<h1 class="storyheadline">Freddie and Fannie's Achilles' heel</h1><h2 class="storysubhead">Both troubled lenders need capital, but they cannot raise it in the way that many companies would. Fortune's Carol Loomis explains their vulnerability. </h2>By Carol Loomis, Fortune senior editor at large
Neither Fannie Mae nor Freddie Mac can make use of the most popular form of preferred stock. More from Fortune Don't look now: Here comes the recession
The next credit scandal
A Genius plan for Miramax's founders
FORTUNE 500 Current Issue Subscribe to Fortune NEW YORK (Fortune) -- Mortgage giants Freddie Mac and Fannie Mae need capital - in today's credit crisis, there's no doubt about that. Freddie even said last week that it was "seriously considering" cutting its $2 annual dividend by half, a radical step indicating how strapped the company is. Freddie also reported it had hired two Wall Street firms to explore "capital-raising alternatives."

And Freddie and Fannie are going to need some especially creative alternatives. Why? When either Freddie or Fannie attempt to build capital, they are handicapped by a peculiarity that very few investors know about: They cannot sell the most popular kind of preferred stock, the "cumulative" variety, because their regulator will not let these securities count toward capital.

What "cumulative" signifies in this context is that if dividends are missed, they pile up to be paid on some brighter day, if that arrives. To the extent that Freddie and Fannie issue preferred shares, therefore, they are forced into selling the "non-cumulative" variety. That means if a dividend is missed, say, in the first quarter of 2008, the owners of the preferred will never get that dividend. It's just gone, zip!

Naturally, prudent investors are not wild about owning non-cumulative preferred shares, which is why there are not many of these securities around. What smart investor unnecessarily wants to put himself in the position - no matter how remote - of missing a dividend and never thereafter being able to capture it?

Freddie, Fannie seek a few billion But the fact is that many investors don't read their prospectuses, don't get full disclosure from their brokers, and are not clued-in to this market wrinkle. For example, Fannie Mae (Charts) sold $500 million of preferred shares on November 16th. Go to Fannie's website, where the security is described: "non-cumulative, perpetual, fixed-rate preferred stock at a dividend rate of 7.625% per annum." How many investors, particularly those being solicited by retail firms to buy these $25 securities, really understood the implications of the term "non-cumulative"?

Of course, the dividend on that preferred will keep on being paid as long as any common dividend is paid. A company can't deny a payout to its preferred shareholders while continuing to reward its common shareholders, and thus far there are no signs that Fannie will stop paying its common stock dividend. Still, the $500 million that Fannie just raised will not solve its total capital needs; it'll be coming to the market again.

But it's Freddie that right now has the emergency. Because of big losses Freddie has taken, its capital has fallen perilously close to the minimums required by its regulator. So that's why it's seeking "capital-raising alternatives."

All this, of course, means dilution for Freddie's existing common shareholders. During a Freddie conference call this past week, analyst Fred Cannon of Keefe Bruyette & Woods probed what the damage could be by asking whether Freddie might not have to raise $2 billion to $4 billion in capital. The company's chief financial officer ducked, saying simply, "This will be a large transaction." It won't be, he added, a sale of common stock.

That leaves the world expecting Freddie to offer a boatload of convertible preferred - non-cumulative, of course. The security will have to be priced well, with a good dividend and a conversion price not way above the market.

And speaking of that market, Freddie (Charts, Fortune 500) closed at $26.47 a share last week. That's 35% below its price a week earlier. If Freddie wants to calm investors, it had better figure out its "alternatives" quickly.

Bank of England warns credit crisis to worsen

By Angela Monaghan
Last Updated: 10:37am GMT 26/11/2007


The Bank of England's chief economist has warned that the impact of the credit crunch on the banks may only be the tip of the iceberg.

<li>Full news and analysis of the credit crisis Charlie Bean has warned that banks may reveal greater lossesCharles Bean said that the banks have so far reported "only a relatively small fraction of the likely losses associated with the US sub-prime market."

"It is quite likely that, over the coming months, there will be more revelations to come out, not necessarily just in this country," he added.

The message from Mr Bean comes after Goldman Sachs warned earlier this month that sub-prime mortgage losses could force banks to slash lending by $2,000bn (£980bn) and push the United States into a deep recession.

Mr Bean said that the immediate future would be characterised by "lots of volatility" and said that it would be "quite a long time before things come back to a full state of normality."

advertisement&lt;SCRIPT language="JavaScript1.1" SRC="http://ad.uk.doubleclick.net/adj/N1137.telegraph.phd/B2587486;abr=!ie;sz=300x250;click=http://ads.telegraph.co.uk/event.ng/Type=click&amp;FlightID=24018&amp;AdID=29207&amp;TargetID=3822&amp;ASeg=&amp;AMod=&amp;Redirect=;ord=oIaKik,bduwgWNAbmiW?"&gt;&lt;/SCRIPT&gt;He made the comments in an interview with the Liverpool Daily Post, and said that the Bank was waiting to see what impact the crisis would have on the wider economy.

"What matters particularly to us is the impact on the economy at large.

"It is reasonable to expect lenders to be more cautious in extending loans whether to households or riskier lending to businesses, maybe some mergers and acquisitions, maybe the commercial property market may be particularly hit.

"That's something that the Monetary Policy Committee will be monitoring closely," he said.

He added that monetary policy would depend on inflationary pressure from the rapidly growing economies of China and India.

"Over the last two or three years, we have moved into a slightly less favourable external environment where the ill-effects of the development of China and India have started to be felt in the form of intense upward pressure they have been putting on commodity prices.

"Those pressures are likely to remain there for some time. The key question will be the extent to which the supply of those commodities can expand to meet the increasing demand from emerging economies.

"So the backdrop to our attempts to keep inflation in line with target is less favourable than it has been.

"We can always meet our inflation target through setting the appropriate monetary policy, but what it will mean is if the imported component of inflation is somewhat higher, the domestically generated component needs to be somewhat lower to compensate, and that may mean we have to run a tighter monetary policy for a while to get that domestic inflation down."

<h1 class="storyheadline">Don't look now: Here comes the recession</h1><h2 class="storysubhead">Even with a boost from holiday spending, the U.S. economy looks shaky, thanks to slumping housing prices, Wall Street woes and debt-laden consumers. How bad could it get? </h2>By Colin Barr, senior writer
Debt-strapped consumers seem likely to cut back spending to the point where it shrinks the U.S. economy.VideoMore video Fortune contributor Ben Stein says the looming Social Security crisis is nothing compared what seniors will face with Medicare costs. Play video More from Fortune Don't look now: Here comes the recession
The next credit scandal
A Genius plan for Miramax's founders
FORTUNE 500 Current Issue Subscribe to Fortune NEW YORK (Fortune) -- The cash registers were ringing on Black Friday, but make no mistake: American consumers are jittery, and seem all but certain to push the U.S. economy into recession.

After years of living happily beyond their means, Americans are finally facing financial reality. A persistent rise in energy prices will mean bigger heating bills this winter and heftier tabs at the gas pump. Job growth is slowing and wage gains have been anemic. House prices are sliding, diminishing the value of the asset that's the biggest factor in Americans' personal wealth. Even the stock market, which has been resilient for so long in the face of eroding consumer sentiment, has begun pulling back amid signs of deep distress in the financial sector.

The latest evidence of the long-awaited consumer retrenchment: Chic discounter Target (Charts, Fortune 500) last week reported a weaker-than-expected third quarter, as sales of higher-margin apparel and home goods slowed. Starbucks (Charts, Fortune 500) reported for the first time that customer traffic in its stores declined in its latest quarter compared to a year earlier. Wal-Mart (Charts, Fortune 500) shares hit a six-year low in September after the retail giant posted another wan sales increase.

With consumer spending accounting for about three-quarters of U.S. economic activity, some economists say it is inevitable that the economy will stop growing at some point in the coming year, for the first time since the mild recession of 2001. "Right now, the question is how bad it's going to get," said David Rosenberg, chief North American economist at Merrill Lynch. "The question is one of magnitude."

Not everyone agrees. Many economists believe the Federal Reserve will steer the economy into a period of slow growth but avoid a recession, which is typically defined as two or more consecutive quarters of economic contraction. Indeed, the Fed already has twice cut its overnight interest-rate target, and options markets show investors expect the Fed to cut by another quarter-point at its Dec. 11 meeting, taking the Fed funds bank-lending rate down to 4.25%.

Government officials have steered well clear of recession talk, with recent Fed documents citing instead the risk of "an unexpectedly severe weakening in economic activity." But Rosenberg and others are skeptical of the Fed's influence on an economy staggering under a mountain of personal, corporate and government debt. The economic recovery underway in 2002 was driven by low interest rates and abundant credit availability -- helped along by then-Fed chief Alan Greenspan's decision to cut interest rates as low as 1% in 2003.

Freddie, Fannie seek a few billion Rosenberg said the low rates and easy underwriting meant loans were available to just about anyone with a pulse, so recent economic gains were more credit-induced "by a factor of four" than any other U.S. expansion on record. Now many of those loans are going bad, which is why investors are fleeing any debt riskier than U.S. Treasury securities.

Making matters worse, the banking system is coming under severe strain. Wall Street has recognized more than $40 billion in losses this year on souring subprime mortgages and a related problem, the toxic debt known as collateralized debt obligations. The losses could constrain the economy by forcing banks and brokerages to sock money away rather than lending it out to businesses and individuals.

Freddie Mac (Charts, Fortune 500), the big government-sponsored mortgage investor, provided some insight into that dynamic last week, when it said a $2 billion third-quarter loss had wiped away two-thirds of its regulatory capital surplus -- raising the prospect that the company will have to become a seller of mortgages at a time when the limping housing market desperately needs Freddie to be a buyer.

"The infection that started in housing is spreading," said Northern Trust chief economist Paul Kasriel. He says banks are extremely vulnerable to the defaults and foreclosures now sweeping American neighborhoods, with mortgage exposure amounting to 63% of U.S. banks' earning assets.

As a result of that exposure - and the hefty losses that financial institutions are going to have to take as more loans go bad -- Kasriel believes Fed chief Ben Bernanke is in a very different position than Greenspan was seven years ago, when the economy last showed signs of heading into recession.

"I'm wondering if Bernanke will have the same latitude" to cut rates, Kasriel said, referring both to the uncertain health of the banking system and the persistent weakness of the U.S. dollar, which is trading at lows unseen since the end of the gold standard in 1971. When Greenspan slashed U.S. interest rates in the early part of the decade, "the financial system was intact," Kasriel said. "Banks were able to extend cheap credit."

But with banks choking on bad loans, Kasriel doesn't expect to see the return of the easy lending standards that fueled the housing boom. Instead, he expects to see "greater risk aversion" that will slow credit growth and reduce the value of assets like property. He says the median U.S. house price would need to fall 17% to return to its 2001 level, which he notes was hardly at the bottom of the house-price cycle. A decline of that magnitude will further erode home-equity borrowing by Americans and, presumably, deliver one more blow to consumers' wallets.

The American consumer seems to grasp the risks. A growing number of Americans expect the economy to tip into recession in the next year -- 40% last week, up from 31% in October, going by a Reuters/Zogby poll released last week. Rosenberg said government statistics show that 500,000 self-employed workers have lost their jobs since July -- a greater loss than was seen in all of 2001. Reported unemployment figures remain low, but Kasriel says those numbers "smell worse than a week-old fish."

The combination of an emerging consumer recession and a heavily stressed financial system has some experts suggesting that a financial meltdown looms.

"In short, the financial markets are at a critical point," fund manager John Hussman of the Hussman Funds wrote last week in a Web site post devoted to discussing a possible financial crisis. "It's possible that investors will somehow adopt a fresh willingness to speculate, but my impression is that in the weeks ahead, investors will be forced to recognize that the recession risk has tipped."

Others are more direct. Nouriel Roubini, an economics professor at New York University who has been predicting the collapse of the housing bubble for years, wrote recently that not only is a recession inevitable, he also sees "the risk of a severe and worsening liquidity and credit crunch leading to a generalized meltdown of the financial system of a severity and magnitude like we have never observed before."

Such a meltdown, he writes, would include bank runs such as the one seen earlier this year at Britain's Northern Rock and the bankruptcy of some broker-dealer firms.

That view isn't widely shared, of course. Few expect Americans to find themselves out on the street corner soon selling apples. Jim Griffin, an economist who writes for ING Investment Weekly in Hartford, Conn., shuns recession forecasts as unreliable and believes worries about the nation and the financial system are mostly overstated.

Griffin sees this fall's turmoil as "part of the next historical phase" in the global economy, as the U.S. shifts from driving world growth to riding behind developing nations. He expects U.S. export growth to help cushion the blows dealt by the housing bust and related bad debt.

Merrill Lynch's Rosenberg is less sanguine than Griffin, but he too discounts the voices of doom. "We've had consumer recessions before," Rosenberg said. "The world doesn't end." Let's hope not.

Foreign Policy News and Commentary Update November 24, 2007


THREE AMERICAN COMICS FIND ISLAMIC AUDIENCES LAUGH TOO: THE 'AXIS OF EVIL' TOURS THE MIDDLE EAST POKING FUN AT STEREOTYPES - DAN MURPHY (CHRISTIAN SCIENCE MONITOR, NOVEMBER 26)
http://www.csmonitor.com/2007/1126/p01s05-wome.html

FOREIGN SHOPPERS HIT 'MALL OF AMERICA': THANKS TO WEAK DOLLAR, MORE EUROPEANS AND CANADIANS ARE TRAVELING TO US TO DO THEIR HOLIDAY SHOPPING - RON SCHERER (CHRISTIAN SCIENCE MONITOR, NOVEMBER 26)
http://www.csmonitor.com/2007/1126/p02s01-usgn.html

U.S. PEACE CORPS RECRUITING OLDER VOLUNTEERS - SARAH ABRUZZESE (INTERNATIONAL HERALD TRIBUNE, NOVEMBER 25): Though older recruits are nothing new to the Peace Corps, it recently began an initiative to entice people age 50 or older into joining at a time when many of them are stepping away from careers and into the great unknown of retirement. In the 1970s, older members represented 5 percent of the corps. That grew to a high of 9.7 percent in 1991, but the number slowly fell back to 5 percent last year.
http://www.iht.com/articles/2007/11/25/america/peace.php

CANADA'S MORAL COMPASS - PIERRE ATLAS (REAL CLEAR POLITICS, NOVEMBER 24): "Unlike the United States, Canada does not wield tremendous military or economic power, but it does have something in abundance that America has been losing of late: soft power. According to numerous surveys of world opinion, respect for the United States has dropped dramatically over the past seven years, and George W. Bush is the world's most reviled leader. But nobody hates Canada, and I doubt few people around the world, or even in Canada, really hate Prime Minister Stephen Harper."
http://www.realclearpolitics.com/articles/...al_compass.html

IRAQ HAS ONLY MILITANTS, NO CIVILIANS: "TACTICAL PERCEPTION MANAGEMENT" IN IRAQ - DAHR JAMAIL (TOMDISPATCH, NOVEMBER 26): At the time of this writing, the group Just Foreign Policy has offered an estimate of Iraqis killed since the U.S.-led invasion and occupation. Their number: 1,118,846. Consider that possibility in the context of the latest round of news from Iraq about lessening violence. It is an indication of the success of an effective Pentagon "tactical perception management campaign," of the way the Bush administration has continued to "catapult propaganda," and of the dehumanization of Iraqis that has gone with it, that the possibility of the number of dead Iraqis being in this range has largely been dismissed (or remained generally undealt with) in the mainstream media in the United States.
http://www.tomdispatch.com/post/174866/tom..._pentagon_style

IRAQIS RETURNING, BUT AT LOWER RATE THAN GOVERNMENT REPORTS - DAMIEN CAVE (INTERNATIONAL HERALD TRIBUNE, NOVEMBER 26)
http://www.iht.com/articles/2007/11/26/africa/returnees.php

20,000 VETS' BRAIN INJURIES NOT LISTED IN PENTAGON TALLY - GREGG ZOROYA (USA TODAY, NOVEMBER 24): At least 20,000 U.S. troops who were not classified as wounded during combat in Iraq and Afghanistan have been found with signs of brain injuries, according to military and veterans records compiled by USA TODAY.
http://www.usatoday.com/news/military/2007...ninjuries_N.htm http://www.juancole.com/2007/11/20000-brai...ot-counted.html

TROOP LEVELS IN IRAQ TO FALL BY 5,000: THE U.S. ARMY'S 3RD BRIGADE, 1ST CAVALRY, WHICH HAS BEEN OPERATING MOSTLY IN VOLATILE DIYALA PROVINCE, IS TO DEPART - ANN M. SIMMONS (LOS ANGELES TIMES, NOVEMBER 25)
http://www.latimes.com/news/nationworld/wo...=la-home-center

$144 MILLION OVER BUDGET AND STILL NOT OPEN FOR BUSINESS: IRAQ EMBASSY AS GILDED PALACE - CHRISTOPHER BRAUCHLI (COUNTERPUNCH, NOVEMBER 24)
http://www.counterpunch.org/brauchli11242007.html

MILITARY WANTS MORE VIEWS ON IRAQ REPORTS: SEPTEMBER'S ASSESSMENT PUT TOO MUCH FOCUS ON GEN. PETRAEUS, SAY OFFICIALS CONCERNED ABOUT THE WAR'S EFFECT ON PUBLIC SUPPORT - JULIAN E. BARNES (LOS ANGELES TIMES, NOVEMBER 26): "This is not Dave Petraeus' war. This is George Bush's war," said one senior official, underscoring the military's view that its role is to carry out the decisions made by political leaders.
http://www.latimes.com/news/nationworld/na...=la-home-center

HOW GOES THE WAR? - PAUL GREENBERG (WASHINGTON TIMES, NOVEMBER 24): However encouraging the news from Iraq, the news from Washington grows ever grimmer. Divided we fall.
http://www.washingtontimes.com/apps/pbcs.d...mplate=printart

LET'S HEAR IT FOR GOOD NEWS FROM IRAQ - JEFF JACOBY (BOSTON GLOBE, NOVEMBER 25): The news from Iraq has been so encouraging in recent months that last week even the mainstream media finally sat up and took notice. Can the Democratic Party be far behind?
http://www.boston.com/bostonglobe/editoria...om_iraq?mode=PF

THE CASE FOR ILLEGAL MINGLING - THOMAS L. FRIEDMAN (NEW YORK TIMES, NOVEMBER 25): Casualties are down in Iraq, but we need to see a lot more.
http://www.nytimes.com/2007/11/25/opinion/...agewanted=print

HANDS OFF IRAN - CHRIS HEDGES (NATION, NOVEMBER 21): A war with Iran is doomed.
http://www.thenation.com/doc/20071210/hedges

A SEPARATE PEACE WITH SYRIA ? EDITORIAL (BOSTON GLOBE, NOVEMBER 24): For Israel, the United States, and those Arab regimes that seek to counter a perceived threat from Iran, Syrian President Bashar Assad has a valuable card to offer: the option of subtracting Syria from an arc of Iranian influence that now stretches through Iraq and Syria to Lebanon.
http://www.boston.com/bostonglobe/editoria...h_syria?mode=PF

AMERICAN FOLLY - CAROLINE GLICK (JERUSALEM POST, NOVEMBER 25): The Americans have shown themselves to be unworthy of Israel's trust. There is no good excuse for the Bush administration's decision to embrace the Palestinians at Israel's expense.
http://www.jpost.com/servlet/Satellite?cid...ticle%2FPrinter

OBSTACLES AND OPPORTUNITY FOR MIDEAST PEACE - JAMES CARROLL (BOSTON GLOBE, NOVEMBER 26): The internationalization of Middle East reconciliation efforts can break the choke hold that has suffocated not only Israeli and Palestinian impulses, but those of the heretofore ineffectual negotiating partners, especially the United States.
http://www.boston.com/bostonglobe/editoria...t_peace?mode=PF

BUSH'S MIDDLE EAST UNRAVELS FURTHER JUAN COLE (INFORMED COMMENT: THOUGHTS ON THE MIDDLE EAST, HISTORY, AND RELIGION, NOVEMBER 26): As of this weekend, Lebanon does not have a president and the country's stability is in doubt. The Palestinian Authority is divided and is a mess, with the elected government having been overthrown by a US-backed coup.
http://www.juancole.com/2007/11/bushs-midd...ls-further.html

THE REAL TWO-STATE SOLUTION - ALUF BENN (SALON, NOVEMBER 26): This week President Bush will convene an international conference in Annapolis, Md., to promote the "two-state solution" for Israelis and Palestinians. The meetings and noble proclamations toward that goal, however, will bear little relation to reality here in the Middle East. Essentially, Bush is too late. For most Israelis, the two-state solution already exists.
http://www.salon.com/opinion/feature/2007/...tate/print.html

THE REGION: INVITING A BULL INTO THE CHINA SHOP ? BARRY RUBIN (JERUSALEM POST, NOVEMBER 25): What most of Washington simply fails to understand is that any real demand for Palestinian or Arab concessions will be fodder for radical groups and frighten Arab regimes, pushing the latter away from support for America rather than toward it. And any Israeli concessions obtained by this process will not satisfy their demands, either
http://www.jpost.com/servlet/Satellite?cid...ticle%2FPrinter

THROUGH IRAQ'S CLOUD COVER - VICTOR DAVIS HANSON (WASHINGTON TIMES, NOVEMBER 24): If you take the anger about George Bush out of the equation, along with the Iraq war and the fear of any more invasions by the United States, why not support democratic reform in the Middle East? We know the alternatives only play into the hands of terrorists.
http://www.washingtontimes.com/apps/pbcs.d...mplate=printart

DEMOCRACY MYTH: FANTASY PAKISTAN - STANLEY KURTZ (NATIONAL REVIEW, NOVEMBER 26): Pakistan has never been a democracy. Woe to us if Nawaz Sharif and his ?democratic? friends take power. And shame on us if, charmed by manipulators of that magical word ?democracy,? we hand power to Nawaz Sharif and his Islamist allies on a silver platter.
http://article.nationalreview.com/?q=ZDg2Y...YWMxOGFhM2MxMWE=

BACK TO THE BRINK IN THE BALKANS - RICHARD HOLBROOKE (WASHINGTON POST, NOVEMBER 25): The United States and most of the European Union (led by Britain, France and Germany) will recognize Kosovo quickly. Russia and its allies will not. Kosovo's eight-year run as the biggest-ever U.N. project will end with great tension and a threat of violence that could spread to Bosnia.
http://www.washingtonpost.com/wp-dyn/conte...2301237_pf.html

VENEZUELA'S PATH TO SELF-DESTRUCTION: VOTERS ARE ON THE VERGE OF HANDING PRESIDENT HUGO CHAVEZ THE POWER TO TURN THEIR COUNTRY INTO A DICTATORSHIP - WILLIAM RATLIFF (LOS ANGELES TIMES, NOVEMBER 24): Chavez promises Venezuelans perks, such as six-hour workdays, and redress of their grievances against domestic and foreign oppressors, including the United States.
http://www.latimes.com/news/opinion/la-oe-...-opinion-center

AUSTRALIA'S PATH BENDS AWAY FROM U.S. - RAYMOND
BONNER (NEW YORK TIMES, NOVEMBER 26): The defeat of John Howard, Australia?s prime minister, in Saturday's election deprived President Bush of one of his most steadfast allies and will bring changes in Australia's foreign policy that will be felt in Washington.
http://www.nytimes.com/2007/11/26/world/as...agewanted=print

AUSTRALIAN U-TURNS - EDITORIAL COMMENT (FINANCIAL TIMES, NOVEMBER 26): The generational shift represented by the triumph of the 50-year-old Mr. Rudd over a man 18 years his senior will affect other aspects of policy and further diminish international support for President George W. Bush.
http://www.ft.com/cms/s/0/d8d72bb6-9b8a-11...00779fd2ac.html

AUSSIE OUSTER ? REVIEW & OUTLOOK (WALL STREET JOURNAL, NOVEMBER 26): Australia's new Prime Minister is Kevin Rudd, a Mandarin-speaking former foreign service officer. On foreign policy, Mr. Rudd's policies also aren't likely to be radically different from those of Mr. Howard -- though his rhetoric tilts more toward the United Nations.
http://online.wsj.com/article/SB119603009823003325.html PAID SUBSCRIPTION

OBAMA IS RIGHT ON IRAN - SHELBY STEELE (WALL STREET JOURNAL, NOVEMBER 26): Moral authority is the single greatest challenge of American foreign policy.
http://online.wsj.com/article/SB1196042346...in_commentaries PAID SUBSCRIPTION

FIGHTING IDENTITY: WHY WE ARE LOSING OUR WARS - MICHAEL VLAHOS (HUFFINGTON POST, NOVEMBER 25): In a world of the stripped and left-behind -- one-half about to become two-thirds of humanity -- we do not have a counter-offer. We offer only lordly altruism, while denying our own identity problem.
http://www.huffingtonpost.com/michael-vlah...we_b_74036.html

AMERICA IN THE TIME OF EMPIRE - CHRIS HEDGES (TRUTHDIG, NOVEMBER 26): The decision to measure the strength of the state in military terms is fatal. It leads to a growing cynicism among a disenchanted citizenry and a Hobbesian ethic of individual gain at the expense of everyone else. Few want to fight and die for a Halliburton or an Exxon. This is why we do not have a draft. It is why taxes have not been raised and we borrow to fund the war. It is why the state has organized, and spends billions to maintain, a mercenary army in Iraq. We leave the fighting and dying mostly to our poor and hired killers. No nationwide sacrifices are required. We will worry about it later. It all amounts to a tacit complicity on the part of a passive population. This permits the oligarchy to squander capital and lives.
http://www.truthdig.com/report/item/200711...time_of_empire/

RICE'S TURNABOUT ON MIDEAST PEACE TALKS - ELISABETH BUMILLER (NEW YORK TIMES, NOVEMBER 26): 'There was absolutely no prospect of a Middle East peace process that was going to lead to anything,' Rice said in an interview in May about her thinking in 2001. 'I just didn't see it.' Nearly seven tumultuous years later, Ms. Rice, as secretary of state, has led the Bush administration to a startling turnaround and is now thrusting the United States as forcefully as Mr. Clinton once did into the role of mediator between the Israelis and Palestinians.
http://www.nytimes.com/2007/11/26/washingt...agewanted=print SEE ALSO
http://www.nytimes.com/2007/11/26/washingt...agewanted=print

It's Not Only theIsrael Lobby --
Other Interests Benefit from the Chaos

by Jon Basil Utley http://antiwar.com/utley/?articleid=11840

The new, public debate about the Israel lobby is missing a major point – the lobby's allies, the many other interests in America that want chaos in the Middle East. For example, in the Walt-Mearsheimer book there is no listing in the index for "military-industrial complex." For all its vaunted power, the Israel lobby could not dominate America's Mideast policies without cover and active support from other powerful groups. Although AIPAC promotes the lobby's image in Congress as being all powerful, it isn't. The book does specify Christian Zionists as an integral part of the lobby, but it neglects many others.

Another important question is how, when polling data shows that most Jews opposed the Iraq war, did the Likud/settler minority faction take over the whole Israel lobby? Although a minority with an agenda will often win over an amorphous majority, that is not a sufficient explanation. Indeed Jews are at the forefront of the fight against the war and the consequent encroaching police state here in America. Some of the most honest reporting on Israel comes from Jewish media: Ha'aretz in Israel and The Forward in America. What happened? ---------------

The first major ally is the military-industrial complex, now funded by the new system of hidden congressional earmarks. Arnaud de Borchgrave first wrote about there being 15,000 defense budget earmarks. These allow a congressman to slip contracts into the budget for favored constituents, who then donate money to the congressman's reelection committee and may also provide well-paid jobs in their districts. These encourage warmaking, or at least threats of war, as never before. It's hard to hide money in the budget for "a bridge to nowhere," but a missile to nowhere will never be questioned, as its sponsors cloak their profits in "national defense."----------
Please go to link above for whole article

Annapolis Conference & Syria's Truth

By Aaron Mannes


If Syria switched teams, from its current alignment with Iran to the U.S. aligned Arab states led by Egypt, Saudi Arabia, Jordan, and the Gulf states, it would be a diplomatic masterstroke. It would isolate Iran and cut loose its key terrorist proxies: Hezbollah, Hamas, Palestinian Islamic Jihad and the lesser Damascus-based groups. If it could be done, it might even be worth paying Syria’s price - return of the Golan Heights and wiping the slate clean on past Syrian support for terrorism, including the investigation into the assassination of former Lebanese Prime Minister Rafiq Hariri.

For decades American foreign policy realists, most recently in the Iraq Study Group, have called for engagement with Syria in order to achieve this aim. The news that Syria will send an emissary to the upcoming conference in Annapolis has raised hopes that this maneuver is possible.

But it won’t happen and anyone who believes that it will doesn’t know the truth about Syria - literally. They must not have read The Truth About Syria by Barry Rubin.

Read the complete review here.

November 26, 2007 05:21 PM Link TrackBack (0) Print
First target for Iran: Qatar?

By Olivier Guitta


Iran has been vocal about what it would do in case of an American or Israeli strike on its nuclear facilities.

I just wrote a piece on that topic for the Middle East Times.

Here is an excerpt:

What would be the most logical target Iran would strike in case of a U.S. or Israeli attack on its nuclear sites?

Qatar.

In fact, Iranian Revolutionary guards have already threatened to attack Qatari oil and gas facilities (hence crippling the world economy by creating an oil and gas shock) by sea and air by using suicide boats and air missiles.

For Iran, it's a no-brainer: Qatar hosts the largest U.S. base in the Middle East (8,000 U.S. soldiers are stationed there) and is also viewed by some as being friendly with Israel.

What is Qatar doing about it?

First and foremost, Qatar has been heavily using the diplomatic weapon. Its strategy is to befriend everyone: from Israel to Hamas, from Syria to France.

Even though Qatar's deputy foreign minister Mohamed al-Ruhaimi firmly believes that "speaking to everyone allows us to have a dynamic and independent policy," it is a recipe for disaster. For instance, Qatar has not been terror-free: in fact, in March 2005, a suicide bomber (most likely linked or inspired by al-Qaida) killed one Briton and wounded 12 people in Doha in an attack at a theater frequented by Westerners.

To read the rest, please click here.

November 26, 2007 03:15 PM Link TrackBack (0) Print
In "Call for Donations," Al Qaeda Admits Financial Stress

By Andrew Cochran


On November 20, I posted on the success of the U.S.-led Iraq Threat Finance Cell in disrupting Al Qaeda in Iraq's financial network. Reuben Paz, one of the leading experts in the CT community and the founder and Director of the Project for the Research of Islamist Movements (PRISM) at the GLORIA Center in Israel, has written a follow-up to that post for us, with an analysis of Al Qaeda's admission of financial distress. I am pleased to run Mr. Paz's analysis below in its entirety with my gratitude:

On 20 November 2007, Andrew Cochran reported on this blog about the success of the U.S. ITFC in shutting down elements of Al-Qaeda's financial network in Iraq, and that the government of a key Gulf state has assisted in these efforts. On the same day, the Washington Post published a report of its own about the U.S. efforts to break Iraqi insurgents’ financial networks, and the growing interest of insurgents in money rather than ideology.

A significant evidence for the U.S. successes in this field has recently appeared from an unexpected direction - Al-Qaeda itself. The Global Islamic Media Front (GIMF)—the primary indoctrination and propaganda means of Al-Qaeda, published on the same day - 20 November 2007, on the main Jihadi forum of Al-Hesbah, an unprecedented announcement, which we may title A CALL FOR DONATIONS. It was not the first time that Jihadi elements posted material on the significance of the Jihad bil-Mal (financial Jihad). However, past writings on the issue have had the religious and indoctrination nature. This time it looks as a genuine call resulting out of a real stress. The post by the “official” GIMF provides it also a nature of an official call by Al-Qaeda, not just some group belonging to the Iraqi insurgency. It does not refer to Iraq or any other place in particular, and therefore, it might also indicate the stress in which the organization is found in other regions of Jihadi fight as well, in the field of finance.

The post by GIMF—titled “A Call from the People of the Places of Fight (Ahl al-Thughur): Oh Muslims, Do You Think You are Going to Enter Paradise?”—is “upgrading,” for the first time in recent years, the financial Jihad to the same level of the fighting form of Jihad. After the process of “upgrading” and the legitimacy of the Jihad by propaganda through the Internet in the past two years, it is now the turn of the financial Jihad to receive the legitimacy of a fully recognized Jihad.

Read More »


The author of this call is not hiding or coloring the financial situation of the group in the battle field:

“Oh Muslims !! this is a call for you from the fighters to the entire Muslims. Following the campaign against Islam to dry its sources, many of the people who support this religion suffer from lack of equipments and basic means for their Jihad, after the belief in Allah. The situation became really bad. Imagine brothers, that some of them carry weapons with no ammunition. Sometimes they have no food or place of refuge. I see you calling for Jihad day and night without implementing it, as if the Jihad is just carrying weapons. Brothers, in many cases the financial Jihad is not less than Jihad by fighting (Al-Jihad bil-Nafs). How could the Mujahid fulfill his huge tasks without weapons? Or without the support for his family while he is away or martyred?

The Noble Qur’an gave the financial Jihad a great priority. It is always compared to the Jihad by fighting as two sides of the equation. Moreover, in all the Qur’anic verses that record the two, except for one verse, the financial Jihad has a priority over the fighting Jihad.

… From these verses and stories, the significance of the financial Jihad is clear. The infidels spend their money to fight [the supporters of] Allah, and their reward, at the end of the day, is only defeat. Should not the believers spend their money to strengthen the basics of religion and enable its spread in the world? No one can claim that he owns nothing. I tell him, don’t you know any wealthy Muslim? Approach him and encourage him [to donate]. We know how far the infidels (Taghout) are suffocating the finance of the Mujahidin, and how dangerous it is.”

The picture is clear and the call seems to be genuine. There is also an interesting element in using the term Taghout for “those who suffocate the finance of the Mujahidin.” This term is used for the Arab or Muslim governments, rather than the U.S. or other Western “enemies.” This might be an indication to the cooperation of Arab governments in this field. This call is significant and reassures the success in fighting the Jihadi insurgency through its “pockets.” Nevertheless, it should also be an indicator to the openness of Al-Qaeda, which runs much of its affairs in public on the Internet, and an indicator for the reliability of the E-Jihad and the significance of its profound monitoring.

« Close It

November 26, 2007 11:13 AM Link TrackBack (0) Print
Danger in Afghanistan

By Douglas Farah


The Washington Post on Sunday carried a disturbing piece on Afghanistan, where the problems cited are part of a broader pattern of the same mistakes across the spectrum in the war with radical Islamists.

After summing up the litany of problems, from a weak and failing government to the fact that the _jihadists_ seem to be able to easily replace the large number of combatants being killed, Karen DeYoung writes that:

But others said the problem is not Pakistan or a lack of military or financial resources in Afghanistan. It is the absence, they say, of a strategic plan that melds the U.S. military effort with a comprehensive blueprint for development and governance throughout the country.

"There are plenty of dollars and a hell of a lot more troops there, by a factor of two, from when I was there," the former commander said. The question, he said, is "who owns the overarching campaign for Afghanistan, and what is it?" My full blog is here.

November 26, 2007 09:29 AM Link

Hands off Iran ... Or Else

Chris Hedges, Truthdig

Rights and Liberties: I will not pay my income tax if Bush and Cheney go to war with Iran. You should consider it too.

Excerpts from the President's Remarks at the Annapolis ConferenceToday, President Bush will address The Annapolis Conference at the U.S. Naval Academy. The following are excerpts from his remarks as prepared for delivery. Gloom Before Annapolisby Robert SpencerAs the Annapolis summit looms, Muslim opinion on it appears to be sharply divided, and no one is particularly enthusiastic.

Even Larry Summers Predicts Doom

A Dollar the Size of a Postage Stamp
By MIKE WHITNEY

Lately it seems as though everyone wants to take a poke at the dollar. Last week, it was the Brazilian supermodel who demanded euros for her jaunts on the catwalk instead of USD. The week before that, hip-hop impresario, Jay-Z, released a video dissin' the dollar and praising the euro as the 'baddest Dude in the 'hood'.

Lambasting the greenback has become trendy. It's a favorite pastime of politicians, too. At the November OPEC meeting in Riyadh, Iran's president Mahmoud Ahmadinejad asked the assembled finance ministers to "study the feasibility of selling oil in another currency." Ahmadinejad disparaged the dollar as "a worthless piece of paper".

The fiery Venezuelan President, Hugo Chavez, followed Ahmadinejad's lead predicting that the demise of the dollar would mean the "end of the Empire."

Hugo may be on to something. The dollar is America's Achilles heel; if the dollar tanks, so does the empire. That means the taxpayer will have to foot the bill for Bush's bloody-interventions in Iraq and Afghanistan, rather than the Chinese. That also means that the US will have to export something of greater value than Daisy Cutters and gulags. That could be a tall-order, now that Bush has boarded up the factories, hollowed out the industrial base, and outsourced 3 million manufacturing jobs. We'll have to scrape the rust off the machinery and get back into the widget-making business like we were before the Free Trade fiasco.

Central banks across the globe are trying to figure out how to ditch their dollar reserves without triggering a stampede for the exits. No one wants to see that. But, then, nobody wants to be stuck with vaults full of Uncle Sam's green confetti either. So, the question arises; What is the best way to divest oneself of $5.6 trillion (total USD held overseas) before the Lusitania capsizes?

Kuwait, Venezuela, Iran, Russia, and Norway have already opted to ignore the destabilizing effects of "conversion" from dollars and are in some stage of divestiture. Others will follow. The UAE, Bahrain, Qatar, Oman and Saudi Arabia are considering switching from the dollar-peg to a basket of currencies so they can hedge against the inflation that's battering their economies. It's only a matter of time before the Petrodollar System---which links the dollar to petroleum sales and creates a de facto "international currency"---unravels completely, precipitating the final collapse of Breton Woods.

Talk of America's impending currency disaster is no longer relegated to the Internet blathershere. Mainstream journalists have joined the chorus and are sending up their own red flags. The UK Telegraph's economics's editor, Liam Halligan, made this grim observation in his recent article, "Bet Your Bottom Dollar Tensions Will Follow":

"The importance of "dollar divestment" cannot be overstated. At the very least it means the greenback has much further to fall - plunging the US into recession. But it begs a bigger, more alarming, question. How will Washington react to the end of the US hegemony?"

The dollar was savaged by the monetary policies of the Federal Reserve. The Fed's policies were designed to coincide with Bush's Middle East Crusade. They were supposed to work like two wheels on the same axle. The administration believed that, by 2007, the military would need only 30,000 or so troops to maintain security in Iraq. That would give Bush's legions the chance to turn east and push on to the next target-state, Iran. If things went according to plan -- and no one thought the high-tech US war machine could be stopped -- the US would control two-thirds of the world's oil. This would allow America to keep writing bad checks on green paper for the next century.

But then, of course, the plan hit a snag. The Iraqi resistance mushroomed, the US got bogged down in an "unwinnable" war, and the once-mighty dollar shriveled into nothingness. Now we're at a turning point and our leaders are in a state of denial. Bush is still playing Teddy Roosevelt, while Paulson and Bernanke are just plain shell-shocked. They probably know the game is over. As the dollar continues to wither; the frustration is beginning to mount in Europe. Liam Halligan sums it up like this:

"Europe has finally had enough of America's "benign neglect" dollar policy. As a large economic area, with a floating exchange rate, the eurozone suffers most. Over the past seven years, the single currency has risen by a shocking 82 per cent against the greenback. That's hammered eurozone exports - provoking serious trade disputes between the EU and US, the world's two biggest trading blocks. No wonder French President Nicolas Sarkozy describes America's drooping dollar as "a precursor to economic war". (UK Telegraph, "Bet Your Bottom Dollar tensions Will Follow")

Sarkozy is leading the charge for "intervention"; the buzzword for shoring the greenback through exchange controls and buying up billions of dollars. But it's a risky business; especially when net capital inflows -- which are the monthly purchases of US-backed securities and Treasuries --have gone negative for the last two months. That means the US isn't attracting enough foreign investment to finance its trade deficit. So the dollar will have to fall to compensate.

So, how much loot is Sarkozy willing to put up to keep the dollar from slumping further -- $100 billion, $500 billion, $1,000 billion? And where's the bottom?

The fact is, the greenback took a "header" down the stairwell and by the time it picks itself up, it could be eye to eye with the peso. Who knows? Maybe its time we all learned Spanish?

More than two-thirds of all sovereign foreign exchange holdings are denominated in dollars. When those dollars are converted into back into foreign currencies and start recycling into the US; we're in deep trouble. Inflation will soar. Surely, the Fed must have known this day would come when they were pumping trillions of dollars into subprime mortgages and complex debt-instruments which served no earthly purpose except to fatten the bottom line for rapacious bankers and hedge-fund managers. The Fed also knew that the nation's wealth was not being "efficiently deployed" for capital improvements on factories, technology or industry. Oh, no. That would have ensured that America would remain competitive in the global marketplace into the new century. Instead, the money was shoveled into the bottomless sinkhole of stucco homes with composition roofing and toxic credit default swaps.

The stock market lost another 237 points yesterday; the third 200-plus slide in a week. Now all three indexes are down more than 10% since their record high on Oct 9. Treasury yields are plunging as investors flee the stock market looking for safety. That means the Fed will have to slash rates again at its December 11 meeting to provide more low interest crack for the investor class. Traders see an 82% chance that Bernanke will cut the Fed Fund's rate by another quarter point to 4.25%. All that is likely to do is put the dollar into free fall and send food, oil and gold prices to the moon. It won't pay off the overdue mortgage payments and it won't remove the billions of dollars of debt from the banks' balance sheets. It's pointless. The US is headed for a "hard landing" and its dragging the rest of the world along with it.

Harvard Economics professor, Lawrence Summers offered this sobering warning yesterday in an article in the Financial Times, "Wake up to the dangers of a deepening crisis":

"Three months ago it was reasonable to expect that the subprime credit crisis would be a financially significant event but not one that would threaten the overall pattern of economic growth. This is still a possible outcome but no longer the preponderant probability. Even if necessary changes in policy are implemented, the odds now favor a US recession that slows growth significantly on a global basis. Without stronger policy responses than have been observed to date, moreover, there is the risk that the adverse impacts will be felt for the rest of this decade and beyond. Several streams of data indicate how much more serious the situation is than was clear a few months ago."

Summers is not the smartest guy on the block. If he was he wouldn't have said men and smarter than women and he'd still be president of Harvard. But he's a capable economist and he can sniff disaster as it comes stampeding round the corner.

Mike Whitney lives in Washington state. He can be reached at: fergiewhitney@msn.com

US wages covert war on Iraq-Iran border

For weeks, the Iranian artillery has been raining shells on hills where suspected Kurdish anti-Iranian militants are based on both sides of the Iran-Iraq border. At the same time, elite US Special Forces are operating inside Iran, training the militants and scouting potential targets for air strikes, a former commando tells Nelson Rand. The Kurdish administration in northern Iraq has placed temporary curbs on the anti-Tehran rebels, but as they have US backing, their fight is far from over. (Nov 27, '07)

Remembering Howard Dean’s 2004 Campaign
by Joshua Frank / November 27th, 2007

Four years ago today Howard Dean was ahead in the polls and set to dominate the early race in Iowa and the primaries in New Hampshire. It was the first time the internet had been used to amass support for a presidential candidate, and the outpouring of antiwar fervor for Dean’s campaign threw the Washington establishment in to a tailspin. It was set to be a campaign to remember, yet it amounted to little more than a forgotten headline. Below we run the following essay from Joshua Frank’s book Left Out! How Liberals Helped Reelect George W. Bush to remember what we are so soon to forget: the Democrats aren’t ready or willing to reform, let alone oppose. It’s a valuable lesson, one we ought to keep in mind as the following year of electoral madness and political punditry unfolds. Tomorrow we’ll run the second half of Frank’s essay, outlining the DLC powers that crushed Dean’s grassroots movement, despite that Dean, during his tenure in Vermont, was a pro-war, pro-business insider. - DV Editors (Full article …)

TIME MAGAZINE – MIDDLE EAST BLOG
11/25/07
What the Saudis Want from Annapolis

Scott Macleod

Saudi Arabian Foreign Minister Saud al-Faisal tells TIME that he is optimistic about this week's Middle East peace conference in Annapolis because of what he calls U.S. determination "to see this through." Continuous U.S. mediation in post-conference negotiations, including pressure on Israel, he says, "can turn things around" and lead to a comprehensive settlement before President Bush's term expires in 13 months.

But, speaking in Paris just hours before his scheduled arrival in the U.S., Prince Saud warned Israelis that they would have no peace until Israel withdrew from Arab territories captured in the 1967 war. Saud, who will be the highest ranking Saudi to ever attend a peace conference with the Jewish state, added that he would not shake the hand of Prime Minister Ehud Olmert or make a symbolic visit to Jerusalem before a peace deal. "The hand that has been extended to us has been a fist so far," he said. He warned Israelis against seeking a surrender, adding, "We don't need a Versailles for the Arab world, a peace that will only be an instigator of future wars."

TIME: Are you optimistic about Annapolis?

Saud: One of the elements of optimism is the sense of determination of the United States to see this through. Peace without the complete and direct involvement of the United States is impossible. The assurance that it is going to be a comprehensive peace that is pursued, to tackle the main issues of borders, Jerusalem, refugees, is certainly one of the elements.

Did you have reservations about attending?

We were fearful of failure. For us, of course, and what the turn of events after a failure would be. But also for the United States. We were anxious that the credibility of the United States is maintained.

Why were you afraid for yourselves?

We have assiduously worked for a strategy for peace. We have convinced our people of the viability of that strategy. If failure occurred, people would turn away from this strategy. Undoubtedly, failure will increase the trend toward radicalism, and undoubtedly it will provide terrorists with further means of recruitment.

Are you confident in the Bush administration's steering of the peace process?

We have confidence in that. I hope we are proven right. Both sides alone won't reach an agreement. It is obvious from the last 60 years of experience with negotiations. With their continuous involvement, and serious intent, this can turn things around [if the United States really is going to put its weight behind its proposals].

Have Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas achieved anything in their talks?

No, that is one of the great disappointments. Everybody had hoped by the time they reached the conference, that Olmert and Abbas had reached some kind of understanding especially about what needs to be done on the ground, issues like a freeze on settlements, the wall, and other issues that make Palestinian life easier. How reasonable is it to assume that you can have negotiations for removing the occupation and at the same time the Israelis are acquiring more land and building more settlements? Here is an obvious area where an intermediary has to step in and say, "No, this cant be."

Do you think Olmert is sincere?

Israel has to make a choice. They have lived for the last 60 years basing their policy on force. Yet they are not closer to achieving peace or security than they have been in the past. It is time for them to try a different policy, a policy of accepting to live with the Palestinians and live in the neighborhood. We don't need a Versailles for the Arab world, a peace that will only be an instigator of future wars.

What do you think of Olmert?

I don't know the man.

He responded positively to the Arab peace initiative and Saudi involvement in the peace process.

Does he accept the principles of the peace proposal totally? Withdrawal for total peace? This will be a test for him in this next conference.

Will you try to get to know him at the conference, shake his hand and have a chat?

No, this is not theater. We are going seriously for peace negotiations. We are not going there just to take pictures of somebody shaking somebody's hand. We can't give false impressions to people. The hand that has been extended to us has been a fist so far. Once it opens for peace, it will be shaken.

Will you avoid shaking his hand if he approaches you?

I'm not going to be there for theatrical gestures of shaking hands that mean nothing. You shake hands, and it implies that you have agreed on something. We have not agreed on anything yet. Better than shaking our hands, he should respond in honesty to the proposals that we have put on the table.

Shaking his hand could send a signal to Israelis that there is a partner for peace.

We are there to support Mahmoud Abbas, the Syrians, and the Lebanese to get their territory. We are there in all honesty, if peace is achieved, to pursue that what was promised in the Arab peace plan. That is normalization, after the peace. We are not going to be party to gestures that could be interpreted as normalization before peace is attained.

What will the Saudi role be after the Annapolis conference?

Saudi Arabia is not looking for a unique role for itself to play. We will not of course negotiate in place of the Palestinians or the Syrians or Lebanese. But we will help in any way that we can if asked by these sides to help.

Would you visit Jerusalem?

No. Not before peace. We will visit only Jerusalem that is liberated.

What is your time frame for reaching a comprehensive peace agreement?

The time frame is very clear. It is until the end of the Bush administration.

Can it happen?

Of course. Every man on the street and every woman on the street, not only the politicians, knows what the settlement will look like in the end. It just needs the action to bring it about. It looks like the 1967 border, with delineation of that border. It looks for a negotiated solution for the Palestinian [refugees] return. It looks for a return of East Jerusalem as part of the Palestinian territories.

And Arab acceptance of Israel's legitimacy as a state?

Of course.

Is there flexibility in the Arab peace initiative, or is it "take it or leave it"?

It is a very simple equation. Either Israel wants peace or territory. It can't have both.

With modifications of borders?

This is up to the negotiators, of course.

What does Israel get in return?

We have made clear that peace means more than the end of hostilities. It means normalization. It means open borders. It means all those elements that normal human beings in one neighborhood act with together.

Can you imagine an Israeli embassy in Riyadh, or a Saudi embassy in Israel?

I hope we can imagine that they will withdraw, first of all. And that normalization will come after withdrawal.

You advocate unity between Abbas' Fatah party and Hamas, but how can you have a peace agreement that includes a group that doesn't accept Israel's legitimacy?

You are entering into negotiations where there is a group of Israelis who say they don't want Palestinians in their land and want a Jewish homeland only. You have that kind of position on both sides. We hope reasonable people, people of peace and good faith, will win the day.

If Annapolis doesn't work out, can you just pick this up again, a few years from now?

I think this is really a turning point. The next conflict will be very dangerous. We have seen shades of that. Israel in particular has to worry about that. Some vulnerability appeared on its part in the Lebanon adventure which is not absent from the minds of anybody who wants to do mischief in the region.

So this is the last chance?

I could say that. I think it if it is not the last chance, it is the precursor of the end of the one direction and the beginning of a new direction in the Middle East, and a disturbing one at that.

Is your peace effort driven by fear of Iran?

Peace with Israel has its own conditions and elements that are not connected with Iran. We want to make peace with Israel on its own terms. Iran is a neighbor that we hope we can live in peace and stability with. It takes two to act in this. They have to want the same thing too. The test with Iran is what they do in Iraq.

Can the nuclear dispute with Iran be handled diplomatically, or are you concerned the U.S. will bomb Iran?

We not only think it can be solved diplomatically, but we are working towards that objective. We hope that conflict will be avoided. Conflict in that region will be a disaster for the international community as much as for the states of the region.

Are you encouraged by the efforts of the Iraqi government for national reconciliation?

It needs a government that would leave no stone unturned and move heaven and earth in order to get the national reconciliation going on, and we haven't seen, unfortunately, such an effort until now.

Iran builds new longer-range missile
e9 = new Object(); e9.size = "160x600,120x600"; e9.noAd = 1; TEHRAN, Nov 27 (AFP) Nov 27, 2007
Iran announced on Tuesday that it has built a new missile with a range sufficient to put Israel and US bases in the Middle East within easy reach, amid rising tensions over Tehran's contested nuclear drive.Defence Minister Mostafa Mohammad Najjar said the new "Ashura" missile had a range of 2,000 kilometres (1,240 miles) -- the farthest in Iran's arsenal, state media reported.

"The construction of the Ashura missile with a range of 2,000 kilometres is one of the accomplishments of the ministry of defence," Iranian news agencies quoted Najjar as saying.

"The missiles are being made in line with Iran's deterrent and defence doctrine," he added.

However, there has been considerable confusion in recent months about the capacities of Iran's longer-range missiles, seen by experts as one of its chief military assets.

At its main military parade in September, Iran unveiled the Ghadr-1 (Power), which was said to have a range of 1,800 kilometres (1,100 miles).

The country's best-known longer-range missile, the Shahab-3, has been said by officials in the past to have a range of 2,000 kilometres. Yet at the military parade it was said to have only a 1,300-kilometre (800-mile) range.

Some Western military experts claimed that the Ghadr-1 was no more than a Shahab-3 under a different name. It has the "baby bottle" style nose for extra aerodynamic efficiency seen on versions of the Shahab-3.

The agencies did not publish any pictures of the Ashura, which is named after the holy mourning ceremony marking the death of Shiite Imam Hossein.

Najjar added to the confusion on Tuesday by saying Iran was developing Ghadr missiles that would also have a range of 2,000 kilometres.

Iran has regularly touted the abilities of its missiles at a time of mounting tension with the West over its nuclear programme.

France, which has in recent months expressed increasing concern over Iran's nuclear ambitions, said it was worried by the new longer-range missile.

"This news is a cause of concern for us, and it illustrates the need to be extremely vigilant with regard to Iran's actions and intentions," foreign ministry spokeswoman Pascale Andreani told reporters.

Najjar also announced that Iran had developed a new submarine named "Ghadir" after another holy day and a destroyer called "Moj" (wave), without giving further details.

The United States has never ruled out a military attack against Iran to punish its years of defiance in the nuclear crisis, even though Washington says it favours resolving the standoff through diplomacy.

Tehran has said it will never initiate any attack but has also warned it will strike back with crushing force if the United States launches an assault.

Iranian military officials have publicly threatened to hit US bases in Iraq, Afghanistan and on the Arabian peninsula with their missiles if Washington attacks.

"Iran will never launch an attack but if Iran is attacked we will respond with all our force against aggressors," Najjar was quoted as saying.

The commander of Iran's elite Revolutionary Guards, Mohammad Ali Jarari echoed that on Tuesday, adding that Tehran had "other capabilities that we believe it is our right to use throughout the region and also around the world."

In remarks on state-owned Press TV, he said "we think there is a possibility of air campaign against a number of special sites ... but if our enemies are wise, they will never even do that."

Without elaborating, he said that with the "same strategies" used by Hezbollah in the Lebanese Shiite movements summer war with Israel last year "we can nullify their (US) military superiority.

"Keep in mind that they are stationed near Iran's borders and well within the range of our different weapons."

The United States accuses Iran of trying to develop a nuclear weapon, a charge that Tehran vehemently denies.

It has also vowed never to recognise Israel -- the region's sole if undeclared nuclear power -- and President Mahmoud Ahmadinejad has called for the Jewish state to be "wiped from the map."

Iran is one of the few regional powers absent from a US-hosted meeting in Annapolis, Maryland that aims to kickstart peace talks between Israel and the Palestinians.

Iranian officials have expressed frustration that states such as Saudi Arabia and its ally Syria are attending the meeting.

All rights reserved. © 2005 Agence France-Presse. Sections of the information displayed on this page (dispatches, photographs, logos) are protected by intellectual property rights owned by Agence France-Presse. As a consequence, you may not copy, reproduce, modify, transmit, publish, display or in any way commercially exploit any of the content of this section without the prior written consent of Agence France-Presse.

Public Sees Progress in War Effort

Released: November 27, 2007

Summary of Findings

For the first time in a long time, nearly half of Americans express positive opinions about the situation in Iraq. A growing number says the U.S. war effort is going well, while greater percentages also believe the United States is making progress in reducing the number of Iraqi casualties, defeating the insurgents and preventing a civil war in Iraq.

Roughly half of the public (48%) believes the U.S. military effort in Iraq is going very or fairly well. Judgments about the overall situation in Iraq have been improving steadily since the summer. As recently as June, only about a third of Americans (34%) said things were going well in Iraq.

The latest national survey by the Pew Research Center for the People & the Press, conducted Nov. 20-26 among 1,399 adults, finds that improved public impressions of Iraq are particularly evident when it comes to security-related issues. The number of Americans who say that the United States is making progress in reducing the number of civilian casualties in Iraq has doubled from 21% to 43% since June. The proportion saying that progress has been achieved in preventing terrorists from establishing bases in Iraq is also up substantially, as is the number saying the U.S. is making progress in defeating the insurgents militarily.

However, a rosier view of the military situation in Iraq has not translated into increased support for maintaining U.S. forces in Iraq, greater optimism that the United States will achieve its goals there, or an improvement in President Bush's approval ratings.

By 54%-41%, more Americans favor bringing U.S. troops home from Iraq as soon as possible rather than keeping troops in Iraq until the situation has stabilized. The balance of opinion on this measure has not changed significantly all year.

Similarly, Americans remain evenly divided over whether the U.S. is likely to succeed or fail in achieving its goals in Iraq; improved perceptions of the situation in Iraq have not resulted in a changed outlook in this regard. In addition, Bush's overall job approval now stands at 30%, which is largely unchanged since June and equals the lowest marks of his presidency.


Views of U.S. Military Effort


Public impressions of the U.S. military effort in Iraq are more positive now than at any point since September 2006. At that time, 47% said things were going very or fairly well. A few months earlier, in June, 53% said things were going well, the last time a majority expressed a positive view of conditions in Iraq. Through the following fall and winter, however, Americans grew increasingly downbeat about progress in the war. In February 2007, just 30% said the U.S. military effort was going very or fairly well – the lowest recorded in a Pew survey.

Opinions about the situation in Iraq have slowly turned around in the second half of 2007. In June, barely a third of Americans (34%) saw the situation in Iraq going well. This rose to 41% in September, 44% in October and 48% currently.

While Iraq remains a deeply polarizing issue across party lines, there has been improvement in how both Democrats and Republicans view the war. At the lowest point in February, barely half of Republicans (51%) said things were going well. Today, 74% of Republicans say the same. And while Democrats remain far more skeptical than Republicans, the proportion of Democrats expressing a positive view of the Iraq effort has doubled since February (from 16% to 33%).

Independents' assessments of how the military effort is going remain far closer to the views of Democrats than of Republicans. Currently, 41% of independents offer a positive assessment, while half say things are not going well. In February, 26% of independents expressed a positive view of the situation in Iraq.


Less Political Progress Seen


In February, about two-thirds of the public (66%) said the U.S. was "losing ground" in preventing civilian casualties, while just 20% saw progress being achieved. Opinions about progress in this area have changed dramatically; in the current survey, 46% say the U.S. is losing ground, compared with 43% who believe the U.S. is making progress.

More Americans also say the United States is making progress in preventing a civil war (up 14 points since February) and defeating the insurgents militarily (up 13 points). However, perceptions of progress in several other areas – including establishing democracy in Iraq, rebuilding Iraq's infrastructure and training Iraq's forces have shown less change.

Opinions about progress toward specific military and political goals remain deeply divided along partisan lines, with Republicans consistently more likely than Democrats to say progress is being achieved. For instance, while there has been an across-the-board increase in the belief the U.S. is making progress in reducing civilian casualties, about twice as many Republicans as Democrats say the United States is making progress on this (60% of Republicans vs. 28% of Democrats).


Stable Support for Troop Withdrawal


Since February, majorities have consistently supported a withdrawal of U.S. forces from Iraq as soon as possible.

Despite the improvement in views of the situation, 54% continue to favor a troop withdrawal while 41% say the United States should keep its troops in Iraq until the situation is stabilized.

Attitudes about what to do with U.S. forces have remained very stable across political lines. Two-thirds of Republicans (67%) currently favor maintaining troops in Iraq, little change from February (71%). Just 39% of independents and 21% of Democrats want to keep troops in Iraq – again, virtually unchanged from nine months ago.


Iraq in a Word


The belief that the situation in Iraq is getting better also is reflected in the single words that people use to describe the war. The word "improving" is most frequently used to characterize people's impression of the war; 29 respondents mentioned this word.

For the most part, negative descriptions of the Iraq situation – such as "terrible" (26 mentions), "bad" (24), and "mess" (21) still predominate. However, fewer people use each of these words in characterizing their impressions of the war than did so in September. Individual mentions of the word "improving" have increased over this period, from eight in September to 29 in the current survey.


Most Important Problem


The survey finds that the war in Iraq continues to be viewed as the most important problem facing the nation, though it is not nearly as dominant a concern as it was early this year. Currently, 32% volunteer the war as the biggest problem facing the United States, while 14% mention the economy. In January, mentions of the war outnumbered mentions of the economy by roughly eight-to-one (42% vs. 5%).

While the economy has increased as a concern, so too have energy and gas prices. Currently, 7% name energy and gas prices as the most important national problem, up from just 2% in September and January.

Overall, 31% of the public mentions either the economy, energy or another economic issue (such as unemployment or the budget deficit) as the top national problem. That compares with 40% who cite the Iraq war or another foreign policy issue. In both January and September, foreign policy concerns outpaced economic issues by far wider margins.

Text: Mearsheimer and Walt interview US academics John Mearsheimer and Stephen Walt speak to the BBC News Website about their controversial new book The Israel Lobby and US Foreign Policy.

What do you think of the way your book was received in the US?

Stephen Walt : It is striking and it is probably something one would predict, having read our book, that virtually all of the mainstream reviews in the United States have been either somewhat negative or harshly negative.

And many have included many personal attacks on us - not all but the vast majority. For example, the Washington Post has run four separate pieces on our book and three of the four are harshly negative, and a couple of them raise the anti-Semitism charge quite explicitly - that's just the Washington Post.

But you would also predict from the book that the reviews outside the United States would be much better. There have been, I think, about eight or nine reviews now in the United Kingdom and virtually all of them are very positive...

Again, this in some way confirms our basic argument that it's much easier to talk about this subject, and that we get a much fairer hearing outside the United States than we do inside the US - which does not surprise us at all.

John Mearsheimer : There is no question that the book has been savaged in the mainstream media in the United States, which is to be expected. But one should also recognize that we have travelled widely in the United States to talk about the book, and everywhere we go, we find that the audiences are clearly on our side, although there are always a few people at each event who harshly criticise us.

Moreover, we have received a huge number of e-mails, letters, and phone calls since the original article appeared in March 2006 and I would estimate that 80% of them are supportive. There is even widespread support for our views in policy-making circles in Washington...

It is worth noting that we have received lots of excellent reviews from readers on amazon.com. I believe we now have 97 reviews and 63 of them are 5-star reviews, which is the best review a book can get. The bottom line is that I think a huge number of Americans agree with what we have to say.

Were you not surprised by the accusations of anti-Semitism? In the book - knowing perhaps that you were on thin ice - you strongly condemn anti-Semitism and anti-Zionism.

John Mearsheimer : We went out of our way to make our arguments perfectly clear, so that they would not be misunderstood. Nevertheless they have been misrepresented time after time in the United States.

But that is not because we are on thin ice, it's because the arguments of the other side are so weak. They can't beat us with facts and logic, so they misrepresent our arguments and then attack the arguments that we did not make.

Do you not play down the determination of Israel's enemies in the book? You portray them as people who can be reasoned with. Isn't that a rosy view?

John Mearsheimer : We made it clear in the book that Israel has enemies. But there are ways that Israel can deal with most of those enemies and significantly improve its security situation.

Syria would be a good example. In 2000, the Israelis and the Syrians came very close to cutting a deal where Syria would get back the Golan Heights and in return it would make peace with Israel, which would include a Syrian agreement to end its support of Hezbollah and Hamas.

However, it was the Israelis who foolishly walked away from the deal, not the Syrians. Israel certainly has some enemies, but most of those enemies could be effectively dealt with if the Israelis pursued different policies than the ones they're now pursuing.

Stephen Walt : I would add that none of those enemies poses an existential threat to Israel at present. Israel has the strongest military in the region, and it has several hundred nuclear weapons of its own. Israel is not going out of business, and we think that's a wonderful thing.

To the extent that Israel does face threats, like from say Hamas or Hezbollah, those are threats that do not jeopardise Israel's existence. They don't have the capabilities to threaten Israel in that way.

And even if a country like Iran were some day down the road to have nuclear weapons, it could not threaten Israel's existence without committing national suicide. So yes, Israel has security problems but they are manageable ones."

What about Iran? Many argue that it has lied about its nuclear program, and the only way to deal with it is to play hardball. Not all of those who hold this view are susceptible to the US Israel lobby.

John Mearsheimer : First of all, we do not deny that the possibility Iran might acquire nuclear weapons is a problem. The question is: how best to address that problem? With regard to the point that Iran has lied to the US and the international community, as you know states sometimes lie.

And in fact, the Israelis lied to the United States about their nuclear program in the 1960s. So it is not altogether surprising that there is evidence that Iran has lied, and the United States and this international community should take that into account when they deal with Iran.

With regard to your point that the United States and other countries should play hardball with Iran, that strategy effectively means keeping the military option on the table. However, as long as that option remains on the table, you are in effect giving the Iranians powerful incentives to acquire nuclear weapons of their own...

The best way, we argue, to deal with Iran's leaders is to try to negotiate with them and try to work out a modus vivendi where they develop a nuclear capability but not a nuclear weapons capability. And to be more specific, the best way to achieve that outcome is to take the military threat off the table.

Many would agree that the Bush administration has made mistakes in Iraq. But why attribute those mistakes to the influence of a lobby? They could have been honest mistakes, or the result of incompetent planning.

Stephen Walt : There have obviously been many mistakes made and some elements could be attributed to incompetence. We do not let the Bush administration off the hook at all. We point out that the final decision to go to war in Iraq was made by President Bush, and he obviously deserves his share of the blame.

But Bush did not think this idea up by himself. In fact, the entire idea of toppling Saddam was originally conceived by the neoconservatives, who are a key component of the Israel lobby.

The lobby has also pushed the United States to adopt a confrontational policy towards Syria, Iran, and Israel's other enemies. Instead of focusing on defeating Al Qaeda and working in an even-handed way to settle the Israeli-Palestinian conflict -which would make Bin Laden's message less attractive - the United States went after Iraq instead and gave Israel a free hand towards the Palestinians.

And the results have been a complete failure, and a disaster for the United States and Israel alike.

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/americas/7104252.stm

Published: 2007/11/22 10:31:15 GMT

© BBC MMVII

abm
+ Ex-Czech PM calls US anti-missile plan 'provocation': report
Prague (AFP) Nov 26, 2007 - A former Czech prime minister condemned on Monday the United States' plans to place anti-missile radars in the Czech Republic as a "useless provocation" of Russia, according to media reports. "The true objective of this radar base is to aim at Russia" and notably to monitor their ballistic missile tests, Milos Zeman said, cited by CTK agency. Russia has vehemently opposed the whole idea, ... more

iran
+ IAEA tight-lipped on Iran's nuclear fuel claims
Vienna (AFP) Nov 26, 2007 - The UN atomic watchdog declined to comment Monday on claims by Iran that it was now in a position to make its own fuel for a 40-megawatt heavy water research reactor under construction in the centre of the country. The International Atomic Energy Agency was similarly tight-lipped on a statement from Tehran, which said that the IAEA had formally closed two key dossiers in its long-running inv ... more

November 5, 2007: Check Your Freedom at the Door, by Kent Masterson Brown

Road to Empire
An illegal treaty with Iraq seals our fate by Justin Raimondo Is the U.S. going to occupy Iraq indefinitely, or will we withdraw our troops within the next year or so, as the majority of Americans would have it? President Bush and Iraqi Prime Minister Nouri al-Maliki don't care what Americans – or Iraqis – think or want: they've already settled the question by signing a "Declaration of Principles for a Long-Term Relationship of Cooperation and Friendship Between the Republic of Iraq and the United States of America" that commits American soldiers to the task of defending the present Iraqi government against internal enemies, as well as foreign-based threats to its sovereignty, either real or imagined. As the Declaration declares, the U.S. is tasked with:

"Supporting the Republic of Iraq in its efforts to combat all terrorist groups, at the forefront of which is al-Qaeda, Saddamists, and all other outlaw groups regardless of affiliation, and destroy their logistical networks and their sources of finance, and defeat and uproot them from Iraq. This support will be provided consistent with mechanisms and arrangements to be established in the bilateral cooperation agreements mentioned herein."

It's in this context that the Kyl-Lieberman resolution, enthusiastically supported by Hillary Clinton as well as the Bush administration, takes on special importance: having targeted the Iranian security force known as al-Quds, or the Revolutionary Guards, as an officially designated "terrorist" group, the American garrison is already authorized to take on Tehran. The road to war with Iran is paved, and we're ready to roll no matter who sits in the driver's seat.

The administration is denying that this is a treaty, which would need to be ratified by the U.S. Senate: it is, instead, a "strategic framework agreement" that just happened to be announced after Congress went into recess. Asked if the administration would seek any congressional "input" on the forging of this agreement, Lt. Gen. Douglas Lute, the administration's point man on Iraq, answered:

"In the course of negotiations like this, it's not – it is typical that there will be a dialogue between congressional leaders at the negotiating table, which will be run out of the Department of State. We don't anticipate now that these negotiations will lead to the status of a formal treaty which would then bring us to formal negotiations or formal inputs from the Congress."

Short answer: hell no.

Oh, they may solicit the complicity of the top Democratic leadership in both houses of Congress, to the extent of asking them not to make any waves, but essentially they'll do what they have always done in the hundred-plus countries where U.S. troops are currently stationed, and that is negotiate a Status of Forces Agreement, the essential element of which immunizes our soldiers from being prosecuted by local authorities for crimes against the natives. In this case, however, the scope of the agreement is a bit more comprehensive, encompassing economic and political elements, as well as the "security" factor, i.e., the military details of the continuing occupation, including U.S. troop levels and the construction of permanent American bases.

What stands out is the stated intention of the Iraqi government to give what news accounts describe as "preferential" treatment to U.S. investment in the country, which presumably means the vital oil production sector. One imagines that the bidding process is already taking place, with all sorts of sub rosa agreements being made to divvy up the country's potentially lucrative oil reserves.

For an administration ostensibly devoted to "free markets," this sort of crony capitalism is a disgrace. It is, in short, good old-fashioned imperialism of the sort embodied by the British East India Company.

So what are the Iraqis getting in return for allowing the wholesale looting of their natural resources? Fifty thousand U.S. troops stationed permanently in the country, mostly in urban areas – the plan is for 14 "enduring bases," as we found out back in 2003. In spite of all the palaver about "foreign" threats, there is no doubt that we are now in the business of protecting the Iraqi "government" from their own people. In return, favored American corporate interests will be allowed to strip the country bare.

This agreement formalizes Iraq's status as a de facto U.S. protectorate, a province of the empire – an American beachhead in a radically destabilized Middle East that could easily be used as a launching pad for future (and even more ambitious) wars of "liberation."

There's just one big problem for the War Party: the Iraqi constitution requires a vote by the Parliament in order to give the Status of Forces Agreement (or this preliminary declaration of intent) the force of law. And that looks problematic, at best, given the weakness of the Maliki regime. As Liwa Sumaysim, formerly tourism minister and now a member of the Iraqi Parliament from the fiercely nationalistic party of Shi'ite cleric Moqtada al-Sadr, put it: "The Iraqi parliament must have the final word on it."

Can the American Congress say the same? I think not.

The Americans are careful to cloak their illegal and increasingly untenable military occupation of Iraq in all sorts of pretensions to legality: they refer to the UN resolution, which sanctions Iraq as a "terrorist" state and a "threat" to "international peace." The Bush administration will go to the Security Council once again for a renewal of this formal mandate – even though it declares, in effect, that Iraq remains a pariah among nations, which rankles the Iraqis. The idea is to transition over to a bilateral Iraqi-U.S. agreement that supersedes the UN framework and codifies the terms of the occupation in Iraqi law.

Whether the Iraqis will go for it, or the more nationalistic elements, such as the Sadrists, manage to stall approval of the declaration and derail the U.S.-Iraqi "negotiations" over the exact content of a future Status of Forces Agreement is a pretty even bet. What you can count on, however, is that we won't hear a peep out of the U.S. Senate or the House of Representatives, which doesn't at all mind being in recess while the president commits us to an open-ended occupation – and America takes a giant step down the road to empire.

Neocon columnist Jonah Goldberg complains that "the word 'empire' substitutes for an argument; there are no good empires, just as there are no good fascists, or racists, or dictators." What he doesn't say is that this argument is only good in America: why, even the supposedly antiwar archbishop of Canterbury, as the denizens of National Review's "The Corner" recently noted, has hailed the alleged achievements of British imperialism as compared to the vulgar American version. The British routinely point to their imperial past as a source of pride, as do American Anglophiles. The French, the Spanish, and the Italians all revel in the supposed glory of their past conquests: it's only the Americans who disdain the very idea of having an empire, and, indeed, instinctively sense something profoundly un-American about the whole concept of Washington, D.C., as the capital of a global imperium.

That's what ordinary Americans think, at any rate: the elites, on the other hand, believe they are uniquely qualified – and, indeed, have a duty – to rule over the peoples of the world … for their own good, of course. To believe otherwise is to stand condemned as an "isolationist,"