Former "Bush Puppet" Iraqi PM Calls for US Withdrawal

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By Maya Schenwar

Dr. Ayad Allawi, the former interim Iraqi prime minister previously referred to even by US Congress members as a "Bush puppet," voiced his strong support for a US withdrawal timeline during a Wednesday Congressional hearing.

During his term in office, from June 2004 to April 2005, Allawi endorsed the US’s controversial bombings of Fallujah and echoed Bush’s speeches almost word for word in many of his own statements; The Washington Post reported that Bush administration officials coached Allawi on the content of his public comments. Prior to his involvement in the US-backed, post-invasion Iraqi government, Allawi worked with the CIA.

Yet, on Wednesday, Allawi blatantly called for "a time frame for reduction of US forces," a statement that stands in stark contrast to the hazy, deadline-less "time horizon" recently advocated by President Bush. Allawi stressed that the Iraqi people’s wishes should take precedence in any agreement on the future of the American presence in Iraq.

"Most importantly, [the security agreement] should be transparent and get the approval of the Iraqi Parliament and people," he testified.

He emphasized the need to develop Iraq’s political, military and economic sovereignty. This is of special significance because, since the advent of the occupation, the US has substantially altered Iraq’s economic structures to favor American interests.

"We are concerned about the protection of Iraqi assets from foreign creditors," Allawi said.

He also spoke of the need for Iraq to cooperate closely with powers other than the US, like the Arab League and the United Nations.

According to Raed Jarrar, the Iraq consultant for the American Friends Service Committee, Allawi’s words are not a total surprise: The politician had lately been moving toward a more nationalist approach. This movement is gaining steam, according to Jarrar.

"[Allawi] is forming a political front with other Sunnis, Shiites, seculars and Christians who are against partitioning Iraq and for ending all types of foreign interventions," Jarrar said.

What’s more, Allawi’s turnaround comes as the latest in a series of anti-occupation statements by Bush-backed Iraqi politicians. Even current Prime Minister Nouri al-Maliki recently expressed his hope for a timely US pullout, telling presidential candidate Barack Obama that he favors a 2010 withdrawal date.

"Huge public pressure" is a major factor in the politicians’ changing sentiments, according to Jarrar, especially since election season is nearing in Iraq.

On the American side, despite a largely antiwar public opinion, some prominent political figures are steadfast in their opposition to a deadline. Wednesday’s hearing featured foreign policy experts from both sides of the withdrawal debate, including Danielle Pletka of the neoconservative American Enterprise Institute. Pletka countered Allawi’s call to consider Iraqi public opinion, saying that American commanders should be given full authority to decide the course of the US military presence in the coming years.

"[The] conduct of war and the protection of our national security is not a popularity contest," Pletka said. "Mob rule does not decide how a President deploys troops in his role as commander in chief, nor how the Congress allocates money with its power of the purse."

Yet, despite the influence of conservative think tanks, there’s a growing sentiment among experts that the US must listen to Iraq in determining its future role there. Steven Kull, director of the Program on International Policy Attitudes at the University of Maryland, urged a sense of "respect for the Iraqi government." According to Kull, that means deferring to Iraq’s wishes, whether the Bush administration likes it or not.

"Convincingly sending the message that the US will only be in Iraq as long as the government wants it to be is central," Kull said in testimony on Wednesday. "It is clear that the Iraqi people are quite eager for the US to lighten its military footprint in Iraq. More importantly, it appears that they are eager to regain their sense of sovereignty. As long as they do not have this sense, they are likely to continue to have a fundamentally hostile attitude toward all aspects of the US presence in Iraq."

Trailer Graveyards Haunt FEMA, Neighbors

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By Pam Fessler

After high formaldehyde levels were found in travel trailers used to house the victims of Hurricane Katrina, the federal government said it would use them again only if it had no other choice.

Which raises the question — what should be done with the almost 100,000 trailers now sitting idly at sites around the country, at a cost to the government of $130 million a year?

It looks as though most could end up being sold for scrap.

Herd Of White Elephants

Wanda Phillips of Purvis, Miss., wants the trailers gone. Her property is across the road from one of several staging areas that FEMA set up right after Hurricane Katrina almost three years ago. Thousands of empty trailers are still stored there, row after row, baking in the sun.

"There’s trailers, I would say, within 150 feet of my house," says Phillips.

Phillips says the site used to be an open field with a lake and longhorn steer. Now, she says, there’s just a herd of white elephants.

And they’ve caused her plenty of trouble. She says the first problem was traffic — hundreds of large trucks each day delivering and picking up trailers for hurricane victims.

"You couldn’t get in and out. They parked in the front yard, parked on our grass, parked on the root system of our trees," says Phillips.

But that was nothing, she says, compared with what followed — insomnia, headaches, coughs and sinus problems. At first, she thought it was all the dust in the air. So she decided to move temporarily to a plot of land she owns elsewhere in the state.

But Phillips made a mistake. She bought a used FEMA trailer to live in.

"And I got worse. I mean, I really.... I just thought I was sick before. I really got worse," she says.

So Phillips decided that if she was going to be sick anyway, she might as well move back home.

And then she recalls sitting on the living room floor one day when her husband tossed her the newspaper and said "Look at this."

"I reached and picked it up off the carpet and I looked at it, and I said, ’Oh my God,’ " she remembers. "I said, ’There’s formaldehyde in those trailers. What is formaldehyde?’ "

And that was just the start.

Since then, Phillips has spent months collecting documents and government reports and making her own stink in an effort to get rid of the trailers. She has joined thousands of Gulf Coast residents who have complained about formaldehyde fumes and are suing the federal government.

Cool, Dry, Clean

FEMA has acknowledged that formaldehyde can be a health problem for people living in some trailers, but it has not said the same for people living near storage sites.

The agency says the ongoing litigation has stalled its efforts to dispose of the more than 94,000 travel trailers it now has sitting — empty and unused — around the country.

Almost a third are in Mississippi.

For Mike Miller, FEMA’s field coordinator in Mississippi, the trailers offered a solution to a problem.

"When some folks look at these trailers, they see formaldehyde. When I look at them, I see a cool, dry, clean place for a family to live until they can get established," he says.

Miller drives along a dirt road that cuts through the staging area right across from Phillips’ yard. Most of the trailers stored here look as though they’re in fairly good shape, although there are several burned-out units, the remnants of household — and meth lab — accidents.

Miller says the trailers served their purpose in the hectic days after Hurricane Katrina, housing more than 120,000 families. But now, he says, he’d be as happy as anyone — if not more so — to see them gone.

"Our job out here in the field is to work ourselves out of a job. But, right now, that’s not taking place, so we’re in caretaker status and making sure we have good security and a good program to maintain the grounds and the units here," he says.

Millions Of Dollars

Taking care of the empty trailers costs money — $28 million a year, just in Mississippi.

FEMA had been selling the trailers but stopped last year because of the concerns about formaldehyde.

Miller says he’s heard a lot of jokes since about what to do with the trailers, such as using them to build a border fence with Mexico. But he thinks taxpayers — who spent about $3 billion to buy trailers and mobile homes after Hurricane Katrina — would be better served if the sales resumed.

He says those who want to buy the trailers aren’t worried about formaldehyde, because most of them want them for part-time recreational use.

"We got folks, hundreds of folks that are calling us wanting us to buy these units. And over the months, probably thousands of folks," he says. "We had one gentleman come in. He wanted to buy 10,000."

Miller’s not sure why, but he suspects it was to house oil field or construction workers.

But what might make sense on the front lines doesn’t always make sense at headquarters.

"What we don’t want to do is provide travel trailers that have high formaldehyde values and sell that to somebody who may end up living in that unit. We’ve decided that we’re not going to take that chance," says David Garrett, FEMA’s deputy assistant administrator for disaster assistance. "We think the safest thing to do is to dispose of these things in a way that may not be a danger to anybody in the future."

And that means selling them for scrap. Garrett says some units might still be sold to individuals, but only after they’ve been tested to see if they’re safe.

Meanwhile, the Centers for Disease Control and Prevention is also looking at whether air filters or something else can be used to make the trailers safe.

MIT FEMA Trailer Challenge

Besides the thousands of units still occupied or sold to individuals, over 7,000 trailers were donated as government surplus to states and nonprofits to be used as police mobile command centers or other temporary facilities.

One of those surplus trailers has ended up in a small lot on the campus of MIT in Cambridge, Mass.

Lecturer Jae Rhim Lee plans to use this trailer for a course she’s teaching this fall. And for a campuswide competition called the MIT FEMA Trailer Challenge.

"People will develop solutions to what do you do with these thousands of surplus trailers," she says.

Lee is reluctant to prejudge the outcome of the competition. She doesn’t want to stifle anyone’s creativity. But, she says, the trailers could be used as mobile health centers or environmental testing labs — something to help people such as Wanda Phillips and others who think they got the raw end of the trailer deal.

Lee says she plans to present the winning ideas to FEMA, hopefully before all the other trailers have been sold for scrap.

Maliki Stunner: He Wants US Pullout Timetable

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By Robert Dreyfuss

The long-running showdown over the proposed US-Iraq treaty, aimed at legitimizing the American occupation of Iraq, is coming to a head, and it doesn't look good for the United States.

Prime Minister Nouri al-Maliki tossed a bombshell today. In a news conference about the still-secret US-Iraqi talks, which began in March, Maliki for the first time said that the chances of securing the pact are just about nil, and instead he said Iraq will seek a limited, ad hoc renewal of the US authority to remain in Iraq, rather than a broad-based accord.

More important, Maliki and his top security adviser, Mouwaffak al-Rubaie added that Iraq intends to link even a limited accord to a timetable for the withdrawal of US forces. Reports the Sydney Morning Herald:


Iraqi Prime Minister Nuri al-Maliki raised the prospect of setting a timetable for the withdrawal of US troops as part of negotiations over a new security agreement with Washington.

It was the first time the US-backed Shi'ite-led government has floated the idea of a timetable for the removal of American forces from Iraq. The Bush administration has always opposed such a move, saying it would benefit militant groups.


[UPDATE July 8: Rubaie was even stronger today: "There should not be any permanent bases in Iraq unless these bases are under Iraqi control. ... We would not accept any memorandum of understanding with (the US) side that has no obvious and specific dates for the foreign troops' withdrawal from Iraq."]

Here's the quote from Maliki:


"The current trend is to reach an agreement on a memorandum of understanding either for the departure of the forces or a memorandum of understanding to put a timetable on their withdrawal."

Don't think for a minute that Maliki, or his Shiite allies, want the US forces to leave. But they are under a lot of pressure. First of all, they are under pressure from Iran, whose regime remains the chief ally of the ruling alliance of Shiites, including Maliki's Dawa party and the powerful Islamic Supreme Council of Iraq (ISCI), led by Abdel Aziz al-Hakim. Iran's goal is to neutralize Iraq as a possible threat to Iran, and Iran's leaders are pressuring Maliki and Hakim to loosen their reliance on the United States. Interestingly, Maliki reportedly told President Bush personally, in a video teleconference on Friday, that the United States cannot use Iraqi territory to attack Iran, and he added that "fomenting tension in the region and pushing for military action against Tehran could wreak havoc on the entire region, including Iraq."

Maliki is also under pressure from a broad coalition of Iraqi nationalists, from angry, disenfranchised Sunnis to Muqtada al-Sadr's movement.

But Maliki's statement is a big deal. At a minimum, it presents an enormous problem for Bush and John McCain, who are arguing for an indefinite US stay in Iraq til "victory," and who oppose a timetable. True, Maliki seems to be linking his timetable to Iraqi military success, which is not too different from the Bush-McCain formula. But inside Iraq, the pressure is building day by day for a US withdrawal, and Maliki is by no means in control of the process. The fact that both Iran and Sunni nationalists, who are on a collision course, agree that US forces need to leave Iraq, only means that pro- and anti-Iranian factions will settle their differences (either by peaceful diplomacy or by violence) once the United States is gone.

Another factor is that Maliki, who is visiting the United Arab Emirates, is working hard to gain the support of the Sunni-led Arab regimes for his shaky coalition. The UAE and Jordan have both announced that they will be sending ambassadors to Baghdad, and King Abdullah of Jordan will himself make a visit to Baghdad soon, the first by an Arab head of state since the US invasion.

Despite US bungling, it seems increasingly likely that Iran and Saudi Arabia are working behind the scenes to negotiate a Shiite-Sunni accord in Iraq, but both Tehran and Riyadh will want it conditioned on a US withdrawal.

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

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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”

Go to Original
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

Go to Original
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.