Saturday, July 5, 2008

US advisers steered Iraqi oil contracts to Western firms

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By Bill Van Auken

As the Iraqi regime formally opened the bidding for foreign oil companies to resume exploitation of the country’s oil wealth, it was revealed that US “advisers” played the leading role in drafting the contracting procedures and steering preferential deals to the big US energy conglomerates.

“A group of American advisers led by a small State Department team played an integral part in drawing up contracts between the Iraqi government and five Western oil companies to develop some of the largest fields in Iraq,” the New York Times reported Monday.

The team of government lawyers and private sector consultants provided “detailed suggestions on drafting the contracts,” the Times reported, citing a senior State Department official.

Among the other “services” offered by the US advisers was ensuring that the Iraqi Oil Ministry dismissed claims by the Russian oil company Lukoil based on contracts signed with the Iraqi government before the US invasion of March 2003.

The Times continued: “It is unclear how much influence their work had on the ministry’s decisions.”

There is nothing unclear about it. The US government dictated terms that are set to bring back Exxon Mobil, Shell, BP, Total and Chevron, the very same multinational energy giants that dominated Iraqi oil production before Baghdad nationalized the sector 36 years ago. They, along with a consortium of smaller firms, have been offered no-bid contracts by the Iraqi government.

These so-called technical support agreements, worth $500 million each, represent the foot in the door for the major Western oil firms, giving them a decisive advantage over rival companies from Russia, China, India and elsewhere.

Iraq has proven crude reserves of 115 billion barrels plus another 112 trillion cubic feet of gas. Under conditions in which other nations, from Russia and Kazakhstan in the East to Venezuela and Bolivia in the West, are imposing tighter national control over their energy resources, the US occupation of Iraq has opened up the potential for an unparalleled profit bonanza for big oil.

That this was the principal aim of the US invasion in the first place is becoming increasingly impossible to deny. Behind all of the lies about “weapons of mass destruction” and supposed ties between Baghdad and Al Qaeda, the US war was about reinstating the domination of the US-based oil giants over the world’s third largest petroleum reserves and blocking access to them by their foreign rivals.

Domination of strategic energy resources and their utilization to further Washington’s increasingly desperate struggle to preserve its global economic hegemony were the real reasons that, as of Monday, 4,113 US troops have lost their lives, with nearly 30,000 more having returned from Iraq wounded, many of them grievously.

These predatory strategic aims, and the related profit interests of the oil conglomerates, are the sole justification for the slaughter of more than one million Iraqis and the transformation of nearly five million more into exiles or internal refugees.

The determination of both major political parties and the US ruling establishment as a whole to pursue this criminal war, whatever their tactical differences, was underscored Monday with President George W. Bush’s signing into law another $162 billion war funding bill, sent to his desk by the Democratic leadership of the US Congress.

Bush praised the Democrats in Congress for having “agreed to provide these vital funds without tying the hands of our commanders, and without an artificial timetable of withdrawal from Iraq.”

As in the past, Bush portrayed the funding for the war as an act of support for the “brave men and women, who ... risk their lives to defeat our adversaries and to keep our country safe.”

What lies! This funding will pay to ensure the sacrifice of more US soldiers and Marines and the killing of far greater numbers of Iraqi civilians to ensure US domination of Iraqi oil and vast new profit streams for Exxon Mobil, Shell, Chevron and the other major energy companies.

Moreover, the Democratic Congressional leadership has crafted the spending package—which brings the total amount spent thus far on the war to over $650 billion—so that it pays for the war through the first six months of the next administration. Their aim was to get the issue off the political agenda well before the November election—allowing them to better posture as opponents of the war—while at the same time sparing an incoming Democratic administration led by Barack Obama from having to seek new money for this vastly unpopular war during its first months in office.

The nakedly colonial character of the oil deals now being pushed by the administration has provoked murmurs of criticism from sections of the Democratic Party.

Democratic Senators Charles Schumer of New York, John Kerry of Massachusetts and Claire McCaskill of Missouri released a letter addressed to US Secretary of State Condoleezza Rice last week urging her to block the no-bid contracts. As the Associated Press reported, the Democrats feared the agreements “could fan the perception that US involvement in Iraq was motivated by oil.” In other words, the agreements are so blatant that they give the entire game away.

The Democratic senators called for any contracts to be postponed until the Iraqi regime succeeds in passing a long-delayed hydrocarbon law, working out such thorny issues as the precise role that the foreign oil firms will play in the country and how revenues accruing to Iraq are to be divided between the federal government and various regional entities.

The government of Prime Minister Nouri al-Maliki has failed to pass the bill for the past year and a half. The legislation has been stalemated in large measure because of the overwhelming popular opposition within Iraq to the return of the major oil companies that are so closely identified with the country’s history of semi-colonial subjugation.

“We urge you to persuade the (government of Iraq) to refrain from signing contracts with multinational oil companies until a hydrocarbon law is in effect in Iraq,” read the Democrats’ letter to Rice. “We fear that any such agreements signed by Iraq’s Hydrocarbon Ministry without an equitable revenue-sharing agreement in place would simply add more fuel to Iraq’s civil war.”

The Bush administration made it clear, however, that it had less concern about giving Washington’s imperialist venture on behalf of big oil a fig leaf of legality.

“Since the United States had no involvement in this, I’m not sure on what basis the United States could ... block the Iraqi government from contracting in the way it sees fit,” State Department spokesman Tom Casey told the media.

Similarly, White House spokeswoman Dana Perino commented, “Iraq is a sovereign country, and it can make decisions based on how it feels that it wants to move forward in its development of its oil resources.” She added: “And if that means that our companies here in the United States can compete and win business, then that’s for them and the Iraqis decide. But we don’t think the federal government of the United States needs to get involved.”

How many lies can be crammed into a single statement? Iraq is an occupied, not a sovereign, country. The decisions undertaken by its government are sharply constrained by the presence of over 140,000 US troops, upon whom its survival depends. As for the US companies, they did not “compete and win business,” but rather reached no-bid deals, prepared by US government advisers working out of the Iraqi oil ministry.

A more honest assessment was provided to the Times by Frederick Barton, senior adviser at the Center for Strategic and International Studies, an establishment think tank whose board of trustees includes figures such as Henry Kissinger, Brent Scowcroft and Zbigniew Brzezinski. “We pretend it [oil] is not a centerpiece of our motivation, yet we keep confirming that it is.” Barton told the paper. “And we undermine our own veracity by citing issues like sovereignty, when we have our hands right in the middle of it.”

The Iraqi regime announced Monday that negotiations on the no-bid contracts with the big Western oil companies were continuing. Last week oil ministry officials had said that the deals were already concluded and would be signed Monday, yet no signing took place.

The agreements had carved up Iraq’s oil fields between the major companies, with Shell gaining access to the northern Kirkuk oilfield, BP set to operate in the southern Rumaila field and Exxon seeking access to the Zubair oil field in the southern province of Basra.

“We did not finalize any agreement with them because they refused to offer consultancy based on fees, as they wanted a share of the oil,” Iraqi Oil Minister Hussein al-Shahristani told a press briefing in Baghdad Monday. “It’s a service contract and not a production-sharing contract,” he added. “We think there is no need to share Iraq’s oil with anybody.”

Last week it was widely reported that the Iraqi government had agreed to no-bid deals that would indeed provide the major Western companies with a share of the oil produced in the fields where they would be “consulting,” offering a hugely lucrative return under the present conditions of soaring energy prices.

This shift in the line from Baghdad is likely driven by the immense popular opposition to turning over the country’s oil wealth to the foreign companies and fear within Maliki’s puppet regime that the deals could provoke its downfall.

While claiming that negotiations on the no-bid deals was continuing, Shahristani also announced that Iraq is opening up six giant oil fields and two gas fields to foreign companies, 41 of which have been invited to bid for contracts. The minister described the six fields being thrown open to foreign exploitation for the first time in nearly four decades as “the backbone of Iraq’s oil production.”

The bids are to be prepared over the next two weeks, with the Oil Ministry saying that deals will be signed by June 2009. The deals are supposed to include Iraqi “partners” with a minimum of 25 percent interest.

While the motives behind the US war of aggression have now been laid bare, their accomplishment remains anything but certain. Thus far, the major US oil firms have shown no intention to launch any immediate resumption of their long suspended operations in Iraq. The continuing resistance of the Iraqi people to the US occupation makes any such venture hazardous in the extreme.

Moreover, the revelations of the profit interests for which the ongoing war in Iraq is being fought are certain to provoke increased anger and militancy among the Iraqi people and, despite the bipartisan support for this war in Washington, revulsion and opposition among masses of American working people as well.

Bank for International Settlements annual report World economy may be at “tipping point”

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By Nick Beams

The world economy is already experiencing the worst financial market turbulence in the postwar period and could be on the edge of something much worse. That is the analysis made in the annual report of the Bank for International Settlements, published yesterday.

The BIS, often known as the central bankers’ bank, has been warning of the dangers contained in the build-up of credit and the development of new and highly complex financial instruments over the past decade. Now it says “the unsustainable has run its course.”

The report insisted that the subprime crisis in the United States was only the trigger for the financial crisis, not its ultimate cause. It also took issue with the “what is different” school of thought, which has sought an explanation for the crisis in the extension of the originate-to-distribute model of banking—in which debts are bundled and then sold off—to the housing market. While such an analysis contained some important insights, it was also important to focus on “what is the same”. Adherents of this school would note the parallels between the current period of economic turmoil and earlier ones.

“Historians would recall the long recession beginning in 1873, the global downturn that began in the late 1920s, and the Japanese and Asian crises of the early and late 1990s, respectively. In each episode, a long period of strong credit growth coincided with an increasingly euphoric upturn in both the real economy and financial markets, followed by an unexpected crisis and extended downturn. In virtually every instance, some form of new economic discovery or new financial development provided a further ‘new era’ justification for rapid credit expansion, and predictably became a focus for blame in the downturn.”

The report pointed out that while over the past two decades “much seems to have gone right in the global economy,” there has been an increase in both the frequency and magnitude of financial shocks. The crisis which followed the collapse of the hedge fund Long Term Capital Management in 1998 raised the question as to whether the centre of the global financial system might eventually prove as vulnerable as the periphery. The events of the past year revealed that these causes for concern were not misplaced.

“The current market turmoil in the world’s financial centres is without precedent in the postwar period. With a significant risk of recession in the United States, compounded by sharply rising inflation in many countries, fears are building that the global economy might be at some kind of tipping point. These fears are not groundless.”

The report noted how previous optimistic predictions about the course of the crisis had proven to be unrealistic. When disturbances began in the subprime section of the American financial market it was thought they could be contained and that consumer spending and the general economy would not be greatly affected. Both those assessments were wrong, with the US housing sector suffering under the impact of falling house prices and a massive build-up of unsold homes.

Then it was suggested, towards the end of last year, that as domestic demand continued to hold up in “emerging market economies” they might be able to “decouple” from the United States, and even act as a “safe haven” from the financial turmoil unfolding elsewhere. This led to capital flows to these economies, providing support for asset prices, even as they fell in other parts of the world. This was no longer the situation.

“As concerns mounted about the possible scale of the US downturn, however, the mood began to change. Indeed, upon closer scrutiny, doubts about the longer-term health of the emerging markets began to surface. In China, the extraordinarily rapid pace of fixed capital investment, much of it recently in heavy industry, fuelled worries about misallocations as well as the broader effects on both global commodity prices and the environment.” In the Middle East there are fears that similar development plans will eventually result in problems of excess capacity and in central and eastern Europe a number of countries are experiencing rising current account deficits, which will prove unsustainable.

On the specific role of financial innovations in preparing the crisis, the report noted that while they were thought to produce a welcome spreading of risk, in fact the way they were introduced “reduced the quality of credit assessments in many markets and also led to a marked increase in opacity.”

“The result was the eventual generation of enormous uncertainty about the size of losses and their distribution. In effect, through innovative repackaging and redistribution, risks were transformed into high-cost but, for a while at least, lower-probability events. In practice, this meant that the risks inherent in new loans seemed effectively to disappear, buoying ratings as well, until they suddenly reappeared in response to the trigger of some realised loss that was wholly unexpected.”

Those charged with oversight of the financial system should have voiced their concerns, but “perhaps... no one saw any pressing need to ask hard questions about the sources of profits when things were going so well.”

While financial innovations played a role, the report found that the “fundamental cause of today’s emerging problems was excessive and imprudent credit growth over a long period. This always threatened two unwelcome outcomes, although it was never clear which would emerge first. One possibility was a rise in inflation as the world economy gradually approached its near-term production potential; the second was an accumulation of debt-related imbalances in the financial and real economy which would at some point prove unsustainable and lead to a significant economic slowdown. In the event, the global economy now seems to be experiencing both unwelcome phenomena at the same time, albeit with different countries often having significantly different degrees of exposure to these common threats.”

The report pointed out that there was considerable uncertainty about the future prospects for the global economy and the impact on growth of a number of interactive processes. It placed considerable emphasis on the “spectre of deleveraging.” That is, after many years of debt accumulation, attempts to reduce debt holdings could lead to banks cutting back on the provision of credit to borrowers and tightening margin requirements. This could result in borrowers, unable to meet the more onerous credit conditions, being forced to undertake a “fire sale” of assets.

It also noted the problem of the “fallacy of composition” that arises as “individual economic actors” trying to deal sensibly with their own problems only succeed in making everyone else’s worse.

The growth of debt, it noted, pointed to the need for higher savings. But not everyone can save simultaneously, and one person’s spending is another person’s income. Consequently, the end result of a process in which saving was increased all round would be lower economic activity, not only in the countries carrying out the saving but in those countries exporting to them. Higher investment would not compensate for a reduction in US consumer spending because corporations would judge that demand was unlikely to recover for some time and hold back spending while cutting costs.

The BIS warned that easing monetary policy, the method employed over the recent period by the US Federal Reserve and other central banks to try to stimulate growth, may not have the desired effect and may only result in higher prices.

As far as policy is concerned, the BIS came down in favour of reining in credit coupled with the use of fiscal measures—increased government spending—to provide a growth stimulus. But it was far from confident in the outcome. A fiscal stimulus could lift inflation, while countries with large external deficits may not be able to implement it because of the effect on their exchange rates.

It was also necessary to recognise that in the US and “prospectively in a number of other countries, there has been a build up of debts that cannot be serviced on the originally agreed terms.”

In conclusion, the report noted that there were “many practical impediments” to the development of a common global approach to the crisis. There were differences over whether excess credit was to blame in the first place and “not everyone” was in agreement that it “might prove difficult to clean up the mess” after periods of excessive credit growth. And then, in a pointed comment directed to its opponents, the reported noted: “While hopefully it will not come to that, if the costs of the current turmoil continue to mount and policy measures prove largely ineffective, such beliefs are more likely to be re-evaluated.”

Even if the measures it advocates were adopted, the BIS insisted that “to be realistic” no one should think that “financial crises with significant economic costs” can ever be eliminated.

In other words, as the global economy stands on the edge of what the BIS, as well as other leading economic and financial authorities, acknowledges is a crisis with the potential for destruction at least as great as during the Great Depression, the world’s people should simply peacefully submit to having their lives violently torn apart.

There could hardly be a clearer demonstration to the international working class of the need to develop a political struggle for an international socialist program to lead mankind out of the economic madhouse into which it has been driven by global capitalism.

A socialist answer to the global rise in gas prices

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By the Editorial Board

The sharp rise in gasoline prices in recent months has imposed enormous burdens on working people in the United States and internationally. With prices at the pumps averaging over $4 a gallon in the US and well on their way to $5 or even higher this summer, working families—already burdened by rising food, housing, medical and other costs—are experiencing a drastic cut in their living standards.

Due to the sprawling character of American metropolitan areas, the long distances from home to work and a general lack of investment in public transit alternatives, working people in the US are more dependent on their cars than many of their counterparts in developed countries. This has made the population even more vulnerable to the rise in gas prices, which have shot up 38 percent since last July.

According to an Associated Press/Yahoo News poll, nine out of ten respondents expect to be financially squeezed over the next six months due to rising fuel prices, with nearly half saying it could cause severe hardship. The increases in the cost of natural gas-based fertilizers and transportation have contributed to the sharp rise in food prices. Diesel prices have driven independent truckers into near-bankruptcy, while the auto and airline industries have carried out mass layoffs due to rising fuel prices.

The conditions in the US are part of an international phenomenon. Protests by truckers, farmers and fisherman facing ruin from rising fuel costs are spreading across Spain, France, Italy, Britain and other European countries. Anger has also erupted in Asia, with strikes and demonstrations in Hong Kong, India, Nepal, Indonesia and South Korea.

There are several factors contributing to the current spike in oil prices, which have risen from $25 a barrel in 2003 to over $140 today—more than doubling in the last year alone. One major factor is the declining value of the US dollar, which has led oil-producing nations to raise prices to compensate for the falling value of the dollar-denominated payments they receive.

The wars and occupations in Iraq and Afghanistan, growing US threats against Iran and geo-political tensions in the Middle East, Africa, Russia and other oil producing regions have also generated fears of sudden supply disruptions. On top of this there is a growing consensus that world petroleum resources are dwindling and cannot keep up with global demand, particularly from the fast-rising economies in China and India.

At the heart of the crisis is the breakdown of the global economic system. For decades, politicians, corporate leaders and the media have subjected the world’s people to the self-serving claim that the capitalist market is the most rational means of allocating society’s resources. What is now being revealed is the basic conflict between the needs of a modern mass society and anarchy of the profit system.

It is impossible to ascertain any truthful estimates of remaining global supplies, because the oil producing countries and energy conglomerates have vested interests in concealing their “business secrets” from the people. Entrenched corporate and political opposition has also largely squelched large-scale development of environmentally safe and sustainable alternatives, although the technology has existed, in some cases, for decades.

Supposed solutions produced within the framework of the capitalist system have only worsened the crisis. The development of bio-fuels is a case in point. Even if one were to accept the widely disputed claims that bio-fuels are a means of reducing carbon emissions, their production has only led to a massive increase in the price of corn and other crops, wreaking havoc throughout the world. The entire project has been tied to the interests of agri-business monopolies, such as ADM and Cargill, which have an overriding concern, not in ending global warming, but boosting their bottom lines.

The rational use of remaining petroleum resources and the development of genuine alternatives require an unprecedented level of international cooperation and the marshalling of the world’s technological, material and human resources. This is not possible as long as capitalism divides the globe into competing nation states, each vying for advantage over the other.

The mad scramble to control the world’s remaining oil supplies has led to a violent struggle, in which the bloody US invasion and occupation of Iraq is but one episode. All of the major powers—from the US, to China, Europe, and Japan—are vying for control of the Middle East, the Caspian region, the Artic and Antarctica and even the sea-beds of the world’s oceans. The struggle for resources is once again threatening the world with the eruption of a new round of imperialist wars, which could threaten the very survival of humanity.

Financial speculation

Another major aspect in the rise of global oil prices is the speculative frenzy that has erupted on the New York Mercantile Exchange and other commodity markets. The growing global financial instability of the last five years—the plunging dollar, the bursting of the dot-com stock market boom, the collapse of the sub-prime mortgage and housing bubble, etc—has led wealthy investors to shift their money into commodity market, where they have engaged in the buying and selling of futures in oil, corn and gold, essentially betting on the continuing rise of prices.

With little regulation from the US government’s Commodity Futures Trading Commission (CFTC), investors increased their purchases of commodity futures twenty-fold over the last five years, from $13 billion in 2003 to $290 billion in 2008. This speculative flow has now created yet another bubble, with the prices of the top 25 commodities rising nearly 200 percent during the same period.

In most cases the speculators never take delivery of the oil they purchased. Instead, they are engaged in an elaborate scheme of trading contracts—with very little money down—whose cumulative impact is to drive up prices and guarantee huge returns for hedge funds, institutional investors and others. By some estimates, speculation has added as much as $50 to the current price of a barrel of oil.

Signaling the Bush administration’s support for such profiteering, US Treasury Secretary Henry Paulson told CNN June 10, “I don’t believe financial investors are responsible to any significant degree to this price movement. This is supply and demand.”

Such comments only underscore the subservience of the American political system to the financial aristocracy. The capitalist market is not an impartial arbiter of economic relations. It can and has been manipulated by the most powerful corporate and financial interests in order to serve their profit interests.

Last year British Petroleum agreed to pay $373 million to end a US Justice Department investigation into price-fixing by BP in the heating oil market, while Enron’s manipulation of the electricity supplies, including the deliberate provoking of rolling blackouts in California, is infamous.

In the case of the oil bubble, hedge funds and major finance houses, such as Goldman Sachs, Morgan Stanley and JP Morgan, have reaped up to 200 percent returns on their investments. Kenneth Griffin, head of energy trader Citadel Investment Group, made $1.5 billion in 2007. Steven Cohen of SAC Capital Advisors made $900 million.

In addition the rise in prices has produced a windfall for Big Oil, with ExxonMobil, Chevron and the other top five corporations raking in $36 billion in profits during the first quarter of this year and rewarding their corporate CEOs with multi-million-dollar pay packages.

Parties offer no relief

Just like every other social problem confronting working people—from home foreclosures, to the massive loss of jobs, the growth of social equality and the danger of war—capitalist political parties around the world have no solution for the staggering rise in fuel prices, whether they call themselves, conservative, labor, Green or socialist. Instead, they all agree working people must accept a massive reduction in consumption to pay for the crisis of the world capitalist system.

In the US neither the Republican nor the Democratic candidate for president has anything to offer. John McCain has called for a $300 million reward for the design of an electrical car, the suspension of the 18-cent federal gas tax for the summer months and lifting environmental restrictions on offshore drilling.

M cCain’s top advisors, including campaign co-chair Phil Gramm, a former senator from Texas, are responsible for the deregulation of energy trading pushed by Enron that paved the way for the current explosion of speculation.

In an effort to pose as a populist opponent of the oil companies and speculators, Barack Obama has called for energy corporations to pay a windfall profit tax and for the closing of the so-called “Enron Loophole.” This will go nowhere, however, since large sections of Democrats, particularly from oil states, oppose any tax on the energy conglomerates, and Wall Street—which has thrown the bulk of its money behind the Obama campaign—opposes any serious regulation on speculation.

Obama himself has close ties to the bio-fuel industry and counts among his top advisors a former lobbyist from the American Petroleum Institute and ex-officials in the Clinton administration officials who played key roles in deregulating the financial markets. In order to win the approval of his corporate and financial paymasters, Obama has repeatedly insisted he will take no measures that undermine their profit interests. The Democratic candidate’s web site declares, “Barack Obama recognizes that it is critical that oil companies and shareholders have strong incentives to run well managed businesses that invest in efficiency and innovation.”

Far from creating efficiency and innovation, the profit system now threatens tens of millions of people around the globe with hunger and malnutrition and rising costs for fuel. Workers are not responsible for the crisis of the capitalist system and should not pay for it.

Emergency measures must be taken to defend the living standards of working people. These should include the implementation of a sliding scale of wages, which would protect the purchasing power of workers’ wages by automatically raising them to compensate for rising prices.

Decades ago, unions such as the United Auto Workers fought for and attained Cost of Living Adjustments (COLA) or Escalator Clauses that automatically increased wages in accordance with the rise in living expenses. The unions long ago abandoned such demands and today are demanding that workers accept huge pay cuts in order to defend the profitability of the corporations. They insist, along with the capitalist parties, that workers adjust to rising prices by tightening their belts and accepting a permanent reduction in their living standards.

The Socialist Equality Party calls for a sliding scale of wages and other emergency measures to provide relief from crushing fuel costs. These include:

* The launching of investigations into the practices of the energy conglomerates and speculators, along with those the government agencies that have sanctioned the looting of society.

* The expropriation of the ill-gotten gains of the commodity investors and corporate CEOs and their deposit into a publicly controlled fund to provide relief to the public.

These immediate measures, can be fought for and won only through the emergence of a new mass political movement of the working class in opposition to the profit system.

They are, however, only a first step. What is needed is a fundamental reorganization of the energy industry and the financial system in the US and around the world, which places the needs of society first, not capitalist profit.

In order to break the stranglehold of the energy conglomerates ExxonMobil, Chevron, ConocoPhillips, British Petroleum, Shell and the other multinational corporations must be converted into publicly-owned and democratically-controlled utilities, as part of the establishment of planned socialist economy.

The vast energy resources of the Middle East and other oil producing countries—which are now held in the hands of the Saudi royal family and other elites, whose rule are in many cases defended by US force of arms—must be placed under the democratic control of the working people of those countries.

In this way, the exploration, development and use of energy supplies can be guided by a rational international plan that is publicly debated and democratically approved by the working class, based on a fair and equitable distribution to meet the needs of the entire world’s population.

At the same time vast resources must be allocated to develop low-cost, renewable and environmentally safe energy.

The decades-long effort by the energy monopolies, the auto industry and government in the US to prevent the development of reliable public transportation must be answered by pouring hundreds of billions of dollars into urban mass transit and light-rail systems, as well as the development of fuel-efficient vehicles. This is crucial, not just for the US, but India and China, where the rapidly expanding use of fossil-fuel burning vehicles threatens to produce an ecological disaster.

The problems facing humanity are not primarily due to the lack of resources but the irrational character of the capitalist system, which squanders vast amounts of human labor and creative potential in order to enrich an already fabulously wealthy elite. The world’s productive and natural resources must be freed from the constraints of capitalist private ownership and the nation state system and marshaled in a scientifically planned, rational and democratic fashion to meet the challenges of the 21st century.

The fight for this requires a struggle against the world’s governments, which represent the corporate and financial elite, not ordinary people. In the US, this means a political break with the Democratic Party and the building of a new political party of the working class based on a socialist and internationalist program.

This is the perspective fought for by the Socialist Equality Party in the US and its sister parties throughout the world.

Bush reaffirms “all options on the table” over Iran

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By Peter Symonds

For all the denials on both sides, a top-level discussion is clearly underway in the US and Israel over the pros and cons of an attack on Iran’s nuclear facilities. In separate press conferences on Wednesday, US President George Bush and the chairman of the US Joint Chiefs of Staff, Admiral Mike Mullen, both reaffirmed that the use of military force against Iran, either directly by the US or following air strikes by Israel, remained an option.

The comments come amid a continuing stream of barely concealed threats from Israeli politicians and officials that action will be taken to ensure that Iran does not achieve a nuclear weapons capability. The Israeli air force carried out a provocative exercise last month in which 100 war planes, backed by refuelling aircraft and rescue helicopters, flew 1,500 kilometres over the Mediterranean Sea in what can only be interpreted as a practice run for striking Iranian nuclear facilities.

In response, the head of the Iranian Revolutionary Guard Corp, General Mohammad Ali Jafari, warned this week: “Any action against Iran will be interpreted as the start of a war.” In a newspaper comment last week, Jafari stated that if attacked, Iran would respond by hitting Israel with long-range missile and taking action to close the strategic Strait of Hormuz, through which 40 percent of the world’s traded oil passes. The commander of the US naval forces in the Persian Gulf, Vice Admiral Kevin Cosgriff, declared this week: “We will not allow Iran to close it.”

When asked on Wednesday about the threat to the Strait of Hormuz, Bush emphatically declared: “I have always said that all options are on the table.” He added that “the first option for the United States is to solve this problem diplomatically... That is why we’ve been pursuing multilateral diplomacy.” Asked if he had discouraged Israel from attacking Iran, the president said that he had made it “very clear to all parties that the first option” should be a diplomatic resolution.

The president’s remarks have been interpreted as a “no” to Israel and a commitment to a diplomatic solution to the standoff with Iran—in the short-term at least. In the longer term, however, Bush has made clear that he is prepared to launch military strikes if Iran refuses to bow to US demands.

As for diplomacy, the White House has repeatedly refused to hold direct talks with Tehran. The aim of Bush’s “diplomatic solution” has been to pressure and bully the major European and Asian powers into imposing punitive sanctions on Iran through the United Nations and unilaterally. Before any negotiations take place, Washington insists that Tehran shut down its major nuclear facilities—including its uranium enrichment plant at Natanz—which Iran has refused to do.

Iran insists that its uranium enrichment program is to provide fuel for power reactors, as is its right under the Nuclear Non-Proliferation Treaty. The Bush administration has failed to demonstrate that Iran has an active weapons program. In fact, last December, a National Intelligence Estimate produced by 16 American spy agencies concluded that Tehran had ended any weapons program in 2003. Despite the finding, Bush continues to claim that Iran is actively pursuing plans for nuclear weapons.

The nuclear issue is simply one of the pretexts that the Bush administration has been preparing as a possible casus belli for attacking Iran. Washington also accuses Iran of arming and training anti-US insurgents attacking American troops in Iraq and of supporting “terrorist groups” such as the Lebanese-based Shiite party Hezbollah. The real reason for the continuing confrontation is that the US regards Iran as an obstacle to American ambitions to establish its strategic and economic dominance throughout the oil-rich Middle East.

An optimistic note has been sounded in the international media over the latest European Union efforts to restart negotiations with Iran, but nothing concrete has emerged from the manoeuvring. Yesterday Tehran issued its formal response to an international package of incentives aimed at encouraging Iran to give up its sensitive nuclear programs. Tehran reportedly offered to engage in comprehensive negotiations, but has not agreed to halt its uranium enrichment.

While publicly supporting the EU efforts, the Bush administration has been engaged in close consultations with Israel over Iran. Last week, three top US military officials, including Joint Chiefs of Staff chairman Mullen, visited Israel for talks with their counterparts. In his press conference on Wednesday, Mullen repeatedly stonewalled questions on the nature of the discussions, the possibility of an Israeli strike on Iran and whether the US would become embroiled. Significantly he did not flatly deny discussions of an Israeli strike on Iran had taken place.

Obviously concerned at the potential for a war, Mullen said: “I’ve been pretty clear before that from the United States’s perspective, the United States’s military perspective in particular, that opening up a third front right now would be extremely stressful on us.” Mullen nevertheless added: “That doesn’t mean we don’t have capacity or reserve, but that would really be very challenging.”

Mullen’s comments point to sharp divisions in the Pentagon and the White House opened up by the potentially catastrophic consequences of a war with Iran. In his lengthy article in the New Yorker this week, veteran journalist Seymour Hersh noted that, according to one of his sources, “the Joint Chiefs of Staff, whose chairman is Admiral Mike Mullen, were ‘pushing back very hard’ against White House pressure to undertake a military strike against Iran.”

The American ambassador to Israel, Richard Jones, this week played down suggestions of an attack on Iran by either Israel or the US in the near future, saying: “Use of military force is a last option and Israel and the United States are cooperating on this matter.” In Israel, however, the pressure building for a strike against Iran is quite tangible.

Last Sunday, former Mossad chief Shabtai Shavit told the British-based Telegraph that time was running out to prevent Iran from building a nuclear bomb. Shavit, who is still an adviser to the Israeli parliament’s powerful defence and foreign affairs committee, claimed, without offering any evidence, that the “worse-case scenario” was “somewhere around a year”.

The article noted that “Israeli officials believe the diplomatic process is useless and have been pressing President Bush to launch air strikes before he leaves office on January 20 next year.” Shavit said that while it would be preferable to have American support in attacking Iran, Israel would not be afraid to go it alone. “It’s not a precondition, [getting] an American agreement,” he said.

A Financial Times article entitled “Fear over Israel’s threat to strike Iran” on Wednesday cited one Israel official as saying: “If you want to do it [attack Iran] you don’t talk about it.” Then he added rather ominously that Prime Minister Ehud Olmert had “adamantly requested that we all shut up”.

On Thursday, senior military figures scotched widespread suggestions that Israel did not have the capacity to carry out a successful attack on Iran’s nuclear facilities. Isaac Ben-Israel, a retired Israeli air force major general and current member of parliament for the ruling Kadima party, told the Financial Times that an air strike “is not a technical problem”. Retired Brigadier General Shlomo Brom, a former director of strategic planning, said: “I often read that Israel is not capable of doing it because the number of targets is very large. That is a mistake... You just have to find the critical notes of this [Iranian nuclear] system and hit them.”

In a comment in the newspaper Yedioth Ahronoth, Israeli analyst Alex Fishman speculated that the Bush administration was exploiting Israeli sabre-rattling to intimidate Iran into agreeing to US demands. “Israel’s strategic military force is serving as a pawn in the hands of the [US] administration to bring this crisis to a situation of near explosion until someone blinks first.”

Even if this were true, the dangers of an explosive new war in the Persian Gulf are by no means diminished. As Fishman himself commented: “The problem is that threats of this type have a dynamic of their own, and they may yet be self-fulfilling. What will happen if the Iranians don’t blink?”