The JFK Assassination and 9/11: the Designated Suspects in Both Cases

Go to Original
By Peter Dale Scott

Global Research recently published my essay entitled 9/11, Deep State Violence and the Hope of Internet Politics In this article, I argue that 9/11 should be analyzed as a deep event (an event not fully aired or understood because of its intelligence connections) and above all as one of a series of deep events which from time to time have frustrated peace initiatives or become pretexts for war.

In support of this overall thesis I pointed to features of 9/11 which recalled similar deep events: the still not fully understood outbreak of the Korean War in 1950, the JFK assassination, and the so-called Second Tonkin Gulf Incident of 1964 (an alleged attack on U.S. destroyers which we now know never happened).

The similarities between these deep events which have disturbed American history since World War Two suggest that they are not just a sequence of unrelated external accidents, but at least in part the product of some on-going deep indigenous force not yet adequately understood.

In this series of deep events, perhaps the most striking similarities are between the JFK assassination (henceforward referred to as "JFK") and 9/11. Earlier talks and articles I have delivered on this topic are developed even further in my forthcoming much expanded reissue of my early book, The War Conspiracy. As The War Conspiracy: JFK, 9/11, and the Deep Politics of War, it is due to be published by the Mary Ferrell Foundation Press in August 2008.

The following essay is the concluding section of the new book, and has never hitherto been published.]

I wish to summarize again the first striking similarity between 11/22/63 and of 9/11/01: the dubious detective work on those two days. Less than fifteen minutes after the President’s assassination, the height and weight of Kennedy’s alleged killer was posted.1 Before the last of the hijacked planes crashed on 9/11, the FBI told Richard Clarke that they had a list of alleged hijackers.2

In the case of Oswald, within fifteen minutes of the assassination and long before Oswald was picked up in the Texas Theater, Inspector Sawyer of the Dallas police put out on the police radio network, and possibly other networks, a description of the killer – "About 30, 5’10", 165 pounds."3 As noted, this height and weight exactly matched the measurements attributed to Lee Harvey Oswald in Oswald’s FBI file, and also in CIA documents about him.4

The announced height and weight were however different from Oswald’s actual measurements, as recorded by the Dallas police after his arrest: 5’9 1/2", 131 pounds.5 More importantly, there is no credible source for the posted measurements from any witness in Dallas. (The witness said to have spotted him, Howard Brennan, failed to identify Oswald in a line-up.)6 This leaves the possibility that the measurements were taken from existing files on Oswald, rather than from any observations in Dallas on November 22. If so, someone with access to those files may have already designated Oswald as the culprit, before there was any evidence to connect him to the crime.

A similar situation pertains to the alleged hijackers on 9/11. For example, shortly afterwards men in Saudi Arabia complained that "the hijackers’ `personal details’" released by the FBI -- "including name, place, date of birth and occupation -- matched their own."7 One of them, Saeed al-Ghamdi, claimed further that an alleged photograph shown on CNN (of an alleged Flight 93 hijacker with the same name) was in fact a photograph of himself. He speculated "that CNN had probably got the picture from the Flight Safety flying school he attended in Florida."8

If the above information is accurate, then the details posted by the FBI and CNN about the alleged hijackers cannot have derived from the events of 9/11, with which the survivors in Saudi Arabia would appear to have been uninvolved. Once again this leaves the strong possibility that the details were taken from existing files, rather than from empirical observations on September 11.9

And some of the hijackers, like Lee Harvey Oswald, may have been in CIA files for a special reason: because the CIA had an operational interest in them.

Internal CIA Evidence of Operational Interest in Oswald and the Hijackers

I have speculated that Oswald, like the al-Qaeda trainer Ali Mohamed, might have been a double agent reporting to the FBI about the terrorist group (Alpha 66) with which some law enforcement officers associated him.

I would like now to discuss more unequivocal evidence, from internal CIA records, about an operational CIA interest in first Oswald and later two of the alleged al-Qaeda hijackers, Nawaz al-Hazmi and Khalid al-Mihdar. In 2001 as in 1963 the CIA inexplicably withheld information about the subjects from the FBI, which ought categorically to have received it. The anomalies are extreme.

This is now easy to show in the case of Oswald. On October 10, 1963, six

weeks before the assassination of John F. Kennedy, CIA Headquarters sent out two messages about Oswald, a teletype to the FBI, State, and Navy, and a cable to the chief of the CIA’s Mexico City station. Both messages contained false and mutually contradictory statements, and also withheld known facts of great potential importance.10 The teletype to the FBI withheld the obviously significant information that Oswald had reportedly met in Mexico City with a Soviet Vice-Consul, Valeriy Kostikov, who was believed by CIA officers to be an officer of the KGB.11

One CIA officer, Jane Roman, helped draft both messages. In 1995 she was confronted by two interviewers with irrefutable evidence that she had signed off on erroneous information about Oswald in the CIA cable to Mexico City. After much questioning, she finally admitted, "I’m signing off on something I know isn’t true." One of the interviewers, John Newman, then asked her, "‘Is this indicative of some sort of operational interest in Oswald’s file?’ ‘Yes,’ Roman replied. ‘To me it’s indicative of a keen interest in Oswald held very closely on the need-to-know basis.’" She later repeated, "I would think there was definitely some operational reason to withhold it [the information at CIA headquarters on Oswald], if it was not sheer administrative error, when you see all the people who signed off on it."12

Other CIA officers withheld important information from the FBI in January 2000, with respect to Khalid al-Mihdar, who would later be identified as one of the al-Qaeda hijackers on September 11, 2001. The NSA overheard on a Yemeni telephone about a meeting in Malaysia which al-Mihdar would attend, along with Tewfiq bin Attash, the mastermind of the fatal attack on the USS Cole.13 It notified the CIA but not the FBI. In consequence

[Khalid al-Mihdar’s] Saudi passport – which contained a visa for travel to the United States – was photocopied [in Qatar] and forwarded to CIA headquarters. The information was not shared with FBI headquarters until August 2001. An FBI agent detailed to the Bin Ladin unit at the CIA attempted to share this information with colleagues at FBI Headquarters. A CIA desk officer instructed him not to send the cable with this information. Several hours later, this same desk officer drafted a cable distributed solely within CIA alleging that the visa documents had been shared with the FBI.14

Lawrence Wright, reviewing this and other significant anomalies, reported in The Looming Tower the belief among FBI agents following bin Laden "that the agency was protecting Mihdar and [his companion, the alleged 9/11 hijacker Nawaz al-] Hazmi because it hoped to recruit them," or alternatively that "the CIA was running a joint venture with Saudi intelligence" using al-Mihdhar and al-Hazmi.15 Wright himself speculated in a companion essay he wrote for The New Yorker that "The CIA may also have been protecting an overseas operation and was afraid that the F.B.I. would expose it."16

The Consequences of the CIA’s Withholding of Evidence

As just noted, the CIA, in its teletype to the FBI of October 10, 1963, withheld the information that Oswald had reportedly met with a KGB officer, Valeriy Kostikov. Former FBI Director Clarence Kelley in his memoir later complained that this failure to inform the FBI was the major reason why Oswald was not put under surveillance on November 22, 1963.17 In other words, the withholding enabled Oswald to play whatever role he played on that fateful day, even if it was only to become a designated patsy.

FBI officials are even more bitter about the consequences of the withholding of information about al-Mihdar:

They didn’t want the bureau meddling in their business – that’s why they didn’t tell the FBI….They purposely hid from the FBI, purposely refused to tell the bureau that they were following a man in Malaysia who had a visa to come to America….And that’s why September 11 happened. That is why it happened….They have blood on their hands. They have three thousand deaths on their hands.18

But the CIA withheld information from the FBI about bin Attash (already the subject of a criminal investigation) as well, even when asked by an FBI agent, Ali Soufan, about bin Attash and the Malaysia meeting. According to Wright,

The agency did not respond to his clearly stated request. The fact that the CIA withheld information about the mastermind of the Cole bombing and the meeting in Malaysia, when directly asked by the FBI, amounted to obstruction of justice in the death of the seventeen American sailors."19

In late August 2001, only days before 9/11, FBI agent Steve Bongardt, complaining about the CIA’s withholding of information about al-Mihdar, correctly predicted in an angry email to the CIA’s bin Laden unit that "someday someone will die."20

The CIA’s Dishonest Efforts to Cover-Up

From the moment Congress, in the 1970s, began to evince an interest in the Kennedy assassination, former CIA officer David Phillips became a vigorous defender of the CIA’s performance. With respect to false information about Oswald in CIA cables both to and from Mexico City (where Phillips was in charge of Cuban affairs for the CIA station), Phillips’s first response was to dismiss Oswald as "a blip" of no interest.21

A similar defense of the CIA’s failure to act on al-Mihdar was offered to the Congressional Joint Inquiry into 9/11 by the Director of the CIA’s Counterterrorism Center, Cofer Black: "I think that month we watchlisted about 150 people."22 The same defense was offered by Dale Watson, the FBI’s former counterterrorism chief:

There were a lot of red flags prior to 9/11….So it’s a mass of information and it’s a sea of threats, and it’s like working against a maze. If you know where the end point of a maze is, it’s certainly easier to work your way back to the starting point than trying to go through the maze and sort out all the red flags.23

The problem with this excuse is that both Oswald and al-Mihdar were singled out for special CIA attention, not left floating in a sea of red flags. The cable to Mexico City which Jane Roman signed off on was not handled routinely, it was sent for signature to the CIA’s Assistant Deputy Director for Plans, Thomas Karamessines. And in the case of al-Mihdar in Malaysia, back in 2000

CIA leaders were so convinced about the potential significance of the al Qaeda meeting in Malaysia, they not only set up surveillance of it, but provided regular updates to the FBI director [Louis Freeh], the head of the CIA [George Tenet], and the national security advisor [Samuel Berger].24

That Freeh and Berger were being notified at the top about the Malaysia meeting (at the same time that the regular FBI bureaucracy was being cut out) is confirmed in accounts by Terry McDermott and Philip Shenon.25

CIA officials testified falsely to congressional committees with respect to both Oswald and al-Mihdar. James Angleton was asked by the staff of the House Select Committee on Assassinations about a memoir written by the CIA’s station chief in Mexico City, Win Scott, and later personally retrieved for the Agency after Scott’s death by Angleton himself. Angleton testified that Scott’s "manuscript was fictional and did not include a chapter on Oswald." In fact, according to Jefferson Morley, "The only surviving manuscript is clearly nonfictional and does have a chapter on Oswald."26

Both George Tenet and Cofer Black testified before the Congressional Joint Inquiry into 9/11 that the FBI had been granted access to the information linking al-Mihdar and Tewfiq bin Attash (alias Khallad), the mastermind of the Cole bombing. The 9/11 Commission, after a lengthy review of the matter, concluded "this was not the case."27

The CIA, Oswald, and Al-Mihdar: Suppression of Vital Records

That the CIA regards its relationship to the suspects Oswald and al-Mihdar as sensitive is further illustrated by its suppression of vital evidence with respect to both. Although in the 1990s all government agencies were required by law to submit their Oswald-related documents to the Assassination Records Review Board, the CIA has been vigorously resisting pressure to do this in the case of former CIA officer George Joannides. In 1963 Joannides was the case officer for AMSPELL, the CIA’s operation in support of the Cuban exile group DRE (Directorio Revolucionario Estudiantil). In August 1963 the DRE was in contact with Oswald and participated with him in a radio broadcast which was later distributed with CIA help throughout Latin America.28

According to Jefferson Morley, "four decades after the fact, the most important AMSPELL records are missing from CIA archives – perhaps intentionally." Monthly reports on DRE activities were filed by CIA case officers Ross Crozier and William Kent, and these records were declassified by the ARRB for the periods September 1960-November 1962 and after May 1964.

But the board was unable to locate any monthly AMSPELL reports from December 1962 to April 1964. There was a seventeen-month gap in the AMSPELL records, which coincided exactly with the period in which George Joannides handled the group.29

With respect to 9/11, all that is known about suppression so far has to do with the public record. Here it is striking that the Report of the Joint Inquiry by Congress into 9/11 has one glaring redaction of twenty-eight pages, dealing with "sources of foreign support for some of the September 11^th hijackers while they were in the United States." Press reports have specified that this refers to Saudi money which reached al-Mihdar and al-Hazmi in 2000 while they were in San Diego. According to committee cochair Senator Bob Graham,

The draft contained a twenty-eight page passage that detailed evidence that Saudis in the United States – Saudi government "spies," Graham called them – had provided financial and logistical support to [al-Mihdar and al-Hazmi] while they lived in Southern California.30

Similarly the 9/11 Commission failed to deal with the information on an FBI "hijacker timeline" that al-Mihdar and al-Hazmi were met at the airport on their first arrival in the United States by Omar al-Bayoumi, the transmitter of the Saudi funds, whom Graham claimed was obviously "a low-ranking Saudi intelligence agent."31 The FBI findings were leaked in an early story in Newsweek:

At the airport, they were swept up by a gregarious fellow Saudi, Omar al-Bayoumi, who had been living in the United States for several years. Al-Bayoumi drove the two men to San Diego, threw a welcoming party and arranged for the visitors to get an apartment next to his. He guaranteed the lease, and plunked down $1,550 in cash to cover the first two months’ rent.32

One month later, "In January 2003, Graham and the other members of the committee were …the focus of a criminal investigation by the FBI into whether someone on the panel had leaked classified information."33

The 9/11 Commission avoided this sensitive area. It cited the FBI Chronology a total of 52 times in its footnotes, for example at 493n55, concerning al-Mihdar’s travel from Yemen to the Malaysian meeting. But it suppressed the FBI’s report that al-Bayoumi met al-Mihdar and al-Hazmi on their arrival; and it substituted what Shenon calls an "improbable tale" supplied by al-Bayoumi himself: namely, that he had run into the two men two weeks later by accident "at a halal food restaurant" near Los Angeles.34

It is clear that two members of the 9/11 Commission staff who redacted this part of the report – Dietrich Snell and Philip Zelikow – were concerned to tone down what junior staffers considered to be "explosive material" on the Saudis.35 Shenon tells how this section of the 9/11 report was rewritten by Snell and Zelikow, until the text "removed all of the most serious allegations against the Saudis."36

But Snell and Zelikow may have been protecting the CIA as well as the Saudis. We have already noted how Lawrence Wright, looking at the extraordinary CIA record on withholding information about al-Mihdar and al-Hazmi, concluded, "It is also possible, as some FBI investigators suspect, the CIA was running a joint venture with Saudi intelligence."37

Conclusion

It is clear, as everyone who has studied these matters closely and impartially concurs, that there have been cover-ups of the CIA’s relationships to first Oswald and later al-Mihdar – cover-ups which in both cases have not yet been adequately resolved.

A reasonable conclusion from the available evidence is that the cover-ups were in order to conceal prior CIA operational interest in the designated subjects, just as in the case of Ali Mohamed in the early 1990s. It could of course be a coincidence that people of operational interest to the CIA became designated subjects in the deep events of JFK and 9/11. Another, more disturbing possibility is that those responsible for these events knew of the CIA’s operational interest, and exploited it in such a way as to ensure that the government would be embarrassed into covering up what really happened on those days.

A lot of books about 9/11, including my own, have focused on the roles played by Bush, Cheney, and Rumsfeld on that day. But it is clear that 9/11 involved a USG connection to at least one figure (Ali Mohamed) so sensitive that it had been covered up from the time of the Nosair murder in 1990 and the first World Trade Center bombing in 1993. It is probable that Oswald’s covert USG connections also dated back to the time of his strange release from the U.S. Marine Corps in 1959, enabling him to travel to the Soviet Union.38

In short there is a substratum of covert operations underlying both events that antedates the presidencies in which they occurred. Thus one should not expect the cover-up of 9/11 in the G.W. Bush administration to dissipate simply because the Democrats take over the White House, just as the Johnson administration’s cover-up of the Kennedy assassination did not dissipate with the election of Richard Nixon.39

This is said not out of despair, but out of belief in the ultimate resilience and good sense of the American people. The analysis in this book is that America’s involvement in two disastrous wars – first Vietnam and later Iraq – was not an outcome of the people’s will, but rather in large part because of deep events that were used to manipulate that will. Thus this analysis is not an attack on America, but on that manipulative mindset that has twice succeeded in maneuvering America into war.

This dominant mindset is not restricted to intelligence agencies, though it is largely rooted there. Over time it has spread into other parts of government, and has also corrupted large sections of the media and even universities. That the mindset is widespread does not however make it either omnipotent or invincible.

It is important to identify the dominant mindset clearly, if we are ever going to displace it. It is important also to recognize that the dark topics discussed in this book are not representative of America as a whole. In the half century since the CIA’s first adventures in Burma and Laos, America has continued to be, as in the two centuries before it, a source of life-enhancing innovations, such as the computer and the internet.

As Amy Chua has written in her book Day of Empire,

If America can rediscover the path that has been the secret to its success since its founding and avoid the temptations of empire building, it could remain the world’s hyperpower in the decades to come – not a hyperpower of coercion and military force, but a hyperpower of opportunity, dynamism, and moral force.40

I have tried to suggest in this book that the key to this rediscovery is the

identification and displacement of the manipulative forces that have maneuvered America, almost unsuspectingly, into two unnecessary and disastrous wars.

If there is any merit to my analysis, then, to isolate those forces, we must press for the truth about both the Kennedy assassination and 9/11.

NOTES

1 Transcript of Dallas Police Channel Two, 12:44 PM; cf. Channel One 12:45 PM,

http://mcadams.posc.mu.edu/dpdtapes/; Warren Report 5, 17 Warren Commission Hearings 397, 23 Warren Commission Hearings 916.

2 Clarke, Against All Enemies, 13-14. The list of 19 names, accepted without question by the 9/11 Commission Report, was given by the FBI to the press on September 14, 2001 (Daily Telegraph, September 15, 2001,

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2001/09/15/whunt15.xml).

3 Transcript of Dallas Police Channel Two, 12:44 PM; cf. Channel One 12:45 PM,

http://mcadams.posc.mu.edu/dpdtapes/; Warren Report 5, 17 Warren Commission Hearings 397.

4 E.g. Dallas FBI Report from John Fain, May 12, 1960, 17 Warren Commission Hearings 704, NARA 157-10006-10213 ("Height: 5’10" Weight: 165 lbs." [inaccurate description supplied by Marguerite Oswald]); CIA HQ Cable DIR 74830 to Mexico City, 10 Oct 1963, NARA 104-10015-10048, reproduced in John Newman, Oswald and the CIA (New York: Carroll & Graf, 1995), 512 ("five feet ten inches, one hundred sixty five pounds").

5 Fingerprint card dated "11-25-63," 17 Warren Commission Hearings 308.

6 Warren Report 5, 144; Sylvia Meagher, Accessories After the Fact (Mary Ferrell Foundation Press, 2006), 10-13, 78n. After seeing Oswald twice on television, Brennan picked out Oswald in a second lineup (Warren Report, 143).

7 Daily Telegraph, September 23, 2001,

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2001/09/23/widen23.xml.

Cf. Guardian, September 21 2001,

http://www.guardian.co.uk/world/2001/sep/21/afghanistan.september112 :" Abdulaziz

Al-Omari has also come forward to say he was not on the flight from Boston that crashed into the north tower of the World Trade Centre. An electrical engineer who works in Saudi Arabia, Mr Al-Omari said he was a student in Denver during the mid-1990s, and that his passport and other papers were stolen in a burglary in the US five years ago. … `The name is my name and the birth date is the same as mine,’ he told Asharq al-Aswat, a London-based Arabic newspaper. `But I am not the one who bombed the World Trade Centre in New York.’"

8 Daily Telegraph, September 23, 2001,

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2001/09/23/widen23.xml.

9 On October 4, 2001, the FBI issued a press release showing what appeared to be photos from surveillance videotape of two hijackers, Mohammed Atta and Abdulaziz Al-Omari, entering Portland Jetport on the morning of September 11, 2001 (FBI Press Release, October 4, 2001,

http://www.fbi.gov/pressrel/pressrel01/100401picts.htm ). If valid, these would constitute evidence from the event itself. However the photos are anomalous, in that they show two time superimposed stamps, one showing 5:45, the other showing 5:53. The photos are not cited as evidence in the 9/11 Commission Report. On July 22, 2004, the date of the release of the 9/11 Commission Report, CNN aired what they said was surveillance videotape of two hijackers, Majed Moqed and Khalid al-Mihdar. entering "at one of the security screening points at Dulles International" (CNN, http://transcripts.cnn.com/TRANSCRIPTS/0407/22/lad.04.html ). The authenticity of the videotape has been challenged, however, because it lacks the time and date and location identification normally burned into a surveillance video image (Rowland Morgan and Ian Henshall, 9/11 Revealed: The Unanswered Questions [New York: Carroll and Graf, 2005], 117-19).

10 I have argued that the conflicting messages were part of a so-called "marked card" or "barium meal" test to determine if and where leaks of sensitive information were occurring. This was a familiar technique, and was the responsibility of the CI/SIG or Counterintelligence Special Intelligence Group which drafted the two cables. See Peter Dale Scott, Deep Politics II: The New Revelations in U.S. Government Files,1994-1999 (Ipswich, MA: Mary Ferrell Foundation Press, 2007), 17-18, 92; also Peter Dale Scott, "Oswald and the Hunt for Popov’s Mole," The Fourth Decade, III, 3 (March 1996), 3;

www.maryferrell.org/mffweb/archive/viewer/showDoc.do?absPageId=519798.

11 Peter Dale Scott, Deep Politics II, 30-33.

12 Jefferson Morley, Our Man in Mexico: Winston Scott and the Hidden History of the CIA (Lawrence, KA: University Press of Kansas, 2008), 196-98. See Peter Dale Scott, Deep Politics II, 30-33.

13 Lawrence Wright, The Looming Tower: Al-Qaeda and the Road to 9/11 (New York: Knopf, 2006), 310.

14 9/11 Commission Report, 502n44.

15 Wright, The Looming Tower, 312, 313.

16 Lawrence Wright, "The Agent," New Yorker, July 10 and 17, 2006, 68.

17 Clarence M. Kelley, Kelley: The Story of an FBI Director (Kansas City: Andrews, McMeel, & Parker, 1987), 268.

18 James Bamford, A Pretext for War: 9/11, Iraq, and the Abuse of America’s Intelligence Agencies (New York: Doubleday, 2004), 224.

19 Wright, The Looming Tower, 329. In his New Yorker story (p. 70), Wright wrote that "By withholding the picture of Khallad [bin Attash]…the C.I.A. may in effect have allowed the September 11th plot to proceed."

20 9/11 Commission Report, 271; Wright, The Looming Tower, 353-54.

21 David Atlee Phillips, Nightwatch, 139; quoted in Morley, Our Man in Mexico, 184. Morley observes that in the 1970s Phillips offered a total of "four not entirely consistent versions of the story of Oswald’s visit to Mexico City."

22 J. Cofer Black testimony before 9/11 Congressional Joint Inquiry, 107th Cong., 2^nd Sess., July 24, 2003.

23 Dale Watson testimony before Joint Inquiry, 107th Cong., 2nd Sess., September 26, 2002.

24 Amy B. Zegart, Flying Blind: The CIA, the FBI, and the Origins of 9/11(Princeton, NJ: Princeton UP, 2007), 117.

25 Terry McDermott, Perfect Soldiers: The Hijackers: Who They Were, Why TheyDid It (New York: HarperCollins, 20050, 294n45; Philip Shenon, The Commission: The Uncensored History of the 9/11 Investigation (New York: Twelve/Hachette, 2008), 141.

26 Morley, Our Man in Mexico, 7, 294.

27 9/11 Commission Report, 267.

28 Peter Dale Scott, Deep Politics and the Death of JFK (Berkeley: University of California Press, 1998), 81-86; Morley, Our Man in Mexico, 170-77.

29 Morley, Our Man in Mexico, 177.

30 Shenon, The Commission, 50-51.

31 Larisa Alexandrovna, "FBI documents contradict 9/11 Commission report," RawStory, February 28, 2008, http://rawstory.com/news/2008/FBI_documents_contradict_Sept._11_Commission_0228.html (met at the airport); Shenon, The Commission, 52 (al-Bayoumi). Al-Bayoumi "apparently did work for Dallah Avco, an aviation-services company with extensive contracts with the Saudi Ministry of Defense and Aviation, headed by Prince Sultan, the father of the Saudi ambassador to the United States, Prince Bandar" ("The Saudi Money Trail," Newsweek, December 2, 2002, http://www.newsweek.com/id/66665).

32 "The Saudi Money Trail," Newsweek, December 2, 2002. The FBI "hijacker timeline" was released by the FBI on February 4, 2008. See Larisa Alexandrovna, "FBI documents contradict 9/11 Commission report, Rawstory.com, February 28, 2008,

http://rawstory.com/news/2008/FBI_documents_contradict_Sept._11_Commission_0228.html.

33 Shenon, The Commission, 54.

34 9/11 Commission Report, 217; Shenon, The Commission, 52-53.

35 Shenon, The Commission, 398.

36 Shenon, The Commission, 398.

37 Wright, The Looming Tower, 313. Looking at the same evidence, Christopher Ketcham has raised an alternative possibility, that "the CIA may have subcontracted to Mossad, given that the agency was both prohibited by law from conducting intelligence operations on U.S. soil, and lacked a pool of competent Arabic-fluent field officers. In such a scenario, the CIA would either have worked actively with the Israelis or quietly abetted an independent operation on U.S. soil…. When in the spring of 2002 the scenario of CIA’s domestic subcontracting to foreign intelligence

was posed to the veteran CIA/NSA intelligence operative, with whom I spoke extensively, the operative didn’t reject it out of hand" (Christopher Ketcham, "Cheering Movers and Art Student Spies: What Did Israel Know in Advance of the 9/11 Attacks?" CounterPunch, February 7, 2007,

http://www.conspiracyplanet.com/channel.cfm?channelid=73&contentid=4253&page=2 ).

38 Oswald requested a dependency discharge from the Marines in August 1959, "on the ground that his mother needed his support" (Warren Report, 688). Accordingly Marine Lt. A.G. Ayers, Jr. signed a document for Oswald’s release to inactive duty on September 11, 1959 (19 WH 679, cf. 17 WH 762) "by reason of hardship (19 WH 678). However Lt. Ayers should have known that Oswald had no intention of staying in Texas to support his mother; he had already, on September 4, 1959, signed an affidavit in support of Oswald’s passport application "to attend the College of A. Schweitzer, Chur, Switzerland and the Univ of Turku, Turku, Finland" (22 WH 77-79). (It is a sign of some covert intrigue that the language of instruction at the University of Turku was Finnish, a language Oswald did not know.)

39 A significant symptom of this enduring substratum has been the Bush Administration’s protection of Samuel Berger, Clinton’s national security advisor. Berger pleaded guilty in April 2005 to having stolen 9/11 documents from the National Archives (Shenon, The Commission, 414). A condition of his plea bargain was to submit to a Justice Department polygraph test, to determine what documents had been stolen. Republican Congressman Dana Rohrabacher, a long-time critic of CIA operations in Afghanistan, revealed to the House in February 2008 that he had written to the Bush Justice Department, demanding that it administer the polygraph test, and that the Justice Department had rejected his demand (Congressional Record, February 26, 2008, House, pp. H1065-H1072). We have already seen that Berger when in office was receiving regular reports from the CIA about the presence of al-Mihdar and al-Hamzi at the Kuala Lumpur meeting (Zegart, Flying Blind, 117). It is possible that these were the reports he was stealing from the Archives, and that the Justice Department refusal to administer the polygraph test is part of a cover-up to protect the CIA’s relationship to the two Saudis.

40 Amy Chua, Day of Empire: How Hyperpowers Rise to Global Dominance – and Why They Fall (New York: Doubleday, 2007), 342.

US advisers steered Iraqi oil contracts to Western firms

Go to Original
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?”

Google Told to Turn Over User Data of YouTube

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By MIGUEL HELFT

SAN FRANCISCO — A federal judge has ordered Google to turn over to Viacom its records of which users watched which videos on YouTube, the Web’s largest video site by far.

The order raised concerns among YouTube users and privacy advocates that the video viewing habits of tens of millions of people could be exposed. But Google and Viacom said they were hoping to come up with a way to protect the anonymity of the site’s visitors.

Viacom also said that the information would be safeguarded by a protective order restricting access to the data to outside lawyers, who will use it solely to press Viacom’s $1 billion copyright suit against Google.

Still, the judge’s order, which was made public late Wednesday, renewed concerns among privacy advocates that Internet companies like Google are collecting unprecedented amounts of private information that could be misused or fall unexpectedly into the hands of third parties.

“These very large databases of transactional information become honey pots for law enforcement or for litigants,” said Chris Hoofnagle, a senior fellow at the Berkeley Center for Law and Technology.

For every video on YouTube, the judge required Google to turn over to Viacom the login name of every user who had watched it, and the address of their computer, known as an I.P. or Internet protocol address.

Both companies have argued that I.P. addresses alone cannot be used to unmask the identities of individuals with certainty. But in many cases, technology experts and others have been able to link I.P. addresses to individuals using other records of their online activities.

The amount of data covered by the order is staggering, as it includes every video watched on YouTube since its founding in 2005. In April alone, 82 million people in the United States watched 4.1 billion clips there, according to comScore. Some experts say virtually every Internet user has visited YouTube.

Google and Viacom said they had had discussions about ways to further protect users’ anonymity, but as of Thursday evening the two companies had yet to agree on how to do that.

“We are investigating techniques, including anonymization, to enhance the security of information that will be produced,” said Michael D. Fricklas, Viacom’s general counsel.

Mr. Fricklas said Viacom would not have direct access to the data, and that its use would be strictly limited by the court order. Viacom would not, for example, chase down users who had illegally posted clips from “The Colbert Report.”

“The information that is produced by Google is going to be limited to outside advisers who can use it solely for the purpose of enforcing our rights against YouTube and Google,” Mr. Fricklas said.

In a letter sent Thursday, Google’s lawyers pressed their counterparts at Viacom to accept a more limited set of data. “We request that plaintiffs agree that YouTube may redact user names and I.P. addresses from the viewing data in the interests of protecting user privacy,” wrote David H. Kramer, a partner at Wilson Sonsini Goodrich & Rosati.

In a response, a Viacom lawyer wrote that Viacom was “committed to working with Google” on the privacy issue.

Interestingly, Google has rejected demands by privacy groups for more stringent protections for I.P. address records, saying that in most cases the addresses cannot be used to identify users. Yet Google argued that YouTube viewing data should be kept from Viacom, in part, to protect the privacy of its users.

Judge Louis L. Stanton of the Southern District of New York, who is presiding over Viacom’s lawsuit against Google and YouTube, referenced Google’s past statements on I.P. addresses to conclude that its “privacy concerns are speculative.”

“It is an ‘I told you so’ moment,” said Marc Rotenberg, executive director of the Electronic Privacy Information Center, an advocacy group in Washington.

Other privacy advocates said they welcomed Viacom’s commitment to limit its use of the information, but they remained concerned about user rights.

“Users should have the right to challenge and contest the production of this deeply private information,” said Kurt Opsahl, senior staff lawyer at the Electronic Frontier Foundation, an online civil liberties group.

That right is protected by the federal Video Privacy Protection Act, Mr. Opsahl added. Congress passed that law in 1988 to protect video rental records, after a newspaper disclosed the rental habits of Robert H. Bork, then a Supreme Court nominee.

Mr. Opsahl also said that even records that did not include a user’s login name and I.P. address might be able to be associated with specific people.

In 2006, after AOL released for research purposes the search records of thousands of anonymous users, reporters from The New York Times were able to track down one person by analyzing her search queries. Mr. Opsahl said anonymous viewing habits may similarly yield clues about the identity of viewers.

Viacom wants the viewing data in part to help it determine the extent to which YouTube’s success was built on the popularity of copyrighted clips that were illegally posted to the site. Outside experts say that without the data it would be virtually impossible to pin that down.

Judge Stanton agreed that the information could help Viacom make its case. “A markedly higher proportion of infringing-video watching may bear on plaintiff’s vicarious liability claim, and defendants’ substantial noninfringing use defense,” he wrote.

US: The Federal Reserve’s dilemma

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By Andre Damon

Earlier this month, Federal Reserve Board Chairman Ben Bernanke hinted that the US central bank would shift to a tighter monetary policy, leading analysts to expect multiple interest rate hikes this year. In a speech given June 3, Bernanke stressed the need to ensure that record oil prices do not feed into wage inflation, and all but announced a plan to boost the US exchange rate by raising interest rates. Now, a month later, the Fed has proven unable to act on either of these goals, having kept the Target Federal Funds Rate at a steady 2 percent at its Federal Open Market Committee (FOMC) meeting last week.

In our analysis of Bernanke’s speech, we stressed that the shift in policy emphasis represented an attempt to orchestrate a controlled recession, leading to a moderate rise in unemployment and a steady lowering of real wages. This process would in turn boost the profits of US corporations, guaranteeing a certain baseline level of returns to carry through the de-leveraging of financial firms and the write-downs of hundreds of billions of dollars in financial assets. The Fed aimed to oversee a controlled purge of infected assets, financed by a recessionary assault on the working class.

But the best-laid plans often go awry, and in the weeks that passed from Bernanke’s speech to the June 25 policy decision the conditions facing US finance capital have taken a tremendous turn for the worse. From late March through May, there was a certain recovery in the financial markets. Stock prices started to creep back up, banks succeeded in reducing the ratio of borrowings to assets by receiving significant infusions of capital, in many cases from abroad. The recovery reached its peak around mid-May, after which stocks began to slump rapidly. Last month ended with stock indexes registering their worst June since the Great Depression.

The institutions that recapitalized banks suffered significant losses on their investments, and—after some had their fingers burned—other institutions are far less willing to invest in bank stocks. The inability to raise capital—together with the precipitous decline of already existing share values—has left many banks, even very large ones, hurtling towards insolvency. As the Fed’s March 14 and March 16 minutes make clear, the Federal Reserve board firmly believed that the collapse of Bear Stearns would have resulted in an uncontrolled destabilization of the financial system leading to further bank failures. The conditions for such a crisis have fully reemerged in recent weeks, only perhaps in more pervasive and systematic form.

Far from being merely a technical operation, monetary policy is among the main regulators of aggregate relations between the working class and the owners of the productive forces—the bourgeoisie. In the US economic system, wages are set by the labor market—that is, by the interaction of labor supply and labor demand. But monetary policy, by spurring or constricting business activity, increases or reduces the demand for labor. Wage levels—if accompanied by aggressive action by one or the other class—tend to move accordingly.

The theory goes as follows: in the event of an unwanted economic slowdown, the Fed will stimulate demand by lowering interest rates—making credit easier to obtain and thus furthering business and consumer consumption. In case of an upturn in the class struggle, the Fed will raise rates, rein in demand, and suppress the wage struggles of the working class.

The Fed—under the leadership of Paul Volker—successfully implemented such a policy in the 1980s, when the breaking of the PATCO strike was accompanied by a manufactured recession—the sharpest since the 1930s—opening up a still-ongoing assault on the US working class.

The Federal Reserve is mandated by the US government to pursue a monetary policy that minimizes both inflation and unemployment. Aside from these policies, it acts as the guarantor of depository institutions; a “lender of last resort” with whom banks are required to keep a certain minimum amount of reserves. But with the latest crisis, the Federal Reserve has taken on the task of preserving the “shadow banking system” of hedge funds, loan distributors, and other unregulated entities, significantly complicating its operations. In so doing, it has granted itself quasi-legal authority to lend to investment banks and to take the assets of distressed institutions onto its own balance sheet.

These latest developments have complicated the Fed’s role. Aside from the “discount window,” through which the Fed lends to banks that are otherwise unable to borrow, the US central bank must operate with the blunt instrument of the Federal Funds rate, which impacts not only wages—the intended target—but also financial performance and exchange rates. In setting interest rate policy, the Federal Reserve now confronts problems on both sides. On one hand, rising commodities prices are fueling inflationary expectations and are likely to lead to a wages counteroffensive by the working class; to guard against this the Fed would need to raise interest rates and tighten the labor market. On the other hand, there is a very real threat of more crises like that of Bear Stearns.

Recent discussions in the business press have made clear that the US financial system faces a long-term solvency crisis that, if stock prices continue to fall, could well result in the failure of multiple “systemically important” institutions, prompting their rescue by the Federal Reserve or the broader US government. Such an event—referred to as the omnipresent “tail risk” in Bernanke’s parlance—could entail the government’s appropriation of hundreds of billions of dollars in toxic assets, putting into question the creditworthiness of US Treasury securities. This could, in turn, precipitate a dollar collapse and a catastrophic reordering of the international economic system.

To guard against this possibility, the Fed would seek to lower interest rates, making cheaper financing available to stimulate business activity and consumer spending, resulting in lower default rates on debt and safer conditions for finance. But to the Fed’s chagrin, its two most pressing goals—anti-inflation and the prevention of a financial meltdown—necessitate opposite policy responses. As the credit crisis reared up again this month, the Fed was forced to back down from its emphasis on raising interest rates.

Meanwhile, the European Central Bank faces the same dilemma. In line with previous announcements by ECB President Jean-Claude Trichet, the bank raised its benchmark rate from 4 to 4.25 percent on Thursday, hoping to stave off a wages offensive in response to rising commodity prices. But the dismal performance of financial stocks has made the likelihood of bank failures even more significant and, according to most financial analysts, further rate hikes unlikely.

Thomas Mayer, chief European economist at Deutsche Bank, observed, “The ECB is hiking at a time when confidence is plummeting.” He continued, “The question is, ‘What do you do when asset prices fall at the same time that consumer prices rise?’ The central bankers seem to have reached the end of the line.”

Bush administration encouraged oil deal in Kurdistan, undermining Iraqi “national unity”

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By David Walsh

The Bush administration publicly criticized a deal made between Hunt Oil of Dallas, Texas and the Kurdistan Regional Government in Iraq last September for supposedly undermining Iraqi “national unity,” while privately officials were facilitating the oil firm’s activities, documents released this week by the US House Committee on Oversight and Government Reform reveal.

Hunt Oil, whose chief executive Ray Hunt has been a major backer of George W. Bush, signed the agreement with the Kurdish government on September 8, 2007 to explore and develop oilfields in the region.

No national law on the division of oil revenues had been passed at the time (and still has not been), and the agreement outraged Iraqi government officials fearful that Baghdad would be cut out of its share of lucrative oil profits by such arrangements and that the country might well break up under centrifugal pressures. At the time Iraq’s oil minister, Hussein al-Shahristani, called the deal “illegal.”

The Bush administration echoed these remarks. The president stated on September 20, 2007: “I knew nothing about the deal. I need to know exactly how it happened. To the extent that it does undermine the ability for the government to come up with an oil revenue sharing plan that unifies the country, obviously if it undermines it I’m concerned.”

A State Department official told the press: “It’s counterproductive. Our view is the contract process should be controlled by the central government and that these regional deals could become illegal if an oil law is passed.”

The Assistant Secretary of State for Legislative Affairs, Jeffrey T. Bergner, wrote to a Congressional committee in October 2007 that, in his department’s view, “the signature of such contracts would needlessly elevate tensions between the KRG [Kurdish Regional Government] and the Government of Iraq.” Bergner went on to say, “We believe it is in the best interest of Iraq for all interested parties to agree to a single central approver of contracts so that Iraq’s oil and gas resources can be developed in accordance with a rational plan.”

This was all for public consumption. Behind the scenes, US government officials were assisting Hunt, a former member of the board at Halliburton (1998-2007), who has contributed $35 million toward the building of a Bush library, to land the deal with the Kurds.

The documents released by California Democratic Congressman Henry Waxman’s Oversight and Government Reform committee include an email from David McDonald, Hunt Oil’s General Manager for Europe, Africa and the Middle East, reporting on conversations with US government officials held June 12 and 15, 2007 in Erbil, the capital of the Kurdish autonomous region. McDonald sent the message in late September 2007, after the Hunt deal had been publicly censured by Bush and other administration officials.

In the email, addressed to Hunt Vice President Ken Topolinsky, McDonald writes about the initial discussion with US officials on June 12: “I described our visit as a security and business opportunity assessment, we discussed their views about security, power supply.” The officials, including members of the State Department’s Regional Reconstruction Team for the Kurdish region, suggested that McDonald return for another discussion three days later “when the expert concerned with the petroleum industry would be present.”

McDonald did so, and on June 15 another conversation took place between the Hunt oilman and US government representatives, among them, the “Senior Economic Adviser, Regional Reconstruction Team, USAID Northern Region.” In response to a question about production sharing contracts, McDonald explained that “I answered with a demonstration on a whiteboard of the terms of the agreement how royalties, cost oil, and profit oil are calculated and noted that the KRG contract [model production sharing agreement on the KRG web site] is consistent with agreements in use around the world and in fact is a sophisticated agreement. I specifically asked if the USG [US government] had a policy toward companies entering contracts with the KRG and [blacked out name] replied that there was no policy, neither for nor against.”

McDonald notes other contacts with American government officials in August and early September 2007, and concludes: “There was no communication to me or in my presence made by the 9 state department officials with whom I met prior to 8 September that Hunt should not pursue our course of action leading to a contract. In fact there was ample opportunity to do so, but it did not happen.”

The Commerce Department official who participated in the June 12 meeting, wrote Hunt Oil executives that same day: “It was a real pleasure meeting with you today, hope you [have] a fruitful visit to Kurdistan ... Please feel free to contact in case you need any support from our office here in Erbil.”

Casting further doubt on State Department claims that it was discouraging deals similar to the one Hunt was making with the Kurdish government, a few days after the agreement was announced in September, the Deputy Director of the US Regional Embassy in Basra wrote to a Hunt official, “I read and heard about with interest your deal with the regional Kurdish government,” and went on to tip her off about “another opportunity,” a liquefied natural gas refinery in southern Iraq. He added, “This seems like it would be a good opportunity for Hunt.”

As to the White House claim that it knew nothing about the deal, Ray Hunt’s own political relationship with the administration puts the lie to that. Aside from being a billionaire oilman, Hunt is a member of the President’s Foreign Intelligence Advisory Board (PFIAB), along with 15 other business, military and intelligence types. Hunt dispatched two letters informing the PFIAB of his Kurdistan venture, presumably because the latter would involve contact with representatives of a foreign government.

On July 12, he wrote: “We were approached a month or so ago by representatives of a private group in Kurdistan as to the possibility of our becoming interested in that region. We had one team of geoscientists travel to Kurdistan several weeks ago and were encouraged by what we saw. We have a larger team going back to Kurdistan this week but who they will actually meet with while they are there and what the relationships of those people might be with the Government of Kurdistan are both unclear at this time.”

Some six weeks later, Hunt wrote again to the PFIAB, informing board members of his upcoming visit to the region: “While my schedule is still fluid, there is a high likelihood that I will meet with President Masoud Barzani, the Prime Minister, the Oil Minister and various other individuals associated with the government of Kurdistan.” The visit bore fruit.

Barzani said recently, in response to criticism from Baghdad, that the more than 20 production-sharing contracts his government has signed with foreign oil companies since passing its own gas and oil law in August 2007 are “irreversible.” He added, “Anyone who wants to put off these deals is a dreamer.” The Iraqi oil ministry has threatened to blacklist any oil firms making deals with the KRG, but that has not stopped the flow of such agreements. In late June, the Kurdish regime announced a new package of oil deals with South Korea’s state oil company.

The revelations about the US government and its dealings with Hunt come in the context of the recent announcement that American and European oil giants Exxon, Shell, BP and Total are receiving no-bid service contracts from the Iraqi government, deals that are simply the foot in the door for the massive companies.

The Bush administration claimed in this case too that it had nothing to do with the negotiations. Secretary of State Condoleezza Rice stated, “The United States Government has stayed absolutely out of the matter of the awarding of Iraq oil contracts.” A State Department spokesman declared, “These are Iraqi contracts. They were made by Iraqis, for Iraqis.”

Everyone over the age of 10 knows that these claims are boldfaced lies. The US intervened in Iraq to seize control of the country’s oil reserves and assert its hegemony throughout the petroleum-rich Middle East. All the stated reasons—weapons of mass destruction, the Hussein regime’s ties with Al Qaeda, the establishment of democracy—have been exposed as falsehoods, and now, some five-and-a-half years later, the truth is emerging for all to see.

This is a potential embarrassment to the American ruling elite. Rep. Waxman makes clear that the brazenness of the Bush administration’s actions is a political problem: “The documents the Committee has received about Hunt Oil show that in matters involving Iraqi oil, official denials of knowledge and involvement can be misleading. This is a serious matter because of the widespread suspicion in Iraq and other nations that the United States went to war to gain access to Iraqi oil.”

As to why the State Department aided Hunt in Kurdistan, effectively undermining official policy in support of Iraqi “national unity,” the Bush administration is no doubt keeping all its options “on the table.” Washington is duplicitous in its dealings with the puppet regime in Baghdad, which it mistrusts and believes is too close to the Iranians, as it is with everyone else.

Voices have loudly been raised in favor of partition of the country, legal or de facto, and this policy has its backers in the administration. At the time of the Hunt deal signing last year, New York Times columnist Paul Krugman noted that Ray Hunt, “thanks to his policy position, is presumably as well-informed about the actual state of affairs in Iraq as anyone in the business world can be. By putting his money into a deal with the Kurds, despite Baghdad’s disapproval, he’s essentially betting that the Iraqi government ... won’t get its act together. Indeed, he’s effectively betting against the survival of Iraq as a nation in any meaningful sense of the term.

“The smart money, then, knows that the surge has failed, that the war is lost, and that Iraq is going the way of Yugoslavia. And I suspect that most people in the Bush administration—maybe even Mr. Bush himself—know this, too.”

Bush officials no doubt believe that there are various routes to the exploitation of Iraqi oil reserves. They are pressing for a national oil law, but see no difficulty in helping open up the Kurdish region to foreign predators in the meantime. Their policy is shortsighted and reckless, but this has been the character of the administration’s actions all along. The criminal plundering of Iraq’s natural resources, in the interest of the American corporate oligarchy, does not lend itself to rational, long-term planning.

Billions of dollars are at stake, and no doubt the administration did what it could to pass along some business to Hunt, a close political ally, whatever the ultimate consequences. A State Department official’s September 2007 email notes that when asked about “concerns over potential conflicts between the recently passed KRG hydrocarbon law and an [sic] national law,” Hunt’s McDonald said “the ‘significant opportunity’ outweighs the legal ambiguity.” Indeed.

It is worth noting that the Hunt name has a special political connotation.

The founder of the company, H.L. Hunt (1889-1974), Ray Hunt’s father, made a fortune in the oil industry in Texas. In 1957 Fortune magazine estimated that Hunt was worth $400-700 million, making him one of the eight richest individuals in the US.

Hunt was a fanatical right-winger and anticommunist. In 1951, he launched the Gen. Douglas MacArthur for president campaign with a chunk of his own money. Later, with two of his sons, he set up a right-wing “intelligence network,” the International Committee for the Defense of Christian Culture.

Hunt was involved in various ultra-right activities, including anti-Castro operations, and was a member of the John Birch Society. He also apparently helped bankroll the career of Democratic President Lyndon B. Johnson.

Ray Hunt was appointed the finance chairman of the Republican National Committee’s Victory 2000 Committee. During that campaign he was designated one of the 241 Bush “Pioneers,” thanks to his raising more than $100,000 in donations from his family. In 2004, Hunt and his wife donated $190,000 to the Republican cause.

In addition to his seat on the Foreign Intelligence Advisory Board, Hunt serves as chairman of the Federal Reserve Bank of Dallas and is a member of the National Petroleum Council, which advises the president on energy policy. As noted above, Hunt also served on the board of Halliburton, the firm once headed by Vice President Dick Cheney.

Inflation worsens as China lifts petrol prices

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By John Chan

In a major shift, the Chinese government raised retail fuel prices by 16-18 percent on June 19. The move will inevitably stoke further inflation and follows similar measures by other Asian countries in recent months. Most analysts were surprised by the move, as they had expected Beijing to lift the oil prices—a politically sensitive decision—only after the Olympic Games in August.

Rising petrol prices have fuelled a wave of protests and riots across the globe. Beijing also is well aware that inflation and deteriorating living standards were a significant factor in large numbers of workers joining protesting students in the demonstrations that were finally crushed by the military in Tiananmen Square in June 1989.

The National Development and Reform Commission (NDRC) announced the decision, declaring: “Due to the sharp spike in international oil prices, some refineries had to be shut down, with queues at petrol stations and rationing re-emerging in some regions. Appropriate increases in fuel prices will help raise supply and promote energy conservation.”

Beijing lifted the retail price of petrol by 16.7 percent to 6,980 yuan ($US1,015) a tonne and diesel by 18.1 percent to 6,520 yuan a tonne. The retail price for electricity was raised by an average of 4.7 percent, except in areas hit by the May 12 earthquake and in the impoverished Central Asian province of Xinjiang.

Like most developing Asian countries, China maintains domestic caps on energy prices that are substantially lower than international benchmarks. As a result, the state-owned petroleum corporations and refiners such as PetroChina and Sinopec have incurred huge financial losses, forcing them to scale back or even halt production and imports. Some smaller refiners have gone bankrupt. China had to increase fuel prices by 9-10 percent in November for the same reason.

Jun Ma, a Deutsche Bank economist, commented that “energy shortages had become a bigger threat to stability ahead of the Olympics” than inflation. Shortages of fuel have caused long queues at petrol stations in many cities throughout China in recent weeks, causing concern that the transport sector would be badly disrupted, affecting the whole economy.

The state-controlled petrol price in China is about $0.85 a litre—still well below $1.08 in the US and $2.33 in the UK. Low prices have been an important stimulant for the rapidly expanding auto industry. China is now the world’s second largest market of automobiles after the US.

Beijing has come under growing international pressure, especially from Washington, to raise fuel prices. American politicians have blamed the Chinese demand for oil for causing price rises. Last week, 16 Democratic senators, including former presidential candidate Hillary Clinton, sent a letter to the Bush administration demanding action to force Beijing to end its controls on fuel prices. “What Americans see happening at the pump is driven, in part, by what is happening in China,” they wrote.

The Wall Street Journal warned: “With inflation a growing worry world-wide, the political furore over China’s price controls has threatened to supplant the long-standing tussle over its exchange-rate policies as the nation’s most contentious international economic issue.”

The crude oil futures in New York did fall by 2 percent following China’s announced fuel rises. In the long term, however, China’s demand for oil is unlikely to slow amid a rapid growth of privately-owned vehicles. China is already the world’s second largest consumer and the International Energy Agency estimates it will account one third of the global oil demand growth from 2007 to 2030.

Worsening inflation

Analysts warn that the increased energy prices will only worsen inflation, which eased to 7.7 percent in May—a slight fall from 8.5 percent in April and a 12-year-high of 8.7 percent in February.

Immediately after the fuel price hikes, the finance ministry announced subsidies of 19.8 billion yuan or $2.9 billion for farmers, taxi drivers and low-income families. Although car ownership is still relatively low, the numbers are growing. Liu Honghui, one driver who had queued in Beijing to fill up petrol, told the Financial Times on June 20: “The price increase is high. It doesn’t matter for official cars and the rich, but for ordinary people the burden will be much heavier.”

Kong Fanshan, a taxi driver in Beijing, told Agence France Press (AFP) that he could not stop driving, even though the hikes would cut a quarter of his monthly income of 2,000 yuan ($290). He would lose a deposit of 20,000 yuan if he terminated his contract with the taxi company. “Besides, I only know driving. People my age can’t get another job. That’s the case for most taxi drivers,” he said.

Simon Yang, a cosmetic shop owner, said his small business would be affected as he made deliveries to clients. “It’s certainly not reasonable, especially when other prices are so high. Everything will rise following the gas price hike,” he said.

For the majority of the population, the increased petrol prices will translate into higher public transport fares. Credit Suisse First Boston (CSFB) estimated that an increase of 8 percent in public transport costs would add 2.3 percent to the inflation rate in China.

The World Bank sharply revised its inflation forecast for China in 2008 from 4.8 to 7 percent in a recent quarterly assessment. While the “worst of the food price hikes” was over, it stated, China was facing a second wave of inflationary pressures from rising prices for industrial commodities. On June 23, for instance, Anglo-Australian mining giants BHP-Billiton and Rio Tinto forced Chinese steel companies to pay up to 100 percent more for iron ore—a new record high.

The World Bank report rather optimistically predicted a growth rate of 9.8 percent this year, despite the economic slow down in the US and Europe and the closure of many low-end factories in China. It urged the government to increase interest rates and speed up the appreciation of yuan to combat inflation. Although China’s foreign currency reserves have reached $1.76 trillion, the bank dismissed fears that inflation was being fuelled by an oversupply of liquidity.

The Chinese government’s analysis differs. Under the pressure from the Bush administration and the US Congress to reduce China’s huge trade deficit ($256 billion in 2007), Beijing ended the yuan’s peg to the US dollar in 2005 and linked it to a basket of currencies instead. The yuan has gradually appreciated by less than 10 percent against the greenback. Speculative capital has flooded into China in the expectation that the yuan will be further revalued and that interest rates will rise.

In April, Zhu Baoling, the deputy chief of the State Information Centre’s economic forecasting department, estimated that the amount of speculative capital reached $80 billion in the first quarter—compared to $120 billion for the whole of 2007. A new estimate by Zhang Ming, a researcher at the Chinese Academy of Social Sciences, put the cumulative total of “hot money” at a staggering $1.75 trillion for the period from 2003 to March this year—far higher than the previous estimate of $500-$600 billion.

Zhang warned of the dangers of a sudden withdrawal by speculators. “The possibility of a large-scale evacuation like in the Asian financial crisis [in 1997-98] is not very big. But if they think the economic fundamentals will change significantly, the outflow can be huge,” he stated.

The South China Morning Post commented on June 16 that it was not just foreign investors who were speculating but state firms and private companies, which “falsify export receipts to move hard currency into the mainland and take advantage of the rising yuan”. At the same time, the rising yuan has hurt export processing industries in the Pearl River and Yangtze River deltas that play a central role in creating the 10-20 million new jobs needed each year.

Tensions between the US and China are rising. During the US-China “Strategic Economic Dialogue” last month, US Treasury Secretary Henry Paulson urged Beijing to abandon its oil price control and further revalue the yuan. Chinese officials fired back that Washington was in no position to demand that China act because of the subprime mortgage mess in the US.

China’s central bank chief Zhou Xiaochuang pointedly told reporters: “China is of course interested in learning from the experience of the United States in macroeconomic regulation and using a market economy, and now we also want to see what lessons we can draw from the experience of the US after the turbulence [of the subprime crisis].” The New York Times commented: “Chinese officials seem to be galled by the apparent hypocrisy of Americans telling them what to do while the American economy is at best stagnant.”

While they have been blaming the falling US dollar and subprime crisis for rising commodity prices and other global economic problems, Chinese officials are deeply concerned that economic troubles in the US and Europe—their largest export markets—can quickly impact on the Chinese economy and lead to social and political unrest.