China Railway attracts sovereign wealth fund
By Anette Jönsson, | 21 November 2007
financeasia.com
China Investment Corp agrees to buy about $100 million worth of shares in the IPO as one of nine cornerstone investors.
China Railway Group has signed nine cornerstone investors who will jointly invest HK$3.18 billion ($410 million) in the H-share portion of its ongoing initial public offering, sources close to the deal confirmed yesterday.
Among these investors, who will receive a guaranteed allocation in return for a 12-month lockup, are China Investment Corp (CIC) – China’s recently created $200 billion sovereign wealth fund – which will buy HK$780 million worth of shares. This will be the fund’s first investment in a Hong Kong IPO and only its second investment overall after taking a $3 billion stake in private equity firm Blackstone earlier this year. So far, that inaugural investment has been a disappointment as Blackstone’s share price has fallen after its IPO in June, which may explain why CIC is now looking to put its money to work closer to home.
Given its large pool of capital, it is possible that the fund could become a regular investor in IPOs of Mainland companies in Hong Kong, although observers suggest that it is likely to focus its investments on state-owned enterprises or companies within strategically important industries. Having had a leading position within China’s railway construction industry since the 1950s, China Railway definitely fits this profile. It is currently the largest construction company in both China and Asia, and the third largest in the world in terms of revenues. It also comes under the direct supervision of SASAC (the State-owned Asset Supervision and Administration Commission of the State Council).
The company derives about 88% of its revenues and just over 60% of its operating profit from infrastructure construction, which aside from railways and subways also include the construction of highways, bridges, tunnels, hydroelectricity projects, ports, airports and municipal works. The rest of the revenues and profits come from engineering equipment and component manufacturing; survey, design and consulting; and real estate development.
Having kicked off the roadshow for the H-share portion of its IPO yesterday, the company aims to raise up to HK$19.2 billion ($2.48 billion) from its Hong Kong listing alone. It is also conducting a near-simultaneous A-share offering that is targeting up to Rmb22.44 billion ($3.03 billion) ahead of a Shanghai listing.
Together, these two offerings will give a maximum combined deal size of $5.51 billion, which could see China Railway squeeze in just ahead of China Citic Bank as this year’s largest Hong Kong IPO. Citic Bank raised $5.4 billion from the base offering of its dual listing in April this year. However, looking at the H-share portions alone, Citic Bank was significantly larger at $3.7 billion, compared with China Railway’s $2.48 billion.
The cornerstone tranche will account for between 16.6% and 19% of the H-share offering, depending on the final price, which is in line with other Hong Kong IPOs and should help to anchor the deal amid the current volatile market environment. The other eight cornerstones, which are all familiar faces when it comes to Hong Kong IPOs, will each buy HK$300 million worth of shares.
According to sources, these investors are: China Life Franklin, a joint venture between the asset management arm of China Life Insurance and fund management firm Franklin Templeton; the Government of Singapore Investment Corp; a fund controlled by Leslie Lee Alexander, owner of the Houston Rockets basketball team; Kerry Group chairman Robert Kuok; the Kwok family, who is the controlling shareholder of Sun Hun Kai Properties; Peter Woo, chairman of Wheelock & Co; a fund owned by Henderson Land Development chairman Lee Shau Kee; and hedge fund Och-Ziff.
China Railway is set to list in Shanghai on December 3 and in Hong Kong on December 7, making this virtually a dual listing. (For more details on this, please see the FinanceAsia story published on November 20).
The H-share portion of the deal, which accounts for 45% of the total base offering, is marketed within a range of HK$5.03 and HK$5.78 per share, while the A-share offering range is Rmb4 to Rmb4.80. The final A-share price will be determined on Thursday, while the H-share price won’t be fixed until November 30.
After the IPO, but before the exercise of the greenshoe, the A-shareholders will own 22.5% of the company, while the H-shareholders (including the National Social Security Fund) will own 17.6%. The remaining 59.9% will remain in the hands of its parent, China Railway Engineering Corp.
BOC International and UBS are acting as joint underwriters both for the A-share and the H-share offerings. They are joined by two other bookrunners on the H-share deal – ABN AMRO Rothschild and JPMorgan.
Saturday, November 24, 2007
China's Sovereign Wealth Fund
Forges Strategy, Hunts for Staff
By RICK CAREW
November 20, 2007; Page A14
BEIJING -- China's $200 billion sovereign wealth fund is beginning to shape its strategy, as it embarks on a global hunt for staff and makes its second investment.
Facing domestic criticism after watching its $3 billion stake in Blackstone Group LP sink in value following Blackstone's June initial public offering, China Investment Corp. has been looking closer to home for investment opportunities. Now, CIC has subscribed to about $100 million of shares in state-owned construction company China Railway Group Ltd.'s forthcoming IPO in Hong Kong, according to people familiar with the situation.
Subscribing as a "cornerstone" investor in IPOs by Chinese companies as they list outside the mainland has been a common investment strategy of the country's national social-security fund. The similarity in investing styles should come as no surprise: China Investment's vice chairman and president is Gao Xiqing, the former vice chairman of the national social-security fund, where he oversaw its investments.
Cornerstone investments are made by a handful of large institutional investors that commit to buying shares in an IPO early in exchange for a larger allocation.
CIC, with its initial capitalization of $200 billion, is one of the largest so-called sovereign wealth funds in the world. Governments in the Middle East and Asia are increasingly allocating chunks of their foreign-exchange reserves to such investment vehicles to reap a higher return as their reserves surpass the level needed to defend their exchange-rate regimes. China's foreign-exchange reserves are the world's largest, at $1.43 trillion.
Even though similar funds have been run by Norway and Alaska in the past, this new crop of huge funds, controlled in many cases by nondemocratic governments, has drawn concern from some Western politicians, who worry about a lack of transparency and the potential that these funds will accumulate strategic assets.
Since Beijing began creating a framework for CIC early this year to diversify a portion of the country's foreign-currency stockpile, global markets have been closely watching the fund's moves. Since the initial Blackstone investment, the fund's senior managers have signaled that CIC would embark on a more conservative investment strategy than that initial bold stroke.
Blackstone's stock has fallen to around $22 from its IPO price of $31. CIC has committed to holding the stock for at least four years, meaning any losses on its stake so far are only on paper.
Chinese officials have been critical of the Blackstone deal, some observers say, because Chinese IPOs tend to be priced to ensure a huge first-day rise by companies, leaving more money on the table than IPOs in more mature markets like the U.S.
CIC, which has allocated one-third of its funds to overseas investments, is also embarking on a gradual process to build up its staff to advise on asset allocation, according to people familiar with the situation.
The experience of China's national social-security fund may offer an indication of more to come at CIC. In 2006, the social-security fund selected 10 global fund managers to manage about $1 billion in initial overseas funds after a six-month selection process.
Forges Strategy, Hunts for Staff
By RICK CAREW
November 20, 2007; Page A14
BEIJING -- China's $200 billion sovereign wealth fund is beginning to shape its strategy, as it embarks on a global hunt for staff and makes its second investment.
Facing domestic criticism after watching its $3 billion stake in Blackstone Group LP sink in value following Blackstone's June initial public offering, China Investment Corp. has been looking closer to home for investment opportunities. Now, CIC has subscribed to about $100 million of shares in state-owned construction company China Railway Group Ltd.'s forthcoming IPO in Hong Kong, according to people familiar with the situation.
Subscribing as a "cornerstone" investor in IPOs by Chinese companies as they list outside the mainland has been a common investment strategy of the country's national social-security fund. The similarity in investing styles should come as no surprise: China Investment's vice chairman and president is Gao Xiqing, the former vice chairman of the national social-security fund, where he oversaw its investments.
Cornerstone investments are made by a handful of large institutional investors that commit to buying shares in an IPO early in exchange for a larger allocation.
CIC, with its initial capitalization of $200 billion, is one of the largest so-called sovereign wealth funds in the world. Governments in the Middle East and Asia are increasingly allocating chunks of their foreign-exchange reserves to such investment vehicles to reap a higher return as their reserves surpass the level needed to defend their exchange-rate regimes. China's foreign-exchange reserves are the world's largest, at $1.43 trillion.
Even though similar funds have been run by Norway and Alaska in the past, this new crop of huge funds, controlled in many cases by nondemocratic governments, has drawn concern from some Western politicians, who worry about a lack of transparency and the potential that these funds will accumulate strategic assets.
Since Beijing began creating a framework for CIC early this year to diversify a portion of the country's foreign-currency stockpile, global markets have been closely watching the fund's moves. Since the initial Blackstone investment, the fund's senior managers have signaled that CIC would embark on a more conservative investment strategy than that initial bold stroke.
Blackstone's stock has fallen to around $22 from its IPO price of $31. CIC has committed to holding the stock for at least four years, meaning any losses on its stake so far are only on paper.
Chinese officials have been critical of the Blackstone deal, some observers say, because Chinese IPOs tend to be priced to ensure a huge first-day rise by companies, leaving more money on the table than IPOs in more mature markets like the U.S.
CIC, which has allocated one-third of its funds to overseas investments, is also embarking on a gradual process to build up its staff to advise on asset allocation, according to people familiar with the situation.
The experience of China's national social-security fund may offer an indication of more to come at CIC. In 2006, the social-security fund selected 10 global fund managers to manage about $1 billion in initial overseas funds after a six-month selection process.
Abu Dhabi's fund eyes emerging markets
Sun Nov 18, 2007 2:49pm GMT
By James Cordahi
ABU DHABI (Reuters) - The $650 billion (317 billion pound) Abu Dhabi Investment Authority is seeking to invest more in emerging markets to get higher returns than from its European and U.S. assets, a senior executive of banking group HSBC said on Sunday.
The world's largest sovereign wealth fund has traditionally invested in U.S. Treasuries and other fixed-income assets.
It has discussed emerging market investments with HSBC, according to Youssef Nasr, the bank's chief executive officer in the Middle East.
"The returns that you get in either the United States or Europe are not going to be as high as you get in emerging markets," Nasr said at an investment conference organised by the London-based Middle East Economic Digest.
"They are asking for some more help as far as these emerging markets are concerned," he said.
Standard Chartered estimated in September that the Abu Dhabi Investment Authority, which manages the surplus funds of the world's sixth-largest oil exporter, had $650 billion in assets, among nearly $1 trillion controlled by Gulf Arab sovereign wealth funds.
Concerns that these funds and state investors in Asia could shift away from U.S. assets are partly behind the dollar's slide this month to a record low against the euro, a 26-year trough against sterling and an 18-month low against the yen.
Qatar's $60 billion sovereign wealth fund, the Qatar Investment Authority, has cut its exposure to the dollar by more than half to around 40 percent of its portfolio in the past two years, the country's prime minister said on October 2.
In September, Kenneth Shen, the Qatar Investment Authority's head of private equity, said in Dubai it was diversifying away from the weakening U.S. dollar by investing more in Asia.
The Kuwait Investment Authority (KIA), which said it had at least $213 billion in assets on March 31, decided in 2005 to double its allocation for Asia to 20 percent of its portfolio.
The KIA is looking to invest in eastern Europe, Australia, Russia and Asian markets such as China and Vietnam, Executive Director Saleh al-Sagoubi said in July.
Sun Nov 18, 2007 2:49pm GMT
By James Cordahi
ABU DHABI (Reuters) - The $650 billion (317 billion pound) Abu Dhabi Investment Authority is seeking to invest more in emerging markets to get higher returns than from its European and U.S. assets, a senior executive of banking group HSBC said on Sunday.
The world's largest sovereign wealth fund has traditionally invested in U.S. Treasuries and other fixed-income assets.
It has discussed emerging market investments with HSBC, according to Youssef Nasr, the bank's chief executive officer in the Middle East.
"The returns that you get in either the United States or Europe are not going to be as high as you get in emerging markets," Nasr said at an investment conference organised by the London-based Middle East Economic Digest.
"They are asking for some more help as far as these emerging markets are concerned," he said.
Standard Chartered estimated in September that the Abu Dhabi Investment Authority, which manages the surplus funds of the world's sixth-largest oil exporter, had $650 billion in assets, among nearly $1 trillion controlled by Gulf Arab sovereign wealth funds.
Concerns that these funds and state investors in Asia could shift away from U.S. assets are partly behind the dollar's slide this month to a record low against the euro, a 26-year trough against sterling and an 18-month low against the yen.
Qatar's $60 billion sovereign wealth fund, the Qatar Investment Authority, has cut its exposure to the dollar by more than half to around 40 percent of its portfolio in the past two years, the country's prime minister said on October 2.
In September, Kenneth Shen, the Qatar Investment Authority's head of private equity, said in Dubai it was diversifying away from the weakening U.S. dollar by investing more in Asia.
The Kuwait Investment Authority (KIA), which said it had at least $213 billion in assets on March 31, decided in 2005 to double its allocation for Asia to 20 percent of its portfolio.
The KIA is looking to invest in eastern Europe, Australia, Russia and Asian markets such as China and Vietnam, Executive Director Saleh al-Sagoubi said in July.
Mortgage Failures Could Create Nightmare
Saturday November 24, 12:02 am ET
By Joe Bel Bruno, AP Business Writer
New Wave of Mortgage Failures Could Create a Nightmare Economic Scenario
NEW YORK (AP) -- When Domenico Colombo saw that his monthly mortgage payment was about to balloon by 30 percent, he had a clear picture of how bad it could get.
His payment was scheduled to surge by an extra $1,500 in December. With his daughter headed to college next fall and tuition to be paid, he feared ending up like so many neighbors in Ft. Lauderdale, Fla., who defaulted on their mortgages and whose homes are now in foreclosure and sporting "For Sale" signs.
Colombo did manage to renegotiate a new fixed interest rate loan with his bank, and now believes he'll be OK -- but the future is less certain for the rest of us.
In the months ahead, millions of other adjustable-rate mortgages like Colombo's will reset, giving them a higher interest rate as required by the loan agreements and leaving many homeowners unable to make their payments. Soaring mortgage default rates this year already have shaken major financial institutions and the fallout from more of them, some experts say, could spread from those already battered banks into the general economy.
The worst-case scenario is anyone's guess, but some believe it could become very bad.
"We haven't faced a downturn like this since the Depression," said Bill Gross, chief investment officer of PIMCO, the world's biggest bond fund. He's not suggesting anything like those terrible times -- but, as an expert on the global credit crisis, he speaks with authority.
"Its effect on consumption, its effect on future lending attitudes, could bring us close to the zero line in terms of economic growth," he said. "It does keep me up at night."
Some 2 million homeowners hold $600 billion of subprime adjustable-rate mortgage loans, known as ARMs, that are due to reset at higher amounts during the next eight months. Subprime loans are those made to people with poor credit. Not all these mortgages are in trouble, but homeowners who default or fall behind on payments could cause an economic shock of a type never seen before.
Some of the nation's leading economic minds lay out a scenario that is frightening. Not only would the next wave of the mortgage crisis force people out of their homes, it might also spiral throughout the economy.
The already severe housing slump would be exacerbated by even more empty homes on the market, causing prices to plunge by up to 40 percent in once-hot real estate spots such as California, Nevada and Florida. Builders like Chicago's Neumann Homes, which filed for bankruptcy protection this month, could go under. The top 10 global banks, which repackage loans into exotic securities such as collateralized debt obligations, or CDOs, could suffer far greater write-offs than the $75 billion already taken this year.
Massive job losses would curtail consumer spending that makes up two-thirds of the economy. The Labor Department estimates almost 100,000 financial services jobs related to credit and lending in the U.S. have already been lost, from local bank loan officers to traders dealing in mortgage-backed securities. Thousands of Americans who work in the housing industry could find themselves on the dole. And there's no telling how that would affect car dealers, retailers and others dependent on consumer paychecks.
Based on historical models, zero growth in the U.S. gross domestic product would take the current unemployment rate to 6.4 percent. That would wipe out about 3 million jobs from the economy, according to the Washington-based Economic Policy Institute.
By comparison, in the last big downturn between 2001-03 some 2 million jobs were lost, according to the Labor Department. The dot-com bust early this decade decimated the technology sector, while the Sept. 11, 2001, terror attacks hurt the transportation and allied industries. Economists said the country was officially in recession from March to November of 2001, but the aftermath stretched to 2003.
There is increasing evidence that another downturn has begun.
Borrowers who took out loans in the first six months of this year are already falling behind on their payments faster than those who took out loans in 2006, according to a report from Arlington, Va.-based investment bank Friedman, Billings Ramsey. That's making it even harder for would-be buyers to get new mortgages -- a frightening prospect for home builders with projects going begging on the market, and for homeowners desperate to unload property to avoid defaulting on their loans.
Meanwhile, the number of U.S. homes in foreclosure is expected to keep soaring after more than doubling during the third quarter from a year earlier, to 446,726 homes nationwide, according to Irvine, Calif.-based RealtyTrac Inc. That's one foreclosure filing for every 196 households in the nation, a 34 percent jump from just three months earlier.
Such data suggests more Americans could lose their homes than ever before, and those in peril are people who never thought they'd welsh on a mortgage payment. They come from a broad swath -- teachers, pharmacists, and civil servants who were lured by enticing mortgage terms.
Some homebuyers gambled on interest-only loans. The mortgages, which allowed buyers to pay just interest at a low rate for two years, were too good to pass up. But with that initial term now expiring, many homeowners find they can't make the payments. The hopes that went along with those mortgages -- that they'd be able to refinance because the equity in their homes would appreciate -- have been dashed as home prices skidded across the country.
"It's been said a lot of people have been using their homes as ATM machines," said Thomas Lawler, a former official at mortgage lender Fannie Mae who is now a private housing and finance consultant. "The risk has a lot of tentacles."
This example illustrates the distress many homeowners are in or will find themselves in: A subprime adjustable-rate mortgage on a $400,000 home could have payments of about $2,200 a month, with borrowers paying 6.5 percent, interest only. When the teaser period expires, that payment becomes $4,000, with the homeowner paying 12 percent and now having to come up with principal as well as interest.
Minneapolis resident Chad Raskovich found himself in a such a situation. He hoped -- it turned out, in vain -- to gain more equity in his home and that a strong record of payments would enable him to secure a better loan later on.
"It's not just me, it's a lot of people I know. The housing market in the Twin Cities has dramatically changed for the worse in the years since I purchased my home. Now we're just looking for a solution," he said.
Colombo, who lives in the planned community of Weston just outside Ft. Lauderdale, said the reset on his home would have "destroyed' his financial situation. He went to Mortgage Repair Center, one of hundreds of debt counselors trying to bail out desperate homeowners, to work with his lender.
"But many people in my neighborhood didn't get help, and some have literally just walked away from their homes," said Colombo. "There are over 133,000 homes on the market in Broward-Miami-Dade counties, and some of them were actually abandoned. People in this situation don't like to talk about it, and end up getting hurt because they don't."
Many Americans are unaware that a borrower defaulting on a loan can have an impact on everyone else's well-being and that of the nation. After all, the amount of mortgages due to reset is just a fraction of the United States' $14 trillion economy.
But the series of plunges that Wall Street has suffered in past months prove that no one is immune when mortgages turn sour.
Today's financial system is interconnected: Mortgages are sold to investment firms, which then slice them up and package them as securities based on risk. Then hedge and pension funds buy up such investments.
When home prices kept rising, these were lucrative assets to own. But the ongoing collapse in housing prices has set off a chain reaction: Lenders are tightening their standards, borrowers are having a harder time refinancing loans and the securities that underpin them are in jeopardy.
This has resulted in more than $500 billion of potentially worthless paper on the balance sheets of the biggest global banks -- losses that could spill into the huge pension and mutual funds that also invest in these securities and that the average worker or investor expects to depend on.
There's more pain left for Wall Street: "We're nowhere close to the end of the collapse," said Mark Patterson, chairman and co-founder of MatlinPatterson Global Advisors, a hedge fund that specializes in distressed funds.
"I just assumed banks could stomach these kind of losses," said Wendy Talbot, an advertising executive when asked about the subprime crisis outside of a Charles Schwab branch in New York. "I guess you don't really pay attention to things until your forced to. ... You put out of your mind the worst things that can happen."
The subprime wreckage could dwarf the nation's last big banking crisis -- the failure of more than 1,000 savings and loans in the 1980s. The biggest difference is that problems with S&Ls were largely contained, and the government was able to rescue them through a $125 billion bailout.
But this situation is far more widespread, which some experts say makes it more difficult to rein in.
"What really makes this a doomsday scenario is where would you even start with a bailout?" housing consultant Lawler asked.
Sen. Charles Schumer, D-N.Y., a key member of Senate finance and banking committees, said borrowers are the ones who need relief. The playbook to bail out the economy would not be applied to the banks and mortgage originators, but money could be funneled through non-profit organizations to homeowners that need help, he said in an interview with The Associated Press.
"There is a worst-case scenario because housing is the linchpin of our economy, and more foreclosures make prices go down, that creates more foreclosures, and creates a vicious cycle," Schumer said. "You add that to the other weakness in the economy -- on one end is the home sector and the other is the financial sector -- and it could create a real problem."
He also believes Federal Reserve Chairman Ben Bernanke should do more to help the economy. Bernanke said in recent comments he has no direct plans to bail out the mortgage industry, but to instead offer relief through cheap interest rates and further liquidity injections into the banking system.
There's also been talk of letting government-backed lenders like Fannie Mae and Freddie Mac buy mortgages of as much as $1 million from lenders, pay the government a fee for guaranteeing them and then turn them into securities to be sold to investors. This would extend the government's support, and its exposure, to the mortgage market to help alleviate stress.
Either way, the impact of a fresh round of subprime losses remains of paramount concern to economists -- especially since there's little certainty about how it would ripple through the U.S. economy.
"We all know that more hits from these subprime loans are coming, but are having a devil of a time figuring out how it will happen or how to stop it," said Lawler, who was once chief economist for Fannie Mae.
"We've never been in this situation before."
Saturday November 24, 12:02 am ET
By Joe Bel Bruno, AP Business Writer
New Wave of Mortgage Failures Could Create a Nightmare Economic Scenario
NEW YORK (AP) -- When Domenico Colombo saw that his monthly mortgage payment was about to balloon by 30 percent, he had a clear picture of how bad it could get.
His payment was scheduled to surge by an extra $1,500 in December. With his daughter headed to college next fall and tuition to be paid, he feared ending up like so many neighbors in Ft. Lauderdale, Fla., who defaulted on their mortgages and whose homes are now in foreclosure and sporting "For Sale" signs.
Colombo did manage to renegotiate a new fixed interest rate loan with his bank, and now believes he'll be OK -- but the future is less certain for the rest of us.
In the months ahead, millions of other adjustable-rate mortgages like Colombo's will reset, giving them a higher interest rate as required by the loan agreements and leaving many homeowners unable to make their payments. Soaring mortgage default rates this year already have shaken major financial institutions and the fallout from more of them, some experts say, could spread from those already battered banks into the general economy.
The worst-case scenario is anyone's guess, but some believe it could become very bad.
"We haven't faced a downturn like this since the Depression," said Bill Gross, chief investment officer of PIMCO, the world's biggest bond fund. He's not suggesting anything like those terrible times -- but, as an expert on the global credit crisis, he speaks with authority.
"Its effect on consumption, its effect on future lending attitudes, could bring us close to the zero line in terms of economic growth," he said. "It does keep me up at night."
Some 2 million homeowners hold $600 billion of subprime adjustable-rate mortgage loans, known as ARMs, that are due to reset at higher amounts during the next eight months. Subprime loans are those made to people with poor credit. Not all these mortgages are in trouble, but homeowners who default or fall behind on payments could cause an economic shock of a type never seen before.
Some of the nation's leading economic minds lay out a scenario that is frightening. Not only would the next wave of the mortgage crisis force people out of their homes, it might also spiral throughout the economy.
The already severe housing slump would be exacerbated by even more empty homes on the market, causing prices to plunge by up to 40 percent in once-hot real estate spots such as California, Nevada and Florida. Builders like Chicago's Neumann Homes, which filed for bankruptcy protection this month, could go under. The top 10 global banks, which repackage loans into exotic securities such as collateralized debt obligations, or CDOs, could suffer far greater write-offs than the $75 billion already taken this year.
Massive job losses would curtail consumer spending that makes up two-thirds of the economy. The Labor Department estimates almost 100,000 financial services jobs related to credit and lending in the U.S. have already been lost, from local bank loan officers to traders dealing in mortgage-backed securities. Thousands of Americans who work in the housing industry could find themselves on the dole. And there's no telling how that would affect car dealers, retailers and others dependent on consumer paychecks.
Based on historical models, zero growth in the U.S. gross domestic product would take the current unemployment rate to 6.4 percent. That would wipe out about 3 million jobs from the economy, according to the Washington-based Economic Policy Institute.
By comparison, in the last big downturn between 2001-03 some 2 million jobs were lost, according to the Labor Department. The dot-com bust early this decade decimated the technology sector, while the Sept. 11, 2001, terror attacks hurt the transportation and allied industries. Economists said the country was officially in recession from March to November of 2001, but the aftermath stretched to 2003.
There is increasing evidence that another downturn has begun.
Borrowers who took out loans in the first six months of this year are already falling behind on their payments faster than those who took out loans in 2006, according to a report from Arlington, Va.-based investment bank Friedman, Billings Ramsey. That's making it even harder for would-be buyers to get new mortgages -- a frightening prospect for home builders with projects going begging on the market, and for homeowners desperate to unload property to avoid defaulting on their loans.
Meanwhile, the number of U.S. homes in foreclosure is expected to keep soaring after more than doubling during the third quarter from a year earlier, to 446,726 homes nationwide, according to Irvine, Calif.-based RealtyTrac Inc. That's one foreclosure filing for every 196 households in the nation, a 34 percent jump from just three months earlier.
Such data suggests more Americans could lose their homes than ever before, and those in peril are people who never thought they'd welsh on a mortgage payment. They come from a broad swath -- teachers, pharmacists, and civil servants who were lured by enticing mortgage terms.
Some homebuyers gambled on interest-only loans. The mortgages, which allowed buyers to pay just interest at a low rate for two years, were too good to pass up. But with that initial term now expiring, many homeowners find they can't make the payments. The hopes that went along with those mortgages -- that they'd be able to refinance because the equity in their homes would appreciate -- have been dashed as home prices skidded across the country.
"It's been said a lot of people have been using their homes as ATM machines," said Thomas Lawler, a former official at mortgage lender Fannie Mae who is now a private housing and finance consultant. "The risk has a lot of tentacles."
This example illustrates the distress many homeowners are in or will find themselves in: A subprime adjustable-rate mortgage on a $400,000 home could have payments of about $2,200 a month, with borrowers paying 6.5 percent, interest only. When the teaser period expires, that payment becomes $4,000, with the homeowner paying 12 percent and now having to come up with principal as well as interest.
Minneapolis resident Chad Raskovich found himself in a such a situation. He hoped -- it turned out, in vain -- to gain more equity in his home and that a strong record of payments would enable him to secure a better loan later on.
"It's not just me, it's a lot of people I know. The housing market in the Twin Cities has dramatically changed for the worse in the years since I purchased my home. Now we're just looking for a solution," he said.
Colombo, who lives in the planned community of Weston just outside Ft. Lauderdale, said the reset on his home would have "destroyed' his financial situation. He went to Mortgage Repair Center, one of hundreds of debt counselors trying to bail out desperate homeowners, to work with his lender.
"But many people in my neighborhood didn't get help, and some have literally just walked away from their homes," said Colombo. "There are over 133,000 homes on the market in Broward-Miami-Dade counties, and some of them were actually abandoned. People in this situation don't like to talk about it, and end up getting hurt because they don't."
Many Americans are unaware that a borrower defaulting on a loan can have an impact on everyone else's well-being and that of the nation. After all, the amount of mortgages due to reset is just a fraction of the United States' $14 trillion economy.
But the series of plunges that Wall Street has suffered in past months prove that no one is immune when mortgages turn sour.
Today's financial system is interconnected: Mortgages are sold to investment firms, which then slice them up and package them as securities based on risk. Then hedge and pension funds buy up such investments.
When home prices kept rising, these were lucrative assets to own. But the ongoing collapse in housing prices has set off a chain reaction: Lenders are tightening their standards, borrowers are having a harder time refinancing loans and the securities that underpin them are in jeopardy.
This has resulted in more than $500 billion of potentially worthless paper on the balance sheets of the biggest global banks -- losses that could spill into the huge pension and mutual funds that also invest in these securities and that the average worker or investor expects to depend on.
There's more pain left for Wall Street: "We're nowhere close to the end of the collapse," said Mark Patterson, chairman and co-founder of MatlinPatterson Global Advisors, a hedge fund that specializes in distressed funds.
"I just assumed banks could stomach these kind of losses," said Wendy Talbot, an advertising executive when asked about the subprime crisis outside of a Charles Schwab branch in New York. "I guess you don't really pay attention to things until your forced to. ... You put out of your mind the worst things that can happen."
The subprime wreckage could dwarf the nation's last big banking crisis -- the failure of more than 1,000 savings and loans in the 1980s. The biggest difference is that problems with S&Ls were largely contained, and the government was able to rescue them through a $125 billion bailout.
But this situation is far more widespread, which some experts say makes it more difficult to rein in.
"What really makes this a doomsday scenario is where would you even start with a bailout?" housing consultant Lawler asked.
Sen. Charles Schumer, D-N.Y., a key member of Senate finance and banking committees, said borrowers are the ones who need relief. The playbook to bail out the economy would not be applied to the banks and mortgage originators, but money could be funneled through non-profit organizations to homeowners that need help, he said in an interview with The Associated Press.
"There is a worst-case scenario because housing is the linchpin of our economy, and more foreclosures make prices go down, that creates more foreclosures, and creates a vicious cycle," Schumer said. "You add that to the other weakness in the economy -- on one end is the home sector and the other is the financial sector -- and it could create a real problem."
He also believes Federal Reserve Chairman Ben Bernanke should do more to help the economy. Bernanke said in recent comments he has no direct plans to bail out the mortgage industry, but to instead offer relief through cheap interest rates and further liquidity injections into the banking system.
There's also been talk of letting government-backed lenders like Fannie Mae and Freddie Mac buy mortgages of as much as $1 million from lenders, pay the government a fee for guaranteeing them and then turn them into securities to be sold to investors. This would extend the government's support, and its exposure, to the mortgage market to help alleviate stress.
Either way, the impact of a fresh round of subprime losses remains of paramount concern to economists -- especially since there's little certainty about how it would ripple through the U.S. economy.
"We all know that more hits from these subprime loans are coming, but are having a devil of a time figuring out how it will happen or how to stop it," said Lawler, who was once chief economist for Fannie Mae.
"We've never been in this situation before."
New boss turns the tables on Al Qaeda
Ex-Sunni insurgent becomes U.S. ally
By Liz Sly, Tribune foreign correspondent; Nadeem Majeed contributed to this report
chicagotribune.com
November 22, 2007
BAGHDAD
The once-dreaded Al Qaeda in Iraq stronghold of Amariyah has a new boss, and he's not shy about telling the story of the shootout that turned him into a local legend and helped change the tenor of the Iraq war.
Earlier this year, Abul Abed, a disgruntled Sunni insurgent leader, began secret talks with the Americans about ending Al Qaeda's reign of terror in this run-down, formerly middle-class Baghdad neighborhood, renowned as one of the city's most dangerous. He had been gathering intelligence on the group for months.
One day in late May, he said, he decided it was time to act.
He hailed the car carrying the feared leader of Al Qaeda in the neighborhood, a man known as the White Lion, on one of Amariyah's main streets. "We want you to stop destroying our neighborhood," he told the man.
"Do you know who you are talking to?" said the White Lion, getting out of his car. "I am Al Qaeda. I will destroy even your own houses!"
He pulled out his pistol and shot at Abul Abed. The gun jammed. He reloaded and fired again. Again, the gun jammed.
By this time, Abul Abed said, he had pulled his own gun. He fired once, killing the White Lion.
"I walked over to him, stepped on his hand and took his gun," Abul Abed, which is a nom de guerre, said at his new, pink-painted headquarters in a renovated school in Amariyah, as an American Army captain seated in the corner nodded his head in affirmation of the account. "And then the fight started."
It was the beginning of the end for Al Qaeda in Amariyah. The next day, a firefight erupted. Al Qaeda fighters closed in on Abul Abed. Most of the 150 men who had joined him fled. Holed up in a mosque with fewer than a dozen supporters, Abul Abed thought the end was near.
"The blue carpet was soaked red with blood," he recalled. Then the imam of the mosque called in American help.
A friendship was born.
Now Abul Abed, a swaggering former major in the Iraqi army and reputedly a top leader in the influential Islamic Army insurgent group, reigns supreme in Amariyah -- with considerable help from the U.S. military.
Still wearing the White Lion's pistol tucked into his belt, he commands his own 600-member paramilitary force, called the Knights of Mesopotamia. He receives $460,000 a month from the U.S. military to pay, arm and equip them. They wear crisp olive green uniforms with smart red and yellow badges bearing the Knights' horse-head logo. They are well-armed, and some have flak jackets.
But they don't really need them. Since the Knights drove Al Qaeda out of Amariyah after a two-month battle, the neighborhood has become largely safe.
"You can move freely in Amariyah at any time of the day or night," Abul Abed said. "You can even see women without head scarves, wearing tight jeans!"
An 'Awakening' in Iraq
Men like Abul Abed have helped change the face of the war. Following in the footsteps of the late Abdul-Sattar Abu Risha, the tribal leader who led the Sunni revolt that drove Al Qaeda from the base of its operations in Iraq's Anbar province, more than 70,000 people, most of them Sunnis, in 148 groups have joined in the so-called Awakening, or Sahwa, movement, according to the U.S. military, turning against Al Qaeda and turning to the Americans for help.
Since Abul Abed's fight in Amariyah, some of the most feared Baghdad neighborhoods, including Abu Ghraib, Fadhil, Ghazaliyah, Dora and Adhamiyah, have followed suit, forming their own brigades of Knights, welcoming the U.S. military and receiving U.S. money.
Abul Abed is coy about his insurgent connections. He gave his real name as Saad Erebi Ghaffouri al-Obaidi, though he is known across Baghdad as Abul Abed. U.S. officials, Amariyah residents and Sunni leaders say he was a prominent commander in the Islamic Army. He described himself as a former Iraqi army major who "went into business" after the regime fell. He won't say what business.
But he acknowledged that many of his men once fought Americans and now work closely with them.
"They recognize that they made a big mistake," he said. "They realize that they were on the wrong path and that they wasted many chances with what they did."
The implications of creating this network of trained, armed paramilitaries loyal not to the government but to an assortment of local strongmen have yet to be played out. U.S. officials said they are relieved that the revolution within the Sunni community has helped to sharply reduce the number of attacks. According to the military, attacks in Iraq fell 55 percent between March and October.
The U.S. wants to absorb the Sunnis who have joined the Awakening movement into the Iraqi security forces, but so far the Shiite-led government has hesitated, concerned that they will one day turn against the government. If the government continues to frustrate the Sunnis, U.S. officials are concerned their new allies could go back to the insurgency.
"That's the big intangible that makes me nervous," said Col. Martin Stanton, who oversees the reconciliation and engagement effort. If there is no progress on getting the paramilitaries regular jobs with the security forces and delivering services to Sunni areas, Sunni frustrations will continue to mount, he said.
"The question is, what's the break point? ... How long before people start getting sick of it and start checking out?" he said.
'Americans are our protectors'
Abul Abed said the Sunni revolution has gone too far for that.
"Americans are our protectors and saviors," he said.
The real enemy of Iraq, he says, now is Iran. He pulled out his mobile phone to show pictures he has saved of the bodies of his four brothers, who were kidnapped and murdered in 2005 by what he suspects was a Shiite death squad with ties to Iran. One of them had a nail driven into his head. Another was missing a hand.
"Even animals wouldn't do that," he said, his face darkening. "Iran is so deeply infiltrated in Iraq, the problem here still cannot be solved. Iran wants to demolish us. If the Americans leave, then you can count Iraq as a second Tehran."
Ex-Sunni insurgent becomes U.S. ally
By Liz Sly, Tribune foreign correspondent; Nadeem Majeed contributed to this report
chicagotribune.com
November 22, 2007
BAGHDAD
The once-dreaded Al Qaeda in Iraq stronghold of Amariyah has a new boss, and he's not shy about telling the story of the shootout that turned him into a local legend and helped change the tenor of the Iraq war.
Earlier this year, Abul Abed, a disgruntled Sunni insurgent leader, began secret talks with the Americans about ending Al Qaeda's reign of terror in this run-down, formerly middle-class Baghdad neighborhood, renowned as one of the city's most dangerous. He had been gathering intelligence on the group for months.
One day in late May, he said, he decided it was time to act.
He hailed the car carrying the feared leader of Al Qaeda in the neighborhood, a man known as the White Lion, on one of Amariyah's main streets. "We want you to stop destroying our neighborhood," he told the man.
"Do you know who you are talking to?" said the White Lion, getting out of his car. "I am Al Qaeda. I will destroy even your own houses!"
He pulled out his pistol and shot at Abul Abed. The gun jammed. He reloaded and fired again. Again, the gun jammed.
By this time, Abul Abed said, he had pulled his own gun. He fired once, killing the White Lion.
"I walked over to him, stepped on his hand and took his gun," Abul Abed, which is a nom de guerre, said at his new, pink-painted headquarters in a renovated school in Amariyah, as an American Army captain seated in the corner nodded his head in affirmation of the account. "And then the fight started."
It was the beginning of the end for Al Qaeda in Amariyah. The next day, a firefight erupted. Al Qaeda fighters closed in on Abul Abed. Most of the 150 men who had joined him fled. Holed up in a mosque with fewer than a dozen supporters, Abul Abed thought the end was near.
"The blue carpet was soaked red with blood," he recalled. Then the imam of the mosque called in American help.
A friendship was born.
Now Abul Abed, a swaggering former major in the Iraqi army and reputedly a top leader in the influential Islamic Army insurgent group, reigns supreme in Amariyah -- with considerable help from the U.S. military.
Still wearing the White Lion's pistol tucked into his belt, he commands his own 600-member paramilitary force, called the Knights of Mesopotamia. He receives $460,000 a month from the U.S. military to pay, arm and equip them. They wear crisp olive green uniforms with smart red and yellow badges bearing the Knights' horse-head logo. They are well-armed, and some have flak jackets.
But they don't really need them. Since the Knights drove Al Qaeda out of Amariyah after a two-month battle, the neighborhood has become largely safe.
"You can move freely in Amariyah at any time of the day or night," Abul Abed said. "You can even see women without head scarves, wearing tight jeans!"
An 'Awakening' in Iraq
Men like Abul Abed have helped change the face of the war. Following in the footsteps of the late Abdul-Sattar Abu Risha, the tribal leader who led the Sunni revolt that drove Al Qaeda from the base of its operations in Iraq's Anbar province, more than 70,000 people, most of them Sunnis, in 148 groups have joined in the so-called Awakening, or Sahwa, movement, according to the U.S. military, turning against Al Qaeda and turning to the Americans for help.
Since Abul Abed's fight in Amariyah, some of the most feared Baghdad neighborhoods, including Abu Ghraib, Fadhil, Ghazaliyah, Dora and Adhamiyah, have followed suit, forming their own brigades of Knights, welcoming the U.S. military and receiving U.S. money.
Abul Abed is coy about his insurgent connections. He gave his real name as Saad Erebi Ghaffouri al-Obaidi, though he is known across Baghdad as Abul Abed. U.S. officials, Amariyah residents and Sunni leaders say he was a prominent commander in the Islamic Army. He described himself as a former Iraqi army major who "went into business" after the regime fell. He won't say what business.
But he acknowledged that many of his men once fought Americans and now work closely with them.
"They recognize that they made a big mistake," he said. "They realize that they were on the wrong path and that they wasted many chances with what they did."
The implications of creating this network of trained, armed paramilitaries loyal not to the government but to an assortment of local strongmen have yet to be played out. U.S. officials said they are relieved that the revolution within the Sunni community has helped to sharply reduce the number of attacks. According to the military, attacks in Iraq fell 55 percent between March and October.
The U.S. wants to absorb the Sunnis who have joined the Awakening movement into the Iraqi security forces, but so far the Shiite-led government has hesitated, concerned that they will one day turn against the government. If the government continues to frustrate the Sunnis, U.S. officials are concerned their new allies could go back to the insurgency.
"That's the big intangible that makes me nervous," said Col. Martin Stanton, who oversees the reconciliation and engagement effort. If there is no progress on getting the paramilitaries regular jobs with the security forces and delivering services to Sunni areas, Sunni frustrations will continue to mount, he said.
"The question is, what's the break point? ... How long before people start getting sick of it and start checking out?" he said.
'Americans are our protectors'
Abul Abed said the Sunni revolution has gone too far for that.
"Americans are our protectors and saviors," he said.
The real enemy of Iraq, he says, now is Iran. He pulled out his mobile phone to show pictures he has saved of the bodies of his four brothers, who were kidnapped and murdered in 2005 by what he suspects was a Shiite death squad with ties to Iran. One of them had a nail driven into his head. Another was missing a hand.
"Even animals wouldn't do that," he said, his face darkening. "Iran is so deeply infiltrated in Iraq, the problem here still cannot be solved. Iran wants to demolish us. If the Americans leave, then you can count Iraq as a second Tehran."
Tuesday, November 20, 2007
US agrees to new talks with Iran
By MATTHEW LEE, Associated Press Writer
November 20, 2007
The United States has accepted an Iraqi proposal to hold new talks with Iran about the security situation in Iraq, the State Department said Tuesday.
The as-yet unscheduled meeting would be the fourth round of talks between Ryan Crocker, the U.S. ambassador to Iraq, and his Iranian counterpart. Two previous sessions ended inconclusively with Iran rejecting U.S. allegations that Iran is supporting Shia insurgent groups in Iraq by providing bombmaking material responsible for the deaths of American troops.
Amid a decline in attacks involving such devices, State Department spokesman Sean McCormack said Washington had responded favorably to a suggestion from the Iraqi government that it was now "the appropriate time" for another meeting at the ambassadorial level in Baghdad.
"We said 'yes,' that we would agree to that," he told reporters, adding that the United States had informed Iran of its acceptance through diplomatic channels that normally involve Swiss intermediaries.
"We have communicated to the Iranian government that we are agreeable to that," McCormack said. "We have not yet received back a reply, either directly or via the Iraqis."
"We are open to using this channel as a way of talking directly about important issues concerning security in Iraq. We don't yet have a date, and as soon as I am aware of a date, I'll try to convey that to you," he said.
Earlier Tuesday in Tehran, the state Iranian news agency IRNA reported that Iran also accepted the offer for new continued talks with the United States and that Foreign Minister Manouchehr Mottaki had welcomed the opportunity.
"Iran will give a positive response to this request," Mottaki was quoted as saying by IRNA, adding that the talks will be held "in the near future. These talks ... are held within the framework of helping Iraqi stability and security and its people."
Meanwhile, the Iraqi government welcomed the agreement by the U.S. and Iran, although it said no date has been set for the meeting.
"The Iraqi government hopes that the new round of talks among the three countries will be fruitful and yield tangible steps that lead to mutual understanding," government spokesman Ali al-Dabbagh said in a brief statement.
He added that the meeting would help the security and stability of Iraq plus reduce tension in the region.
The developments came against a background of U.S. military reports that violence is down 55 percent in Iraq since a U.S.-Iraqi security operation began this summer.
Iran has long been accused by Washington of training, arming and funding Shiite extremists inside Iraq to kill American troops. But in recent weeks, U.S. officials have said Tehran appears to have halted the flow of arms across its border into Iraq.
Iran has denied the arms-funneling accusations, insisting that it is doing its best to help stabilize its embattled western neighbor.
Mottaki said Iran's consent for a fourth round of talks comes after Tehran received an official U.S. request for talks through the Swiss Embassy, which looks after American interests in Iran.
McCormack denied that the United States had proposed the meeting, but had responded to the Iraqi request through the Swiss.
Switzerland looks after U.S. interests in Tehran in the absence of formal diplomatic relations between Tehran and Washington, which were severed after the 1979 Islamic Revolution and U.S. Embassy takeover by militants in Tehran. The Revolution toppled the pro-Western Shah Mohammad Reza Pahlavi and installed a hard-line Islamic government.
Crocker and his Iranian counterpart Hassan Kazemi Qomi have held three rounds of talks in Baghdad since May on Iraqi but without much apparent headway.
The first round in May broke a 27-year diplomatic freeze between Iran and the United States. Crocker and Qomi agreed during their July talks to set up a security subcommittee to carry forward talks on restoring stability in Iraq.
The subcommittee met in August for the first time in Baghdad and agreed to meet again at a later date but no more information is available on the outcome of those talks.
Iran has also accused the U.S. of providing "support for veteran (militant) elements and giving terrorists a free hand in specific locations in Iraq."
Tehran insists that it supports Nouri al-Maliki's government to establish security and bring stability to Iraq, an apparent reference to the political crisis surrounding the Shiite leader.
Iran holds considerable sway in Iraq, where the majority of the population is also Shiite Muslim and where Shiite political parties have close ties to Tehran.
By MATTHEW LEE, Associated Press Writer
November 20, 2007
The United States has accepted an Iraqi proposal to hold new talks with Iran about the security situation in Iraq, the State Department said Tuesday.
The as-yet unscheduled meeting would be the fourth round of talks between Ryan Crocker, the U.S. ambassador to Iraq, and his Iranian counterpart. Two previous sessions ended inconclusively with Iran rejecting U.S. allegations that Iran is supporting Shia insurgent groups in Iraq by providing bombmaking material responsible for the deaths of American troops.
Amid a decline in attacks involving such devices, State Department spokesman Sean McCormack said Washington had responded favorably to a suggestion from the Iraqi government that it was now "the appropriate time" for another meeting at the ambassadorial level in Baghdad.
"We said 'yes,' that we would agree to that," he told reporters, adding that the United States had informed Iran of its acceptance through diplomatic channels that normally involve Swiss intermediaries.
"We have communicated to the Iranian government that we are agreeable to that," McCormack said. "We have not yet received back a reply, either directly or via the Iraqis."
"We are open to using this channel as a way of talking directly about important issues concerning security in Iraq. We don't yet have a date, and as soon as I am aware of a date, I'll try to convey that to you," he said.
Earlier Tuesday in Tehran, the state Iranian news agency IRNA reported that Iran also accepted the offer for new continued talks with the United States and that Foreign Minister Manouchehr Mottaki had welcomed the opportunity.
"Iran will give a positive response to this request," Mottaki was quoted as saying by IRNA, adding that the talks will be held "in the near future. These talks ... are held within the framework of helping Iraqi stability and security and its people."
Meanwhile, the Iraqi government welcomed the agreement by the U.S. and Iran, although it said no date has been set for the meeting.
"The Iraqi government hopes that the new round of talks among the three countries will be fruitful and yield tangible steps that lead to mutual understanding," government spokesman Ali al-Dabbagh said in a brief statement.
He added that the meeting would help the security and stability of Iraq plus reduce tension in the region.
The developments came against a background of U.S. military reports that violence is down 55 percent in Iraq since a U.S.-Iraqi security operation began this summer.
Iran has long been accused by Washington of training, arming and funding Shiite extremists inside Iraq to kill American troops. But in recent weeks, U.S. officials have said Tehran appears to have halted the flow of arms across its border into Iraq.
Iran has denied the arms-funneling accusations, insisting that it is doing its best to help stabilize its embattled western neighbor.
Mottaki said Iran's consent for a fourth round of talks comes after Tehran received an official U.S. request for talks through the Swiss Embassy, which looks after American interests in Iran.
McCormack denied that the United States had proposed the meeting, but had responded to the Iraqi request through the Swiss.
Switzerland looks after U.S. interests in Tehran in the absence of formal diplomatic relations between Tehran and Washington, which were severed after the 1979 Islamic Revolution and U.S. Embassy takeover by militants in Tehran. The Revolution toppled the pro-Western Shah Mohammad Reza Pahlavi and installed a hard-line Islamic government.
Crocker and his Iranian counterpart Hassan Kazemi Qomi have held three rounds of talks in Baghdad since May on Iraqi but without much apparent headway.
The first round in May broke a 27-year diplomatic freeze between Iran and the United States. Crocker and Qomi agreed during their July talks to set up a security subcommittee to carry forward talks on restoring stability in Iraq.
The subcommittee met in August for the first time in Baghdad and agreed to meet again at a later date but no more information is available on the outcome of those talks.
Iran has also accused the U.S. of providing "support for veteran (militant) elements and giving terrorists a free hand in specific locations in Iraq."
Tehran insists that it supports Nouri al-Maliki's government to establish security and bring stability to Iraq, an apparent reference to the political crisis surrounding the Shiite leader.
Iran holds considerable sway in Iraq, where the majority of the population is also Shiite Muslim and where Shiite political parties have close ties to Tehran.
Baghdad Starts to Exhale as Security Improves
By DAMIEN CAVE and ALISSA J. RUBIN
November 20, 2007
NYT
BAGHDAD, Nov. 19 — Five months ago, Suhaila al-Aasan lived in an oxygen tank factory with her husband and two sons, convinced that they would never go back to their apartment in Dora, a middle-class neighborhood in southern Baghdad.
Today she is home again, cooking by a sunlit window, sleeping beneath her favorite wedding picture. And yet, she and her family are remarkably alone. The half-dozen other apartments in her building echo with emptiness and, on most days, Iraqi soldiers are the only neighbors she sees.
“I feel happy,” she said, standing in her bedroom, between a flowered bedspread and a bullet hole in the wall. “But my happiness is not complete. We need more people to come back. We need more people to feel safe.”
Mrs. Aasan, 45, a Shiite librarian with an easy laugh, is living at the far end of Baghdad’s tentative recovery. She is one of many Iraqis who in recent weeks have begun to test where they can go and what they can do when fear no longer controls their every move.
The security improvements in most neighborhoods are real. Days now pass without a car bomb, after a high of 44 in the city in February. The number of bodies appearing on Baghdad’s streets has plummeted to about 5 a day, from as many as 35 eight months ago, and suicide bombings across Iraq fell to 16 in October, half the number of last summer and down sharply from a recent peak of 59 in March, the American military says.
As a result, for the first time in nearly two years, people are moving with freedom around much of this city. In more than 50 interviews across Baghdad, it became clear that while there were still no-go zones, more Iraqis now drive between Sunni and Shiite areas for work, shopping or school, a few even after dark. In the most stable neighborhoods of Baghdad, some secular women are also dressing as they wish. Wedding bands are playing in public again, and at a handful of once shuttered liquor stores customers now line up outside in a collective rebuke to religious vigilantes from the Shiite Mahdi Army.
Iraqis are clearly surprised and relieved to see commerce and movement finally increase, five months after an extra 30,000 American troops arrived in the country. But the depth and sustainability of the changes remain open to question.
By one revealing measure of security — whether people who fled their home have returned — the gains are still limited. About 20,000 Iraqis have gone back to their Baghdad homes, a fraction of the more than 4 million who fled nationwide, and the 1.4 million people in Baghdad who are still internally displaced, according to a recent Iraqi Red Crescent Society survey.
Iraqis sound uncertain about the future, but defiantly optimistic. Many Baghdad residents seem to be willing themselves to normalcy, ignoring risks and suppressing fears to reclaim their lives. Pushing past boundaries of sect and neighborhood, they said they were often pleasantly surprised and kept going; in other instances, traumatic memories or a dark look from a stranger were enough to tug them back behind closed doors.
Mrs. Aasan’s experience, as a member of the brave minority of Iraqis who have returned home, shows both the extent of the improvements and their limits.
She works at an oasis of calm: a small library in eastern Baghdad, where on several recent afternoons, about a dozen children bounced through the rooms, reading, laughing, learning English and playing music on a Yamaha keyboard.
Brightly colored artwork hangs on the walls: images of gardens, green and lush; Iraqi soldiers smiling; and Arabs holding hands with Kurds.
It is all deliberately idyllic. Mrs. Aasan and the other two women at the library have banned violent images, guiding the children toward portraits of hope. The children are also not allowed to discuss the violence they have witnessed.
“Our aim is to fight terrorism,” Mrs. Aasan said. “We want them to overcome their personal experiences.”
The library closed last year because parents would not let their children out of sight. Now, most of the children walk on their own from homes nearby — another sign of the city’s improved ease of movement.
But there are scars in the voice of a ponytailed little girl who said she had less time for fun since her father was incapacitated by a bomb. (“We try to make him feel better and feel less pain,” she said.) And pain still lingers in the silence of Mrs. Aasan’s 10-year-old son, Abather, who accompanies her wherever she goes.
One day five months ago, when they still lived in Dora, Mrs. Aasan sent Abather to get water from a tank below their apartment. Delaying as boys will do, he followed his soccer ball into the street, where he discovered two dead bodies with their eyeballs torn out. It was not the first corpse he had seen, but for Mrs. Aasan that was enough. “I grabbed him, we got in the car and we drove away,” she said.
After they heard on an Iraqi news program that her section of Dora had improved, she and her husband explored a potential return. They visited and found little damage, except for a bullet hole in their microwave.
Two weeks ago, they moved back to the neighborhood where they had lived since 2003.
“It’s just a rental,” Mrs. Aasan said, as if embarrassed at her connection to such a humble place. “But after all, it’s home.”
In interviews, she and her husband said they felt emboldened by the decline in violence citywide and the visible presence of Iraqi soldiers at a checkpoint a few blocks away.
Still, it was a brave decision, one her immediate neighbors have not yet felt bold enough to make. Mrs. Aasan’s portion of Dora still looks as desolate as a condemned tenement. The trunk of a palm tree covers a section of road where Sunni gunmen once dumped a severed head, and about 200 yards to the right of her building concrete Jersey barriers block a section of homes believed to be booby-trapped with explosives.
“On this street,” she said, standing on her balcony, “many of my neighbors lost relatives.” Then she rushed inside.
Her husband, Fadhel A. Yassen, 49, explained that they had seen several friends killed while they sat outside in the past. He insisted that being back in the apartment was “a victory over fear, a victory over terrorism.”
Yet the achievement remains rare. Many Iraqis say they would still rather leave the country than go home. In Baghdad there are far more families like the Nidhals. The father, who would only identify himself as Abu Nebras (father of Nebras), is Sunni; Hanan, his wife, is a Shiite from Najaf, the center of Shiite religious learning in Iraq. They lived for 17 years in Ghazaliya in western Baghdad until four gunmen from Al Qaeda in Mesopotamia, the homegrown Sunni extremist group that American intelligence agencies say is led by foreigners, showed up at his door last December.
“My sons were armed and they went away but after that, we knew we had only a few hours,” Abu Nebras said. “We were displaced because I was secular and Al Qaeda didn’t like that.”
They took refuge in the middle-class Palestine Street area in the northeastern part of Baghdad, a relatively stable enclave with an atmosphere of tolerance for their mixed marriage. Now with the situation improving across the city, the Nidhal family longs to return to their former home, but they have no idea when, or if, it will be possible.
Another family now lives in their house — the situation faced by about a third of all displaced Iraqis, according to the International Organization for Migration — and it is not clear whether the fragile peace will last. Abu Nebras tested the waters recently, going back to talk with neighbors on his old street for the first time.
He said the Shiites in the northern part of Ghazaliya had told him that the American military’s payments to local Sunni volunteers in the southern, Sunni part of the neighborhood amounted to arming one side.
The Americans describe the volunteers as heroes, part of a larger nationwide campaign known as the Sunni Awakening. But Abu Nebras said he did not trust them. “Some of the Awakening members are just Al Qaeda who have joined them,” he said. “I know them from before.”
With the additional American troops scheduled to depart, the Nidhal family said, Baghdad would be truly safe only when the Iraqi forces were mixed with Sunnis and Shiites operating checkpoints side by side — otherwise the city would remain a patchwork of Sunni and Shiite enclaves. “The police, the army, it has to be Sunni next to Shiite next to Sunni next to Shiite,” Abu Nebras said.
They and other Iraqis also said the government must aggressively help people return to their homes, perhaps by supervising returns block by block. The Nidhal family said they feared the displaced Sunnis in their neighborhood who were furious that Shiites chased them from their houses. “They are so angry, they will kill anyone,” Abu Nebras said.
For now, though, they are trying to enjoy what may be only a temporary respite from violence. One of their sons recently returned to his veterinary studies at a university in Baghdad, and their daughter will start college this winter.
Laughter is also more common now in the Nidhal household — even on once upsetting subjects. At midday, Hanan’s sister, who teaches in a local high school, came home and threw up her hands in exasperation. She had asked her Islamic studies class to bring in something that showed an aspect of Islamic culture. “Two boys told me, ‘I’m going to bring in a portrait of Moktada al-Sadr,’” she said.
She shook her head and chuckled. Mr. Sadr is an anti-American cleric whose militia, the Mahdi Army, has been accused of carrying out much of the displacement and killings of Sunnis in Baghdad. They can joke because they no longer fear that the violence will engulf them.
In longer interviews across Baghdad, the pattern was repeated. Iraqis acknowledged how far their country still needed to go before a return to normalcy, but they also expressed amazement at even the most embryonic signs of recovery.
Mrs. Aasan said she was thrilled and relieved just a few days ago, when her college-aged son got stuck at work after dark and his father managed to pick him up and drive home without being killed.
“Before, when we lived in Dora, after 4 p.m., I wouldn’t let anyone out of the house,” she said.
“They drove back to Dora at 8!” she added, glancing at her husband, who beamed, chest out, like a mountaineer who had scaled Mount Everest. “We really felt that it was a big difference.”
By DAMIEN CAVE and ALISSA J. RUBIN
November 20, 2007
NYT
BAGHDAD, Nov. 19 — Five months ago, Suhaila al-Aasan lived in an oxygen tank factory with her husband and two sons, convinced that they would never go back to their apartment in Dora, a middle-class neighborhood in southern Baghdad.
Today she is home again, cooking by a sunlit window, sleeping beneath her favorite wedding picture. And yet, she and her family are remarkably alone. The half-dozen other apartments in her building echo with emptiness and, on most days, Iraqi soldiers are the only neighbors she sees.
“I feel happy,” she said, standing in her bedroom, between a flowered bedspread and a bullet hole in the wall. “But my happiness is not complete. We need more people to come back. We need more people to feel safe.”
Mrs. Aasan, 45, a Shiite librarian with an easy laugh, is living at the far end of Baghdad’s tentative recovery. She is one of many Iraqis who in recent weeks have begun to test where they can go and what they can do when fear no longer controls their every move.
The security improvements in most neighborhoods are real. Days now pass without a car bomb, after a high of 44 in the city in February. The number of bodies appearing on Baghdad’s streets has plummeted to about 5 a day, from as many as 35 eight months ago, and suicide bombings across Iraq fell to 16 in October, half the number of last summer and down sharply from a recent peak of 59 in March, the American military says.
As a result, for the first time in nearly two years, people are moving with freedom around much of this city. In more than 50 interviews across Baghdad, it became clear that while there were still no-go zones, more Iraqis now drive between Sunni and Shiite areas for work, shopping or school, a few even after dark. In the most stable neighborhoods of Baghdad, some secular women are also dressing as they wish. Wedding bands are playing in public again, and at a handful of once shuttered liquor stores customers now line up outside in a collective rebuke to religious vigilantes from the Shiite Mahdi Army.
Iraqis are clearly surprised and relieved to see commerce and movement finally increase, five months after an extra 30,000 American troops arrived in the country. But the depth and sustainability of the changes remain open to question.
By one revealing measure of security — whether people who fled their home have returned — the gains are still limited. About 20,000 Iraqis have gone back to their Baghdad homes, a fraction of the more than 4 million who fled nationwide, and the 1.4 million people in Baghdad who are still internally displaced, according to a recent Iraqi Red Crescent Society survey.
Iraqis sound uncertain about the future, but defiantly optimistic. Many Baghdad residents seem to be willing themselves to normalcy, ignoring risks and suppressing fears to reclaim their lives. Pushing past boundaries of sect and neighborhood, they said they were often pleasantly surprised and kept going; in other instances, traumatic memories or a dark look from a stranger were enough to tug them back behind closed doors.
Mrs. Aasan’s experience, as a member of the brave minority of Iraqis who have returned home, shows both the extent of the improvements and their limits.
She works at an oasis of calm: a small library in eastern Baghdad, where on several recent afternoons, about a dozen children bounced through the rooms, reading, laughing, learning English and playing music on a Yamaha keyboard.
Brightly colored artwork hangs on the walls: images of gardens, green and lush; Iraqi soldiers smiling; and Arabs holding hands with Kurds.
It is all deliberately idyllic. Mrs. Aasan and the other two women at the library have banned violent images, guiding the children toward portraits of hope. The children are also not allowed to discuss the violence they have witnessed.
“Our aim is to fight terrorism,” Mrs. Aasan said. “We want them to overcome their personal experiences.”
The library closed last year because parents would not let their children out of sight. Now, most of the children walk on their own from homes nearby — another sign of the city’s improved ease of movement.
But there are scars in the voice of a ponytailed little girl who said she had less time for fun since her father was incapacitated by a bomb. (“We try to make him feel better and feel less pain,” she said.) And pain still lingers in the silence of Mrs. Aasan’s 10-year-old son, Abather, who accompanies her wherever she goes.
One day five months ago, when they still lived in Dora, Mrs. Aasan sent Abather to get water from a tank below their apartment. Delaying as boys will do, he followed his soccer ball into the street, where he discovered two dead bodies with their eyeballs torn out. It was not the first corpse he had seen, but for Mrs. Aasan that was enough. “I grabbed him, we got in the car and we drove away,” she said.
After they heard on an Iraqi news program that her section of Dora had improved, she and her husband explored a potential return. They visited and found little damage, except for a bullet hole in their microwave.
Two weeks ago, they moved back to the neighborhood where they had lived since 2003.
“It’s just a rental,” Mrs. Aasan said, as if embarrassed at her connection to such a humble place. “But after all, it’s home.”
In interviews, she and her husband said they felt emboldened by the decline in violence citywide and the visible presence of Iraqi soldiers at a checkpoint a few blocks away.
Still, it was a brave decision, one her immediate neighbors have not yet felt bold enough to make. Mrs. Aasan’s portion of Dora still looks as desolate as a condemned tenement. The trunk of a palm tree covers a section of road where Sunni gunmen once dumped a severed head, and about 200 yards to the right of her building concrete Jersey barriers block a section of homes believed to be booby-trapped with explosives.
“On this street,” she said, standing on her balcony, “many of my neighbors lost relatives.” Then she rushed inside.
Her husband, Fadhel A. Yassen, 49, explained that they had seen several friends killed while they sat outside in the past. He insisted that being back in the apartment was “a victory over fear, a victory over terrorism.”
Yet the achievement remains rare. Many Iraqis say they would still rather leave the country than go home. In Baghdad there are far more families like the Nidhals. The father, who would only identify himself as Abu Nebras (father of Nebras), is Sunni; Hanan, his wife, is a Shiite from Najaf, the center of Shiite religious learning in Iraq. They lived for 17 years in Ghazaliya in western Baghdad until four gunmen from Al Qaeda in Mesopotamia, the homegrown Sunni extremist group that American intelligence agencies say is led by foreigners, showed up at his door last December.
“My sons were armed and they went away but after that, we knew we had only a few hours,” Abu Nebras said. “We were displaced because I was secular and Al Qaeda didn’t like that.”
They took refuge in the middle-class Palestine Street area in the northeastern part of Baghdad, a relatively stable enclave with an atmosphere of tolerance for their mixed marriage. Now with the situation improving across the city, the Nidhal family longs to return to their former home, but they have no idea when, or if, it will be possible.
Another family now lives in their house — the situation faced by about a third of all displaced Iraqis, according to the International Organization for Migration — and it is not clear whether the fragile peace will last. Abu Nebras tested the waters recently, going back to talk with neighbors on his old street for the first time.
He said the Shiites in the northern part of Ghazaliya had told him that the American military’s payments to local Sunni volunteers in the southern, Sunni part of the neighborhood amounted to arming one side.
The Americans describe the volunteers as heroes, part of a larger nationwide campaign known as the Sunni Awakening. But Abu Nebras said he did not trust them. “Some of the Awakening members are just Al Qaeda who have joined them,” he said. “I know them from before.”
With the additional American troops scheduled to depart, the Nidhal family said, Baghdad would be truly safe only when the Iraqi forces were mixed with Sunnis and Shiites operating checkpoints side by side — otherwise the city would remain a patchwork of Sunni and Shiite enclaves. “The police, the army, it has to be Sunni next to Shiite next to Sunni next to Shiite,” Abu Nebras said.
They and other Iraqis also said the government must aggressively help people return to their homes, perhaps by supervising returns block by block. The Nidhal family said they feared the displaced Sunnis in their neighborhood who were furious that Shiites chased them from their houses. “They are so angry, they will kill anyone,” Abu Nebras said.
For now, though, they are trying to enjoy what may be only a temporary respite from violence. One of their sons recently returned to his veterinary studies at a university in Baghdad, and their daughter will start college this winter.
Laughter is also more common now in the Nidhal household — even on once upsetting subjects. At midday, Hanan’s sister, who teaches in a local high school, came home and threw up her hands in exasperation. She had asked her Islamic studies class to bring in something that showed an aspect of Islamic culture. “Two boys told me, ‘I’m going to bring in a portrait of Moktada al-Sadr,’” she said.
She shook her head and chuckled. Mr. Sadr is an anti-American cleric whose militia, the Mahdi Army, has been accused of carrying out much of the displacement and killings of Sunnis in Baghdad. They can joke because they no longer fear that the violence will engulf them.
In longer interviews across Baghdad, the pattern was repeated. Iraqis acknowledged how far their country still needed to go before a return to normalcy, but they also expressed amazement at even the most embryonic signs of recovery.
Mrs. Aasan said she was thrilled and relieved just a few days ago, when her college-aged son got stuck at work after dark and his father managed to pick him up and drive home without being killed.
“Before, when we lived in Dora, after 4 p.m., I wouldn’t let anyone out of the house,” she said.
“They drove back to Dora at 8!” she added, glancing at her husband, who beamed, chest out, like a mountaineer who had scaled Mount Everest. “We really felt that it was a big difference.”
fighting words: A wartime lexicon.
Something To Give Thanks ForGood news from Iraq.
By Christopher Hitchens
Posted Monday, Nov. 19, 2007, at 10:47 AM ET
A few weeks ago, in Britain's Prospect magazine, the paper's foreign editor, Bartle Bull, published a bold essay saying that the high tide of violence in Iraq was essentially behind us and that the ebb had disclosed some interesting things. First, the Iraqi people as a whole had looked into the abyss of civil war and had drawn back from the brink. Second, the majority of Sunni Arabs had realized that their involvement with al-Qaida forces was not a patriotic "insurgency" but was instead a horrific mistake and had exposed their society to the most sadistic and degraded element in the entire Muslim world. Third, the Shiite militias had also come to appreciate that they had overplayed their hand. There remained, according to Bull, an appalling level of criminal and antisocial violence, but essentially Iraq was agreed on a rough new dispensation whereby ethnic and social compromise would determine events and where subversive outside interference would not be welcomed.
I read the article and admired its nerve, but I didn't really choose to believe it. It didn't appear to me that things had yet bottomed out, and it didn't seem believable that the essential sectarianism of the Maliki regime, illustrated so graphically by its crude execution of Saddam Hussein, could be explained away. Worst of all, the exodus of so many secular or qualified or educated Iraqis (perhaps as many as 2.5 million exiles living in Syria or Jordan or farther away) seemed to threaten a long period of social and cultural decline, a sort of Road Warrior situation in which only the parties of God would benefit.
Keeping all this in mind, it nonetheless does begin to look as if Iraqis may in fact have started to recover command over their own destiny, and also as if America may have helped them to do so. The surge is only a part of this story. Quite obviously, if the Sunnis of Anbar Province had not of their own volition turned on the hideous forces of al-Qaida, then no amount of extra troops could have made the difference. But some combination of the two things appears to have altered the chemistry, and not just in that province, and all the reporters and soldiers I can get hold of (who include some direly skeptical people in both categories) seem agreed on one thing: The forces of Abu Musab al-Zarqawi stink in the nostrils of the Arab world, and have been—here I borrow some words of Thomas Paine—"in point of generalship … outwitted, and in point of fortitude outdone." Bin Ladenism in Iraq has been dealt a stinging defeat. Surely this is something to celebrate.
For the rest, one has to piece together an anecdote here and a bit of patchwork there. Last weekend, the London Sunday Times had this to say under the byline of Hala Jaber:
Most of Baghdad's street lamps went on last week for the first time in years. It was a small improvement in the quality of life, but in the twinkling light the Iraqi capital looked a little less menacing and a lot more familiar. Ahmed Chalabi, the former darling of American neoconservatives who lobbied hard for the overthrow of Saddam and later became deputy prime minister, toured the city with quiet satisfaction. … Earlier this month Nouri al-Maliki, the Iraqi prime minister, put Chalabi in charge of restoring essential services to the capital.
Aha, you say, the Murdoch press will never give up on its favorite Iraqi stooge. All right, try this from the Los Angeles Times of Nov. 13:
The first stop on [Chalabi's] itinerary this day is the compound of Sheik Nadeem Hatim Sultan, leader of the Tamimi tribe in the Taji region north of the capital. Until two months ago, the area was a hot spot for ethnic violence and an outpost for the insurgent group Al Qaeda in Iraq. U.S.-led troops routed insurgents under the new security push, and tribal sheiks fought to regain control of their community. Sectarian fires have cooled now and residents are eager to rebuild the area's economy, fueled by lush farmland and about 15 textile factories, and to restore its public services. Chalabi is received like royalty.
To have savaged and discredited al-Qaida in an open fight and to have taken down a fascist Baath Party, which betrayed its pseudosecularism by forging an alliance with al-Qaida, is to have scored an impressive victory on any terms. However, the price of this achievement was often the indulgence of some excessive conduct on the part of the Shiite parties and militias. The next stage must be the reining-in of the Sadrists and the discouragement of Iranian support for such groups. Again, one hardly dares to hope, but there are some promising signs. The Maliki government is not using undue haste or sectarian demagogy in the case of Sultan Hashim Ahmed al-Tai, Saddam Hussein's former defense minister, sentenced to death but not yet executed. Many Sunni Kurds and Arabs, either opposed to the death penalty on principle or opposed in this case, seem for now to have prevailed. And "the cabinet," according to the Nov. 18 New York Times, "has sent legislation to the Parliament softening the de-Baathification law that had prevented former Baathists' working in government jobs." I wonder how many people, reading that ordinary sentence about "the cabinet" and "the Parliament," as reported also in independent Iraqi media, have any idea what it means when compared with the insane proceedings of the totalitarian abattoir state that was Iraq until 2003.
As I began by saying, I am not at all certain that any of this apparently good news is really genuine or will be really lasting. However, I am quite sure both that it could be true and that it would be wonderful if it were to be true. What worries me about the reaction of liberals and Democrats is not the skepticism, which is pardonable, but the dank and sinister impression they give that the worse the tidings, the better they would be pleased. The latter mentality isn't pardonable and ought not to be pardoned, either.
Something To Give Thanks ForGood news from Iraq.
By Christopher Hitchens
Posted Monday, Nov. 19, 2007, at 10:47 AM ET
A few weeks ago, in Britain's Prospect magazine, the paper's foreign editor, Bartle Bull, published a bold essay saying that the high tide of violence in Iraq was essentially behind us and that the ebb had disclosed some interesting things. First, the Iraqi people as a whole had looked into the abyss of civil war and had drawn back from the brink. Second, the majority of Sunni Arabs had realized that their involvement with al-Qaida forces was not a patriotic "insurgency" but was instead a horrific mistake and had exposed their society to the most sadistic and degraded element in the entire Muslim world. Third, the Shiite militias had also come to appreciate that they had overplayed their hand. There remained, according to Bull, an appalling level of criminal and antisocial violence, but essentially Iraq was agreed on a rough new dispensation whereby ethnic and social compromise would determine events and where subversive outside interference would not be welcomed.
I read the article and admired its nerve, but I didn't really choose to believe it. It didn't appear to me that things had yet bottomed out, and it didn't seem believable that the essential sectarianism of the Maliki regime, illustrated so graphically by its crude execution of Saddam Hussein, could be explained away. Worst of all, the exodus of so many secular or qualified or educated Iraqis (perhaps as many as 2.5 million exiles living in Syria or Jordan or farther away) seemed to threaten a long period of social and cultural decline, a sort of Road Warrior situation in which only the parties of God would benefit.
Keeping all this in mind, it nonetheless does begin to look as if Iraqis may in fact have started to recover command over their own destiny, and also as if America may have helped them to do so. The surge is only a part of this story. Quite obviously, if the Sunnis of Anbar Province had not of their own volition turned on the hideous forces of al-Qaida, then no amount of extra troops could have made the difference. But some combination of the two things appears to have altered the chemistry, and not just in that province, and all the reporters and soldiers I can get hold of (who include some direly skeptical people in both categories) seem agreed on one thing: The forces of Abu Musab al-Zarqawi stink in the nostrils of the Arab world, and have been—here I borrow some words of Thomas Paine—"in point of generalship … outwitted, and in point of fortitude outdone." Bin Ladenism in Iraq has been dealt a stinging defeat. Surely this is something to celebrate.
For the rest, one has to piece together an anecdote here and a bit of patchwork there. Last weekend, the London Sunday Times had this to say under the byline of Hala Jaber:
Most of Baghdad's street lamps went on last week for the first time in years. It was a small improvement in the quality of life, but in the twinkling light the Iraqi capital looked a little less menacing and a lot more familiar. Ahmed Chalabi, the former darling of American neoconservatives who lobbied hard for the overthrow of Saddam and later became deputy prime minister, toured the city with quiet satisfaction. … Earlier this month Nouri al-Maliki, the Iraqi prime minister, put Chalabi in charge of restoring essential services to the capital.
Aha, you say, the Murdoch press will never give up on its favorite Iraqi stooge. All right, try this from the Los Angeles Times of Nov. 13:
The first stop on [Chalabi's] itinerary this day is the compound of Sheik Nadeem Hatim Sultan, leader of the Tamimi tribe in the Taji region north of the capital. Until two months ago, the area was a hot spot for ethnic violence and an outpost for the insurgent group Al Qaeda in Iraq. U.S.-led troops routed insurgents under the new security push, and tribal sheiks fought to regain control of their community. Sectarian fires have cooled now and residents are eager to rebuild the area's economy, fueled by lush farmland and about 15 textile factories, and to restore its public services. Chalabi is received like royalty.
To have savaged and discredited al-Qaida in an open fight and to have taken down a fascist Baath Party, which betrayed its pseudosecularism by forging an alliance with al-Qaida, is to have scored an impressive victory on any terms. However, the price of this achievement was often the indulgence of some excessive conduct on the part of the Shiite parties and militias. The next stage must be the reining-in of the Sadrists and the discouragement of Iranian support for such groups. Again, one hardly dares to hope, but there are some promising signs. The Maliki government is not using undue haste or sectarian demagogy in the case of Sultan Hashim Ahmed al-Tai, Saddam Hussein's former defense minister, sentenced to death but not yet executed. Many Sunni Kurds and Arabs, either opposed to the death penalty on principle or opposed in this case, seem for now to have prevailed. And "the cabinet," according to the Nov. 18 New York Times, "has sent legislation to the Parliament softening the de-Baathification law that had prevented former Baathists' working in government jobs." I wonder how many people, reading that ordinary sentence about "the cabinet" and "the Parliament," as reported also in independent Iraqi media, have any idea what it means when compared with the insane proceedings of the totalitarian abattoir state that was Iraq until 2003.
As I began by saying, I am not at all certain that any of this apparently good news is really genuine or will be really lasting. However, I am quite sure both that it could be true and that it would be wonderful if it were to be true. What worries me about the reaction of liberals and Democrats is not the skepticism, which is pardonable, but the dank and sinister impression they give that the worse the tidings, the better they would be pleased. The latter mentality isn't pardonable and ought not to be pardoned, either.
Sunday, November 18, 2007
China fears devastation to exports
By Jamil Anderlini in Beijing
Published: November 16 2007 02:00 | Last updated: November 16 2007 02:00
ft.com
China's commerce ministry warned yesterday that a slowing US economy would trigger a drop in Chinese exports that would mark a "turning point" for China's rapid economic growth.
A global economic slowdown stemming from problems in the US subprime mortgage market and the resulting credit squeeze "will be the biggest challenge to China's economy next year", a report from the ministry's policy research department said.
The report is Beijing's first public comment on what repercussions it expects from the global credit crisis and a sign that the government does not support the view that Asian growth has "decoupled" from the US.
"If demand in the US drops further, Chinese exporters will be devastated by a rapid and continuous fall in orders," the report said.
Exports account for more than a third of China's economic growth and 10 per cent of overall GDP, a radically different situation from just four years ago, when exports contributed nothing to headline growth figures.
Huang Yiping, chief Asia economist for Citigroup, said: "I agree with the government that a marked slowdown in the US would be very bad for China.
"We haven't seen over-capacity or a so-called hard landing in China because it has been able to export all its excess capacity until now."
The ministry's report was pessimistic about the chances of avoiding a US and global slowdown, pointing out that although central banks in the US, Europe and Japan had taken numerous steps to alleviate the credit crisis the situation had continued to deteriorate and "panic in the credit market remains".
The US receives a fifth of all Chinese exports, making it the second largest destination for Chinese-made goods after the European Union.
China's central bank estimates that every 1 per cent drop in US economic growth translates into a 6 per cent fall in Chinese exports.
Exports to the US have slowed significantly since the start of the year, dropping from a 20.4 per cent year-on-year rise in the first quarter to a 15.6 per cent increase in the second. Growth fell to 12.4 per cent in the third quarter following the eruption of subprime loan problems.
The ministry said a combination of falling US interest rates and rising Chinese rates was limiting Beijing's ability to rein in soaring property and stock market prices and inflation was running at its highest level in a decade.
It added that continued turmoil in global financial markets could encourage greater capital inflows to China, straining the country's financial and regulatory system and increasing inflationary pressure.
While potentially devastating for Chinese exports, a US slowdown could help reduce China's soaring trade surplus, which hit a monthly high of $27bn (€18bn, £13bn) in October, having increased more than 59 per cent to $212.4bn in the first 10 months from a year earlier.
The US reported a $232.5bn trade deficit with China last year, its biggest ever with any country.
By Jamil Anderlini in Beijing
Published: November 16 2007 02:00 | Last updated: November 16 2007 02:00
ft.com
China's commerce ministry warned yesterday that a slowing US economy would trigger a drop in Chinese exports that would mark a "turning point" for China's rapid economic growth.
A global economic slowdown stemming from problems in the US subprime mortgage market and the resulting credit squeeze "will be the biggest challenge to China's economy next year", a report from the ministry's policy research department said.
The report is Beijing's first public comment on what repercussions it expects from the global credit crisis and a sign that the government does not support the view that Asian growth has "decoupled" from the US.
"If demand in the US drops further, Chinese exporters will be devastated by a rapid and continuous fall in orders," the report said.
Exports account for more than a third of China's economic growth and 10 per cent of overall GDP, a radically different situation from just four years ago, when exports contributed nothing to headline growth figures.
Huang Yiping, chief Asia economist for Citigroup, said: "I agree with the government that a marked slowdown in the US would be very bad for China.
"We haven't seen over-capacity or a so-called hard landing in China because it has been able to export all its excess capacity until now."
The ministry's report was pessimistic about the chances of avoiding a US and global slowdown, pointing out that although central banks in the US, Europe and Japan had taken numerous steps to alleviate the credit crisis the situation had continued to deteriorate and "panic in the credit market remains".
The US receives a fifth of all Chinese exports, making it the second largest destination for Chinese-made goods after the European Union.
China's central bank estimates that every 1 per cent drop in US economic growth translates into a 6 per cent fall in Chinese exports.
Exports to the US have slowed significantly since the start of the year, dropping from a 20.4 per cent year-on-year rise in the first quarter to a 15.6 per cent increase in the second. Growth fell to 12.4 per cent in the third quarter following the eruption of subprime loan problems.
The ministry said a combination of falling US interest rates and rising Chinese rates was limiting Beijing's ability to rein in soaring property and stock market prices and inflation was running at its highest level in a decade.
It added that continued turmoil in global financial markets could encourage greater capital inflows to China, straining the country's financial and regulatory system and increasing inflationary pressure.
While potentially devastating for Chinese exports, a US slowdown could help reduce China's soaring trade surplus, which hit a monthly high of $27bn (€18bn, £13bn) in October, having increased more than 59 per cent to $212.4bn in the first 10 months from a year earlier.
The US reported a $232.5bn trade deficit with China last year, its biggest ever with any country.
China pulls out of UN meeting on sanctions
By Daniel Dombey in Washington
Published: November 17 2007 02:00 | Last updated: November 17 2007 02:00
ft.com
China has pulled out of a meeting to discuss new sanctions on Iran, European diplomats said yesterday, highlighting the obstacles western powers face in their quest to increase pressure on Tehran over its nuclear programme.
The US had wanted to agree a set of prospective measures by the end of this month, which could be quickly taken to the United Nations Security Council if Iran failed to comply with UN demands to rein in its nuclear programme.
But China's decision not to participate in the scheduled meeting next week of political directors from the Security Council's five permanent members, plus Germany, means that no such agreement is likely to be in place by that time. The meeting is now unlikely to take place next week.
"It's pretty well understood why the Chinese have postponed," said a British official. "It was a mixture of genuine diary difficulties coupled with the track record of resistance on their part to moving swiftly towards an outcome."
This comes despite an agreement among the big powers in September to "finalise a text" on new sanctions and bring it to a vote at the Security Council, unless two international reports assessed that Iran had made progress on complying with UN demands.
The first of those reports, by Mohamed ElBaradei, head of the International Atomic Energy Agency, said this week Iran had provided new information about the nuclear programme's past, but the agency's current information about the programme was "diminishing". The second report, by Javier Solana, EU foreign policy chief, is due this month.
"If both reports show that there is no progress or political outcome then we are going for a further resolution," said a French official. "We prefer action at the UN but we are also ready to pursue measures at the European Union." Germany also described Mr ElBaradei's report as "on the whole . . . not encouraging".
However, China and Russia have consistently been reluctant to impose additional sanctions on Tehran, and have instead encouraged Mr ElBaradei in his efforts to broker a deal with Iran on disclosing more about its nuclear past.
Yesterday, some diplomats said that without further progress, the US and the EU could seek to take a new resolution to the Security Council before securing the backing of Moscow and Beijing - a high risk approach.
Britain and France also face difficulties in persuading the EU to agree sanctions, because of reservations among Germany, Spain and Italy about proceeding with unilateral steps that go beyond UN sanctions.
By Daniel Dombey in Washington
Published: November 17 2007 02:00 | Last updated: November 17 2007 02:00
ft.com
China has pulled out of a meeting to discuss new sanctions on Iran, European diplomats said yesterday, highlighting the obstacles western powers face in their quest to increase pressure on Tehran over its nuclear programme.
The US had wanted to agree a set of prospective measures by the end of this month, which could be quickly taken to the United Nations Security Council if Iran failed to comply with UN demands to rein in its nuclear programme.
But China's decision not to participate in the scheduled meeting next week of political directors from the Security Council's five permanent members, plus Germany, means that no such agreement is likely to be in place by that time. The meeting is now unlikely to take place next week.
"It's pretty well understood why the Chinese have postponed," said a British official. "It was a mixture of genuine diary difficulties coupled with the track record of resistance on their part to moving swiftly towards an outcome."
This comes despite an agreement among the big powers in September to "finalise a text" on new sanctions and bring it to a vote at the Security Council, unless two international reports assessed that Iran had made progress on complying with UN demands.
The first of those reports, by Mohamed ElBaradei, head of the International Atomic Energy Agency, said this week Iran had provided new information about the nuclear programme's past, but the agency's current information about the programme was "diminishing". The second report, by Javier Solana, EU foreign policy chief, is due this month.
"If both reports show that there is no progress or political outcome then we are going for a further resolution," said a French official. "We prefer action at the UN but we are also ready to pursue measures at the European Union." Germany also described Mr ElBaradei's report as "on the whole . . . not encouraging".
However, China and Russia have consistently been reluctant to impose additional sanctions on Tehran, and have instead encouraged Mr ElBaradei in his efforts to broker a deal with Iran on disclosing more about its nuclear past.
Yesterday, some diplomats said that without further progress, the US and the EU could seek to take a new resolution to the Security Council before securing the backing of Moscow and Beijing - a high risk approach.
Britain and France also face difficulties in persuading the EU to agree sanctions, because of reservations among Germany, Spain and Italy about proceeding with unilateral steps that go beyond UN sanctions.
Oil-rich Norwegians avoid 'curse'
Nation doesn't let wealth corrupt services, education
Nov. 17, 2007, 5:34PM
By TOM HUNDLEY
Chicago Tribune
OSLO, NORWAY — If you wanted to design a small, 21st century nation from scratch, combining outrageous good fortune with virtue, you'd probably come up with something like Norway.
With a per capita income of $65,509, Norway ranks second only to super-rich Luxembourg. Much of the wealth derives from North Sea oil, but Norwegians have barely touched a penny of it, instead putting more than $350 billion into an investment fund.
Health care services are considered among the best in the world and are available to everyone, with the cap on out-of-pocket expenses at $200 a year. Working women on maternity leave get a year off at 80 percent pay. Elderly Norwegians seeking to escape the harsh northern winters can retire to government-run geriatric communities in sunny Spain.
Norway, home of the Nobel Peace Prize, has no enemies, but it does have a well-trained army that is always on the front lines of international peacekeeping missions. It also gives generously to less fortunate nations, donating more per capita than any other country.
And the government recently unveiled plans to cut its greenhouse gas emissions to zero and thus become the world's first "carbon-neutral" country by 2050.
Sassy, but not fat
So you might think that all of this good fortune and virtue would make the Norwegians just a little bit fat and self-satisfied?
Self-satisfied maybe, but fat, no. According to a new study on obesity, Norwegians are the slimmest people in Europe.
Business and political leaders agree that one key to Norway's success is that it has been able to avoid the "oil curse."
Oil is not usually the first thing that comes to mind when people think of Norway, but Norway is the world's third-largest oil exporter after Saudi Arabia and Russia. At close to $96 a barrel, its 2.9 million barrels a day bring in roughly $1.8 billion a week.
Saudi Arabia has been pumping oil far longer than Norway, but most of the Saudi wealth has been pocketed by the royal family. Venture beyond the five-star hotels of Riyadh and Jiddah and you are in a Third World economy struggling with poverty, unemployment and Islamic radicalism.
Russia's oil wealth has given Vladimir Putin an intimidating geo-political weapon to wield against the West.
In developing countries as disparate as Nigeria and Venezuela, the easy money of oil has propped up corrupt and incompetent ruling classes.
But Norway has not let its wealth go to its head.
"We've been lucky," said Erling Steigum, an economist at the Norwegian School of Management in Oslo.
Also smart. But some lessons had to be learned the hard way.
When Norway began pumping oil in the 1970s, politicians were happy to spend the windfall.
"We started spending ahead of revenues, spending on expectations," Steigum said.
The economy overheated, inflation set in, the currency exchange rate tanked, and when oil prices collapsed in 1986, the contractions in the Norwegian economy were painful.
After that, Norwegian politicians recognized the danger of oil addiction. They passed legislation requiring that almost all the revenues from the government-owned oil company, Statoil, be placed in an investment fund "to ensure that oil and gas receipts will also benefit future generations."
Originally called the Petroleum Fund, the name was changed in 2005 to the Government Pension Fund to make the point that the money was not to be touched. In reality, Norway's money is in a sovereign wealth fund, a state-owned investment tool that has started to raise alarms in the U.S. and other Western economies.
The Bush administration is pressing the World Bank and the International Monetary Fund to look into regulating such funds.
The fear is that the funds could be used to destabilize markets or to take over strategic assets. Of particular concern are giant funds controlled by Russia and a new $200 billion fund launched by China this year.
Libya announced a $40 billion fund last month.
Ethical guidelines
The Norwegian fund, however, is a model of transparency and enlightened Scandinavian management. It invests mainly in European and U.S. companies, but it is precluded from owning more than a 3 percent stake in any company so it won't influence a company's business.
Ethical guidelines adopted in 2004 prevents the fund from investing in firms that make weapons such as cluster bombs, or that violate human rights or environmental standards.
The fund is now worth about $350 billion, making it one of the largest pools of investment capital in the world.
A few other countries with oil money have taken note, and Martin Skancke, who heads the Norwegian Finance Ministry's asset department, which oversees the fund, has been fielding queries from such places as East Timor and Bolivia.
"It's a lot easier when you have transparent institutions, an educated population and a long history of democracy with very little corruption," Skancke said.
But it is more than good government that has helped the Norwegians.
The combination of high taxes in exchange for a dazzling array of social welfare benefits provided by the state has created a cohesive society with a strong egalitarian streak.
In Europe's second-wealthiest country, "you won't see opulence or ostentatious consumption," said Stein Iversen, a Norwegian diplomat. "We are taught that you are not supposed to be flashy about your wealth. Self-restraint and modesty are expected."
Nation doesn't let wealth corrupt services, education
Nov. 17, 2007, 5:34PM
By TOM HUNDLEY
Chicago Tribune
OSLO, NORWAY — If you wanted to design a small, 21st century nation from scratch, combining outrageous good fortune with virtue, you'd probably come up with something like Norway.
With a per capita income of $65,509, Norway ranks second only to super-rich Luxembourg. Much of the wealth derives from North Sea oil, but Norwegians have barely touched a penny of it, instead putting more than $350 billion into an investment fund.
Health care services are considered among the best in the world and are available to everyone, with the cap on out-of-pocket expenses at $200 a year. Working women on maternity leave get a year off at 80 percent pay. Elderly Norwegians seeking to escape the harsh northern winters can retire to government-run geriatric communities in sunny Spain.
Norway, home of the Nobel Peace Prize, has no enemies, but it does have a well-trained army that is always on the front lines of international peacekeeping missions. It also gives generously to less fortunate nations, donating more per capita than any other country.
And the government recently unveiled plans to cut its greenhouse gas emissions to zero and thus become the world's first "carbon-neutral" country by 2050.
Sassy, but not fat
So you might think that all of this good fortune and virtue would make the Norwegians just a little bit fat and self-satisfied?
Self-satisfied maybe, but fat, no. According to a new study on obesity, Norwegians are the slimmest people in Europe.
Business and political leaders agree that one key to Norway's success is that it has been able to avoid the "oil curse."
Oil is not usually the first thing that comes to mind when people think of Norway, but Norway is the world's third-largest oil exporter after Saudi Arabia and Russia. At close to $96 a barrel, its 2.9 million barrels a day bring in roughly $1.8 billion a week.
Saudi Arabia has been pumping oil far longer than Norway, but most of the Saudi wealth has been pocketed by the royal family. Venture beyond the five-star hotels of Riyadh and Jiddah and you are in a Third World economy struggling with poverty, unemployment and Islamic radicalism.
Russia's oil wealth has given Vladimir Putin an intimidating geo-political weapon to wield against the West.
In developing countries as disparate as Nigeria and Venezuela, the easy money of oil has propped up corrupt and incompetent ruling classes.
But Norway has not let its wealth go to its head.
"We've been lucky," said Erling Steigum, an economist at the Norwegian School of Management in Oslo.
Also smart. But some lessons had to be learned the hard way.
When Norway began pumping oil in the 1970s, politicians were happy to spend the windfall.
"We started spending ahead of revenues, spending on expectations," Steigum said.
The economy overheated, inflation set in, the currency exchange rate tanked, and when oil prices collapsed in 1986, the contractions in the Norwegian economy were painful.
After that, Norwegian politicians recognized the danger of oil addiction. They passed legislation requiring that almost all the revenues from the government-owned oil company, Statoil, be placed in an investment fund "to ensure that oil and gas receipts will also benefit future generations."
Originally called the Petroleum Fund, the name was changed in 2005 to the Government Pension Fund to make the point that the money was not to be touched. In reality, Norway's money is in a sovereign wealth fund, a state-owned investment tool that has started to raise alarms in the U.S. and other Western economies.
The Bush administration is pressing the World Bank and the International Monetary Fund to look into regulating such funds.
The fear is that the funds could be used to destabilize markets or to take over strategic assets. Of particular concern are giant funds controlled by Russia and a new $200 billion fund launched by China this year.
Libya announced a $40 billion fund last month.
Ethical guidelines
The Norwegian fund, however, is a model of transparency and enlightened Scandinavian management. It invests mainly in European and U.S. companies, but it is precluded from owning more than a 3 percent stake in any company so it won't influence a company's business.
Ethical guidelines adopted in 2004 prevents the fund from investing in firms that make weapons such as cluster bombs, or that violate human rights or environmental standards.
The fund is now worth about $350 billion, making it one of the largest pools of investment capital in the world.
A few other countries with oil money have taken note, and Martin Skancke, who heads the Norwegian Finance Ministry's asset department, which oversees the fund, has been fielding queries from such places as East Timor and Bolivia.
"It's a lot easier when you have transparent institutions, an educated population and a long history of democracy with very little corruption," Skancke said.
But it is more than good government that has helped the Norwegians.
The combination of high taxes in exchange for a dazzling array of social welfare benefits provided by the state has created a cohesive society with a strong egalitarian streak.
In Europe's second-wealthiest country, "you won't see opulence or ostentatious consumption," said Stein Iversen, a Norwegian diplomat. "We are taught that you are not supposed to be flashy about your wealth. Self-restraint and modesty are expected."
Abu Dhabi fund takes $622m stake in AMD
Mubadala, the state-backed Middle Eastern investment group, acquired 8% of second-largest chip manufacturer
Rhys Blakely
November 16, 2007
business.timesonline.co.uk
Mubadala Development, the Abu Dhabi state-backed investment fund, has acquired an 8.1 per cent stake worth $622 million in Advanced Micro Devices, the second-largest maker of computer chips.
The deal was priced at $12.70 a share, Advanced Micro Devices (AMD)’s closing level on Thursday.
AMD, which trails Intel in the microprocessor market, noted that the investment represents a non-controlling, minority holding and stressed that Mubadala will not receive any board representation.
Mubadala, which is wholly-owned by the Abu Dhabi Government and led by chief executive Khaldoon Khalifa Al Mubarak, holds stakes in businesses ranging from a mining joint venture with BHP Billiton in the Republic of Guinea, to a five per cent state in Ferrari, the Italian supercar marque.
Its investment in AMD drives the total value of sovereign wealth fund investments worldwide in the last two years towards an estimated $140 billion. Much of that spending has been fuelled by soaring oil costs.
However, the purchase may yet be investigated by the US Committee on Foreign Investment, which vets acquisitions by overseas investors on national security grounds. Technology and defence deals regularly come under particular scrutiny.
Shares in AMD have plummeted from $23 over the past year. As a newly aggressive Intel has staged a turnaround, AMD has struggled to cap costs and deliver new products on time.
The group introduced its first quad-core chip – which gathers four processors on a single piece of silicon – in September. However, the product’s initial clock speed of two gigahertz was slower than many industry watchers expected.
Also under scrutiny is AMD’s $5.4 billion acquisition of ATI technologies in 2005, a deal that increased the group’s exposure in graphics technology and made it the third-largest supplier of graphics cards.
Last month, AMD posted a larger-than-expected third-quarter loss, of $396 million, tied in part to a $120 million charge taken for the ATI acquisition.
The Mubadala move comes amid speculation that AMD is on the brink of a possible management revamp that could involve the departure of its chief executive, Hector Ruiz .
It is also rumoured that AMD is set to alter its strategy to focus on the development of new chips and move away from manufacturing — a so-called “fab light” model.
Shares in AMD 3.1 per cent to $13.09 ahead of the bell in New York.
Mubadala, the state-backed Middle Eastern investment group, acquired 8% of second-largest chip manufacturer
Rhys Blakely
November 16, 2007
business.timesonline.co.uk
Mubadala Development, the Abu Dhabi state-backed investment fund, has acquired an 8.1 per cent stake worth $622 million in Advanced Micro Devices, the second-largest maker of computer chips.
The deal was priced at $12.70 a share, Advanced Micro Devices (AMD)’s closing level on Thursday.
AMD, which trails Intel in the microprocessor market, noted that the investment represents a non-controlling, minority holding and stressed that Mubadala will not receive any board representation.
Mubadala, which is wholly-owned by the Abu Dhabi Government and led by chief executive Khaldoon Khalifa Al Mubarak, holds stakes in businesses ranging from a mining joint venture with BHP Billiton in the Republic of Guinea, to a five per cent state in Ferrari, the Italian supercar marque.
Its investment in AMD drives the total value of sovereign wealth fund investments worldwide in the last two years towards an estimated $140 billion. Much of that spending has been fuelled by soaring oil costs.
However, the purchase may yet be investigated by the US Committee on Foreign Investment, which vets acquisitions by overseas investors on national security grounds. Technology and defence deals regularly come under particular scrutiny.
Shares in AMD have plummeted from $23 over the past year. As a newly aggressive Intel has staged a turnaround, AMD has struggled to cap costs and deliver new products on time.
The group introduced its first quad-core chip – which gathers four processors on a single piece of silicon – in September. However, the product’s initial clock speed of two gigahertz was slower than many industry watchers expected.
Also under scrutiny is AMD’s $5.4 billion acquisition of ATI technologies in 2005, a deal that increased the group’s exposure in graphics technology and made it the third-largest supplier of graphics cards.
Last month, AMD posted a larger-than-expected third-quarter loss, of $396 million, tied in part to a $120 million charge taken for the ATI acquisition.
The Mubadala move comes amid speculation that AMD is on the brink of a possible management revamp that could involve the departure of its chief executive, Hector Ruiz .
It is also rumoured that AMD is set to alter its strategy to focus on the development of new chips and move away from manufacturing — a so-called “fab light” model.
Shares in AMD 3.1 per cent to $13.09 ahead of the bell in New York.
Stronger Iraqi government behind drop in violence: Iran
Sun Nov 18, 2007 5:20am EST
By Hossein Jaseb
TEHRAN (Reuters) - A strengthened Iraqi government and a reduction of "foreign interferences" have helped improve security in Iraq, Iran said on Sunday in an apparent reference to the role of U.S.-led forces in its neighbor.
The Islamic Republic has repeatedly blamed the violence in Iraq on the U.S.-led invasion of the country in 2003. For its part, the United States accuses Iran of arming and training Shi'ite militias in Iraq, a charge Iranian officials deny.
Iranian Foreign Ministry spokesman Mohammad Ali Hosseini told a press conference that Washington had leveled "baseless accusations" at Tehran over its role in Iraq, which like Iran is predominantly Shi'ite Muslim.
"As for the betterment of the security situation it is because the role of the Iraqi government has been strengthened and Iraqi security forces are more active than before and foreign interferences also have decreased," he said.
Hosseini, whose comments were translated by Iran's English-language Press TV satellite station, did not specify what he meant with "foreign interferences". The U.S. military hopes to gradually hand over security control to Iraqi forces.
U.S. officials have attributed falls in U.S. military and Iraqi civilian deaths in the past two months to a "surge" of 30,000 extra U.S. troops and tribal Sunni Arab sheikhs organizing supporters into local police units.
They have also appeared to soften their rhetoric about Iran's involvement in Iraq, noting a sharp drop in mortar attacks on Baghdad's heavily fortified Green Zone which they have blamed on Shi'ite militias using weapons supplied from Iran.
Some analysts say America and Iran, two old foes who are also at odds over Tehran's disputed atomic ambitions, may be trying to ease tension over Iraq. Both have expressed willingness to attend further talks on Iraq's security situation.
Hosseini did not mention the U.S. "surge" but reiterated allegations that the U.S.-presence had benefited "terrorist groups" in Iraq, referring to Kurdish guerrillas operating in its north.
Turkey has massed up to 100,000 troops near its border ahead of a possible major cross-border incursion to crush armed groups of the outlawed Kurdistan Workers Party (PKK) hiding there.
Like Turkey, Iran also has a Kurdish minority and it faces occasional attacks by rebels belonging to a PKK offshoot. Iran has at times shelled their suspected hideouts in Iraq.
"Terrorist groups have used the opportunity of the presence of the United States ... to beef up their activities," he said.
"But right now with the cooperation of neighboring countries we see some steps forward," Hosseini said. "And I think the problem ... between Iraq and Turkey will be solved in the near future."
Sun Nov 18, 2007 5:20am EST
By Hossein Jaseb
TEHRAN (Reuters) - A strengthened Iraqi government and a reduction of "foreign interferences" have helped improve security in Iraq, Iran said on Sunday in an apparent reference to the role of U.S.-led forces in its neighbor.
The Islamic Republic has repeatedly blamed the violence in Iraq on the U.S.-led invasion of the country in 2003. For its part, the United States accuses Iran of arming and training Shi'ite militias in Iraq, a charge Iranian officials deny.
Iranian Foreign Ministry spokesman Mohammad Ali Hosseini told a press conference that Washington had leveled "baseless accusations" at Tehran over its role in Iraq, which like Iran is predominantly Shi'ite Muslim.
"As for the betterment of the security situation it is because the role of the Iraqi government has been strengthened and Iraqi security forces are more active than before and foreign interferences also have decreased," he said.
Hosseini, whose comments were translated by Iran's English-language Press TV satellite station, did not specify what he meant with "foreign interferences". The U.S. military hopes to gradually hand over security control to Iraqi forces.
U.S. officials have attributed falls in U.S. military and Iraqi civilian deaths in the past two months to a "surge" of 30,000 extra U.S. troops and tribal Sunni Arab sheikhs organizing supporters into local police units.
They have also appeared to soften their rhetoric about Iran's involvement in Iraq, noting a sharp drop in mortar attacks on Baghdad's heavily fortified Green Zone which they have blamed on Shi'ite militias using weapons supplied from Iran.
Some analysts say America and Iran, two old foes who are also at odds over Tehran's disputed atomic ambitions, may be trying to ease tension over Iraq. Both have expressed willingness to attend further talks on Iraq's security situation.
Hosseini did not mention the U.S. "surge" but reiterated allegations that the U.S.-presence had benefited "terrorist groups" in Iraq, referring to Kurdish guerrillas operating in its north.
Turkey has massed up to 100,000 troops near its border ahead of a possible major cross-border incursion to crush armed groups of the outlawed Kurdistan Workers Party (PKK) hiding there.
Like Turkey, Iran also has a Kurdish minority and it faces occasional attacks by rebels belonging to a PKK offshoot. Iran has at times shelled their suspected hideouts in Iraq.
"Terrorist groups have used the opportunity of the presence of the United States ... to beef up their activities," he said.
"But right now with the cooperation of neighboring countries we see some steps forward," Hosseini said. "And I think the problem ... between Iraq and Turkey will be solved in the near future."
Could U.S. military gains in Iraq outlast Bush?
Sat Nov 17, 2007 6:41pm EST
By David Morgan
WASHINGTON (Reuters) - With an intensifying White House race drawing attention to his legacy, President George W. Bush could leave office without the baggage of complete failure in Iraq thanks to new U.S. military gains, some analysts say.
American success at quelling sectarian and insurgent violence has raised hopes that the relatively calmer conditions of the past few months in Iraq might last into early 2009, when the next U.S. president takes over.
"The overall prediction has to be that George Bush will escape this without an obviously visible abject failure. It may become that again over time. But right now, it looks like Bush will escape by the skin of his teeth," said Michael O'Hanlon of the Brookings Institution.
O'Hanlon, who drew attention last July when he expressed optimism about the U.S. mission in Iraq in a New York Times column, estimates the odds of a major deterioration during Bush's remaining 14 months in office at less than 50 percent.
Bush's so-called surge strategy, which placed an extra 30,000 troops in Iraq this year to stabilize Baghdad and its environs, has contributed to a steep decline in violence the past two months, statistics released in recent weeks show.
Violence has fluctuated widely since the 2003 U.S. invasion. But analysts say recent improvements may continue because of more effective U.S. tactics and a rebellion against al Qaeda in Iraq by Sunni leaders in Anbar province.
Roadside bombing incidents have fallen by more than half since March. U.S. military deaths in October were at their lowest level since March 2006, and Iraqi civilian deaths were down about two-thirds from a 2007 high in January.
O'Hanlon said he believed the less violent conditions are likely to endure until Bush leaves office, despite the planned withdrawal of 20,000 U.S. combat troops by next July.
"It'll still be a lot of people getting killed," he said. "But the trajectory we're on is for muddling along into some type of gradually improving semi-stability."
O'Hanlon is not alone in expectations for Bush to achieve a grim victory by avoiding the worst of Iraq legacies.
"The Bush administration has managed to basically gain enough time to come to the end of the administration without any serious deterioration in Iraq," said Joost Hiltermann, a long-time critic of Bush policy in Iraq at the Brussels-based International Crisis Group.
"He's bought himself enough time to sit out his presidency: applause. Bush won in that sense," Hiltermann added.
UNPREDICTABLE
But others said stability in Iraq cannot be predicted, given the tenuous nature of political relations between Sunnis and Shi'ites and the fact that an estimated 15 percent of the country's population has been displaced by violence.
"This isn't anything that any of us can assign probabilities to," said Anthony Cordesman of the Center for Strategic and International Studies.
Critics say Bush is concentrating too heavily on military strategy and a moribund national political dialogue, while ignoring the need for a full diplomatic engagement with Iraq's neighbors and provincial leaders that would be necessary to forge lasting stability.
"This president is mainly interested in seeing Iraq not implode further on his watch. He wants to hand this off," said Michele Flournoy of the Center for a New American Security.
"The next president will have very few options and will be under huge pressure to get out fast, no matter the consequences. And that could cause even more catastrophic damage to our interests in the region," she said.
Hiltermann is also pessimistic that recent gains can be sustained for long after Bush leaves office. "You have to have a serious political strategy for dealing with the vacuums that exist in Iraq," he said. "I don't see one."
But O'Hanlon believes Iraq could continue on a slow path of improvement well beyond the Bush administration, as more reconstruction aid reaches provinces and Iraqi security forces become more capable.
"That will be possible, but again: a lot of caveats, a lot of conditions and none of it adding up to a brilliant success," he said.
Sat Nov 17, 2007 6:41pm EST
By David Morgan
WASHINGTON (Reuters) - With an intensifying White House race drawing attention to his legacy, President George W. Bush could leave office without the baggage of complete failure in Iraq thanks to new U.S. military gains, some analysts say.
American success at quelling sectarian and insurgent violence has raised hopes that the relatively calmer conditions of the past few months in Iraq might last into early 2009, when the next U.S. president takes over.
"The overall prediction has to be that George Bush will escape this without an obviously visible abject failure. It may become that again over time. But right now, it looks like Bush will escape by the skin of his teeth," said Michael O'Hanlon of the Brookings Institution.
O'Hanlon, who drew attention last July when he expressed optimism about the U.S. mission in Iraq in a New York Times column, estimates the odds of a major deterioration during Bush's remaining 14 months in office at less than 50 percent.
Bush's so-called surge strategy, which placed an extra 30,000 troops in Iraq this year to stabilize Baghdad and its environs, has contributed to a steep decline in violence the past two months, statistics released in recent weeks show.
Violence has fluctuated widely since the 2003 U.S. invasion. But analysts say recent improvements may continue because of more effective U.S. tactics and a rebellion against al Qaeda in Iraq by Sunni leaders in Anbar province.
Roadside bombing incidents have fallen by more than half since March. U.S. military deaths in October were at their lowest level since March 2006, and Iraqi civilian deaths were down about two-thirds from a 2007 high in January.
O'Hanlon said he believed the less violent conditions are likely to endure until Bush leaves office, despite the planned withdrawal of 20,000 U.S. combat troops by next July.
"It'll still be a lot of people getting killed," he said. "But the trajectory we're on is for muddling along into some type of gradually improving semi-stability."
O'Hanlon is not alone in expectations for Bush to achieve a grim victory by avoiding the worst of Iraq legacies.
"The Bush administration has managed to basically gain enough time to come to the end of the administration without any serious deterioration in Iraq," said Joost Hiltermann, a long-time critic of Bush policy in Iraq at the Brussels-based International Crisis Group.
"He's bought himself enough time to sit out his presidency: applause. Bush won in that sense," Hiltermann added.
UNPREDICTABLE
But others said stability in Iraq cannot be predicted, given the tenuous nature of political relations between Sunnis and Shi'ites and the fact that an estimated 15 percent of the country's population has been displaced by violence.
"This isn't anything that any of us can assign probabilities to," said Anthony Cordesman of the Center for Strategic and International Studies.
Critics say Bush is concentrating too heavily on military strategy and a moribund national political dialogue, while ignoring the need for a full diplomatic engagement with Iraq's neighbors and provincial leaders that would be necessary to forge lasting stability.
"This president is mainly interested in seeing Iraq not implode further on his watch. He wants to hand this off," said Michele Flournoy of the Center for a New American Security.
"The next president will have very few options and will be under huge pressure to get out fast, no matter the consequences. And that could cause even more catastrophic damage to our interests in the region," she said.
Hiltermann is also pessimistic that recent gains can be sustained for long after Bush leaves office. "You have to have a serious political strategy for dealing with the vacuums that exist in Iraq," he said. "I don't see one."
But O'Hanlon believes Iraq could continue on a slow path of improvement well beyond the Bush administration, as more reconstruction aid reaches provinces and Iraqi security forces become more capable.
"That will be possible, but again: a lot of caveats, a lot of conditions and none of it adding up to a brilliant success," he said.
Uncertain antitrust trajectory
washingtontimes.com
November 18, 2007
Wayne Crews and Alex Nowrasteh - The proposed XM/Sirius satellite merger — awaiting OKs from the Justice Department and Federal Communications Commission (FCC) — represents the antitrust establishment's latest target... and potential casualty.
Smokestack-era antitrust law presents one of today's gravest threats to hyper-competitive frontier industries and the customers they serve.
Fortunately many Wall Street analysts foresee a favorable decision come early December. Bear Stearns analysts put approval at 70 percent.
Yet that optimism must be qualified by recognizing the damage caused by subjecting every major but routine voluntary alliance to months of wealth-draining "analysis" and groveling. The companies have given the government millions of pages of "documentation," a situation that has become routine.
This ceaseless intervention by government in every significant market transaction is to the economy what constant noisy interruption is to a conversation. The costs are enormous. Bear Stearns should be analyzing actual deals, not the odds on government intervention while companies twiddle their thumbs.
Some merger opponents are the usual anticapitalist, anticorporate advocates who see big business as an almost personal affront and regard the market as a zero-sum game. Our society is capitalist and corporate enough for them to enjoy the leisure of complaining, so they do.
Meanwhile, competitors — in this case, traditional broadcast radio — lobby strongly against mergers. Competitor opposition is usually a given; it's really the foundation and lifeblood of today's entire misguided antitrust enterprise.
Think about it: Competitors would cheer an inefficient merger, since that would keep them from having to reduce their own prices or improve their offerings. The mergers that competitors try to block are the efficient ones that benefit consumers.
Thus for innovative companies seeking to merge, appeasement becomes mandatory. A few weeks back, XM and Sirius promised not to raise prices during their first year as a combined entity.
Agreeing to such concessions benefits competitors but hurts the competitive process and customers. Competitor response and new market entry in a profitable field are sufficient discipline. As many commentators have noted, satellite radio competes with free radio, podcasts, mp3 players and more. XM/Sirius' greatest threat may be "wi-fi everywhere" mobile Internet radio with user-programmable stations.
This XM/Sirius promise amounts to a self-imposed price control. But price controls hurt consumers: A low price is not a good price if it means inferior service or discourages needed investment and innovation.
Like all market prices, satellite radio fees are not a legitimate concern of responsible government. Prices are best kept in check by a marketplace clearly swarming with competing media platforms.
An efficient merger forces competitors to respond by expanding consumer choices even more aggressively. That's hard work, so it's no wonder some would try to block it. Keeping XM and Sirius apart merely constitutes "corporate welfare" for rival platforms, who would get a reprieve from making tough choices and innovating.
Too many businesses view competition like exercise — as good for other people. But for a functioning market economy, it is indispensable that competition discipline all players. The XM/Sirius merger, by creating a leaner, streamlined satellite radio industry, would energize competition among all forms of media.
Unelected bureaucrats should not dictate the structure of a competitive market. FCC can best expand consumer choice by liberalizing the government-controlled electromagnetic spectrum, deliberately scaling down its own oversight in favor of competition through auctions and new spectrum exchanges.
Such market dynamism is its own reward. Unfortunately, we remain on the wrong path. The concessions the merged XM/Sirius may have to offer are troublesome for free enterprise at large. When Lewis Carroll's Alice crawled into the rabbit hole, she encountered a crazy world whose characters had to perform wasteful tasks to avoid arbitrary punishments by the Queen of Hearts. It was supposed to have been fiction.
Wayne Crews and Alex Nowrasteh are, respectively, vice president for policy and research associate at the Competitive Enterprise Institute.
washingtontimes.com
November 18, 2007
Wayne Crews and Alex Nowrasteh - The proposed XM/Sirius satellite merger — awaiting OKs from the Justice Department and Federal Communications Commission (FCC) — represents the antitrust establishment's latest target... and potential casualty.
Smokestack-era antitrust law presents one of today's gravest threats to hyper-competitive frontier industries and the customers they serve.
Fortunately many Wall Street analysts foresee a favorable decision come early December. Bear Stearns analysts put approval at 70 percent.
Yet that optimism must be qualified by recognizing the damage caused by subjecting every major but routine voluntary alliance to months of wealth-draining "analysis" and groveling. The companies have given the government millions of pages of "documentation," a situation that has become routine.
This ceaseless intervention by government in every significant market transaction is to the economy what constant noisy interruption is to a conversation. The costs are enormous. Bear Stearns should be analyzing actual deals, not the odds on government intervention while companies twiddle their thumbs.
Some merger opponents are the usual anticapitalist, anticorporate advocates who see big business as an almost personal affront and regard the market as a zero-sum game. Our society is capitalist and corporate enough for them to enjoy the leisure of complaining, so they do.
Meanwhile, competitors — in this case, traditional broadcast radio — lobby strongly against mergers. Competitor opposition is usually a given; it's really the foundation and lifeblood of today's entire misguided antitrust enterprise.
Think about it: Competitors would cheer an inefficient merger, since that would keep them from having to reduce their own prices or improve their offerings. The mergers that competitors try to block are the efficient ones that benefit consumers.
Thus for innovative companies seeking to merge, appeasement becomes mandatory. A few weeks back, XM and Sirius promised not to raise prices during their first year as a combined entity.
Agreeing to such concessions benefits competitors but hurts the competitive process and customers. Competitor response and new market entry in a profitable field are sufficient discipline. As many commentators have noted, satellite radio competes with free radio, podcasts, mp3 players and more. XM/Sirius' greatest threat may be "wi-fi everywhere" mobile Internet radio with user-programmable stations.
This XM/Sirius promise amounts to a self-imposed price control. But price controls hurt consumers: A low price is not a good price if it means inferior service or discourages needed investment and innovation.
Like all market prices, satellite radio fees are not a legitimate concern of responsible government. Prices are best kept in check by a marketplace clearly swarming with competing media platforms.
An efficient merger forces competitors to respond by expanding consumer choices even more aggressively. That's hard work, so it's no wonder some would try to block it. Keeping XM and Sirius apart merely constitutes "corporate welfare" for rival platforms, who would get a reprieve from making tough choices and innovating.
Too many businesses view competition like exercise — as good for other people. But for a functioning market economy, it is indispensable that competition discipline all players. The XM/Sirius merger, by creating a leaner, streamlined satellite radio industry, would energize competition among all forms of media.
Unelected bureaucrats should not dictate the structure of a competitive market. FCC can best expand consumer choice by liberalizing the government-controlled electromagnetic spectrum, deliberately scaling down its own oversight in favor of competition through auctions and new spectrum exchanges.
Such market dynamism is its own reward. Unfortunately, we remain on the wrong path. The concessions the merged XM/Sirius may have to offer are troublesome for free enterprise at large. When Lewis Carroll's Alice crawled into the rabbit hole, she encountered a crazy world whose characters had to perform wasteful tasks to avoid arbitrary punishments by the Queen of Hearts. It was supposed to have been fiction.
Wayne Crews and Alex Nowrasteh are, respectively, vice president for policy and research associate at the Competitive Enterprise Institute.
U.S. Secretly Aids Pakistan in Guarding Nuclear Arms
By DAVID E. SANGER and WILLIAM J. BROAD
November 18, 2007
NYT
WASHINGTON, Nov. 17 — Over the past six years, the Bush administration has spent almost $100 million on a highly classified program to help Gen. Pervez Musharraf, Pakistan’s president, secure his country’s nuclear weapons, according to current and former senior administration officials.
But with the future of that country’s leadership in doubt, debate is intensifying about whether Washington has done enough to help protect the warheads and laboratories, and whether Pakistan’s reluctance to reveal critical details about its arsenal has undercut the effectiveness of the continuing security effort.
The aid, buried in secret portions of the federal budget, paid for the training of Pakistani personnel in the United States and the construction of a nuclear security training center in Pakistan, a facility that American officials say is nowhere near completion, even though it was supposed to be in operation this year.
A raft of equipment — from helicopters to night-vision goggles to nuclear detection equipment — was given to Pakistan to help secure its nuclear material, its warheads, and the laboratories that were the site of the worst known case of nuclear proliferation in the atomic age.
While American officials say that they believe the arsenal is safe at the moment, and that they take at face value Pakistani assurances that security is vastly improved, in many cases the Pakistani government has been reluctant to show American officials how or where the gear is actually used.
That is because the Pakistanis do not want to reveal the locations of their weapons or the amount or type of new bomb-grade fuel the country is now producing.
The American program was created after the Sept. 11, 2001, attacks, when the Bush administration debated whether to share with Pakistan one of the crown jewels of American nuclear protection technology, known as “permissive action links,” or PALS, a system used to keep a weapon from detonating without proper codes and authorizations.
In the end, despite past federal aid to France and Russia on delicate points of nuclear security, the administration decided that it could not share the system with the Pakistanis because of legal restrictions.
In addition, the Pakistanis were suspicious that any American-made technology in their warheads could include a secret “kill switch,” enabling the Americans to turn off their weapons.
While many nuclear experts in the federal government favored offering the PALS system because they considered Pakistan’s arsenal among the world’s most vulnerable to terrorist groups, some administration officials feared that sharing the technology would teach Pakistan too much about American weaponry. The same concern kept the Clinton administration from sharing the technology with China in the early 1990s.
The New York Times has known details of the secret program for more than three years, based on interviews with a range of American officials and nuclear experts, some of whom were concerned that Pakistan’s arsenal remained vulnerable. The newspaper agreed to delay publication of the article after considering a request from the Bush administration, which argued that premature disclosure could hurt the effort to secure the weapons.
Since then, some elements of the program have been discussed in the Pakistani news media and in a presentation late last year by the leader of Pakistan’s nuclear safety effort, Lt. Gen. Khalid Kidwai, who acknowledged receiving “international” help as he sought to assure Washington that all of the holes in Pakistan’s nuclear security infrastructure had been sealed.
The Times told the administration last week that it was reopening its examination of the program in light of those disclosures and the current instability in Pakistan. Early this week, the White House withdrew its request that publication be withheld, though it was unwilling to discuss details of the program.
In recent days, American officials have expressed confidence that Pakistan’s nuclear arsenal is well secured. “I don’t see any indication right now that security of those weapons is in jeopardy, but clearly we are very watchful, as we should be,” Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, told a Pentagon news conference on Thursday.
Admiral Mullen’s carefully chosen words, a senior administration official said, were based on two separate intelligence assessments issued this month that had been summarized in briefings to Mr. Bush. Both concluded that Pakistan’s nuclear arsenal was safe under current conditions, and one also looked at laboratories and came to the same conclusion.
Still, the Pakistani government’s reluctance to provide access has limited efforts to assess the situation. In particular, some American experts say they have less ability to look into the nuclear laboratories where highly enriched uranium is produced — including the laboratory named for Abdul Qadeer Khan, the man who sold Pakistan’s nuclear technology to Iran, North Korea and Libya.
The secret program was designed by the Energy Department and the State Department, and it drew heavily from the effort over the past decade to secure nuclear weapons, stockpiles and materials in Russia and other former Soviet states. Much of the money for Pakistan was spent on physical security, like fencing and surveillance systems, and equipment for tracking nuclear material if it left secure areas.
But while Pakistan is formally considered a “major non-NATO ally,” the program has been hindered by a deep suspicion among Pakistan’s military that the secret goal of the United States was to gather intelligence about how to locate and, if necessary, disable Pakistan’s arsenal, which is the pride of the country.
“Everything has taken far longer than it should,” a former official involved in the program said in a recent interview, “and you are never sure what you really accomplished.”
So far, the amount the United States has spent on the classified nuclear security program, less than $100 million, amounts to slightly less than one percent of the roughly $10 billion in known American aid to Pakistan since the Sept. 11 attacks. Most of that money has gone for assistance in counterterrorism activities against the Taliban and Al Qaeda.
The debate over sharing nuclear security technology began just before then-Secretary of State Colin L. Powell was sent to Islamabad after the Sept. 11 attacks, as the United States was preparing to invade Afghanistan.
“There were a lot of people who feared that once we headed into Afghanistan, the Taliban would be looking for these weapons,” said a senior official who was involved. But a legal analysis found that aiding Pakistan’s nuclear weapons program — even if it was just with protective gear — would violate both international and American law.
General Musharraf, in his memoir, “In the Line of Fire,” published last year, did not discuss any equipment, training or technology offered then, but wrote: “We were put under immense pressure by the United States regarding our nuclear and missile arsenal. The Americans’ concerns were based on two grounds. First, at this time they were not very sure of my job security, and they dreaded the possibility that an extremist successor government might get its hands on our strategic nuclear arsenal. Second, they doubted our ability to safeguard our assets.”
General Musharraf was more specific in an interview two years ago for a Times documentary, “Nuclear Jihad: Can Terrorists Get the Bomb?” Asked about the equipment and training provided by Washington, he said, “Frankly, I really don’t know the details.” But he added: “This is an extremely sensitive matter in Pakistan. We don’t allow any foreign intrusion in our facilities. But, at the same time, we guarantee that the custodial arrangements that we brought about and implemented are already the best in the world.”
Now that concern about General Musharraf’s ability to remain in power has been rekindled, so has the debate inside and outside the Bush administration about how much the program accomplished, and what it left unaccomplished. A second phase of the program, which would provide more equipment, helicopters and safety devices, is already being discussed in the administration, but its dimensions have not been determined.
Harold M. Agnew, a former director of the Los Alamos weapons laboratory, which designed most of the United States’ nuclear arms, argued that recent federal reluctance to share warhead security technology was making the world more dangerous.
“Lawyers say it’s classified,” Dr. Agnew said in an interview. “That’s nonsense. We should share this technology. Anybody who joins the club should be helped to get this.”
“Whether it’s India or Pakistan or China or Iran,” he added, “the most important thing is that you want to make sure there is no unauthorized use. You want to make sure that the guys who have their hands on the weapons can’t use them without proper authorization.”
In the past, officials say, the United States has shared ideas — but not technologies — about how to make the safeguards that lie at the heart of American weapons security. The system hinges on what is essentially a switch in the firing circuit that requires the would-be user to enter a numeric code that starts a timer for the weapon’s arming and detonation.
Most switches disable themselves if the sequence of numbers entered turns out to be incorrect in a fixed number of tries, much like a bank ATM does. In some cases, the disabled link sets off a small explosion in the warhead to render it useless. Delicate design details involve how to bury the link deep inside a weapon to keep terrorists or enemies from disabling the safeguard.
The most famous case of nuclear idea sharing involves France. Starting in the early 1970s, the United States government began a series of highly secretive discussions with French scientists to help them improve the country’s warheads.
A potential impediment to such sharing was the 1968 Nuclear Nonproliferation Treaty, which bars cooperation between nations on weapons technology.
To get around such legal prohibitions, Washington came up with a system of “negative guidance,” sometimes called “20 questions,” as detailed in a 1989 article in Foreign Policy. The system let United States scientists listen to French descriptions of warhead approaches and give guidance about whether the French were on the right track.
Nuclear experts say sharing also took place after the cold war when the United States worried about the security of Russian nuclear arms and facilities. In that case, both countries declassified warhead information to expedite the transfer of safety and security information, according to federal nuclear scientists.
But in the case of China, which has possessed nuclear weapons since the 1960s and is a signatory to the Nuclear Nonproliferation Treaty, the Clinton administration decided that sharing PALS would be too risky. Experts inside the administration feared the technology would improve the Chinese warheads, and could give the Chinese insights into how American systems worked.
Officials said Washington debated sharing security techniques with Pakistan on at least two occasions — right after it detonated its first nuclear arms in 1998, and after the terrorist attack on the United States in 2001.
The debates pitted atomic scientists who favored technical sharing against federal officials at such places as the State Department who ruled that the transfers were illegal under the Nuclear Nonproliferation Treaty and under United States law.
In the 1998 case, the Clinton administration still hoped it could roll back Pakistan’s nuclear program, forcing it to give up the weapons it had developed. That hope, never seen as very realistic, has been entirely given up by the Bush administration.
The nuclear proliferation conducted by Mr. Khan, the Pakistani metallurgist who built a huge network to spread Pakistani technology, convinced the Pakistanis that they needed better protections.
“Among the places in the world that we have to make sure we have done the maximum we can do, Pakistan is at the top of the list,” said John E. McLaughlin, who served as deputy director of the Central Intelligence Agency at the time, and played a crucial role in the intelligence collection that led to Mr. Khan’s downfall.
“I am confident of two things,” he added. “That the Pakistanis are very serious about securing this material, but also that someone in Pakistan is very intent on getting their hands on it.”
By DAVID E. SANGER and WILLIAM J. BROAD
November 18, 2007
NYT
WASHINGTON, Nov. 17 — Over the past six years, the Bush administration has spent almost $100 million on a highly classified program to help Gen. Pervez Musharraf, Pakistan’s president, secure his country’s nuclear weapons, according to current and former senior administration officials.
But with the future of that country’s leadership in doubt, debate is intensifying about whether Washington has done enough to help protect the warheads and laboratories, and whether Pakistan’s reluctance to reveal critical details about its arsenal has undercut the effectiveness of the continuing security effort.
The aid, buried in secret portions of the federal budget, paid for the training of Pakistani personnel in the United States and the construction of a nuclear security training center in Pakistan, a facility that American officials say is nowhere near completion, even though it was supposed to be in operation this year.
A raft of equipment — from helicopters to night-vision goggles to nuclear detection equipment — was given to Pakistan to help secure its nuclear material, its warheads, and the laboratories that were the site of the worst known case of nuclear proliferation in the atomic age.
While American officials say that they believe the arsenal is safe at the moment, and that they take at face value Pakistani assurances that security is vastly improved, in many cases the Pakistani government has been reluctant to show American officials how or where the gear is actually used.
That is because the Pakistanis do not want to reveal the locations of their weapons or the amount or type of new bomb-grade fuel the country is now producing.
The American program was created after the Sept. 11, 2001, attacks, when the Bush administration debated whether to share with Pakistan one of the crown jewels of American nuclear protection technology, known as “permissive action links,” or PALS, a system used to keep a weapon from detonating without proper codes and authorizations.
In the end, despite past federal aid to France and Russia on delicate points of nuclear security, the administration decided that it could not share the system with the Pakistanis because of legal restrictions.
In addition, the Pakistanis were suspicious that any American-made technology in their warheads could include a secret “kill switch,” enabling the Americans to turn off their weapons.
While many nuclear experts in the federal government favored offering the PALS system because they considered Pakistan’s arsenal among the world’s most vulnerable to terrorist groups, some administration officials feared that sharing the technology would teach Pakistan too much about American weaponry. The same concern kept the Clinton administration from sharing the technology with China in the early 1990s.
The New York Times has known details of the secret program for more than three years, based on interviews with a range of American officials and nuclear experts, some of whom were concerned that Pakistan’s arsenal remained vulnerable. The newspaper agreed to delay publication of the article after considering a request from the Bush administration, which argued that premature disclosure could hurt the effort to secure the weapons.
Since then, some elements of the program have been discussed in the Pakistani news media and in a presentation late last year by the leader of Pakistan’s nuclear safety effort, Lt. Gen. Khalid Kidwai, who acknowledged receiving “international” help as he sought to assure Washington that all of the holes in Pakistan’s nuclear security infrastructure had been sealed.
The Times told the administration last week that it was reopening its examination of the program in light of those disclosures and the current instability in Pakistan. Early this week, the White House withdrew its request that publication be withheld, though it was unwilling to discuss details of the program.
In recent days, American officials have expressed confidence that Pakistan’s nuclear arsenal is well secured. “I don’t see any indication right now that security of those weapons is in jeopardy, but clearly we are very watchful, as we should be,” Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, told a Pentagon news conference on Thursday.
Admiral Mullen’s carefully chosen words, a senior administration official said, were based on two separate intelligence assessments issued this month that had been summarized in briefings to Mr. Bush. Both concluded that Pakistan’s nuclear arsenal was safe under current conditions, and one also looked at laboratories and came to the same conclusion.
Still, the Pakistani government’s reluctance to provide access has limited efforts to assess the situation. In particular, some American experts say they have less ability to look into the nuclear laboratories where highly enriched uranium is produced — including the laboratory named for Abdul Qadeer Khan, the man who sold Pakistan’s nuclear technology to Iran, North Korea and Libya.
The secret program was designed by the Energy Department and the State Department, and it drew heavily from the effort over the past decade to secure nuclear weapons, stockpiles and materials in Russia and other former Soviet states. Much of the money for Pakistan was spent on physical security, like fencing and surveillance systems, and equipment for tracking nuclear material if it left secure areas.
But while Pakistan is formally considered a “major non-NATO ally,” the program has been hindered by a deep suspicion among Pakistan’s military that the secret goal of the United States was to gather intelligence about how to locate and, if necessary, disable Pakistan’s arsenal, which is the pride of the country.
“Everything has taken far longer than it should,” a former official involved in the program said in a recent interview, “and you are never sure what you really accomplished.”
So far, the amount the United States has spent on the classified nuclear security program, less than $100 million, amounts to slightly less than one percent of the roughly $10 billion in known American aid to Pakistan since the Sept. 11 attacks. Most of that money has gone for assistance in counterterrorism activities against the Taliban and Al Qaeda.
The debate over sharing nuclear security technology began just before then-Secretary of State Colin L. Powell was sent to Islamabad after the Sept. 11 attacks, as the United States was preparing to invade Afghanistan.
“There were a lot of people who feared that once we headed into Afghanistan, the Taliban would be looking for these weapons,” said a senior official who was involved. But a legal analysis found that aiding Pakistan’s nuclear weapons program — even if it was just with protective gear — would violate both international and American law.
General Musharraf, in his memoir, “In the Line of Fire,” published last year, did not discuss any equipment, training or technology offered then, but wrote: “We were put under immense pressure by the United States regarding our nuclear and missile arsenal. The Americans’ concerns were based on two grounds. First, at this time they were not very sure of my job security, and they dreaded the possibility that an extremist successor government might get its hands on our strategic nuclear arsenal. Second, they doubted our ability to safeguard our assets.”
General Musharraf was more specific in an interview two years ago for a Times documentary, “Nuclear Jihad: Can Terrorists Get the Bomb?” Asked about the equipment and training provided by Washington, he said, “Frankly, I really don’t know the details.” But he added: “This is an extremely sensitive matter in Pakistan. We don’t allow any foreign intrusion in our facilities. But, at the same time, we guarantee that the custodial arrangements that we brought about and implemented are already the best in the world.”
Now that concern about General Musharraf’s ability to remain in power has been rekindled, so has the debate inside and outside the Bush administration about how much the program accomplished, and what it left unaccomplished. A second phase of the program, which would provide more equipment, helicopters and safety devices, is already being discussed in the administration, but its dimensions have not been determined.
Harold M. Agnew, a former director of the Los Alamos weapons laboratory, which designed most of the United States’ nuclear arms, argued that recent federal reluctance to share warhead security technology was making the world more dangerous.
“Lawyers say it’s classified,” Dr. Agnew said in an interview. “That’s nonsense. We should share this technology. Anybody who joins the club should be helped to get this.”
“Whether it’s India or Pakistan or China or Iran,” he added, “the most important thing is that you want to make sure there is no unauthorized use. You want to make sure that the guys who have their hands on the weapons can’t use them without proper authorization.”
In the past, officials say, the United States has shared ideas — but not technologies — about how to make the safeguards that lie at the heart of American weapons security. The system hinges on what is essentially a switch in the firing circuit that requires the would-be user to enter a numeric code that starts a timer for the weapon’s arming and detonation.
Most switches disable themselves if the sequence of numbers entered turns out to be incorrect in a fixed number of tries, much like a bank ATM does. In some cases, the disabled link sets off a small explosion in the warhead to render it useless. Delicate design details involve how to bury the link deep inside a weapon to keep terrorists or enemies from disabling the safeguard.
The most famous case of nuclear idea sharing involves France. Starting in the early 1970s, the United States government began a series of highly secretive discussions with French scientists to help them improve the country’s warheads.
A potential impediment to such sharing was the 1968 Nuclear Nonproliferation Treaty, which bars cooperation between nations on weapons technology.
To get around such legal prohibitions, Washington came up with a system of “negative guidance,” sometimes called “20 questions,” as detailed in a 1989 article in Foreign Policy. The system let United States scientists listen to French descriptions of warhead approaches and give guidance about whether the French were on the right track.
Nuclear experts say sharing also took place after the cold war when the United States worried about the security of Russian nuclear arms and facilities. In that case, both countries declassified warhead information to expedite the transfer of safety and security information, according to federal nuclear scientists.
But in the case of China, which has possessed nuclear weapons since the 1960s and is a signatory to the Nuclear Nonproliferation Treaty, the Clinton administration decided that sharing PALS would be too risky. Experts inside the administration feared the technology would improve the Chinese warheads, and could give the Chinese insights into how American systems worked.
Officials said Washington debated sharing security techniques with Pakistan on at least two occasions — right after it detonated its first nuclear arms in 1998, and after the terrorist attack on the United States in 2001.
The debates pitted atomic scientists who favored technical sharing against federal officials at such places as the State Department who ruled that the transfers were illegal under the Nuclear Nonproliferation Treaty and under United States law.
In the 1998 case, the Clinton administration still hoped it could roll back Pakistan’s nuclear program, forcing it to give up the weapons it had developed. That hope, never seen as very realistic, has been entirely given up by the Bush administration.
The nuclear proliferation conducted by Mr. Khan, the Pakistani metallurgist who built a huge network to spread Pakistani technology, convinced the Pakistanis that they needed better protections.
“Among the places in the world that we have to make sure we have done the maximum we can do, Pakistan is at the top of the list,” said John E. McLaughlin, who served as deputy director of the Central Intelligence Agency at the time, and played a crucial role in the intelligence collection that led to Mr. Khan’s downfall.
“I am confident of two things,” he added. “That the Pakistanis are very serious about securing this material, but also that someone in Pakistan is very intent on getting their hands on it.”
Police to search for guns in homes
City program depends on parental consent
By Maria Cramer, Globe Staff | November 17, 2007
boston.com
Boston police are launching a program that will call upon parents in high-crime neighborhoods to allow detectives into their homes, without a warrant, to search for guns in their children's bedrooms.
The program, which is already raising questions about civil liberties, is based on the premise that parents are so fearful of gun violence and the possibility that their own teenagers will be caught up in it that they will turn to police for help, even in their own households.
In the next two weeks, Boston police officers who are assigned to schools will begin going to homes where they believe teenagers might have guns. The officers will travel in groups of three, dress in plainclothes to avoid attracting negative attention, and ask the teenager's parent or legal guardian for permission to search. If the parents say no, police said, the officers will leave.
If officers find a gun, police said, they will not charge the teenager with unlawful gun possession, unless the firearm is linked to a shooting or homicide.
The program was unveiled yesterday by Police Commissioner Edward F. Davis in a meeting with several community leaders.
"I just have a queasy feeling anytime the police try to do an end run around the Constitution," said Thomas Nolan, a former Boston police lieutenant who now teaches criminology at Boston University. "The police have restrictions on their authority and ability to conduct searches. The Constitution was written with a very specific intent, and that was to keep the law out of private homes unless there is a written document signed by a judge and based on probable cause. Here, you don't have that."
Critics said they worry that some residents will be too intimidated by a police presence on their doorstep to say no to a search.
"Our biggest concern is the notion of informed consent," said Amy Reichbach, a racial justice advocate at the American Civil Liberties Union. "People might not understand the implications of weapons being tested or any contraband being found."
But Davis said the point of the program, dubbed Safe Homes, is to make streets safer, not to incarcerate people.
"This isn't evidence that we're going to present in a criminal case," said Davis, who met with community leaders yesterday to get feedback on the program. "This is a seizing of a very dangerous object. . . .
"I understand people's concerns about this, but the mothers of the young men who have been arrested with firearms that I've talked to are in a quandary," he said. "They don't know what to do when faced with the problem of dealing with a teenage boy in possession of a firearm. We're giving them an option in that case."
But some activists questioned whether the program would reduce the number of weapons on the street.
A criminal whose gun is seized can quickly obtain another, said Jorge Martinez, executive director of Project Right, who Davis briefed on the program earlier this week.
"There is still an individual who is an impact player who is not going to change because you've taken the gun from the household," he said.
The program will focus on juveniles 17 and younger and is modeled on an effort started in 1994 by the St. Louis Police Department, which stopped the program in 1999 partly because funding ran out.
Police said they will not search the homes of teenagers they suspect have been involved in shootings or homicides and who investigators are trying to prosecute.
"In a case where we have investigative leads or there is an impact player that we know has been involved in serious criminal activity, we will pursue investigative leads against them and attempt to get into that house with a search warrant, so we can hold them accountable," Davis said.
Police will rely primarily on tips from neighbors. They will also follow tips from the department's anonymous hot line and investigators' own intelligence to decide what doors to knock on. A team of about 12 officers will visit homes in four Dorchester and Roxbury neighborhoods: Grove Hall, Bowdoin Street and Geneva Avenue, Franklin Hill and Franklin Field, and Egleston Square.
If drugs are found, it will be up to the officers' discretion whether to make an arrest, but police said modest amounts of drugs like marijuana will simply be confiscated and will not lead to charges.
"A kilo of cocaine would not be considered modest," said Elaine Driscoll, Davis's spokeswoman. "The officers that have been trained have been taught discretion."
The program will target young people whose parents are either afraid to confront them or unaware that they might be stashing weapons, said Davis, who has been trying to gain support from community leaders for the past several weeks.
One of the first to back him was the Rev. Jeffrey L. Brown, cofounder of the Boston TenPoint Coalition, who attended yesterday's meeting.
"What I like about this program is it really is a tool to empower the parent," he said. "It's a way in which they can get a hold of the household and say, 'I don't want that in my house.' "
Suffolk District Attorney Daniel F. Conley, whose support was crucial for police to guarantee there would be no prosecution, also agreed to back the initiative. "To me it's a preventive tool," he said.
Boston police officials touted the success of the St. Louis program's first year, when 98 percent of people approached gave consent and St. Louis police seized guns from about half of the homes they searched.
St. Louis police reassured skeptics by letting them observe searches, said Robert Heimberger, a retired St. Louis police sergeant who was part of the program.
"We had parents that invited us back, and a couple of them nearly insisted that we take keys to their house and come back anytime we wanted," he said.
But the number of people who gave consent plunged in the next four years, as the police chief who spearheaded the effort left and department support fell, according to a report published by the National Institute of Justice.
Support might also have flagged because over time police began to rely more on their own intelligence than on neighborhood tips, the report said.
Heimberger said the program also suffered after clergy leaders who were supposed to offer help to parents never appeared.
"I became frustrated when I'd get the second, or third, or fourth phone call from someone who said, 'No one has come to talk to me,' " he said. Residents "lost faith in the program and that hurt us."
Boston police plan to hold neighborhood meetings to inform the public about the program. Police are also promising follow-up visits from clergy or social workers, and they plan to allow the same scrutiny that St. Louis did.
"We want the community to know what we're doing," Driscoll said.
Ronald Odom - whose son, Steven, 13, was fatally shot last month as he walked home from basketball practice - was at yesterday's meeting and said the program is a step in the right direction. "Everyone talks about curbing violence," he said, following the meeting. ". . . This is definitely a head start."
City program depends on parental consent
By Maria Cramer, Globe Staff | November 17, 2007
boston.com
Boston police are launching a program that will call upon parents in high-crime neighborhoods to allow detectives into their homes, without a warrant, to search for guns in their children's bedrooms.
The program, which is already raising questions about civil liberties, is based on the premise that parents are so fearful of gun violence and the possibility that their own teenagers will be caught up in it that they will turn to police for help, even in their own households.
In the next two weeks, Boston police officers who are assigned to schools will begin going to homes where they believe teenagers might have guns. The officers will travel in groups of three, dress in plainclothes to avoid attracting negative attention, and ask the teenager's parent or legal guardian for permission to search. If the parents say no, police said, the officers will leave.
If officers find a gun, police said, they will not charge the teenager with unlawful gun possession, unless the firearm is linked to a shooting or homicide.
The program was unveiled yesterday by Police Commissioner Edward F. Davis in a meeting with several community leaders.
"I just have a queasy feeling anytime the police try to do an end run around the Constitution," said Thomas Nolan, a former Boston police lieutenant who now teaches criminology at Boston University. "The police have restrictions on their authority and ability to conduct searches. The Constitution was written with a very specific intent, and that was to keep the law out of private homes unless there is a written document signed by a judge and based on probable cause. Here, you don't have that."
Critics said they worry that some residents will be too intimidated by a police presence on their doorstep to say no to a search.
"Our biggest concern is the notion of informed consent," said Amy Reichbach, a racial justice advocate at the American Civil Liberties Union. "People might not understand the implications of weapons being tested or any contraband being found."
But Davis said the point of the program, dubbed Safe Homes, is to make streets safer, not to incarcerate people.
"This isn't evidence that we're going to present in a criminal case," said Davis, who met with community leaders yesterday to get feedback on the program. "This is a seizing of a very dangerous object. . . .
"I understand people's concerns about this, but the mothers of the young men who have been arrested with firearms that I've talked to are in a quandary," he said. "They don't know what to do when faced with the problem of dealing with a teenage boy in possession of a firearm. We're giving them an option in that case."
But some activists questioned whether the program would reduce the number of weapons on the street.
A criminal whose gun is seized can quickly obtain another, said Jorge Martinez, executive director of Project Right, who Davis briefed on the program earlier this week.
"There is still an individual who is an impact player who is not going to change because you've taken the gun from the household," he said.
The program will focus on juveniles 17 and younger and is modeled on an effort started in 1994 by the St. Louis Police Department, which stopped the program in 1999 partly because funding ran out.
Police said they will not search the homes of teenagers they suspect have been involved in shootings or homicides and who investigators are trying to prosecute.
"In a case where we have investigative leads or there is an impact player that we know has been involved in serious criminal activity, we will pursue investigative leads against them and attempt to get into that house with a search warrant, so we can hold them accountable," Davis said.
Police will rely primarily on tips from neighbors. They will also follow tips from the department's anonymous hot line and investigators' own intelligence to decide what doors to knock on. A team of about 12 officers will visit homes in four Dorchester and Roxbury neighborhoods: Grove Hall, Bowdoin Street and Geneva Avenue, Franklin Hill and Franklin Field, and Egleston Square.
If drugs are found, it will be up to the officers' discretion whether to make an arrest, but police said modest amounts of drugs like marijuana will simply be confiscated and will not lead to charges.
"A kilo of cocaine would not be considered modest," said Elaine Driscoll, Davis's spokeswoman. "The officers that have been trained have been taught discretion."
The program will target young people whose parents are either afraid to confront them or unaware that they might be stashing weapons, said Davis, who has been trying to gain support from community leaders for the past several weeks.
One of the first to back him was the Rev. Jeffrey L. Brown, cofounder of the Boston TenPoint Coalition, who attended yesterday's meeting.
"What I like about this program is it really is a tool to empower the parent," he said. "It's a way in which they can get a hold of the household and say, 'I don't want that in my house.' "
Suffolk District Attorney Daniel F. Conley, whose support was crucial for police to guarantee there would be no prosecution, also agreed to back the initiative. "To me it's a preventive tool," he said.
Boston police officials touted the success of the St. Louis program's first year, when 98 percent of people approached gave consent and St. Louis police seized guns from about half of the homes they searched.
St. Louis police reassured skeptics by letting them observe searches, said Robert Heimberger, a retired St. Louis police sergeant who was part of the program.
"We had parents that invited us back, and a couple of them nearly insisted that we take keys to their house and come back anytime we wanted," he said.
But the number of people who gave consent plunged in the next four years, as the police chief who spearheaded the effort left and department support fell, according to a report published by the National Institute of Justice.
Support might also have flagged because over time police began to rely more on their own intelligence than on neighborhood tips, the report said.
Heimberger said the program also suffered after clergy leaders who were supposed to offer help to parents never appeared.
"I became frustrated when I'd get the second, or third, or fourth phone call from someone who said, 'No one has come to talk to me,' " he said. Residents "lost faith in the program and that hurt us."
Boston police plan to hold neighborhood meetings to inform the public about the program. Police are also promising follow-up visits from clergy or social workers, and they plan to allow the same scrutiny that St. Louis did.
"We want the community to know what we're doing," Driscoll said.
Ronald Odom - whose son, Steven, 13, was fatally shot last month as he walked home from basketball practice - was at yesterday's meeting and said the program is a step in the right direction. "Everyone talks about curbing violence," he said, following the meeting. ". . . This is definitely a head start."
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