic missile at Hawaii, the U.S. government was then pressed to explain its response to this possibility. At a Pentagon news conference, Defense Secretary Robert Gates announced that the ground-based mid-course interceptors at Fort Greely, Alaska stand ready, a mobile THAAD battery has deployed to Hawaii, and the sea-based X-band radar platform has sailed. For his part, President Obama assured a reporter that "the T's are crossed and the I's are dotted in terms of what might happen."

The Wall Street Journal sent an intrepid reporter to a beach on Kauai to get some thoughts from the locals about the prospect of ICBM bombardment.

President Obama and his national security staff will have to ponder more than just their defensive preparations. Should North Korea make even a failed attempt to strike a Hawaiian island, what practical and political pressures will the President face to retaliate against North Korea?

John Pike of Globalsecurity plotted North Korea's April 2009 Taepodong-2 test on this graphic. This launch was intended to achieve low earth orbit, with a trajectory in the general direction of Hawaii. The flight failed to achieve orbit and impacted at sea not even half way to Hawaii.

As President Obama and his advisers contemplate how to respond to a possible North Korean missile attack on Hawaii, they must first try to understand North Korea's motives. Why would the North Korean leadership risk or even attempt to incite U.S. retaliation?

In a military crisis, which side perceives itself to have "escalation dominance"? Which side believes that its position will improve the more the military crisis escalates?

From a conventional military perspective, it would seem that the U.S.-South Korean side possesses escalation dominance. U.S. air and naval power would finally get an opportunity to bash North Korea's known and suspected nuclear and missile installations. If it came to ground combat, North Korea's undertrained and undersupplied forces likely would not last long. True, North Korean tube and rocket artillery holds part of Seoul hostage. But South Korea can partially mitigate this threat through civil defense preparation and counter-battery fire. And should North Korea actually make good on this threat, the regime must know that that would be the end for them.

Thus even a failed North Korean missile strike on Hawaii would seem to be a gross miscalculation. It would offer the U.S. a chance to stop the North Korean proliferation threat for good.

But maybe the North Korean leadership doesn't see it this way. First, based on past experience North Korea's leaders may believe that they possess escalation dominance. From their perspective, previous crises have resulted in diplomatic flurries, the arrival of emissaries, negotiations, and, very frequently, payments to North Korea.

Second, North Korea may be looking for a way to patch up fraying relations with China and Russia. North Korea's leaders may see a threatened or actual U.S. attack on North Korea as a very effective way of renewing North Korea's security relationships with China and Russia.

Finally, an ICBM launch directed at Hawaii would be a good way of collecting data on the U.S. missile defense system, a procedure that perhaps the Chinese and Russians are quietly encouraging. Russian and Chinese intelligence-gathering ships, aircraft, and satellites would welcome a chance to observe the U.S. turning on its missile defense radars and communications systems.

Unless the U.S. absolutely has to attempt an intercept of an incoming ICBM, President Obama's likely preference would be to simply ignore North Korea's antics. With this course, he would preserve his flexibility and enhance his diplomatic advantage.

However, such a course may not be politically or practically feasible. In addition to the possible North Korean ICBM shot is the journey of the Kang Nam, a North Korean freighter suspected of carrying missile components prohibited by UN Security Council resolutions. USS John S. McCain is following the freighter which may be headed for a port in Myanmar.

The U.S. will not get any cooperation from Myanmar authorities regarding an inspection of the Kang Nam. Should the Obama administration fail to respond to both the Kang Nam and a North Korean missile shot aimed at Hawaii, it risks coming under stern criticism for having a feckless policy toward North Korea. At a practical level, U.S. allies in Asia will have new questions about the value of U.S. security guarantees. And bolder challenges to the Obama administration (not just from North Korea) would be inevitable.

If both sides in a conflict believe they possess escalation dominance, escalation becomes likely. But both sides can't be right. Wars are typically the result of miscalculation. It is remarkable that miscalculation over North Korean brinkmanship has not already occurred.

http://smallwarsjournal.com/blog/2009/06/m...a-wants-to-get/

Pyongyang Declares It's A 'Proud Nuclear Power'

Pyongyang Declares It's A 'Proud Nuclear Power'

From The Washington Times:

Obama 'fully prepared' to deal with N. Korea.

President Obama said the U.S. is ready to cope with "any contingencies" involving North Korea and vowed not to "reward belligerence and provocation."

South Korea's YTN news network reported that a U.S. Navy destroyer was tailing a North Korean ship suspected of carrying missiles and related parts toward Myanmar in what could be the first test of new U.N. sanctions, imposed after the North's recent nuclear test. The sanctions toughen an earlier arms embargo against North Korea and authorize ship searches in an attempt to thwart its nuclear and ballistic-missile programs.

Read more .... http://www.washingtontimes.com/news/2009/jun/22/obama-us-up-to-any-threat/

So the U.S. President and the U.S. Government is ready for the North Koreans .... I hope so, because the following article from The Small Wars Journal concerns me .... Maybe North Korea wants to get bombed, http://smallwarsjournal.com/blog/2009/06/maybe-north-korea-wants-to-get/

Fictions on the ground By Tony Judt, New York Times,

Fictions on the ground
By Tony Judt, New York Times, June 22, 2009

Israel needs “settlements.” They are intrinsic to the image it has long sought to convey to overseas admirers and fund-raisers: a struggling little country securing its rightful place in a hostile environment by the hard moral work of land clearance, irrigation, agrarian self-sufficiency, industrious productivity, legitimate self-defense and the building of Jewish communities. But this neo-collectivist frontier narrative rings false in modern, high-tech Israel. And so the settler myth has been transposed somewhere else — to the Palestinian lands seized in war in 1967 and occupied illegally ever since.

It is thus not by chance that the international press is encouraged to speak and write of Jewish “settlers” and “settlements” in the West Bank. But this image is profoundly misleading. The largest of these controversial communities in geographic terms is Maale Adumim. It has a population in excess of 35,000, demographically comparable to Montclair, N.J., or Winchester, England. What is most striking, however, about Maale Adumim is its territorial extent. This “settlement” comprises more than 30 square miles — making it one and a half times the size of Manhattan and nearly half as big as the borough and city of Manchester, England. Some “settlement.”

There are about 120 official Israeli settlements in the occupied territories of the West Bank. In addition, there are “unofficial” settlements whose number is estimated variously from 80 to 100. Under international law, there is no difference between these two categories; both are contraventions of Article 47 of the Fourth Geneva Convention, which explicitly prohibits the annexation of land consequent to the use of force, a principle re-stated in Article 2(4) of the United Nations Charter. [continued…]
http://www.nytimes.com/2009/06/22/opinion/22judt.html?_r=1

Ignore the chickenhawks pushing for an Iran coup By LEON HADAR

http://www.businesstimes.com.sg/sub/storyprintfriendly/0,4582,338729,00.html?

Business Times - 23 Jun 2009

Ignore the chickenhawks pushing for an Iran coup

By LEON HADAR
WASHINGTON CORRESPONDENT

MUCH has been said and written in recent days about the way the demonstrators in Tehran have been utilising new kinds of 'social media' to challenge the Iranian theocratic regime. Protestors blog, post to Facebook, and most intriguing, coordinate their protests on Twitter, the messaging service.

On Twitter, young Iranians and their supporters post reports and links to photos from demonstrations along with accounts of street fighting and casualties around the country. So will this revolution be twitted?

Perhaps. But in any case, with all the attention focused on Tehran's Twitter Revolutionaries, we shouldn't forget the other impressive group of revolutionaries that has emerged in Washington just as the media started reporting on allegations about a rigged Iranian presidential election and angry protesters were gathering in Teheran.

I'm referring here to the many brave US lawmakers, op-ed columnists, television talking-heads, think-tankers and bloggers who are angry that President Barack Obama has refused to punish the Ayatollahs in Iran by, say, bombing Iran into the stone age or doing a regime change in Tehran. Hence Republican Senator and former presidential candidate John McCain - thank God for small mercies - is now criticising the man who beat him last November for not talking tough with the Iranians like - I kid you not! - former President George W Bush.

'Look, these people are bad people and I know that it was unpopular to call them part of an axis of evil or whatever it was, but we just showed again that an oppressive regime will not allow democratic elections, free and democratic elections,' Mr McCain told reporters last week.

Yep. President Obama should follow the footsteps of his predecessor who certainly knew how to talk tough ('Bring them on') to Osama Bin Laden (and then let him get away to Pakistan) and to Saddam Hussein (and then generating a military fiasco in Iraq) and to Iran (and then helping it emerge as a regional power).

So Mr McCain, who during the campaign entertained an audience while singing Bomb, Bomb Iran to the tune of an old Beach Boys hit, is now advising President Obama on doing his version of the 'right thing' in Iran.

Mr McCain is at least a war veteran. Most of the other critics of Mr Obama's policy of maintaining a distance from the political upheaval in Iran are veterans of the battles of the blogs that took place before and during the Iraq War. They are so-called chicken-hawks who continue to protect such neoconservative bastions as the American Enterprise Institute (AEI) and the Weekly Standard, and who not long ago were promising us that the Iraq War would be a 'cake walk', and that Iraqis would greet Americans as liberators with garlands and sweets.

Now after that Iraqi Mission Not-Really Accomplished, they seem to be coming back to life, showing up once again on all the televisions news shows and authoring new op-eds for prestigious publications, despite the fact that much of their foreign policy agenda has been bankrupted and is now lying ruined on the sands of Mesopotamia.

Well . . . never mind. Now they suggest that America should exert all its power to lend a helping hand to former prime minister Mir-Hossein Mousavi as he and his supporters attempt to challenge the presidential election results, a move that will only play into the hands of the ruling Ayatollahs and President Mahmoud Ahmadinejad, who hope to portray Mr Mousavi and the protesters as American stooges.

Ironically, these same American critics who now depict Mr Mousavi as Iran's Gorbachev were warning on the eve of the Iran election that even if Mr Mousavi would win, the Americans would have no choice but to confront Iran over its nuclear military programme and consider giving Israel a green light to strike that country's nuclear facilities.

But now they explain that Mr Mousavi's election will ignite a democratic revolution in Iran and mark the start of a new era in US-Iran relationship. Trying to make sense of that kind of intellectual gibberish that passes for foreign policy analysis in Washington these days, I recalled Twiddle-dee and Twiddle-dum, those two silly characters from Lewis Carroll's Alice in Wonderland.

The two were known for talking nonsense all the time: 'This must be Thursday. Never could get the hand of Thursdays, though on a whole, Thursdays have been pretty good'. Their names derived from the expression 'twiddling my thumbs' which is to say they had nothing to do, like: 'Oh, I'm doing nothing, but twiddling my thumbs'.

So let's forget about Twitter. When it comes to the revived chickenhawks of Washington, the revolution will be twiddled.

Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.

Assessing North Korea's uranium enrichment capabilities By Hui Zhang

Assessing North Korea's uranium enrichment capabilities
By Hui Zhang | 18 June 2009
Article Highlights

* Last weekend, Pyongyang threatened to begin enriching uranium in an effort to expand its nuclear weapons program.
* While much is known about North Korea's plutonium production program, far less is understood about what enrichment capabilities Pyongyang currently possesses.
* That said, all of the publicly known evidence seems to indicate that North Korea currently has a very limited capacity for enrichment.

As retaliation against tighter U.N. sanctions, on Saturday North Korea defiantly threatened to expand its nuclear arsenal and begin a program of uranium enrichment--a threat it first made in response to U.N. condemnation of its early April rocket launch. Compared to North Korea's well-known plutonium production program, the nature of Pyongyang's highly enriched uranium (HEU) program is less clear.

The HEU issue first surfaced in October 2002, when North Korean First Deputy Foreign Minister Kang Sok Ju reportedly acknowledged the existence of such a program in response to allegations made by U.S. officials who were visiting Pyongyang. Ever since, though, Kang and other North Korean officials have consistently denied that the country is enriching uranium.

What does the publicly available information reveal about the North Korean enrichment program? A November 2002 declassified CIA report to Congress stated, "North Korea was constructing a plant that could produce enough weapons-grade uranium for two or more nuclear weapons when fully operational--which could be as soon as mid-decade." And a declassified August 2007 Director of National Intelligence report noted, "We continue to assess with high confidence that North Korea has pursued efforts to acquire a uranium enrichment capability, which we assess is intended for nuclear weapons. All intelligence community agencies judge with at least moderate confidence that this past effort continues. The degree of progress toward producing enriched uranium remains unknown, however."

The main evidence regarding Pyongyang's HEU program includes:

* Acquisition of about 24 P1 and P2 centrifuges, blueprints, a flow meter, and special oils for centrifuges, as well as visits to top-secret centrifuge plants built by A. Q. Khan.
* Import of 150 tons of high-strength aluminum tubes from a Russian trader. As of 2008, these tubes haven't been used for centrifuges, which U.S. experts confirmed when North Korea allowed them to see the tubes. U.S. scientists did find traces of enriched uranium on aluminum tubing that Pyongyang had provided to prove that it wasn't conducting enrichment activities, but there is still some argument about the source of these traces.
* A blocked shipment of 22 tons worth of high-strength aluminum tubes in April 2003. Other unfulfilled orders of high-strength aluminum tubes also have been reported.
* An attempt to buy two electrical-frequency converters from a Japanese firm in 1999, and a repeat effort to purchase three converters four years later.
* Acquisition of equipment suitable for use in uranium feed-and-withdrawal systems.
* Reports of traces of HEU on documents submitted to the United States as part of North Korea's nuclear declaration. However, there has been no confirmation of the source of these traces.

In short, there isn't recent evidence of North Korean procurements for a large-scale centrifuge program, as one senior U.S. official knowledgeable about the intelligence on North Korea's nuclear program noted in January 2007. Moreover, there isn't convincing or overwhelming evidence to support the existence of the construction of a large-scale centrifuge facility in the last several years.

How long would it take North Korea to have production-scale centrifuge enrichment? The 2002 CIA estimate may have been based on a "worst-case" scenario that assumed Pyongyang could use the high-strength aluminum tubes it acquired from Russia to produce centrifuges, possessed every other difficult-to-manufacture component such as bottom bearings and ring magnets, and had the expertise or outside help to build and install thousands of centrifuges within a few years. In any case, the 150 tons of high-strength aluminum North Korea acquired would be enough for about 2,600 P1 centrifuges.

Still, it likely would take many more years to get the centrifuges fully functional. Consider Iran, for example. It took Tehran about 20 years from the time it procured the complete P1 designs to the time it had a substantial number of P1s operating. To run a centrifuge enrichment plant, Pyongyang would need to overcome many difficult engineering challenges. So it seems unlikely that North Korea will succeed in establishing a substantial enrichment capability using this technology in the near term.

That timetable could accelerate, however, if Iran is willing to impart to North Korea the knowledge it accumulated at its Natanz Fuel Enrichment Plant, which utilizes the same P1 centrifuge. Given that both Iran and North Korea have similar strategic goals and a common enemy (the United States), close collaboration between the two countries is a possibility--although there is a good chance that Western intelligence agencies would detect such collaboration.

Either way, the publicly available evidence seems to indicate that North Korea has a very limited capacity for enrichment, and the number of centrifuges it could produce would be dependent upon the quantity of materials it already acquired from abroad. Obviously, it would be significantly more difficult for Pyongyang to get those materials now, considering the international attention on its nuclear program and the stricter control of those materials since the start of the North Korean nuclear crisis.

Hypothetically, if North Korea builds a plant with up to 2,600 P1 centrifuges, it could produce around 20 kilograms of 90 percent HEU per year. Since Pyongyang already has developed implosion-type plutonium bombs, it could theoretically also produce an implosion-type design for an HEU bomb, which would save considerable amounts of HEU. For example, if Pyongyang plans to build a compact, lower-yield bomb (let's say the 4-kiloton bomb it told China it tested in 2006), it could use less than 10 kilograms of HEU for each bomb. In addition, North Korea has plenty of natural uranium reserves, with estimates of up to 300,000 megatons.

If Pyongyang were to successfully develop a centrifuge enrichment program, it would pose a huge challenge in verifying North Korean denuclearization. Unlike plutonium production, which involves a reactor that is difficult to hide because of the heat it generates, and a reprocessing facility, which leaks fission products that are detectable off-site, a compact centrifuge uranium enrichment facility could be easily concealed from satellite imagery and off-site sampling. Thus, verification would entail intrusive inspections and greater cooperation from Pyongyang.

Even worse, HEU is attractive to sub-national groups looking for a nuclear capability. While a plutonium bomb requires the assembly of a complicated weapons system to deal with pre-detonation issues, a HEU bomb is relatively easy to construct. And there is little disagreement that a terrorist group would be able to design and produce a HEU-based gun-type weapon or that it could be expected to work without testing. Moreover, unlike plutonium, HEU poses no significant health hazards during the construction phase because of its low level of radiation.

The idea of Pyongyang selling HEU to terrorist groups is scary, and history has demonstrated North Korea's willingness to sell a wide range of dangerous materials to other states--missiles, missile technologies, drugs, etc. Its export of missile components and technology to Iran has been particularly troublesome. Also, North Korea reportedly helped Syria build a reactor that Israeli air strikes destroyed in September 2007. The prevailing fear is that the North Korean economic situation will deteriorate to even more desperate levels, causing Pyongyang to recklessly sell its nuclear weapons and materials.

The sale of bomb-grade nuclear material to another state or a terrorist group is a dangerous strategy for North Korea, and the chances of such a transfer are admittedly small. But once Pyongyang accumulates enough nuclear material to spare, the risk could increase. Therefore, the international community must act now to draw North Korea to the negotiation table. Otherwise, it's only giving Pyongyang more time to expand its nuclear program.
http://www.thebulletin.org/web-edition/features/assessing-north-koreas-uranium-enrichment-capabilities

Dirty Little Secrets The Saudi Nuke by James Dunnigan

Dirty Little Secrets
The Saudi Nuke
by James Dunnigan
June 20, 2009

The United States believes that Pakistan has 60 nuclear weapons, and is producing nuclear material for at least 5-6 more bombs a year. The U.S. has provided money and technical assistance to ensure the security of those weapons. It is believed that Pakistan stores its nukes with the nuclear material kept separate from the rest of the weapon (which contains the explosives that compress the enriched uranium, causing the nuclear explosion, as well as the electronics and warhead components needed to trigger the explosion.)

Pakistan built its nuclear weapons in order to guarantee its independence from Indian attack, invasion and conquest. India has no interest in conquering Pakistan. That would nearly double the number of Moslems in India, as well as adding an area that has a lot more poverty and corruption. Then there are the Pakistani tribal territories, with over 20 million tribal people who have, for thousands of years, raided into, and occasionally invaded, India. Pakistanis are coming to accept this Indian attitude as true, and for the last five years, the two countries have been negotiating to settle the territorial and political differences that have caused decades of violence (and four wars) between the two nations. Most people, on both sides of the border, agree that a nuclear war would be a tragic disaster for both nations, insuring that neither could claim "victory" with a straight face.

Pakistan denies that it is expanding its nuclear arsenal, but U.S. intelligence (and their Indian counterparts) believe otherwise. Sixty weapons should be sufficient to maintain the "balance of terror" with India. What no one wants to discuss openly is the risk of Pakistan selling its "surplus" of nukes to another country. Pakistan certainly needs the money, and already has a track record of peddling nuclear weapons technology. The UN IAEA (International Atomic Energy Agency) continues investigating Pakistani nuclear weapons scientist A Q Khan's illegal nuclear weapons technology smuggling organization. IAEA believes that Khan's group not only had a wider reach than previously thought, but is still in business.

Khan is suspected of peddling nuclear secrets as far back as the late 1990s. In 2004, Khan finally admitted it. There was popular outrage in Pakistan at a local politicians suggestion that A Q Khan, who originally stole technology from the West and created Pakistan's nuclear bombs, be questioned by foreign police for his role in selling that technology (as a private venture) to other nations (like Libya and North Korea). Khan was placed under house arrest after he confessed, and kept away from journalists, but was otherwise untouchable, because he was a national hero for creating the "Islamic Bomb." Popular demand eventually led to Khan being released from house arrest last year.

The IAEA continues to question Khan's customers, some of whom (particularly Libya) have been very cooperative. It is now known, for example, that most of the nuclear weapons documents provided were in electronic form. Thus the information could be easily copied and distributed. There's no way to track down how many copies there are or who has them. It is known that the documents are not in wide distribution, but it is likely that someone (especially in Iran and North Korea) has copies. But there are indications that the documents are still on the market.

A prime customer for Pakistani nukes is Saudi Arabia, which fears increased Iranian aggression once Iran acquires nukes. The Saudis have already bought ballistic missiles from China (which is suspected of supplying Pakistan with some nuclear weapons technology.) Saudi Arabia has the cash to buy nuclear weapons from Pakistan (along with the technology to build a ballistic missile warhead for them). Saudi Arabia would need several dozen nuclear weapons to provide them with an adequate counter to Iranian nukes. This would benefit Pakistan in that Iranian control of Arab oil in the Persian Gulf would put Pakistan at a disadvantage against their Iranian neighbor.
http://www.strategypage.com/dls/articles/The-Saudi-Nuke-6-20-2009.asp

This Is Why We Must Fight And Win In Afghanistan

This Is Why We Must Fight And Win In Afghanistan A video grab from an undated footage from the Internet shows Al Qaeda leader in Afghanistan Mustafa abu al-Yazid making statements from an unknown location. REUTERS/REUTERS TV

Al Qaeda Says Would Use Pakistani Nuclear Weapons -- Reuters

DUBAI (Reuters) - If it were in a position to do so, Al Qaeda would use Pakistan's nuclear weapons in its fight against the United States, a top leader of the group said in remarks aired on Sunday.

Pakistan has been battling al Qaeda's Taliban allies in the Swat Valley since April after their thrust into a district 100 km (60 miles) northwest of the capital raised fears the nuclear-armed country could slowly slip into militant hands.

Read more .... http://in.reuters.com/article/worldNews/idINIndia-40495320090621

More News On Al Qaeda Threats To Use Nuclear Weapons

Al-Qaeda threatens to use Pak nuclear weapons against U.S. -- The Hindu
http://www.hindu.com/thehindu/holnus/000200906221113.htm

Al-Qaeda ready to use Pakistan's nuclear weapons against US -- M&C
http://www.monstersandcritics.com/news/southasia/news/article_1485024.php/Al-Qaeda_ready_to_use_Pakistans_nuclear_weapons_against_US_

Qaeda vows to fire Pakistan nukes at US -- Press TV
http://www.presstv.ir/detail/98717.htm?sectionid=351020401

Al-Qaeda to use Pak's atomic weapons against US -- Fresh News
http://www.freshnews.in/al-qaeda-to-use-paks-atomic-weapons-against-us-150921

The Saudi Nuke -- Strategy Page
http://www.strategypage.com/dls/articles/The-Saudi-Nuke-6-20-2009.asp

# Obama's Latest Surrender to Wall St. - Michael Hudson

Obama's Latest Surrender to Wall St. - Michael Hudson

http://www.counterpunch.org/hudson06222009.html

How the Financial Reform Plan Protects the Status Quo
Obama's (Latest) Surrender to Wall Street

By MICHAEL HUDSON

In reaching across the aisle for Republican support – and no doubt future campaign contributions from the financial sector Pres. Obama is morphing into Joe Lieberman. There also is a touch of Boris Yeltsin in his sponsorship of a financial “reform” ominously similar to what advisor Larry Summers backed in Russia – relinquishing government power to a banking elite. The Financial Regulatory Reform proposal promotes Wall Street’s “product,” debt creation, at the expense of the economy at large, and lets financial chieftains continue to self-regulate the debt industry – and to keep scot-free all their gains from the past decade’s worth of fraudulent lending.

Confronting the wreckage of a debt crisis worse than any since the Great Depression, Mr. Obama has achieved what no Republican could have: rescuing the Bush Administration’s pro-creditor policies that fostered the Bubble Economy in the first place. “Most of the financial sector lobby community is happy with what has emerged,” the Financial Times summarized. A spokesman for the Financial Services Forum, a major Wall Street lobbying organization, called the proposals “careful and balanced.”1/ With such endorsements, victims of predatory lending have good reason to worry. The Obama plan is just the opposite from reforming the financial system along lines that progressive Democrats and other critics have urged.

The plan’s six most fatal flaws are apparent in its preamble, which lays out a false diagnosis of the financial problem in a way that whitewashes Wall Street (in contrast to Mr. Obama’s nice televised populist speech giving verbal criticism to “culture of irresponsibility”). A false diagnosis must lead to wrong-headed cures – rarely by accident. There invariably is a financial beneficiary who gains from blind spots in a legal “reform” package.

1. Regulatory capture. Preparing the ground for future Alan Greenspan “free market” ideologues

The most serious problem is “regulatory capture”: control of the public regulatory process by the special interests being regulated. Mr. Obama’s speech introducing his reform was forthright in acknowledging that “some companies shop for the regulator of their choice … That is why, as part of these reforms, we will dismantle the Office of Thrift Supervision [OTS] and close loopholes that have allowed important institutions to cherry-pick among banking rules. We will offer only one federal banking charter, regulated by a strengthened federal supervisor.” It was the OTS, after all, that AIG and Washington Mutual chose as their regulator, as did GE Capital. The most incompetent, most ideologically opposed to serious regulation, its idea of a “free market” in practice was one free for fraud-ridden subprime lenders to do whatever they wanted.

One could go down the list of non-enforcement agencies – the Securities and Exchange Commission (SEC) not responding to warnings about Bernie Madoff, and the most deregulatory agency of them all: the Federal Reserve under Bubblemeister Alan Greenspan. Traditionally, the Fed has acted as lobby for the commercial banking system and indeed for Wall Street as a whole. (Its shares are owned by the commercial bank members of its system.) The Fed’s refusal to intervene to stop the subprime mortgage bubble, fraudulent lending and other elements of the Greenspan Chairmanship does not give much faith that it will take actions that will interfere with Wall Street’s money-making at the expense of the rest of the economy. Even today, the Fed is stonewalling Congress by refusing to release details on its $2 trillion “cash for trash” giveaway to favored Wall Street institutions.

It is supposed to be the Treasury’s role to represent the public interest. Unfortunately, appointing Treasury Secretaries from the ranks of Wall Street management – or giving Wall Street veto power over the nominee – undermines this mission. Elsewhere in what is supposed to be the regulatory system of public-private checks and balances, the simple tactic of underfunding the criminal justice system, the FBI, state and local prosecutors – or actively blocking them, as George Bush did – leaves the economy without adequate protection against financial fraud and predatory credit. Putting the Congressional financial committee heads up for sale to the highest campaign contributors caps the process of transforming economic democracy into oligarchy.

Meaningful regulation should start with the premise that the right of banks to create credit out of thin air (actually, out of strokes on a computer keyboard, as long as bankers can find borrowers to sign IOUs) is a public utility. Mr. Obama and his Treasury do not agree. They treat credit creation as a private Wall Street monopoly, to be regulated more in name than in practice. The result is a Thatcherite giveaway to the banking sector – and as Tim Geithner noted, Wall Street institutions of all stripes, from brokerage houses to automobile lenders and retail stores are now declaring themselves “banks” in order to get government handouts to anyone who is a creditor (but nothing for their debtors). This is part of the New Class War that the Bush-Obama administration has sponsored to polarize the economy between creditors and debtors.

The politically astute way to deregulate a public utility – especially in the wake of a financial crisis that has much of the population up in arms – is to shed crocodile tears over Wall Street’s “culture of irresponsibility,” as Mr. Obama did on Wednesday, and then claim that you are “centralizing” regulation to make it stronger rather than weaker. If you are going to block future bank regulation, of course you promise that your act will provide greater public oversight. Mr. Obama has tapped the Federal Reserve for this role. But this is precisely what exacerbated the Greenspan Bubble.

The deregulation-by-centralization ploy peaked when Pres. George W. Bush used it to nullify attempts by state attorney generals to prosecute Countrywide Financial, Washington Mutual, Citibank and other financial crooks as criminal enterprises for making fraudulent subprime mortgage loans. The ruse Mr. Bush used to block their lawsuits was an obscure small-print rule from the 1864 National Bank Act giving Washington the power to overrule local states in bringing criminal charges. The motivation for this Civil War law was clear enough: Local governments and their courts tended to be venal and corrupt. Washington asserted its oversight so as to prosecute “wildcat banking” in an era when bankers issued their own bank notes, many of which were worth much less than their face value when their holders tried to spend them.

Pres. Bush turned this law on its head, blocking eleven state AGs from prosecuting financial fraud. Taking matters out of their hands, he assigned the complaints to the Washington national bank regulator – who refused to prosecute, claiming that fraud was all part of America’s wonderful free market. This has cost the U.S. economy over a trillion dollars so far. Washington has preferred to let the banks make their fraudulent loans, and then pay them in full (along with the financial companies they’ve victimized, but not the personal debtors of course) for their bad loans that defaulted, so as to “save the system.”

Mr. Obama’s reform does not propose repealing or qualifying this clause of the National Bank Act so as to permit any prosecutor to prosecute (but not to allow prosecutions of financial fraud to be blocked). Placing regulatory power in the Fed has the potential to annull any serious fraud prosecution. This is the Robert Rubin and Larry Summers-style free market – free for criminalized finance to proceed unchecked. And if Mr. Summers is to become the next Fed Chairman … well, you can guess where this will lead on the regulation/deregulatory spectrum between creditors and debtors!

2. Failure to give meaningful teeth to fraud reduction

Sound regulations against fraud are on the books, many of them from the New Deal. But as the Bubble Economy saw levels of financial fraud unprecedented since the 1920s, officials who wanted to prevent abuses found their departments un-funded. Mr. Obama’s proposal fails to address this problem. “There are … millions of Americans who signed contracts they did not always understand offered by lenders who did not always tell the truth,” he acknowledged in introducing his plan on June 17. Mr. Obama promised “enforcement will be the rule, not the exception.” But where is the funding for the FBI’s criminal fraud division? Where is effective consumer protection from insurance companies that don’t pay, from crooked contractors and mortgage companies using property appraisers, lawyers and collection agencies, or from stockbrokers packaging junk mortgages into junk securities? They’ve been given a fortune in recent years – and can keep it to set themselves up to make yet a new killing. It looks as if as little will be done to financial fraud as will be done to the Guantanamo torturers and the high-ups who condoned their actions.

Much attention has been given to the Consumer Financial Products Agency, whose role has been defined largely by Elizabeth Warren of the Harvard Law School. Its main aim is to enforce truth-in-lending laws on credit-card companies and mortgage lenders. (Weren’t these laws already on the books?) This is progress, but surely much more is needed. One way to make credit-card rates more economic would be for the government to provide its own rival service. After all, credit cards have become a major form of payment today. Isn’t electronic payment really a public utility? The difference is that unlike electric and gas utilities or railroads, there is no regulation to keep fees in line with economically necessary basic costs to the card issuer. It is fine to hear that one finally will be able to read clearly how much one is being exploited. But why not stop the exploitation in the first place?

Republicans may simply try to make the Consumer Financial Products Agency only “advisory,” without real regulatory power. So even if Congress doesn’t kill the proposal, Mr. Obama doesn’t have to worry too much about offending his number-one donor constituency. Serious regulation over Wall Street will have about as much effect as the corporate “social responsibility” desk to which companies assign employees on their way out. At the Senate hearings on June 18, Sen. Robert Menendez of New Jersey asked Mr. Geithner “whether the council that would watch over the financial regulators has any power to do anything other than make recommendations. Mr. Geithner [said] they may not have gotten the balance exactly right, but he didn’t want the council to have the authority to unilaterally force changes on the regulators it oversees.”

To really protect consumers, why not counter extortionate credit-card practices by re-introducing anti-usury laws? They were evaded initially by companies incorporating themselves in states with “race to the bottom” laws. If Washington can override state prosecutors to prevent punishment of financial fraud, why can’t it override such ploys by the usury industry? Here’s where centralized federal law really should count for something.

3. Failure to reverse the shift to pro-creditor bankruptcy laws

The Obama plan allows Wall Street to keep on selling its product – debt, growing at exponential rates – as if finance were an “industry” like manufacturing. (In this spirit the Dow Jones Industrial Average now contains the leading financial-sector firms, although it dropped Citicorp when its shares dropped below the $1 cutoff point.) The reality is that tax favoritism for finance and debt leveraging is largely responsible for de-industrializing the economy. More and more income is being diverted away from buying goods and services in order to pay lenders on debts run up in the past. What is needed to free economies from such debt is repeal of the pro-creditor reversal that Congress passed in 2005 in response to lobbying by the credit card and banking industry. Making it harder for personal debtors to go bankrupt, this law blocked courts from rolling back debt to the population’s ability to pay.

Obama’s plan fails to rectify matters. It treats the financial “services” issue in isolation from the economy’s debt problem and general economic welfare. FDIC head Sheila Bair has proposed limiting mortgage interest to 32 per cent of the debtor’s family income. The alternative is for home foreclosures to continue, expropriating many recent buyers and also owners who have borrowed against their homes to pay off their higher-interest credit-card debt or simply to maintainliving standards that their paychecks no longer cover.

Ever since colonial times, New York State has had the Fraudulent Conveyance Law on its books. This wise legislation states that if a bank makes a loan to a borrower without knowing how the debtor can reasonably meet the terms of the loans out of normal income, the loan is deemed fraudulent and therefore null and void.

4. Failure to re-introduce Glass Steagall or otherwise limit lenders “too big to fail”

In presenting his program, Mr. Obama misrepresented a major cause of the Bubble Economy. It all seemed to be caused by the impersonal force of technology “A regulatory regime,” he claimed, “basically crafted in the wake of a 20th century economic crisis – the Great Depression – was overwhelmed by the speed, scope, and sophistication of a 21st century global economy.” Not exactly. The capstone of FDR’s New Deal was the Glass-Steagall Act separating commercial banking from investment banking. This blocked the financial conflict of interest between serving retail bank customers and investment-bank profiteering.

One consequence of Glass-Steagall was to make the merger between Citibank and Travelers Insurance illegal. To save Citibank officials from suffering the consequences of breaking the law – and in the process, to open the doors to the conglomerate movement that brought down the economy – President Clinton took the advice of Messrs. Summers and Greenspan and signed into law the repeal of Glass-Steagall in 1999. Banks were permitted to buy insurance companies’ real estate and stock brokers and law firms to package junk mortgages into junked collateralized debt obligations (CDOs), cover them with junk-insurance policies written by A.I.G. and other companies taking fees for promising to pay money they did not have, and get bailed out with trillions of dollars of “taxpayer” money in the form of the Federal Reserve and Treasury’s “cash for trash” swaps.

5. Failure to deter credit default swaps and other “casino capitalist” gambles

On Mr. Summers’ watch under the Clintons, the word “reform” came to mean what it meant in Russia, where he had a free hand in the 1990s: a giveaway of public assets to financial insiders. In the United States this involved stripping away the true reforms put in place from the Progressive Era to the New Deal. Among the excuses being cited is the need to free “innovation.” But financial innovation is not like that of manufacturing. Instead of raising productivity to produce more with less labor (and hence at falling prices), financial innovation aims at extracting more from debtors and from money-management clients and funds. Under free competition, for example, modern electronic technology enables banks to clear checks in a single day. But “financial engineering” has gone hand in hand with political engineering, permitting the banking monopoly to adhere to old pony express schedules – and keeping depositors’ money as “float,” that is, as an interest-free loan.

The main achievement of financial engineering has been to create mathematically opaque derivatives. As no less a speculator than George Soros has noted: “Financial engineers claimed they were reducing risks through geographic diversification: in fact they were increasing them by creating an agency problem. The agents were more interested in maximizing fee income than in protecting the interests of bondholders. … Custom-made derivatives only serve to improve the profit margin of the financial engineers designing them.” The only cure is to ban credit default swaps outright. But they have become Wall Street’s leading profit center. Mr. Obama’s reform does not interfere with that cash cow.

As for the “technology” of credit evaluation, modern web searching should enable any creditor or hapless buyer of packaged bank mortgages to check the estimated price of any home or building on-line – or any credit reporting score on individuals, for that matter. Banks have no interest in doing this when it interferes with their rip-offs. “We’ve seen a system that allowed lenders to profit by providing loans to borrowers who would never repay,” Mr. Obama explained, “because the lender offloaded the loan, and the consequences, to someone else.” Much of today’s institutionalized financial irresponsibility indeed stems from the fact that banks today no longer hold the mortgages they originated. Instead, they “offloadi” their loans and give bonuses to officers based on their loan volume without any consideration for loan quality or reality. It used to be called fraud, and be prosecuted.

Mr. Obama proposes that originators of loans keep a token 5 per cent on their own books. Critics point out that this hardly will deter junk-mortgage practices, and suggest that the required proportion at least be doubled, along with blocking off-balance-sheet vehicles, especially in tax-avoidance zero-oversight offshore banking centers. In view of the almost universal condemnation of this practice, Mr. Obama’s delicate steps suggest that the plan was formulated with a view of “How little do we have to yield to popular and Congressional anger at the trillions of bailout dollars we have given to financial crooks?”

6. Failure to reform the tax system that has distorted the financial system to promote predatory extractive debt, not productive industrial credit

The “product” that the banking “industry” sells is debt – loans which, under today’s financial circumstances and tax favoritism for Wall Street, are extended in a way whose main effect is to inflate asset prices, not fund tangible capital formation. Rising prices for housing and commercial property, stocks and bonds, are taken as justification for yet more lending, backed by collateral being bid up in price. By loading the economy down with debt, this seeming “wealth creation” becomes a vicious circle, increasing the economy’s financial carrying charge.

Mr. Obama’s “reform” plan seeks to sustain this dynamic, not reverse it. The plan does not acknowledge the symbiotic relationship between fiscal and financial policy. Cutting property taxes leaves more real estate rent, monopoly rent and asset-price gains “free” to be pledged to the banks for yet larger loans – pledged to pay more interest on the rising debt taken on to buy assets being inflated by the credit bubble.

The resulting financial “enterprise” is different from industrial innovation. It consists largely of capturing congressional tax legislators so as to write small-print tax “loopholes” and more glaring tax breaks that shift the fiscal burden onto productive labor and industry. That is the essence of today’s “pay to play” democracy. Financializing the economy in this way has gone hand in hand with de-industrialization.

The most regressive tax is FICA wage withholding for Social Security and Medicare. Only wages below about $102,000 are subject to this tax, not higher incomes. And Wall Street speculators only pay a low “capital gains” rate on their trading. By shifting the tax burden onto the “real” economy, this tax shift polarizes income and wealth at the top of the economic pyramid while increasing the cost of living (taxes are a cost, after all). This squeezes family budgets and shrinks spending on goods and services. And as a result of tax subsidy for debt leveraging, industrial cash flow is diverted to pay interest and dividends rather than being reinvested in new means of production and being liable for income taxes.

More bank lending – that is, more debt – is the heart of today’s economic problem, not the solution. Finance capitalism is undercutting industrial capitalism, replacing the production of goods and services with predatory extraction of rent and interest via economic “tollbooths,” from parking meters in Chicago to roads in New Jersey. States and localities are facing fiscal shortfalls obliging them to sell off their roads, parking meters and public enterprises to buyers who erect expensive tollbooths and extract yet more income from the shrinking “real” economy. The economy is heading toward debt peonage as it polarizes between wealthy patrons and a work force reduced to patron-client dependency relationships.

Do we need a new beginning for meaningful financial restructuring?

America’s financial problem thus requires deeper solutions than have been discussed to date. Paul Krugman has complained in his New York Times column about two obvious gaps in the Obama plan. “To live up to its own analysis, the Obama administration needs to come down harder on the rating agencies and, even more important, get much more specific about reforming the way bankers are paid.” The securities ratings agencies certainly have an inherent conflict of interest in being paid by their clients to give reviews – usually a rave AAA rating - for junk securities. But beneath this problem lie much deeper ones, so it is understandable that when Mr. Geithner was asked about better regulation of the ratings agencies in his Senate testimony on Thursday, he said that this would have to wait for another day. As Mr. Obama explained: “we are proposing a set of reforms to require regulators to look not only at the safety and soundness of individual institutions, but also – for the first time – at the stability of the system as a whole.”

But this is just what is not being done. The plan is silent when it comes to the reported 25 per cent of U.S. real estate sunk into a state of negative equity and 1/8 already in arrears heading for foreclosure as the mortgage debt attached to it exceeds its (falling) market price. Commercial real estate looks like the next big sector to topple. Debt service meanwhile is crowding out consumer spending on goods and services, shrinking the domestic market and aggravating unemployment.

The economy needs an FDR but has got the opposite. Mr. Obama promised change, but is defending the status quo. Will his historical role be to have made a doomed attempt to sustain growth in America’s debt overhead? Eroding Progressive Era checks on financial dynamics has been the political and economic trend for the past thirty years. It is advisor Summers’ idea of “reform” which he and his neoliberal cohorts imposed on Russia in the mid-1990s, endowing a kleptocracy and imposing poverty on the population at large, stripping away industrial capital.

Mr. Obama’s financial “reform” aims at sustaining casino capitalism by rolling back a century’s worth of progressive tax and financial legislation. After his speech the Dow Jones Industrial Average rose on Thursday, mainly because most “industrials” are now financial companies, reflecting the degree to which financial engineering has replaced industrial engineering.

The banks will complain about the Obama plan (really the Paulson Plan) to centralize financial regulation in a strengthened Federal Reserve. But of course that’s just where they want to end up, under a compliant Chairman (Mr. Summers himself?) appointed with Wall Street’s advice and consent. “Born and bred in the briar patch,” crowed B’rer Rabbit triumphantly after being thrown there. Saved from future Eliot Spitzers!

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) He can be reached via his website, mh@michael-hudson.com

Note.


1. Edward Luce, “White paper sets out skilful compromises,” Financial Times, June 18, 2009.

World Bank Warns of Social Unrest - BBC

World Bank Warns of Social Unrest - BBC
http://news.bbc.co.uk/2/hi/business/8066037.stm

John Williams' Shadow Government Statistics Analysis Behind and Beyond Government Economic Reporting Hyperinflation Special Report

John Williams'
Shadow Government Statistics
Analysis Behind and Beyond Government Economic Reporting

Hyperinflation Special Report
June 2nd, 2008

UPDATE — COMMENTARY

"How has the hyperinflation outlook changed since the Hyperinflation Special Report was published in April 2008?" Such is the most frequently asked question I receive these days.

The answer is that the outlook is little changed, since the following report outlines the basic issues and limited options for the U.S. government that were in play well before the current crises broke. The actions taken since by the federal government, U.S. Treasury and the Federal Reserve, in response to the still-deepening recession and ongoing systemic solvency woes, just exacerbated the long-range problems described in the report. The official actions likely have advanced the timing of the hyperinflation to the much nearer future, perhaps within the next year or two. Since September 2008, the Federal Reserve has been attempting to debase the U.S. dollar at an extraordinary pace, and such now is recognized widely among the major U.S. trading partners.

The current issues are discussed regularly and those analyses are available to subscribers in the Shadow Government Newsletter and related Flash Updates and Alerts. An updated Hyperinflation Special Report should be posted in the next several months.

Thank you for your interest.

Best wishes,

John Williams
www.shadowstats.com
June 2, 2009

HYPERINFLATION SPECIAL REPORT



Issue Number 41

April 8, 2008

__________



Inflationary Recession Is in Place

Banking Solvency Crisis Has Opened First Phase of Monetary Inflation

Hyperinflationary Depression Remains Likely As Early As 2010

__________



Overview

The U.S. economy is in an intensifying inflationary recession that eventually will evolve into a hyperinflationary great depression. Hyperinflation could be experienced as early as 2010, if not before, and likely no more than a decade down the road. The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, and gross mismanagement.

The U.S. has no way of avoiding a financial Armageddon. Bankrupt sovereign states most commonly use the currency printing press as a solution to not having enough money to cover their obligations. The alternative would be for the U.S. to renege on its existing debt and obligations, a solution for modern sovereign states rarely seen outside of governments overthrown in revolution, and a solution with no happier ending than simply printing the needed money. With the creation of massive amounts of new fiat (not backed by gold) dollars will come the eventual complete collapse of the value of the U.S. dollar and related dollar-denominated paper assets.

What lies ahead will be extremely difficult and unhappy times for many. Ralph T. Foster, in his "Fiat Paper Money" (see recommended further reading at the end of this issue), closes his book’s preface with a particularly poignant quote from a 1993 interview of Friedrich Kessler, a law professor at Harvard and University of California Berkeley, who experienced the Weimar Republic hyperinflation:

"It was horrible. Horrible! Like lightning it struck. No one was prepared. You cannot imagine the rapidity with which the whole thing happened. The shelves in the grocery stores were empty. You could buy nothing with your paper money."

This Special Report updates and expands upon the three-part Hyperinflation Series that began with the December 2006 SGS Newsletter, exploring: (1) the causes and background of the evolving hyperinflation and great depression; (2) why circumstances will differ from the deflationary Great Depression of the 1930s; (3) implications for politics and the financial markets; (4) considerations for individuals and businesses.

The broad outlook has not changed during the last year. More generally, though, developments in the economy and the financial markets have been in line with projections and have tended to confirm the unfolding disaster. Specifically, the current inflationary recession has gained much broader recognition, while the still-unfolding banking solvency crisis has confirmed the Fed’s and the U.S. government’s willingness to spend whatever money they have to create in order to keep the financial system from imploding. While the dollar has taken a heavy hit — down roughly 20% against key currencies from last year — selling of the U.S. currency still has been far short of the outright dollar dumping that eventually will lead to flight to safety outside of the U.S. dollar. That event is important to the shorter-term timing of the pending hyperinflation.

Regular readers may recognize text from last year’s Series, as well as material from various SGS newsletters, but such is the nature of revisions to prior material. Points that may be repeated from earlier newsletters are done so in sequence to help build the arguments explaining the unfolding crisis. Great thanks are extended to the numerous subscribers who offered ideas, questions and materials that have been incorporated in this report.



Defining the Components of a Hyperinflationary Great Depression

Deflation, Inflation and Hyperinflation. Inflation generally is defined in terms of a rise in general prices due to an increase in the amount of money in circulation. The inflation/deflation issues defined and discussed here are as applied to goods and services, not to the pricing of financial assets.

In terms of hyperinflation, there have been a variety of definitions used over time. The circumstance envisioned ahead is not one of double- or triple- digit annual inflation, but more along the lines of seven- to 10-digit inflation seen in other circumstances during the last century. Under such circumstances, the currency in question becomes worthless, as seen in Germany (Weimar Republic) in the early 1920s, in Hungary after World War II and in the dismembered Yugoslavia of the early 1990s.

The historical culprit generally has been the use of fiat currencies — currencies with no asset backing such as gold — and the resulting massive printing of currency that the issuing authority needed to support its system, when it did not have the ability, otherwise, to raise enough money for its perceived needs, through taxes or other means.

Foster (see recommended further reading at the end of this issue) details the history of fiat paper currencies from 11th century Szechwan, China, to date, and their consistent collapses, time-after-time, due to what appears to be the inevitable, irresistible urge of issuing authorities to print too much of a good thing. The United States is no exception, already having obligated itself to liabilities well beyond its ability ever to pay off.

Here are the definitions:

Deflation. A decrease in the prices of goods and services, usually tied to a contraction of money in circulation.

Inflation. An increase in the prices of goods and services, usually tied to an increase of money in circulation.

Hyperinflation: Extreme inflation, minimally in excess of four-digit annual percent change, where the involved currency becomes worthless. A fairly crude definition of hyperinflation is a circumstance, where, due to extremely rapid price increases, the largest pre-hyperinflation bank note ($100 bill in the United States) becomes worth more as functional toilet paper/tissue than as currency.

As discussed in the section Historical U.S. Inflation: Why Hyperinflation Instead of Deflation, the domestic economy has been through periods of both major inflation and deflation, usually tied to wars and their aftermaths. Such, however, preceded the U.S. going off the gold standard in 1933. The era of the modern fiat dollar generally has been one of persistent and slowly debilitating inflation.

Recession, Depression and Great Depression. A couple of decades back, I tried to tie down the definitional differences between a recession, depression and a great depression with the Bureau of Economic Analysis (BEA), the National Bureau of Economic Research (NBER) and a number of private economists. I found that there was no consensus on the matter, so I set some definitions that the various parties (neither formally nor officially) thought were within reason.

If you look at the plot of the level of economic activity during a downturn, you will see something that looks like a bowl, with activity recessing on the downside and recovering on the upside. The term used to describe this bowl-shaped circumstance before World War II was "depression," while the downside portion of the cycle was called "recession." Before World War II, all downturns simply were referred to as depressions. In the wake of the Great Depression of the 1930s, however, a euphemism was sought for future economic contractions so as to avoid evoking memories of that earlier, financially painful time.

Accordingly, a post-World War II downturn was called "recession." Officially, the worst post-World War II recession was from November 1973 through March 1975, with a peak-to-trough contraction of 5%. Such followed the Vietnam War, Nixon’s floating of the U.S. dollar and the Oil Embargo. The double-dip recession in the early-1980s may have seen a combined contraction of roughly 6%. I contend that the current double-dip recession that began in late-2000 already is rivaling the 1980s double-dip as to depth. (See the Reporting/Market Focus of the October 2006 SGS for further detail.) Please note that the definition for "great depression" below has been revised to a contraction in excess of 25% (from 20% stated in the March 16, 2008 newsletter), in order to be consistent with the usage in last year’s Series.

Here are the definitions:

Recession:Two or more consecutive quarters of contracting real (inflation-adjusted) GDP, where the downturn is not triggered by an exogenous factor such as a truckers’ strike. The NBER, which is the official arbiter of when the United States economy is in recession, attempts to refine its timing calls, on a monthly basis, through the use of economic series such as payroll employment and industrial production, and it no longer relies on the two quarters of contracting GDP rule.

Depression:A recession, where the peak-to-trough contraction in real growth exceeds 10%.

Great Depression:A depression, where the peak-to-trough contraction in real growth exceeds 25%.

On the basis of the preceding, there has been the one Great Depression, in the 1930s. Most of the economic contractions before that would be classified as depressions. All business downturns since World War II — as officially reported — have been recessions. Using the somewhat broader "great depression" definition of a contraction in excess of 20% (instead of 25%), the depression of 1837 to 1843 would be considered "great," as technically would be the war-time production shut-down in 1945.

The current economic contraction is about halfway towards being classified as a "depression," based on my definitions and GDP accounting. As the Great War became World War I with the advent of World War II, so too may the Great Depression become Great Depression I, as the current crisis reaches its full, terrible potential. As with the two world wars, what may become known as Great Depression II had its roots in Great Depression I.



Current Environment

Before examining how the current circumstance can evolve from an inflationary recession to a hyperinflationary depression and then great depression, it is worth defining the nature of the current economic and inflation conditions in the United States, and likely near-term developments.

Based on the regular material discussed in the SGS Newsletter, the U.S. economy is in an inflationary recession as will be reported in official statistics. Real (inflation-adjusted) fourth-quarter 2007 GDP, in July’s benchmark revision, and/or first-quarter 2008 GDP should be in contraction, with most underlying economic series showing distressed levels of activity consistent with a recession. Annual CPI inflation is at 4.0% and headed higher. Oil prices remain over $100 per barrel, weakness in the dollar is just beginning to impact the CPI, and the inflationary effects of soaring broad money growth should start to surface around mid-year. Official CPI could be running in double-digits by year-end 2008.

Net of gimmicked methodologies that have reduced CPI inflation reporting and inflated GDP reporting, the U.S. economy has been in a recession since late-2006, entering the second down-leg of a multiple-dip economic contraction, where the first downleg was the recession of 2001 that really began back in late-1999. Annual CPI inflation currently is running around 11.6%, again, facing further upside pressures.

The current outlook does not exclude further bounces and dips in economic activity. As was seen during the Great Depression, in severe contractions the economy can hit bottom and then bounce briefly until it falls again, finding a new bottom. As discussed in the Depression/Great Depression section, the current economic downturn reflects a structural shift, which increasingly has constrained consumer activity during the last several decades, and which cannot be turned quickly. The current downturn, by my numbers, already is halfway to qualifying as a depression. The evolving depression quickly will move to great depression status, when the hyperinflation hits, as such will be extremely disruptive to the conduct of normal commerce.

The efforts by the federal government and the Federal Reserve to prevent a systemic collapse as a result of the banking solvency crisis has started to spike broad money growth, as measured by the SGS-Ongoing M3 measure, which currently shows a record annual growth rate of 17.3%. While the Fed has not been formally creating new money — yet — by adding to reserves, it has had the effect of creating new money by re-liquefying otherwise illiquid banks, by lending liquid assets versus illiquid assets. As a result, a number of banks have been able to resume more normal functioning, lending money and creating new money supply. As the systemic bailout proceeds, formal money creation will follow and already may be starting to show up in official accounting.

In response to the rapidly deteriorating fundamentals underlying the value of the U.S. dollar, selling of the greenback has been intense, but contained, with brief periods of stability as seen at the moment. In the near future, dollar selling should build towards an extreme, with heavy foreign investment in the dollar fleeing the U.S. currency for safety elsewhere. With the domestic financial markets and U.S. Treasuries so heavily dependent on foreign capital for liquidity, the Federal Reserve — now touted as the formal financial market stabilizer — will be forced increasingly to monetize federal debt. That process will build over time, given the federal government’s effective bankruptcy, as discussed in the section U.S. Government Cannot Cover Existing Obligations. Therein lies the ultimate basis for the pending hyperinflation.

Again, the current circumstance will evolve into a hyperinflationary depression, then great depression. Although such is not likely much before 2010, or after 2018, that financial end game for the current markets will tend to come sooner rather than later and will break with surprising speed when it hits. As discussed later, this likely will not be a deflationary environment as seen during the Great Depression.

What lies ahead for the current year will be severe enough and financially painful enough to affect the outcome of the 2008 presidential election. Historically, the concerns of the electorate have been dominated by pocketbook issues. Prior to gimmicked methodologies making the reporting of disposable personal income largely meaningless, that measure was an excellent predictor of presidential elections.

In every presidential race since 1908, in which consistent, real (inflation-adjusted) annual disposable income growth was above 3.3%, the incumbent party holding the White House won every time. When income growth was below 3.3%, the incumbent party lost every time. Again, with redefinitions to the national income accounts in the last two decades, a consistent measure of disposable income as reported by the government has disappeared. Yet, even with official reporting, the current annual growth in real disposable income is at 2.2%, well below the traditional 3.3% limit.

Accordingly, odds are quite high that the numbers for 2008 will favor an incumbent party loss, i.e. a victory for the Democrats. Where I always endeavor to keep my political persuasions separate from my analyses, for purposes of full disclosure, my background is as a conservative Republican with a libertarian bent.

What follows or coincides politically with a hyperinflationary depression offers a wide variety of possibilities, but the political status quo likely would not continue. Times would be financially painful enough to encourage the development of a third party that could move the Republicans or Democrats to third-party status in the 2010 mid-term or 2012 presidential elections.



Historical U.S. Inflation: Why Hyperinflation Instead of Deflation

Fire and Ice

Some say the world will end in fire,
Some say in ice.
From what I’ve tasted of desire
I hold with those who favor fire.
But if it had to perish twice,
I think I know enough of hate
To say that for destruction ice
Is also great
And would suffice.

– Robert Frost

As to the fate of the developing U.S. great depression, it will encompass the fire of a hyperinflation, instead of the ice of deflation seen in the major U.S. depressions prior to World War II. What promises hyperinflation this time is the lack monetary discipline formerly imposed on the system by the gold standard, and a Federal Reserve dedicated to preventing a collapse in the money supply and the implosion of the still, extremely over-leveraged domestic financial system.

The accompanying two graphs measure the level of consumer prices since 1665 in the American Colonies and later the United States. The first graph shows what appears to be a fairly stable level of prices up to the founding of the Federal Reserve in 1913 (began activity in 1914) and Franklin Roosevelt’s abandoning of the gold standard in 1933. Then, inflation takes off in a manner not seen in the prior 250 years, and at an exponential rate when viewed using the SGS-Alternate Measure of Consumer Prices in the last several decades. The price levels shown prior to 1913 were constructed by Robert Sahr of Oregon State University. Price levels since 1913 either are Bureau of Labor Statistics (BLS) or SGS based, as indicated.

The magnitude of the increase in price levels in the last 50 years or so, however, visually masks in the first graph the inflation volatility of the earlier years. That volatility becomes evident in the second graph, with inflation history shown only through 1960.

What is shown in the second graph is that up through the Great Depression, regular periods of inflation — usually seen around wars — have been offset by periods of deflation. Particular inflation spikes can be seen at the time of the American Revolution, the War of 1812, the Civil War, World War I and World War II.



The inflation peaks and the ensuing post-war depressions and deflationary periods tied to the War of 1812, the Civil War and World War I show close to 60-year cycles, which is part of the reason some economists and analysts have been expecting a deflationary depression in the current period. There is some reason behind 30- and 60-year financial and business cycles, as the average difference in generations in the U.S. is 30 years, going back to the 1600s. Accordingly, it seems to take two generations to forget and repeat the mistakes of one’s grandparents. Similar reasoning accounts for other cycles that tend to run in multiples of 30 years.

Aside from minor average annual price level declines in 1944 and 1955, the United States has not seen a deflationary period in consumer prices since before World War II. The reason for this is the same as to why there has not been a formal depression since before World War II: the abandonment of the gold standard and recognition by the Federal Reserve of the impact of monetary policy — free of gold-standard system restraints — on the economy.

The gold standard was a system that automatically imposed and maintained monetary discipline. Excesses in one period would be followed by a flight of gold from the system and a resulting contraction in the money supply, economic activity and prices.

Faced with the Great Depression, and unable to stimulate the economy, partially due to the monetary discipline imposed by the gold standard, Franklin Roosevelt used those issues as an excuse to abandon gold and to adopt close to a fully fiat currency under the auspices of what I call the debt standard, where the government effectively could print and spend whatever money it wanted to.



Roosevelt’s actions were against the backdrop of the banking system being in a state of collapse. The Fed stood by twiddling its thumbs as banks failed and the money supply imploded. A depression collapsed into the Great Depression, with intensified price deflation. Importantly, a sharp decline in broad money supply is a prerequisite to goods and services price deflation. Messrs Greenspan and Bernanke are students of the Great Depression period. As did Mr. Greenspan before him, "Helicopter Ben" has vowed not to allow a repeat of the 1930s money supply collapse.

Federal Reserve Chairman Ben Bernanke picked up his various helicopter nicknames and references as the result of a November 21, 2002 speech he gave as a Fed Governor to the National Economists Club entitled "Deflation: Making Sure ‘It’ Doesn’t Happen Here." The phrase that the now-Fed Chairman Bernanke likely wishes he had not used was a reference to "Milton Friedman’s famous ‘helicopter drop’ of money."

Attempting to counter concerns of another Great Depression-style deflation, Bernanke explained in his remarks: "I am confident that the Fed would take whatever means necessary to prevent significant deflation in the United States …" As a quick point of clarification, Mr. Bernanke’s actions to address the current banking system’s solvency issues are still in the preventative phase. The money supply is not in collapse, and the Fed has not started dropping cash from helicopters, yet, but the choppers are in the air and remain at the ready.

As expounded upon by Mr. Bernanke, "Indeed, under a fiat (that is, paper) money system, a government (in practice, the central bank in cooperation with other agencies) should always be able to generate increased nominal spending and inflation, even when the short-term nominal interest rate is at zero."

"Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation." The full text of then-Fed Governor Bernanke’s remarks can be found at: http://federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm.

Where Franklin Roosevelt abandoned the gold standard and its financial discipline for the debt standard, eleven successive administrations have pushed the debt standard to the limits of its viability, as seen now in the ongoing threat of possible systemic collapse. The effect of these policies has been a slow-motion destruction of the U.S. dollar’s purchasing power, as seen in the accompanying table, since the gold standard was abandoned in 1933.

Loss of U.S. Dollar Purchasing Power through March 2008
—-Since January of —-
Versus: 1914 1933 1970
Swiss franc -80.4% -80.4% -76.5%
CPI-U -95.1% -94.0% -82.3%
Gold -97.9% -97.9% -93.4%
SGS-Alternate CPI -98.2% -97.8% -93.6%



Note: Gold and Swiss franc values were held constant
by the gold standard versus coins in 1914 and 1933.
Sources: Shadow Government Statistics, Federal Reserve

As discussed in the next section, the limits to the unlimited abuse of the debt standard are particularly evident in the GAAP-based financial statements of the U.S. government, which show the actual federal deficit at $4.0-plus trillion for 2007, alone, with total federal obligations standing at $62.6 trillion. With no ability to honor these obligations, the government effectively is bankrupt.

At such debt levels, the markets soon will recoil from lending Uncle Sam whatever he needs. Major buyers of U.S. Treasuries from outside the United States, including a number of central banks, already are balking. These investors have funded nearly all net U.S. Treasury debt issuance of the last five years, putting to use the excess dollars flushed into the global markets by the United States’ excessive and ever-expanding trade deficit. This practice, however, generated liquidity for the U.S. markets that has helped to depress long-term Treasury yields as well as to boost equity prices, in general.

Although the U.S, government faces ultimate insolvency, it has the same way out taken by most countries faced with bankruptcy. It can print whatever money it needs to create, in order to meet its obligations. The effect of such action is a runaway inflation — a hyperinflation — with a resulting, effective full debasement of the U.S. dollar, the world’s reserve currency. The magnitude of the loss of the U.S. dollar’s purchasing power in the last 75 years now has the potential of being replicated within a few days or weeks.

In the present environment, the chances for the collapse in money supply needed to generate a consumer price deflation are nil. First, the discipline of the gold standard that helped trigger historical deflations is gone. Second, both from the standpoint of the government’s fiscal irresponsibility and from the Fed’s standpoint of providing the financial system with whatever liquidity is needed to keep it afloat, the U.S. central bank already is pushing broad money growth to new extremes, not containing it.

Shown in the next four graphs are powerful fundamentals that either drive U.S. inflation or reflect market expectations of the longer-term domestic inflation outlook. Oil prices are near historic highs, the dollar is near historic lows, and money growth is at an all-time. The near-term outlook for all three series is for new record levels and for extremely strong upside pressure on U.S. inflation. Accordingly, gold prices should continue moving higher, setting new historic highs.







U.S. Government Cannot Cover Existing Obligations

The U.S. Treasury publishes annual financial statements of the United States Government, prepared using generally accepted accounting principles (GAAP), audited by the General Accountability Office (GAO) and signed off on by Treasury Secretary Paulson.

The statements show that the federal government’s annual fiscal deficit, far from being officially in the low hundreds of billions of dollar — although 2008 numbers rapidly are moving towards the $500 billion mark — is careening wildly out of control, averaging $4.6 trillion dollars per year for the six years through 2007. The difference is in accounting for the net present value, and year-to-year changes in same, for unfunded Social Security and Medicare liabilities.

The government’s finances not only are out of control, but the actual deficit is not containable. Put into perspective, if the government were to raise taxes so as to seize 100% of all wages, salaries and corporate profits, it still would be showing an annual deficit using GAAP accounting on a consistent basis. In like manner, given current revenues, if it stopped spending every penny (including defense and homeland security) other than for Social Security and Medicare obligations, the government still would be showing an annual deficit.

The results summarized in the following table show the various deficit/debt/obligation measures. The official GAAP-based deficit, including the annual change in the net present value of unfunded liabilities for Social Security and Medicare is estimated at more than $4.0 trillion in 2007 versus $4.6 trillion in 2006. The 2007 estimate is based on a consistent year-to-year accounting basis.

Further, contrary to the suggestion of Treasury Secretary Paulson — aside from a weakening economic outlook discussed in the next section — if the annual deficit is beyond containment through standard fiscal actions, then the United States has no way to grow out of this shortfall.



U.S. Government - Alternate Fiscal Deficit and Debt
Reported by U.S. Treasury
Dollars are either billions or trillions, as indicated.
Sources: U.S. Treasury, Shadow Government Statistics.
Fiscal
Year (1) Formal
Cash-
Based
Deficit
($Bil) GAAP
Ex-SS
Etc.
Deficit
($Bil) GAAP
With SS
Etc.
Deficit
($Tril) GAAP
Federal
Negative
Net Worth
($Tril) Gross
Federal
Debt
($Tril) Federal
Obilga-
tions(2)
(GAAP)
($Tril)
2007 $162.8 $275.5 (3)$4.0 $57.1 $9.0 $62.6
2006 248.2 449.5 4.6 53.1 8.5 58.2
2005 318.5 760.2 3.5 48.5 7.9 53.3
2004 412.3 615.6 (4)11.0 45.0 7.4 49.5
2003 374.8 667.6 3.0 34.0 6.8 39.1
2002 157.8 364.5 1.5 31.0 6.2 35.4

(1) Fiscal year ended September 30th. (2) Revised to include gross
federal debt, not just "public" debt. (3) On a consistent reporting
basis, net of one-time changes in actuarial assumptions and
accounting, SGS estimates that the GAAP-based deficit for 2007
topped $4 trillion, instead of the gimmicked $1.2 trillion.
(4) SGS estimates $3.4 trillion, excluding one-time unfunded setup
costs of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (enacted December 2003). Link to the 2007
statements: http://fms.treas.gov/fr/07frusg/07frusg.pdf

The GAAP-accounting is what a U.S. corporation would have to show. The Administration’s rationale as to why Social Security and Medicare should remain off balance sheet runs along the lines that the government always has the option of changing the Social Security and Medicare programs. That said, there clearly is no one in political Washington willing to go public with the concept of eliminating or substantially cutting those programs. Such includes the prospective presidential candidates.

Consider that given the current financial condition of the government, various politicians are pushing ever further for expensive cradle-to-grave programs for the electorate, ranging from national health insurance to bailouts of mortgaged homeowners at risk of foreclosure. With no full funding available for any new programs, the government again is showing its willingness to spend whatever money it has to create. The intent going forward is inflation — hyperinflation. This circumstance has evolved with the full knowledge of political Washington and the Federal Reserve.



As shown in the above graph, U.S. federal obligations are so huge versus the national GDP that the country’s finances look more like those of a banana republic than the world’s premiere financial power and home to the world’s primary reserve currency, the U.S. dollar.

If not for the special position the United States holds in the world, its debt — U.S. Treasuries — likely would be rated as below investment grade, instead of triple-A. Moody’s has even hinted at a longer-term downgrade on Treasury securities. While a three-month Treasury bill should be safe, I would not want to bet on receiving full value on a 10-year Treasury note or 30-year Treasury bond.

Yet, as shown in the following two graphs, most U.S. Treasury issuance has been purchased by investors outside the United States. Not only have these investors been taking a hit in terms of the value of the U.S. dollar, but also they face meaningful default/devaluation risk in the future. It is only a matter of time before this accommodation of foreign investors shifts to flight to safety outside the greenback, and therein will develop the early pressures for the Fed to start becoming the lender of last resort to the federal government.







Depression/Great Depression

The U.S. economy is in a deepening structural change that has resulted from U.S. trade policies that have driven the U.S. manufacturing base offshore. As a result, a large number of related, high paying jobs have been lost to U.S. workers.

As shown in the accompanying graphs, as the U.S. trade deficit has risen to the highest level for any country in history, U.S. average weekly earnings, adjusted for inflation, have fallen. Even using official CPI for deflation, current real earnings are below their peak back in the 1970s. Adjusted for the SGS-Alternate CPI measure, real earnings have been falling since the early 1980s. Also shown are real median incomes for U.S. males versus females, showing declines in recent years, per official government data.

The effect of this structural change has been that most consumers have been unable to sustain adequate income growth beyond the rate of inflation, unable to maintain their standard of living. The only way that personal consumption — the dominant component of GDP — can grow in such a circumstance is for the consumer to take on new debt or to liquidate savings. Both those factors are short-lived and have reached untenable extremes. Debt expansion and savings liquidation both were encouraged by the investment bubbles created by Alan Greenspan; he knew that economic growth could not be had otherwise. Part of what is happening today is payback for those policies.

This circumstance places both the federal government and the Federal Reserve in untenable positions, where they cannot easily or rapidly address the underlying problems, even if standard economic stimuli were available. From the standpoint of the federal government, traditional fiscal stimulus in the form of tax cuts or increased federal spending have reached their practical limits, with the actual annual budget deficit running out of control at $4.0-plus trillion per year.

From the Fed’s standpoint, it can neither stimulate the economy nor contain inflation. Lowering rates has done little to stimulate the structurally-impaired economy, and raising rates may become necessary in defense of the dollar. Similarly, raising rates will do little to contain a non-demand driven inflation, such as seen in the current circumstance that is so heavily affected by high oil prices.

By the time hyperinflation kicks in, the economy already should be in depression, and the hyperinflation quickly should pull the economy into a great depression. Uncontained inflation is likely to bring normal commercial activity to a halt. Such is consistent with the final graph in this group, which shows household income dispersion at historic highs.

The greater the variance in income, the more negative are the longer term economic implications. A person earning $100,000,000 per year is not going to buy that many more automobiles that someone earning $100,000 per year. The stronger the middle class is, generally the stronger the economy will be. Extremes in income variance usually are followed by financial panics and economic depressions. U.S. Income variance today is higher than it was coming into 1929, and it is nearly double that of any other "advanced" economy.



Hyperinflationary Great Depression

In the United States, the printing presses have not been revved up heavily, yet, but the commitments are in place, as seen in the annual GAAP-based deficit running on average more $4.0 trillion per year. That amount is far beyond the ability of the government to tax or the political willingness of the government to cut entitlement spending. While the inevitable inflationary collapse, based solely on these funding needs, could be pushed well into the next decade, actions already taken likely have set the stage for a much earlier crisis.

The current systemic bailout being worked at all costs by the Federal Reserve and the U.S. government, as well as earlier efforts by the Fed to buy time, have made the circumstance worse. Pushing recent Treasury funding needs on foreign investors — stuck with excess dollars from the ever-expanding U.S. trade deficit — has created a huge dollar overhang in the markets that already has started to crumble. The more the crisis has been pushed into the future, the greater the potential for pending calamity has become.

Milton Friedman and Anna Jacobson Schwartz noted in their classic A Monetary History of the United States that the early stages of the Weimar Republic hyperinflation were accompanied by a huge influx of foreign capital, much as had happened during the U.S. Civil War. The speculative influx of capital into the U.S. at the time of the Civil War inflation helped to stabilize the system, as the recent foreign capital influx to the United States has helped stabilize the equity and credit markets of recent years. Following the Civil War, however, the underlying economy had significant untapped potential and was able to generate strong, real economic activity that covered the spending excesses of the war.

Post-World War I Germany was a different matter, where the country was financially and economically depleted as a penalty for losing the war. Here, after initial benefit, the influx of foreign capital helped to destabilize the system. "As the mark depreciated, foreigners at first were persuaded that it would subsequently appreciate and so bought a large volume of mark assets …" Such boosted the foreign exchange value of the German mark and the value of German assets. "As the German inflation went on, expectations were reversed, the inflow of capital was replaced by an outflow, and the mark depreciated more rapidly … (Friedman p. 76)."

The Weimar circumstance is closer to the current U.S. circumstance, although, in certain aspects, the current situation is worse. Unlike the untapped economic potential of the United States 140 years ago, today’s U.S. economy is languishing in the structural problems of the loss of its manufacturing base and a shift of domestic wealth offshore.

In the early 1920s, foreign investors were not propping up the world’s reserve currency in an effort to prevent a global financial collapse, knowing in advance that they were doomed to take a large hit on their investments in Germany. In today’s environment, both central bank and major private investors know that the dollar is going to be a losing proposition. They either expect and/or hope that they can get out of the dollar in time to lock in their profits, or, primarily in the case of the central banks, that they can forestall the ultimate global economic crisis.

It is this environment that leaves the U.S. dollar open to potentially such a rapid and massive decline, and dumping of U.S. Treasuries, that the Federal Reserve would be forced to monetize significant sums of Treasury debt, triggering the early phases of a monetary inflation. In this environment annual multi-trillion dollar deficits rapidly would feed into a vicious, self-feeding cycle of currency debasement and hyperinflation.

Lack of Physical Cash. The United States in a hyperinflation would experience the quick disappearance of cash as we know it. Shy of the rapid introduction of a new currency and/or the highly problematic adaptation of the current electronic commerce system to new pricing realities, a barter system is the most likely circumstance to evolve for regular commerce. Such would make much of the current electronic commerce system useless and add to what would become an ongoing economic implosion.

Some years back, I happened to be in San Francisco, having dinner with a former regional Federal Reserve Bank president and the chief economist for a large Midwestern bank. Market rumors that day had been that there was a run on a major bank in the City by the Bay. So I queried the regional Fed president as to what would be happening if the rumors were true.

He had had some personal experience with a run on banks in his region and explained how the Fed had a special team designed to handle such a crisis. The biggest problem he had had was getting adequate cash to the troubled banks to cover depositors, having to fly cash in by helicopters to meet the local cash flow needs.

The troubled bank in San Francisco, however, was much larger than the example cited, and the former Fed bank president speculated that there was not enough cash in the vaults of the regional Federal Reserve Bank, let alone the entire Federal Reserve System, to cover a true run on deposits at the major bank.

Therein lies an early problem for a system headed into hyperinflation: adequate currency. Where the Fed may hold roughly $210 billion in currency (sharply increased in the last year) outside of $50 billion in commercial bank vault cash, the bulk of roughly $780 billion in currency outside the banks is not in the United States. Back in 2000, the Fed estimated that 50% to 70% of U.S. dollar cash was outside the system. That number probably is higher today, with perhaps as little as $200 billion in physical cash in circulation in the United States, or roughly 1.5% of M3.

The rest of the dollars are used elsewhere in the world as a store of wealth, or as an alternate currency free of the woes of unstable domestic financial conditions. In Zimbabwe, for example, where something akin to hyperinflation is underway, U.S. dollars are used to maintain some semblance of economic activity, where wages and salaries seriously lag inflation, and goods often are available only on the black market.

Given the extremely rapid debasement of the larger denomination notes, with limited physical cash in the system, existing currency would disappear quickly as a hyperinflation broke.

For the system to continuing functioning in anything close to a normal manner, the government would have to produce rapidly an extraordinary amount of new cash, and electronic commerce would have to be able to adjust to rapidly changing prices.

In terms of cash, new bills of much higher denominations would be needed, but production lead time is a problem. Conspiracy theories of recent years have suggested the U.S. Government already has printed a new currency of red-colored bills, intended for some dual internal and external U.S. dollar system. If such indeed were the case, then there might be a store of "new dollars" that could be released at a 1-to-1,000,000 ratio, or whatever ratio was needed to make the new currency meaningful, but such would not resolve any long-term problems, unless it were part of an overall restructuring of the domestic and global financial and currency systems.

From a practical standpoint, however, currency would disappear, at least for a period of time in the early period of a hyperinflation.

Where the vast bulk of today’s money is not physical, but electronic, however, chances of the system adapting here are virtually nil. Think of the time, work and effort that went into preparing computer systems for Y2K, or even problems with the recent early shift to daylight savings time. Systems would have to be adjusted for variable, rather than fixed pricing, credit card lines would need to be expanded daily, the number of digits used in tallying dollar-denominated transactions would need to be expanded sharply.

While I have been advised that a number of businesses have accounting software that can handle any number of digits, I also noted on a recent cross-country trip that a large number of gas stations have older pumps that cannot register more than two digits’ worth of dollars in their totals or more than $9.99 per gallon of gas.

From a practical standpoint, the electronic quasi-cashless society of today also would shut down early in a hyperinflation. Unfortunately, this circumstance rapidly would exacerbate an ongoing economic collapse.

Barter System. With standard currency and electronic payment systems non-functional, commerce quickly would devolve into black markets for goods and services and a barter system.

Unlike Zimbabwe, the United States does not have widely available, for circulation, a back-up reserve currency for use in place of a highly-inflated domestic currency. The alternative here is in the traditional monetary precious metals. Gold and silver both are likely to retain real value and would be exchangeable for goods and services. Silver would help provide smaller change for less costly transactions.

Other items that would be highly barterable would include bottles of a good scotch or wine, or canned goods, for example. Similar items that have a long shelf life can be stocked in advance of the problem, and otherwise would be consumable if the terrible inflation never came. Separately, individuals, such as doctors and carpenters, who provide broadly useable services, would have a service to barter.

A note of caution was raised once by one of my old economics professors, who had spent part of his childhood living in a barter economy. He told a story of how his father had traded a shirt for a can of sardines. The father decided to open the can and eat the sardines, but he found the sardines had gone bad. Nonetheless, the canned sardines had taken on a monetary value.

Reserves of the Necessities of Life. Howard J. Ruff, who has been writing about these problems and issues since Nixon closed the Gold window, rightly argues that it will take some time for a barter system to be established, and suggests that individuals should build up a six-month store of goods to cover themselves and their families in the difficult times. Mr. Ruff covers this and many other excellent fundamentals in his new book How to Prosper During the Coming Bad Years in the 21st Century (see recommended further reading at the end of this report).

Financial Hedges. During these times, safety and liquidity remain key concerns for investments, as investors look to preserve their assets and wealth through what are going to be close to the most difficult of times.

In such a circumstance, gold and silver would be primary hedging tools that would retain real value and also be portable in the event of possible civil turmoil. Also, at some point, the failure of the world’s primary reserve currency will lead to the structuring of a new global currency system. I would not be surprised to find gold as part of the new system, structured in there in an effort to sell the system to the public.

Real estate also would provide a basic hedge, but it lacks the portability and liquidity of gold. Having some funds invested offshore — outside of the U.S. dollar — would be a plus in circumstances where the government might impose currency or capital controls.

While equities do provide something of an inflation hedge — revenues and profits get expressed in current dollars — they also reflect underlying economic and political fundamentals. I still look for U.S. stocks to take an ultimate 90% hit, peak-to-trough, net of inflation, during this period. Where all stocks are tied to a certain extent to the broad market — to the way investors are valuing equities — such a large hit on the broad market will tend to have a dampening effect on nearly all equity prices, irrespective of the quality of a given company or a given industry.

Other Issues. A hyperinflationary depression would be extremely disruptive to the lives, businesses and economic welfare of most individuals. Such severe economic pain could lead to extreme political change and/or civil unrest. What has been discussed here still has not been a comprehensive overview of all possible issues, but rather at least has raised some questions and touched upon some likely consequences. No one can figure out better than you the peculiarities of this circumstance and how you and/or your business might be affected. Using common sense is about the best advice I can give.

These matters will continue to be expanded upon over time in future SGSs, as circumstances and subscriber reactions continue dictate. As always, please feel free to offer your comments or raise your questions by e-mail to johnwilliams@shadowstats.com.



Recommended Further Reading

Two particularly valuable books, mentioned elsewhere in the text, are recommended to subscribers:

How to Prosper During the Coming Bad Years in the 21st Century
by Howard J. Ruff
www.rufftimes.com

Fiat Paper Money, The History and Evolution of Our Currency
by Ralph T. Foster
2189 Bancroft Way, Berkeley, CA 94704
Telephone: (510) 845-3015, E-mail: tfdf@pacbell.net

Iran: Survey Raises Election Questions

The first media accounts to present a factual basis for questioning the validity of the Iran elections was published today by CNN and the BBC, based on a Chatham House examination of official statistics.
Iran: Survey Raises Election Questions
June 21, 2009 | 1654 GMT

An examination conducted by a U.K. think-tank uncovered irregularities in the contested Iranian election, and raised “serious doubts” about President Mahmoud Ahmadinejad’s victory, CNN reported June 21. The examination conducted by the Chatham House of official statistics obtained from the Iranian Interior Ministry showed that the number of votes cast exceeded the number of eligible voters in two provinces, and that Ahmadinejad’s sweep of rural provinces also contradicts previous election trends.

This is the CNN report:
Survey raises questions about Iran vote results
Sunday, June 21

LONDON, England (CNN) -- A survey of Iran's election results raises "serious questions" about the victory that President Mahmoud Ahmadinejad is said to have won and uncovers irregularities in the official results, a British think tank said Sunday.

Iranian expatriates protest the June 12 presidential election results on Sunday in Berlin, Germany.
Official statistics obtained from Iran's Ministry of the Interior show the votes cast exceeded the number of eligible voters in two provinces, said Chatham House, a London-based institute that analyzes international affairs.

Claims that Ahmadinejad, the conservative incumbent, swept the board in rural provinces also flies in the face of previous results, said Chatham House, which conducted the survey with the University of St. Andrews in Scotland.

Release of the survey results comes on the heels of violent demonstrations that followed Iran's disputed June 12 presidential election.

Anti-government demonstrators have protested the results in street rallies and marches, defying warnings from Iran's supreme leader, Ayatollah Ali Khamenei, not to engage in such action.

Iran's foreign minister Sunday disputed allegations of ballot irregularities.

For the survey published Sunday, researchers worked from the province-by-province breakdowns of the 2009 and 2005 results, released by the Iranian Ministry of Interior, and from the 2006 census as published by the official Statistical Center of Iran, Chatham House said.
The survey made four main observations:

# In two conservative provinces, Mazandaran and Yazd, a turnout of more than 100 percent was recorded.
# At a provincial level, there is no correlation between the increased turnout and the swing to Ahmadinejad. This challenges the notion that his announced victory was due to the massive participation of a previously silent conservative majority.
# In a third of all provinces, the official results would require that Ahmadinejad had received not only all former conservative voters, all former centrist voters and all new voters but also up to 44 percent of former reformist voters -- despite a decade of conflict between these two groups.
# In the 2005 election, as in the elections of 2001 and 1997, conservative candidates -- and Ahmadinejad in particular -- were markedly unpopular in rural areas. That makes it "highly implausible" that the countryside swung substantially toward Ahmadinejad.

"The analysis shows that the scale of the swing to Ahmadinejad would have had to have been extraordinary to achieve the stated result," said professor Ali Ansari, a co-author of the survey who is director of the Institute for Iranian Studies at St. Andrews.

Data from the June 12 election suggests a sudden shift in political support toward Ahmadinejad in rural areas, which had not previously supported him or any other conservative, the survey said.

At the same time, the official data suggests the vote for challenger Mehdi Karrubi -- who was extremely popular in the rural, ethnic minority areas in 2005 -- has collapsed entirely, even in his home province of Lorestan, the survey said.

In that province, his vote went from 55.5 percent in 2005 to 4.6 percent in the most recent vote, the survey found. At the same time, Ahmadinejad won 50.9 percent of the vote in this election, including the votes of nearly half (47.5 percent) of those who voted for reformist candidates in 2005, the survey found.

Such an outcome is "highly implausible," the survey said.

The Iranian government has said Ahmadinejad won the election by a huge margin. Ahmadinejad's main challenger, Mir Hossein Moussavi, and his supporters have contested the results.
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"In a country where allegations of 'tombstone voting' -- the practice of using the identity documents of the deceased to cast additional ballots -- are both long-standing and widespread, this result is troubling but perhaps not unexpected," the Chatham House survey said.

"This problem did not start with Ahmadinejad," the report added. "According to official statistics gathered by the International Institute for Democracy and Electoral Assistance in Stockholm, there were 12.9 percent more registered voters at the time of Mohammed Khatami's 2001 victory than there were citizens of voting age." ========================
#

Another account, apparently based in part on the Chatham House surveiy, was published today in the BBC News online site:
#
Suspicions Behind Iran Poll Doubts

By Catherine Miller
BBC News

When Mahmoud Ahmadinejad was declared the landslide victor in Iran's presidential election - less than 24 hours after polls closed - the shock on the streets of Tehran was palpable.

Mr Ahmadinejad had won 63% of the vote, his challenger, Mir Hossein Mousavi, 34%.

"I thought at least 80-90% of Tehrani voters were in favour of Mousavi, I can't really believe it," said one man.

Disbelief quickly turned to anger and hundreds of thousands of Mr Mousavi's supporters came out in protest.

But Iran's Supreme Leader, Ayatollah Ali Khamanei, the final authority on all constitutional matters, has stood by the result, saying the Islamic Republic "would not betray the vote of the people".

Mobile polling stations

Opposition concerns about the running of the election emerged early in the process.

Monitors from their campaign teams, who by law are allowed to oversee every polling station, were issued with invalid ID cards or refused entry.

And there was a 10-fold increase in the number of mobile polling stations - ballot boxes transported from place to place by agents of the interior ministry, which is run by a close ally of Mr Ahmadinejad.

"One third of the ballot boxes were mobile," says Mehdi Khalaji, senior fellow at the Washington Institute for Near East Policy.

"They were out of the control of the local authorities and the representatives of the candidates, and nobody knows what they have done to them".

Polling day saw a record turnout and Iranians queued for hours to cast their ballot in an election which all agreed was critical to the future direction of their country.

"Early on polling day, the SMS network was shut down, that made me worried about what was going to happen," says Tehran journalist Ali Pahlavan.

With little access to the state-controlled broadcast media, Mr Mousavi's largely young, technically savvy supporters use text messages to campaign.

"Then the interior ministry [where results from polling stations around the country are collated] started kicking out its own employees so that just a skeleton personnel and the top officials were left," says Mr Pahlavan.

Quick results

Despite the high turnout, the count was remarkably quick, and the results unusually consistent, with none of the typical variations between different regions and cities.
“ This is something more than a manipulated election, this is a coup ”
Mehdi Khalaji

"Iran is a huge country, nearly four times the size of France and they began announcing the results within four hours, in past elections it's taken 24. It just seems to me the fix was in," says Juan Cole, Professor of Middle Eastern History at the University of Michigan.

Others point to particular results which appear unlikely.

For example, in Mr Mousavi's home province of East Azerbaijan, which is known to have fierce regional and ethnic loyalties to the reformist candidate, he polled far worse than expected.

And the liberal cleric Mehdi Karroubi polled 5% in Lorestan, despite having won 55% there in the first round of voting in 2005 when he also stood as a candidate.

"In some provinces like Khoresan or Mazandaran the number of people who voted exceeded the number of eligible voters in those provinces," points out Mr Khalaji.

"If they wanted to do a manipulation as they have done before, they could have done it in a more elegant and delicate way.

"This is something more than a manipulated election, this is a coup".

Irregularities

But others say there is no proof of a large scale plot by the establishment.

"The opposition has not provided any hard evidence yet that the elections were rigged," says Arshin Adib Moghaddem of the School of Oriental and African Studies in London.

"If there had been a strategic plan to hijack the elections, I wonder why people like Mohsen Rezai the head of the Expediency Council, who was also one of the presidential candidates, did not know about it. It is highly unlikely".

But with their monitors excluded from the voting and counting process it is difficult for the opposition to come up with such hard evidence.

The Guardian Council, the country's highest supervisory committee is investigating 646 complaints of misconduct.

"It's an admission there were irregularities," says Prof Cole.

"But the problem is, the Guardian Council is headed by a cleric, who is a far-right hardliner and known big supporter of Mr Ahmadinejad," he adds.

"So asking that body to review the ballot is like putting the fox in charge of the chicken coop."

Loss of faith

No-one may ever know exactly what happened on the night of Iran's elections, or who the rightful winner is.

Even critics of the process say it is possible Mr Ahmadinejad won.

An independent poll taken in May by the US organisation Terror Free Tomorrow found 34% of those surveyed would vote for Mr Ahmadinejad, with 14% for Mr Mousavi and 27% undecided.

But the opposition believes this crisis has now gone beyond the question of who the true victor is.

Iran's particular brand of religious democracy has always promised a balance between clerical leadership and the will of the people.

Now many people's faith in that system has been lost. It may take more than a recount of the votes to restore it.

Netanyahu's "brilliant" peace plan By Hasan Abu Nimah and Ali Abunimah

A Palestinian perspective on Netanyahu's exercise of his right of reply to President Obama.

Netanyahu's "brilliant" peace plan

By Hasan Abu Nimah and Ali Abunimah

The Electronic Intifada
17 June 2009

http://electronicintifada.net/v2/article10606.shtml


Israeli Prime Minister Benjamin Netanyahu proposed a peace plan so
ingenious it is a wonder that for six decades of bloodshed no one
thought of it. Some people might have missed the true brilliance of
his ideas presented in a speech at Bar Ilan University on 14 June,
so we are pleased to offer this analysis.

First, Netanyahu wants Palestinians to become committed Zionists.
They can prove this by declaring, "We recognize the right of the
Jewish people to a state of their own in this land." As he pointed
out, it is only the failure of Arabs in general and Palestinians in
particular to commit themselves to the Zionist dream that has caused
conflict, but once "they say those words to our people and to their
people, then a path will be opened to resolving all the problems
between our peoples." It is of course perfectly natural that
Netanyahu would be "yearning for that moment."

Mere heartfelt commitment to Zionism will not be enough, however.
For the Palestinians' conversion to have "practical meaning,"
Netanyahu explained, "there must also be a clear understanding that
the Palestinian refugee problem will be resolved outside Israel's
borders." In other words, Palestinians must agree to help Israel
complete the ethnic cleansing it began in 1947-48, by abandoning the
right of return. This is indeed logical because as Zionists,
Palestinians would share the Zionist ambition that Palestine be
emptied of Palestinians to the greatest extent possible.

Netanyahu is smart enough to recognize that even the
self-ethnic-cleansing of refugees may not be sufficient to secure
"peace": there will still remain millions of Palestinians living
inconveniently in their native land, or in the heart of what
Netanyahu insisted was the "historic homeland" of the Jews.

For these Palestinians, the peace plan involves what Netanyahu calls
"demilitarization," but what should be properly understood as
unconditional surrender followed by disarmament. Disarmament, though
necessary, cannot be immediate, however. Some recalcitrant
Palestinians may not wish to become Zionists. Therefore, the newly
pledged Zionist Palestinians would have to launch a civil war to
defeat those who foolishly insist on resisting Zionism. Or as
Netanyahu put it, the "Palestinian Authority will have to establish
the rule of law in Gaza and overcome Hamas." (In fact, this civil
war has already been underway for several years as the American and
Israeli-backed Palestinian "security forces," led by US Lt. General
Keith Dayton, have escalated their attacks on Hamas).

Once anti-Zionist Palestinians are crushed, the remaining
Palestinians -- whose number equals that of Jews in historic
Palestine -- will be able to get on with life as good Zionists,
according to Netanyahu's vision. They will not mind being squeezed
into ever smaller ghettos and enclaves in order to allow for the
continued expansion of Jewish colonies, whose inhabitants Netanyahu
described as "an integral part of our people, a principled,
pioneering and Zionist public." And, in line with their heartfelt
Zionism, Palestinians will naturally agree that "Jerusalem must
remain the united capital of Israel."

These are only the Palestinian-Israeli aspects of the Netanyahu
plan. The regional elements include full, Arab endorsement of
Palestinian Zionism and normalization of ties with Israel and even
Arab Gulf money to pay for it all. Why not? If everyone becomes a
Zionist then all conflict disappears.

It would be nice if we could really dismiss Netanyahu's speech as a
joke. But it is an important indicator of a hard reality. Contrary
to some naive and optimistic hopes, Netanyahu does not represent
only an extremist fringe in Israel. Today, the Israeli Jewish public
presents (with a handful of exceptions) a united front in favor of a
racist, violent ultra-nationalism fueled by religious fanaticism.
Palestinians are viewed at best as inferiors to be tolerated until
circumstances arise in which they can be expelled, or caged and
starved like the 1.5 million inmates of the Gaza prison.

Israel is a society where virulent anti-Arab racism and Nakba denial
are the norm although none of the European and American leaders who
constantly lecture about Holocaust denial will dare to admonish
Netanyahu for his bald lies and omissions about Israel's ethnic
cleansing of the Palestinians.

Netanyahu's "vision" offered absolutely no advance on the 1976 Allon
Plan for annexation of most of the occupied West Bank, or Menachem
Begin's Camp David "autonomy" proposals. The goal remains the same:
to control maximum land with minimum Palestinians.

Netanyahu's speech should put to rest newly revived illusions -- fed
in particular by US President Barack Obama's Cairo speech -- that
such an Israel can be brought voluntarily to any sort of just
settlement. Some in this region who have placed all their hopes in
Obama -- as they did previously in Bush -- believe that US pressure
can bring Israel to heel. They point to Obama's strong statements
calling for a complete halt to Israeli settlement construction -- a
demand Netanyahu defied in his speech. It now remains to be seen
whether Obama will follow his tough words with actions.

Yet, even if Obama is ready to put unprecedented pressure on Israel,
he would likely have to exhaust much of his political capital just
to get Israel to agree to a settlement freeze, let alone to move on
any of dozens of other much more substantial issues.

And despite the common perception of an escalating clash between the
Obama administration and the Israeli government (which may come over
minor tactical issues), when it comes to substantive questions they
agree on much more than they disagree. Obama has already stated that
"any agreement with the Palestinian people must preserve Israel's
identity as a Jewish state," and he affirmed that "Jerusalem will
remain the capital of Israel and it must remain undivided." As for
Palestinian refugees, he has said, "The right of return [to Israel]
is something that is not an option in a literal sense."

For all the fuss about settlements, Obama has addressed only their
expansion, not their continued existence. Until the Obama
administration publicly dissociates itself from the positions of the
Clinton and Bush administrations, we must assume it agrees with them
and with Israel that the large settlement blocks encircling
Jerusalem and dividing the West Bank into ghettos would remain
permanently in any two-state solution. Neither Obama nor Netanyahu
have mentioned Israel's illegal West Bank wall suggesting that there
is no controversy over either its route or existence. And now, both
agree that whatever shreds are left can be called a "Palestinian
state." No wonder the Obama administration welcomed Netanyahu's
speech as "a big step forward."

What is particularly dismaying about the position stated by Obama in
Cairo -- and since repeated constantly by his Middle East envoy
George Mitchell -- is that the United States is committed to the
"legitimate Palestinian aspiration for dignity, opportunity, and a
state of their own." This formula is designed to sound meaningful,
but these vague, campaign-style buzzwords are devoid of any
reference to inalienable Palestinian rights. They were chosen by
American speechwriters and public relations experts, not by
Palestinians. The Obama formula implies that any other Palestinian
aspirations are inherently illegitimate.

Where in international law, or UN resolutions can Palestinians find
definitions of "dignity" and "opportunity?" Such infinitely
malleable terms incorrectly reduce all of Palestinian history to a
demand for vague sentiments and a "state" instead of a struggle for
liberation, justice, equality, return and the restoration of usurped
rights. It is, after all, easy enough to conceive of a state that
keeps Palestinians forever dispossessed, dispersed, defenseless and
under threat of more expulsion and massacres by a racist,
expansionist Israel.

Through history it was never leaders who defined rights, but the
people who struggled for them. It is no small achievement that for a
century Palestinians have resisted and survived Zionist efforts to
destroy their communities physically and wipe them from the pages of
history. As long as Palestinians continue to resist in every arena
and by all legitimate means, building on true international
solidarity, their rights can never be extinguished. It is from such
a basis of independent and indigenous strength, not from the elusive
promises of a great power or the favors of a usurping occupier, that
justice and peace can be achieved.


Hasan Abu Nimah is the former permanent representative of Jordan at
the United Nations.

Co-founder of The Electronic Intifada, Ali Abunimah is author of One
Country: A Bold Proposal to End the Israeli-Palestinian Impasse
Metropolitan Books, 2006).

A version of this article first appeared in The Jordan Times and is
reprinted with the authors' permission.

Another alternative view.... These are the birth pangs of Obama's new regional order

Another alternative view....
These are the birth pangs of Obama's new regional order

The turmoil in Tehran reflects a refusal to accept Ahmadinejad is popular and confusion about how to respond to the US

o Seumas Milne
o The Guardian, Thursday 18 June 2009

'They have elected a ­Labour government," a Savoy diner famously declared on the night of Britain's election landslide in 1945. "The country will never stand for it." From the evidence so far coming out of Iran, something similar seems to be ­happening on the streets of Tehran – and in the western capitals just as desperate to see the back of Iranian president ­Mahmoud Ahmadinejad.

Of course the movement behind opposition candidate Mir Hossein Mousavi spreads far beyond the capital's elite, as did the supporters of Winston Churchill against Clement Attlee. In Iran, it includes large sections of the middle class, students and the secular. But a similar misreading of their own social circles for the country at large appears to have convinced the opposition's supporters that it can only have lost last Friday's election through fraud.

That is also reflected in the western media, whose cameras focus so lovingly on Tehran's gilded youth and for whom Ahmadinejad is nothing but a Holocaust-denying fanatic. The other Ahmadinejad, who is seen to stand up for the country's independence, expose elite corruption on TV and use Iran's oil wealth to boost the incomes of the poor majority, is largely invisible abroad.

While Mousavi promised market reforms and privatisation, more personal freedom and better relations with the west, the president increased pensions and public sector wages and handed out cheap loans. So it's hardly surprising that Ahmadinejad should have a solid base among the working class, the religious, small town and rural poor – or that he might have achieved a similar majority to that of his first election in 2005. That's what one of the few genuinely independent polls (the US-based Ballen-Doherty survey) predicted last month, when the Times reported Ahmadinejad was "expected to win".

But such details have got los