Educate Yourself

Week in Review
For the week 7/31/2006 - 8/4/2006
Brian Trumbore
President/Editor, StocksandNews.com

On one of the paramount issues of this tumultuous decade, I will continue to present all sides, as harsh as some of it may be, in an attempt to fully understand the conflict.

"The tragedies in Qana suggest to the Lebanese that the Israelis, who are waging a campaign of ethnic cleansing in South Lebanon, have forgotten their own suffering during the Holocaust. The Israelis and their allies have callously ignored a besieged people's pleas for mercy. Instead, the children of the Holocaust, whom one would expect to show empathy for the plight of weak and helpless innocents, are now meting out the same racist rage that was demonstrated in Treblinka, Auschwitz and Dachau. How can Israeli mothers and fathers sleep at night knowing that their government is conducting massacres in Lebanon? Do they believe that by virtue of our religion or nationality that we innocent Lebanese are expendable? Have they now embraced the very logic that sought to eliminate their people?

"We urge the Israelis to abandon the logic of death and destruction that they have been showering on the people around them. We urge them to instead embrace the pursuit of meaningful negotiations and the rapid implementation of all UN resolutions. What is needed is a sense of humanity and an intelligent resolution of this conflict, not America's laser-guided 'smart' weapons, or other tools of extermination."

Michel Aoun, former Lebanese prime minister, commander of its armed forces, and current member of parliament / Wall Street Journal, July 31, 2006

"No matter how much longer this fight goes on, the truth of the matter is that political negotiations will be the endgame. The solution that will present itself a week, a month or a year from now will be, in essence, the same solution as the one available today, and which, tragically, was available before a single shot was fired or a single child killed. Given this reality, a more concerted effort is required sooner rather than later to stop the death and destruction on both sides of the border?

"(Our own recent) extensive negotiations with Hizbullah resulted in an articulation of the three main roadblocks regarding resolution of the Hizbullah arms issue: First, the return of Lebanese prisoners in Israeli prisons. Second, the return of the Shebaa Farms, a tiny piece of Lebanese territory still occupied by Israel. And third, the formulation of a comprehensive strategy to provide for Lebanon's defense, centered upon a strong national army and central state decision-making authority in which all political groups are assured a fair opportunity to participate.

"This structure, if joined together with international guarantees which forbid the nationalization of Palestinian refugees in Lebanon and which protect Lebanon from Israeli incursions, and if tied on the internal level to a new, fair and uniform electoral law, is the best hope for peacefully resolving the Hizbullah weapons issue?

"Our party presented this solution internally to all Lebanese political groups, the Lebanese government, and the international community - including the U.S. administration - repeatedly, for an entire year before this crisis began.

"Rather than help us to resolve the weapons issue peacefully and avoid the current agony our country is now enduring, the international community and Lebanese government flatly ignored the proposed solution?.

"Let us (now) proceed from the standpoint that all human life is equal, and that if there is a chance to save lives and to achieve the same ultimate result as may be achieved without the senseless killings, then let us by all means take that chance."

"The Israelis may be making subtle changes in their stated strategic goals - from wanting to destroy Hizbullah, to degrading it significantly, to pushing it back beyond the Litani River, to simply preventing attacks against Israel. Israel has a legitimate and reasonable demand in wanting to prevent attacks against its territory from Lebanon, though it seems to remain blind to the reality that attacks against it from Lebanon are part of a long cycle where both sides have grievances."

"Despite growing international calls for an immediate ceasefire in Lebanon, Israel is persisting with its effort to save face, insisting that it will achieve a tangible military victory before negotiations begin. Much like Hizbullah, which on July 12 captured two Israeli soldiers in an effort to secure the release of Lebanese prisoners in Israeli jails, Israel has embraced the faulty and dangerous logic of waging war in order to achieve piece. In the course of the war, both Hizbullah and Israel have adopted some of the same strategies and methods, endangering the lives of civilians on both sides of the border. And as the war drags on, Hizbullah and Israel run the risk of plunging the entire region into a vortex of violence.

"All of the forthcoming death and destruction will be for naught. A comprehensive solution to the longstanding Lebanon-Israeli conflict has been put forth by Lebanese Prime Minister Fouad Siniora. His proposed solution has already been approved unanimously by the Lebanese Cabinet, including Hizbullah ministers. The package includes seven points: an exchange of prisoners; an end to Israel's occupation of the Shebaa Farms and incursions into Lebanese territory; a deployment of the Lebanese Army to South Lebanon; a provision by Israel of maps of minefields in South Lebanon; a disarmament of Hizbullah; a probe into Israel's indiscriminate bombings in Lebanon; and the deployment of an international peacekeeping force to assist the Lebanese Army in preserving security along the border."

"The grave tragedy that has been unfolding before our eyes in Lebanon, and the inability of the international community to bring it to an end after three weeks of suffering, unfortunately raise questions about the United States and its proud legacy of leadership for freedom and justice.

"After all, my generation grew up with an image of the United States as standing for the revered values of democracy. It is sad that this image of a 'kinder, gentler nation' is being tarnished as millions around the world watch in complete horror as events unfold in Lebanon.

"Today live images of the carnage and destruction are broadcast directly into our households. Each time a bomb wreaks havoc on the streets of Beirut, it hits the consciences of people everywhere?.

"Needless to say, this does not bode well for the much-needed dialogue and understanding between civilizations.

"Retaining the higher moral ground is even more essential in the age of instant information. It is time for all of us to act upon what our collective conscience has been telling us for many days.

"In Lebanon we have once again seen the limitations of our classic notions of security in the face of asymmetric challenges. The reality is that the use of disproportionate and indiscriminate force makes difficult situations even more intractable without enhancing anyone's security. In fact, if we take the long view, it will be seen that the reverse is happening.

"The only way out of the present crisis is determined action by the international community that truly addresses the core issues that have been festering in the Middle East and that lie at the very roots of the conflict. This requires nothing less than genuine leadership, which must adhere to the values that it asks of others in order to be effective."

"Events as momentous as the current war between Israel and Hizbullah, and Israel's assault on all of Lebanon, have a tendency to impact on the entire region, where the political repercussions are likely to be serious. We see signs of this in the usual channels of public opinion, including street demonstrations, political protests, fund-raising campaigns, and media statements?..Some (moderate) leaders had spoken out against Hizbullah initially, naming it as the reckless party that pushed Lebanon into its current state of siege and destruction. Anger and protest have not been limited to the Arab world, either, as has usually been the case when Israel attacks and kills Arabs?.

"The result is evident throughout the region. Hizbullah is both a manifestation of this process and a catalyst for it. The current war in Lebanon is likely to keep pushing Arab public opinion in this same direction. The conspicuous disenchantment of large segments - perhaps majorities - of Arab public opinion with their own government policies is being exacerbated every day. The consequences are ominous in a region with so much of the world's energy reserves, and so many governments and ordinary citizens willing to use the most awful kind of violence to achieve their goals.

"The signs of radicalization that continue to manifest themselves in various Arab countries, as a consequence of the war between Lebanon and Israel, must not be ignored. They must be appreciated and addressed, with a ceasefire now and wider political resolutions soon after, before they take the destruction we witness today to other parts of the region and the world."

"The emergence of the Shebaa Farms as a possible item in an agreement authorizing a multinational force for South Lebanon raises a number of issues of which not all the participants in the current negotiations may be aware. They go deep into the question of the very existence of Lebanon as a sovereign state?.

"In the negotiations leading to the Israeli withdrawal from southern Lebanon in 2000, Lebanon for the first time raised its claim to the farms, but based on all previous historical documents and maps, the UN sided with the Israeli version, i.e., that this was Syrian territory and subject to future Israeli-Syrian negotiations. The Lebanese claim was used by Hizbullah to continue its resistance to 'Israeli occupation of Lebanese territory.'

"Nobody, however, believes that even if the farms were handed over to Lebanon, Hizbullah would stop its armed activities which are, after all, aimed at the destruction of the 'Zionist entity in occupied Palestine.'

"At the time of the 2000 Israeli withdrawal the UN asked Syria about its position on the issue. Damascus was in a quandary: On the one hand, this was obviously Syrian territory; on the other, if Syria conceded that the farms belong to Lebanon, there might be a chance of getting one more sliver of Arab territory out of Israeli hands.

"Syria thus responded that whatever its former claims to the Shebaa Farms, it now agreed to cede them to Lebanon.

"But when the UN asked Damascus for a formal document stating that the area had indeed been legally transferred to Lebanon, Syria balked - and it has still not supplied such a document.

"Why? At the root of the issue is the simple fact that up to this very day Syria has not accepted the legitimacy of the existence of a separate, sovereign Lebanese state. Lebanon was carved out by the French imperial powers in the 1920s as an attempt to create a pro-Western, Christian entity in the Levant - hence France's continuous solicitude for Lebanon, including its recent support for UN decisions calling on Syria to evacuate Lebanon?.

"The Syrian refusal to supply a document confirming the ceding of the Shebaa Farms to Lebanon is not a mere formality: Were Syria to issue such a document - clearly stating that the farms are part of Lebanon and not of Syria - this would mean Syria recognizes Lebanon as a separate, independent, sovereign state?.

"Diplomats who are now concerned with a cessation of violence in South Lebanon and northern Israel should be aware of this conundrum, which is no mere formality.

"If the Shebaa Farms appears in any form as part of the deal, this should be accompanied by an unequivocal statement from Syria recognizing that the area belongs to the Republic of Lebanon.

"It is my guess that the chances of such a statement are minimal. Without it, the international legitimacy of the agreement - and its subsequent implementation - may be extremely problematic."

"Israel went to war to remove Hizbullah's strategic missile threat on the Jewish state's northern border. Hizbullah has kept Israel hostage to its missile threat for the past six years, during which the terror group has transformed itself into a highly effective deterrent force?.

"(While) Israel is at war only to eliminate the acute strategic threat of some 13,000 to 15,000 short- and longer-range Iranian and Syrian missiles pointed at its major cities, this Israeli campaign must also achieve three additional and necessary outcomes that have far-reaching implications for the future of the Middle East region and the free world.

"First, an Israeli victory over Hizbullah - meaning the uprooting of Hizbullah as an armed force that has become an army within an army - may offer the Lebanese people another window of opportunity to become a democratic sovereign state free from the fear and tyranny Syria and Iran, via Hizbullah, have imposed on it?.

"The second necessary byproduct of Israel's war against Hizbullah is the ripple effect it will have on the international axis of radical Sunni and Shiite Islamic networks. Radical Islam is nurtured by its perceived successes, as it is poisoned by its perceived failures. Unfortunately, since the 1979 Iranian revolution, and particularly following the defeat of Soviet forces by al-Qaeda in Afghanistan in 1989, radical Islam has felt 'well fed' by its successes against the West.

"Osama bin Laden is alive and has been in command since the al-Qaeda attacks of September 11. The United States is bogged down in Iraq. Al-Qaeda scored quantitative hits in London and Madrid, and even caused a change of government in the Spanish elections.

"Moreover, Israel's unilateral retreat from Lebanon in May 2000 was considered a major victory by Hizbullah, providing important encouragement to Yasser Arafat, who based his Intifada 2000 strategy on Hizbullah's terror war of attrition in Lebanon from 1982 to 2000.

"Israel's unilateral withdrawal from Gaza in September 2005 was also clearly understood by the Palestinians as a vindication of the Hamas terror group's actions, and this led in no small part to the Hamas electoral victory in January this year. The Muslim Brotherhood has since refortified itself in Egypt and Jordan?.

"Therefore, and in no uncertain terms, the Israeli counteroffensive in Lebanon is one of the last stations at which the seeming runaway train of radical Islam can be stopped or certainly slowed in its tracks.

"The West and radical Islam have reached a dramatic, yet still undetermined, turning point: An Israeli victory over Hizbullah would send a critically important signal to the American and Iraqi government forces fighting the radical insurgency in Iraq and Afghanistan; to the Hamas terrorists in Gaza; and to its leadership and Syrian hosts in Damascus. An Israeli failure would have the opposite effect, strengthening Hamas's terror operations and radical Islamic groups in Europe, and increasing the threats against Jordan, Egypt and other Arab countries.

"The third critical byproduct of a successful Israeli campaign would be a blow to Iran. Israel must neutralize Tehran's strategic weapon - Hizbullah - which has been a lever by which Tehran could threaten to ignite the Middle East at will."

"(The Bush) administration's rhetoric about the crisis as 'an opportunity' for 'a new Middle East' may horrify Washington's self-described realists. But a more hardheaded way of spelling out the same stakes came from Walid Jumblatt, the Lebanese Druze leader who is no friend of the United States or Israel. 'Either we will have a state able to establish its control over the country or we will have?a reduced weakened state and a strong militia beside the Lebanese army that decides war and peace at any time and has its schedule decided by the Iranians and the Syrians?I don't see a state of Lebanon surviving with a militia next to an army. That's it.'"

"Generally speaking, wars are lost either militarily or politically. Israel is losing both ways. Two weeks ago, Israeli officials boasted they had destroyed 50% of Hizbullah's military capabilities and needed just 10 to 14 days to finish the job. Two days ago, after a record 140 Katyushas landed on Israel, Prime Minister Ehud Olmert told visiting Secretary of State Condoleezza Rice he needed another 10 to 14 days. When the war began, Israeli officials spoke of 'breaking' Hizbullah; next of evicting Hizbullah from the border area; then of 'degrading' Hizbullah's capabilities; now of establishing an effective multinational force that can police the border. Israel's goals are becoming less ambitious while the time it needs to accomplish them is growing longer.

"It is amazing how much can be squandered in the space of three weeks. On July 12, Israel sat behind an internationally recognized frontier, where it enjoyed a preponderance of military force. It had deterrence and legitimacy. Hizbullah's cross- border raid that day was widely condemned within Lebanon and among Arab leaders as heedless and provocative. Mr. Olmert's decision to respond with massive force enjoyed left-to-right political support. He also had a green light from the Bush administration, which has reasons of its own to want Hizbullah defanged and which assumed the Israelis were up to the job. But it seems they are not. The war began with a string of intelligence failures: Israel had lowered its alert level on the northern border prior to the raid; it did not know that Hizbullah possessed Chinese-made anti-ship missiles, one of which nearly sank an Israeli missile boat off the coast of Beirut; it was caught off guard by the fierce resistance it encountered in the two Lebanese villages it has so far attempted to capture. Such failures are surprising and discouraging, given that Israel has been tracking and fighting Hizbullah for nearly a quarter-century?..

"(Regarding Qana), yes, Hizbullah bears ultimate responsibility here for deliberately placing its military assets among civilians. Yet the death of those children should be counted as a crime if Israel's purposes in Lebanon are basically feckless. A line being bandied about in Israeli security circles is that the purpose of the bombing is to show Hizbullah that 'the boss-man has gone berserk.' What kind of goal is that? Nobody in this conflict ever doubted Israel's ability to set Lebanon back 20, 50 or 500 years (about where Hizbullah itself wants the country to be).

"The goal, rather, is to ensure that Hizbullah will never again be in a position to spark a similar crisis, and to do so with maximum effect in the shortest possible time. Israeli Chief of Staff Dan Halutz warned two weeks ago that Hizbullah wants a long war: 'They realize that prolonged attrition causes internal pressure from Israeli citizens and international pressure, and think those are our weak points.' That's right, which makes his three-week bombing campaign puzzling."

"The airstrike on the Lebanese village of Qana has been a tragedy for Israel. A publicity debacle, the deaths of 57 civilians [ed. since lowered to 28 with 13 missing by Human Rights Watch] united Israel's enemies, complicated American support - and may lead to a ceasefire that rewards Hizbullah?.

"Anxious to hurt Hizbullah, a chain of command grown tired and careless ended up harming Israel terribly.

"The consequences are grave. At Qana, Israel lost the information war beyond all hope of recovery. It's losing the war on the ground, too. After ill-judged claims a week ago that the Israeli Defense Forces had eliminated 40% of Hizbullah's military capability, more rockets rained down on Israel last Sunday than on any previous day of the conflict?.

"Our support for Israel has always been costly to our foreign policy, yet it was justified on several grounds: morally imperative backing for a Jewish homeland after the Holocaust, moral and practical support for a fellow rule-of-law democracy and the knowledge that Israel would fight to win.

"But Israel isn't fighting to win this time: It's been tossing bombs and hoping for a miracle?.

"The problem isn't Israel's people - who overwhelmingly support the effort to destroy Hizbullah. And the IDF knows how to do the job. But the Olmert government seems terrified of finishing what it started. Now, with global cries for a ceasefire, it may be too late. This may be the first 'shooting war' Israel losses."

Ralph Peters / New York Post, Aug. 3, 2006 [Peters was more optimistic two days later as Israel launched its ground campaign. He had other concerns, however.]

"Meanwhile, dangers loom on the diplomatic front. Our secretary of state performed splendidly in the first weeks of the war, defending Israel as the victim of terror. But Condoleezza Rice's brutal schedule is wearing her down: Her recent statement that a ceasefire could come in a matter of days was a gift to our mutual enemies.

"We wouldn't want Israel - or anybody - shoving a timetable for Iraq down our throats. All timetables and deadlines only encourage our enemies to resist, to hang on, to hope. Statements conflicted within the Israeli government, too, with some voices guessing the war will last another week or two, while others speak of months.

"My best advice to Israel: Everybody just shut up. Fight. Win the damned war. Then talk."

"It is even possible that a comprehensive settlement might help stabilize Iraq. A chastened Iran, bereft of the 'Israeli card,' might be more willing to reach a modus vivendi with the Sunnis and Kurds in Iraq, and with the United States as well. All countries in the region - not to mention Iraq itself - need a stable, prosperous and peaceful Iraq. The road to achieving this may well lead eastward from a Jerusalem shared peacefully by Israelis and Palestinians.

"This latest in a seemingly endless series of conflagrations in the region just may present a unique opportunity to change the situation in the Middle East for the better for all time. Let us not shrink from the task."

"It is only when one has reviewed (the interlocking elements of the crisis) that one fully appreciates the extreme unwisdom of the Bush administration in having allowed if not encouraged the Olmert government to pursue a policy of wide retaliation across Lebanon?.

"The outcome is so astoundingly awful that it has taken weeks to sink in. Iran hands out missiles to a theocratic gang that was until recently mounting pro-Syrian demonstrations in Beirut, all the while spitting in the face of the UN, the U.S. and the EU on the nuclear issue - and is subjected to precisely no consequences. Syria openly parades the leader of Hamas in a Damascus hotel, while accepting Iranian largesse (and incidentally proving once again that 'secular' Baathists can indeed collude full-time with religious fundamentalists), sends its death-squads to murder Lebanese politicians and journalists - and is subjected to precisely no consequences. Syria and Iran send sophisticated explosives for the use of Shiite sectarians in Iraq, who employ them to murder American soldiers and Sunni civilians - and are subjected to precisely no consequences. While all the time, because of its arming and encouraging of Israel, the otherwise passive United States is regarded with as much hatred and fury as if it had in fact tried to remove Assad and Ahmadinejad from power!

"To suffer all the consequences of being imperialistic, while acting with all the resolution and consistency and authority of, say, Belgium, is to have failed rather badly."

"The administration's determination to give Israel time to destroy the Hizbullah military infrastructure is understandable but mistaken. Because Israel's military operations cannot destroy Hizbullah without destroying Lebanon in the process, time plays to Tehran's advantage. There is a battle between the U.S. and Iran to see who will appear more reasonable to the world. If Iran seems more reasonable on Lebanon, it will weaken the international consensus to stop its nuclear program. So a U.S. initiative to stop the violence should include more than just a ceasefire: It should also include a major program to train and equip the Lebanese military so it can eventually disarm Hizbullah; massive economic assistance to Lebanon to win popular support for such an effort; encouragement of Israel to discuss all issues of concern with the Lebanese government; and an international force that can help the Lebanese armed forces establish a buffer zone along the border until the Lebanese are ready to handle the mission on their own.

"In addition, the administration should use this opportunity to pursue a multilateral approach to Damascus, designed to force it to choose between its ties to Hizbullah and Iran, and its desire for reintegration into the global community. In return for Syrian assistance in shutting down supply routes to Hizbullah, the West should offer Syria two paths: One would entail its giving up its WMD programs and support for terrorist groups, in return for peace negotiations leading to economic assistance and political rapprochement; the other would mean ever greater economic and political isolation.

"Meanwhile, the U.S., together with the Europeans, Russians and Chinese, must refuse to allow Tehran to use the Lebanon crisis as a way of avoiding sanctions over its nuclear program. The 14-1 Security Council vote on Monday, insisting that Iran suspend its nuclear activities and react positively to the West's nuclear offer was an encouraging sign, but it must be followed up by a determination to stand firm regardless of Lebanon. It might help to point out that if a primary reason for the U.S. or Israel to resist the temptation to use military force against Iranian nuclear sites was the risk that Iran would turn Hizbullah loose on Israel, that disincentive is now noticeably absent.

"Even as we cope with the more immediate aspects of the current crisis, the long-term goal of preventing Iran from acquiring a nuclear-enrichment capability must not be forgotten."

For its part, Iran was more vocal than usual this week and, again, it's important to understand just what its people and the regime's followers are reading, understanding they are seldom receiving the other side of the debate.

"The events in Lebanon have exposed the true nature of American human rights and have revealed the kind of Middle East the U.S. government intends to have.

"Today it has become clear to all that the attack on Lebanon was premeditated and part of a joint U.S.-Zionist stratagem and is a major step toward domination of the Middle East and the Islamic world.

"Bush and his American cohorts share the same degree of guilt in the disasters brought upon Lebanon as the evil and wicked Zionist regime. And the silence of the United Nations and many of the Western governments and above all the support by some governments, such as the notorious British government, make them accountable and partners in crime in varying degrees in the contemporary and future judgment of humanity and on the day of reckoning and the divine judgment day.

"More than ever before the Muslim nations loathe America. Their governments, even those that are constrained because of political considerations, loathe and oppose the U.S. government because of so many outrageous and arrogant aggressions. The U.S. regime must expect a hard slap on the face and the crushing fist of the Muslim ummah because of its support for the crimes and the Zionist criminals and its blatant violation of the rights of Muslim nations."

"Although the main solution is for the elimination of the Zionist regime, at this stage an immediate ceasefire must be implemented?.(The Middle East would be better off) without the existence of the Zionist regime?.(Israel) is an illegitimate regime, there is no legal basis for its existence."

Ahmadinejad added, "Today the Americans are after the greater Middle East. The Zionist regime is used to reach this objective. The sole existence of this regime is for invasion and attack."

The week started with the bombing at Qana, one that Jordan's King Abdullah called "criminal aggression" on the part of Israel, an "ugly massacre" in the words of UAE leadership, and an "unjustifiable action," by French President Jacques Chirac.

Israel admitted almost immediately Qana was a major mistake, but just as in the case of the United States, the conduct of the war in Iraq, and episodes like Abu Ghraib and Haditha, Israel has to be virtually perfect. I can't repeat this enough, as much as it infuriates some. It's the way of today's world and one also can't underestimate the power of having every Arab television (and those in Indonesia, the Philippines and Malaysia as well) tuned into the coverage, almost every second of it biased.

According to the first poll conducted in Lebanon, 80% of the people now support Hizbullah. As much as you might want to believe that is merely an emotional reflex and that a year from now the figure will be nowhere near that level, it could actually go higher.

It doesn't help when the spokesmen that Israel puts forward, such as Ambassador to the U.S. Daniel Ayalon and UN Ambassador Dan Gillerman, often treat us as idiots.

When an incident like Qana occurs, for Gillerman to say "I wouldn't be surprised it if wasn't timed for Sec. Rice's trip," when it was Israel that fired the missile, is absurd. In the words of Ralph Peters, sometimes it's best just to "shut up."

So you might be thinking, well what of Hizbullah's rocket attacks that killed 8 Israeli civilians on Thursday alone?

Israel can't continue to play tit-for-tat. It will lose in the long run and you will see more Jewish targets taken out, worldwide, such as the bombing decades ago in Buenos Aires that killed over 80.

I'm frustrated because I can't imagine this all would have happened under a Prime Minister Sharon, yet it's not worth anyone's time to contemplate this further except for those writing "What If?" books.

This war, at this particular point in time, could have been avoided had the U.S., France, and the UN supported the elected Lebanese government, beginning May 2005, and insisted on the implementation of UN Security Council Resolution 1559 that called for the disarmament of Hizbullah. History will not be kind to them, but I've said enough about this in prior columns.

There is another important issue, however, that being the world has yet to fully grasp the environmental disaster taking place in Lebanon. Last Sunday, The New York Times had a story on Israel's targeting of a major fuel depot with five of six tanks going up in flames, spilling massive quantities of heavy fuel oil into the Mediterranean. In just the first day, 10,000 tons, a quarter of the entire Exxon Valdez disaster, flooded out.

Lebanon's Daily Star reported on Wednesday that at least a third of Lebanon's coast was impacted and the fuel spill has reached Syria.

"In an interview with the Associated Press, Environmental Minister Yaacoub Sarraf said: 'As long as there is no ceasefire and as long as we don't have access to the sea, not only can we not start the treatment but we cannot even access or get the data which is essential. Chances are our whole marine ecosystem facing the Lebanese shoreline is already dead. What is at stake today is all marine life in the Eastern Mediterranean.'"

A German expert has worried that the use of chemicals in removing the slick would only cause further environmental damage and could be more toxic to the environment than the initial pollution. "Experts calculate that for every ton of fuel oil cleaned by chemicals, an additional 10 tons of hazardous waste is generated."

Friends, this is but one example of the humanitarian and environmental crisis in Lebanon. Yes, Hizbullah started this war but imagine how the Arab media will cover 'Israel poisoning Lebanon's coastal waters; fishing industry destroyed,' etc., let alone the fact that if the United States were to say this weekend 'we want to help rebuild Lebanon,' it would be truly laughable.

Lastly, I noted with interest the Israeli operation in Baalbek, which is where I hired the driver to take me one day last spring. When I told him to turn around and head back to Beirut after reaching the town center, spooked out of my mind, I said to my driver, Haitnam El chaar, once we were out of Baalbek, "I probably shouldn't have been there." To which he replied "Your government doesn't want you here." [WIR 5/7/05]

You are going to have to forgive me, but as I have a lot of new readers next week I'm going to summarize my stand on Iraq, going back to the period before the war started. It's been a consistent position and if you think I'm going to disagree with Sen. Hillary Clinton for her performance this week, it would be hypocritical of me to do so considering the fact I called for Sec. of Defense Donald Rumsfeld's resignation in 2003.

For today, though, I'll just note that at a hearing of the Senate Armed Services Committee, the top commander in the Middle East, Gen. John Abizaid, said "Iraq could move toward civil war," further noting "the sectarian violence is probably as bad as I have seen it."

Anyone with half a brain has known this for some time now, but it took our military leaders until today to publicly state the obvious.

And so much for Senator John McCain's presidential run. I admire this man and would vote for him myself, but he took a stand in 2003 that we needed more troops in Iraq, they weren't forthcoming, and now he can do little more than point out what abject fools some of our commanders on the ground have been, let alone, by inference, the commander-in-chief.

But for now, the only other item I'll mention is the uncovering of further examples of massive corruption in the reconstruction effort. Every American, especially those with sons and daughters in the field, should be sick to the core over this. Whether it is the State Department agency that has played a shell game with its $1.4 billion budget, constantly hiding the facts, and funds, from Congress and the government's auditing arm (which finally uncovered it), or the $4 to $5 billion that has lined the pockets of officials in the Iraqi government, as reported by Yochi J. Dreazen in The Wall Street Journal.

And nice anti-America / anti-Israel parade in Baghdad on Friday; at least 50,000 strong.

The UN Security Council passed Resolution 1696 requiring Iran to suspend its nuclear enrichment program by August 31 or face possible sanctions, but the effort was watered down considerably. In the words of Vitaly Churkin, the Russian ambassador to the UN, it was "crucial that any additional measures that could be required (sanctions), rule out the use of military force," while China's deputy ambassador insisted "dialogue and negotiations are the only way out" of the impasse. [Financial Times]

"Now, Iranians' questions for the five major nuclear powers and other Security Council members (except Qatar, ed. the lone dissenter in a 14-1 vote) are: Is it not the Security Council's responsibility to maintain world peace? Has the nuclear Non- Proliferation Treaty died so that the Security Council is worried about international peace while Iran is in compliance with the treaty? Is the silence of the Security Council over Israel's brutal slaughter of hundreds of Lebanese and Palestinian women and children a response to these questions? Should the regime that is free to produce nuclear weapons also be free to butcher children?"

This is what we're up against. Two weeks ago it was far easier to say a defeat of Hizbullah was a defeat of Iran. But I'm of the increasing opinion it's too late and it's hard to gauge at this point just how painful for Hizbullah the taking out of Hasan Nasrallah would be to the cause. Short-term, a huge victory no doubt, but as we've learned with the killing of Zarqawi and all the others of his ilk, the fundamentalist threat continues to reconstitute itself.

Lastly, a note on Afghanistan where NATO forces suffered through a brutal week with at least seven killed after the U.S. turned over the southern province containing Kandahar to NATO command. 3 British soldiers were killed in one day and four Canadians, bringing the latter's death toll in Afghanistan to 21 by most counts.

Here in the United States, it's easy to note the weakness of the Canadian military, as I have myself on more than one occasion over the years, but Americans need to recognize the sacrifice our good neighbors have made in the Afghan war. I was surprised to see this week that the latest poll in Canada still showed a slight majority, 50-46, supporting the deployment there. Remember Canada's contribution the next time you hear their anthem at a sporting event.

Stocks finished narrowly mixed, once again largely dismissing the widening tensions in the Middle East because the fighting between Israel and Lebanon doesn't directly involve the flow of oil. Instead the market is fixated on the Federal Reserve and an important decision it will be making on interest rates this coming Tuesday.

Due to an unexciting employment report for the month of July, with the U.S. economy adding all of 113,000 jobs, the experts are saying it's a lock the Fed will finally 'pause' after 17 straight rate increases because the evidence clearly speaks to a slowdown.

Some of the manufacturing data released this week was actually pretty solid, and we got out of the heat by hitting the malls, as some retailers reported, but we've learned in past weeks the days of 5.6% growth, as in the first quarter, are long gone.

As for inflation, Fed Chairman Ben Bernanke earlier expressed confidence that any price pressures would abate as the overall economy slowed so there's further ammunition for the 'pause' camp. This week offered classic evidence of Bernanke's stance in the form of Procter & Gamble's earnings report. The company said it was able to raise prices on selected items recently, but it wasn't confident it would be able to continue to do so in the future.

And while some retailers like Wal-Mart and Target reported July same-store sales that were up in the 2.5-3% range, not exactly "lights out," there were also growing signs $3 a gallon gas was hitting restaurant chains in the form of lighter checks.

Otherwise, as I've taken up more than enough space the past few reviews with general economic commentary, I'll pause myself until next time.

However, I just want to touch on two items. The latest Goldman Sachs Confidence Index, which is based on CEO assessments of business conditions, declined dramatically. As the director of the survey said, "Chief executives appear more concerned about economic uncertainty than at any time in recent quarters."

The crisis in the Middle East isn't helping either, though this isn't necessarily being reflected in the data as yet. Seeing as it's my theory it will, and that this directly impacts capital spending at some point, it's just another reason to be concerned about future corporate earnings.

And I was perusing the September issue of The Atlantic Monthly and spotted a piece by Clive Crook titled "The Height of Inequality: America's productivity gains have gone to giant salaries for just a few."

"Lately economists have been using new data to look more closely within the top decile of American incomes. What they've found is startling. Here are some results from Ian Dew- Becker and Robert Gordon of Northwestern University. Between 1966 and 2001, median wage and salary income increased by just 11 percent, after inflation. Income at the 90th percentile (six minutes from the end of the hour-long parade) increased nearly six times as much - by 58 percent. At the 99th percentile (the last thirty-six seconds), the rise was 121 percent. At the 99.9th percentile (3.6 seconds before the end), it was 236 percent. And at the 99.99th percentile (0.36 seconds, representing the 13,000 highest-paid workers in the American economy), the rise was 617 percent.

"That is worth repeating: Over 35 years, the rise in wages and salaries in the wide middle of the income distribution was 11 percent. The rise in wages and salaries at the top of the income distribution was 617 percent?.

"This is quite disturbing. Historically, rising productivity has been a tide that lifted nearly all boats. For more than twenty years during the long surge of productivity growth that followed the Second World War, median incomes in the United States rose as quickly as the highest incomes. This came to be regarded as normal - and, seen from a global vantage point, it still is. The dispersed benefits of high aggregate productivity are the reason why jobs of almost every kind pay better in rich countries than in poor ones?.

"Such extreme skewness is new. It suggests that a huge proportion of the economy's productivity gains are neither being passed on to consumers through lower prices - which would have the effect of raising real incomes very broadly - nor being distributed to investors as profit, nor even being used to raise the wages of most employees in industries seeing rapid productivity growth. Rather, they're being diverted to a comparative handful of employees."

So?is it any wonder that yet another poll, this one from the Los Angeles Times and Bloomberg News, once again shows a vast majority, by a 59/34 margin, disapproving of President Bush's handling of the economy. How you rectify this disconnect without worshipping at the feet of Karl Marx is anyone's guess. But as I'll discuss further below, there's no shortage of evidence that America's elite are largely a bunch of pigs.

--For the week the Dow Jones rose just 0.2% to 11240, the S&P 500 added a whopping point, and Nasdaq finished down 0.4% to 2085. The market gave up a 100-point rally on the Dow following the employment report on Friday as Mr. Trader realized, hey, maybe slow growth really does impact earnings, at least versus already lofty expectations.

Bonds, on the other hand, loved the jobs data and the feeling the Fed was finished. Even if Bernanke and Co. were to hike one more time and add the statement "that's all, folks" I can't imagine bonds giving up much of the gains. And the rally occurred in the face of rate hikes by the Bank of England (a surprise), the European Central Bank (not a surprise) and Australia (Aussie Aussie Aussie!?????..this is what you write when you forgot if the move was a surprise or not).

--Asian automakers now make up a record 41.4% of the U.S. market, with Toyota at #2 for the first time, trailing only General Motors.

For July, Ford and DaimlerChrysler's sales were off 34% and GM's down 23% as all three continue to suffer on the light truck/SUV front. Toyota's, though, were up 12% and Honda's 6%. Incidentally, also for the first time ever, Japan produced more cars overseas than in Japan for the year ended 3/31.

And as if Ford didn't already have enough problems, it recalled 1.2 million trucks and SUVs because of a problem with the cruise control that could lead to engine fires?.normally not a good thing, unless you want to junk the car for insurance purposes.

--China's government continues to struggle in its efforts to rein in its white-hot economy. As Morgan Stanley's chief economist Stephen Roach told Bloomberg News, "China's unbalanced growth model has now gone to excess and seems in danger of veering out of control. The longer China's economic boom runs, the tougher it will be to avoid a more treacherous endgame."

And to give you an example of the kinds of projects China has been funding when you read of 20-30% increases in capital investment, a terminal at Beijing's airport will be bigger than all five terminals at London's Heathrow Airport combined.

Of course Chinese officials are scared to death of unrest during any slowdown, while Asia's other export dependent countries would suffer tremendously as well, along with basically the rest of the world these days.

--Meanwhile, China continues to grapple with its exploding pollution problem due to hyper-growth. Because of its dependence on coal for energy, sulfur dioxide emissions are up 27% since 2000. Over half of 696 cities and counties monitored by the government experience acid rain.

--But one area where the government is having some early success is in reining in the property market. Last week Shanghai real estate fell 10%, in seven days, after authorities announced they would enforce a 20% capital gains tax (to discourage speculators) as well as limiting foreign investment (often further speculators). Prices in Guangzhou fell at least 5%.

--Speaking of real estate I was reading a piece in U.S. News & World Report on metro areas and the highest percentages of interest-only mortgages and I assumed the top spots were in California?.wrong. Try Boulder-Longmont, Co., with 49.5% of all mortgages being of the I-O kind. Denver is next at 47.9%.

[San Francisco is #5 at 45.7%, San Diego #7, Santa Barbara- Santa Maria #8, and San Jose #9.]

--Both the House and Senate have approved bills to open up millions of acres in the central Gulf of Mexico to oil and gas drilling, but the House bill goes farther and efforts to reconcile the two will be tough.

But I get a kick out of critics who say it will be years before any oil or gas finds its way into the system. We said the same thing over ten years ago with regards to the Arctic National Wildlife Refuge. It would have been flowing by now, sports fans, and you have to start somewhere, for crying out loud.

--Offshore drilling, by the way, is even more critical when you read of stories such as in Mexico where crude-oil production at its biggest field, Cantarell, is falling precipitously?from 1.92 million barrels in January to just 1.74 million in June. Cantarell, the second-biggest in the world next to Ghawar in Saudi Arabia, also accounts for over half of overall production in Mexico, a nation that is one of the top three suppliers to the U.S. Pemex, Mexico's state oil company, says new techniques will eventually increase production but some of us have heard this story before.

--On the topic of oil, though, here's the latest out of Russia, as reported by Andrei Makhovsky and Darius James Ross of Reuters:

"Russia is keeping Belarus well supplied with crude oil even though it shares a pipeline with Lithuania, which Moscow has cut off, after citing a leak, officials in Belarus said Thursday.

"Their comments may add to speculation that Russian pipeline monopoly Transneft used this weekend's minor leak as a pretext to cut flows to Lithuania as punishment for choosing a Polish buyer for its Mazeikiu refinery over Russian bidders?.

"Oil officials in Belarus said the Naftan refinery was receiving full volumes of Russian oil through a spur of the Druzhba pipeline that continues to Lithuania.

"Lithuanian oil officials said Moscow had given no clear indication of when their supplies would resume."

--Did you know Exxon Mobil gets 30% of its production from Africa these days? I didn't. [Business Week]

--Wall Street is losing initial public offerings of stock at a rapid pace and while some blame costs associated with complying with Sarbanes-Oxley, The Wall Street Journal's Alan Murray certainly hit on another big reason why business is going elsewhere?fees. Wall Street's investment banks charge an outrageous 6.5% to 7%, while in Europe it's generally 3% to 4% and even lower in Asia.

--On a related topic we have the ongoing story of the private- equity deals that have been whipping around Wall Street at light speed. When the KKR's of the world turn around and bring the companies public, such as in the case of Burger King, the amount the bankers and venture capitalists have stripped out is appalling. In the case of BK, the Journal reports $30 million was paid out to Texas Pacific Group, the private-equity arm of Goldman Sachs Group and Bain Capital as a termination fee.

--But wait, there's more! A U.S. Senate report claims the superrich have evaded as much as $70 billion a year in taxes through use of offshore accounts and tax shelters. Senator Carl Levin of Michigan said "The universe of offshore tax cheating has become so large that no one, not even the United States government, could go after all of it." Most of these scams involve generating billions of dollars of fake capital losses.

--And then there's this. In the ongoing stock options scandal, that paragon of virtue (NOT!), Computer Associates, admitted to backdating options for its highest executives which resulted in $342 million in pre-tax profits from 1996-2006 that really weren't; this on top of the $2.2 billion CA is already responsible for in its massive accounting fraud probe for which former CEO Sanjay Kumar will be serving jail time.

Then you have Apple Computer, which also warned that it will have to restate earnings going back to 2002 because of options chicanery just uncovered. Initially, Apple shares were whacked but made back most of the losses by the close on Friday.

I wonder if the Journal's Holman Jenkins Jr. will continue defending the backdating of options practice, at least in those cases where it was hidden from shareholders? When are defenders going to recognize it was out-and-out fraud?

--So with all of the above - exorbitant fees for Wall Street's elite, the superrich evading $billions in taxes, or executives treating corporations as a personal piggybank - no wonder Treasury Secretary Hank Paulson, himself one of the superrich, had to concede in his first major speech that there is a growing problem in this country over the issue of income inequality.

--It's really sad just how far Eastman Kodak has fallen, especially for the city of Rochester, N.Y. Kodak, in reporting a loss for the second quarter as part of its ongoing restructuring efforts, announced it is laying off an additional 2,000 employees for a total of 27,000.

--Merck's record in Vioxx trials is now a solid 5-3, which these days in baseball would earn an otherwise journeyman pitcher a 3-year, $9 million deal?.but I digress. A California jury cleared the drug maker of liability in another heart attack case. Merck continues to maintain it will fight each one, of which on paper there are still some 14,000.

--I must say I didn't realize 20% of all "conflict diamonds" from places such as Sierra Leone and the Congo find their way to Lebanon before ending up in Antwerp, Belgium, the diamond capital of the world. Industry experts say Hizbullah earned as much as $100 million through the trade. Obviously this has been severely interrupted with the war. [Paul Tharp / New York Post]

--AOL is scrapping fees for broadband users to encourage them to keep their AOL.com e-mail addresses and use other AOL software as the company hopes to make up any losses through increased advertising revenue. In addition the company is laying off 5,000, a quarter of its global workforce, as a result of de- emphasizing its dial-up operation.

To stop paying for AOL services, however, you have to call customer service directly at 888-265-8008. Operators are standing by. [I still have an AOL dial-up account for my travels?but this doesn't make me a bad person.]

--I'm shocked! BetonSports, the Internet gaming company at the center of a criminal investigation, allegedly has ties to the Bonanno crime family of New York.

[fyi?. "Yes, we have no Bonannos" was written in 1923 by Frank Silver and Irving Cohn?.or was it "bananas"?]

--Inflation Watch: College tuition at 4-year schools in New Jersey is going up an average of 9.3%.

--Good news for those of us living in the shadow of Lucent's headquarters in Murray Hill, N.J. It will be the North American headquarters for the combined Lucent / Alcatel operation, so local merchants should be breathing a sigh of relief, along with realtors. I also expect the condition of the lawn to improve.

--Shares in Starbucks were hit this week on word July same-store sales were weaker than expected. Starbucks blamed long lines for its cold drinks, a convenient excuse some would say. Others offer it has to do with $3 gas and consumers' cutting back some.

But one thing is for sure, CEO Howard Schultz is one arrogant jerk; at least that was my take during his appearance on CNBC the other day.

[After the above comment the phrase "you'll never drink coffee again in this town" is probably apt in my case.]

--Finally, Foster's Beer has decided to drop its U.S. television advertising budget in favor of Internet ads. Foster's is also introducing a new slogan, "Crack open a friendly," a play on "Australians' approachable image, (suggesting) that Foster's drinkers are friendly people" according to one advertising executive. [Aaron O. Patrick / Wall Street Journal] I've found Rolling Rock drinkers to be friendly, too.

Cuba: What does Washington have to show for its own hard-line policy of the past 47 years? Zippo. It's not like it's easy for Americans to head down there to attend classic car shows, either. I just don't want another Mariel boatlift when Fidel finally exits stage left, while at the same time I admit it would be worrisome if brother Raul further strengthens the relationship with Venezuela's Chavez.

Venezuela: Speaking of Hugo Chavez, the Venezuelan president has been on a world tour (you can probably pick up a spiffy jacket on chavezisanutcase.com) and while in Vietnam told his audience:

"Vietnam was able to defeat (U.S.) imperialism not only with its army, but with socialism as an ideological form of battle. The spirit of independence that Simon Bolivar carried was reborn in the form of Ho Chi Minh." [Santiago Times]

"(President) Bush claims that he has a connection with God every day, but, in fact, he has a connection with the devil because no other country has put humanity in danger like the United States." [Tehran Times]

Mexico: The electoral court here has until Sept. 6 to resolve the July 2 election result that Andres Manuel Lopez Obrador continues to pursue. Last Sunday an estimated 1.2 million crammed Mexico City to hear his call for civil disobedience in order to "defend democracy" and force the recognition of "my triumph as president."

"Mexico does not deserve to be governed by an illegitimate president," Lopez Obrador added. [James C. McKinley Jr. / New York Times]

And in keeping with the civil disobedience call, hundreds of leftists attempted to disrupt trading on the Mexico Stock Exchange Thursday but were unsuccessful in doing so. Lopez Obrador, though, said no further massive demonstrations were planned until the court rules.

Ukraine: President Viktor Yushchenko, the leader of 2004's Orange Revolution, had to bite the bullet and accept rival Viktor Yanukovich as prime minister after over four months of political chaos following the March 26 election. The two will now share power with Yanukovich, Moscow's erstwhile boy, supposedly agreeing to help promote Yushchenko's West- leaning agenda including NATO membership.

This will be interesting. Recall that Ukraine is split 50/50 on favoring the East or West. The big loser is former prime minister and coalition partner Yulia Tymoshenko, whose party had finished 2nd and ahead of Yushchenko's in the March vote.

Yushchenko had the option of dissolving parliament but this would have meant new elections and further turmoil.

North Korea: 10,000 are feared dead from the Hermit Kingdom's worst floods in a century. Having seen firsthand some of the deforestation that has taken place here during my recent trip to the border (natives cut down the trees for fuel and eat the bark), it's easy to imagine the flooding that occurred as rainwater rushed down the hillsides. Additionally, shots were exchanged across the DMZ for the first time since October, though no one was hurt.

But experts are also trying to figure out why Pyongyang appears to have moved a long-range missile from the launch site used on July 5 (July 4 in the States) when the commies test-fired seven missiles of varying sophistication. It's possible Kim Jong-il didn't want to provoke further condemnation at this time.

Russia: President Vladimir Putin signed a law making criticism of a public official a crime; so much for debate. Russian officials also face fines if they say "dollar" when "ruble" could have been used.

Bangladesh: Al Qaeda-types are always looking for a new home, whether it's a return engagement in Somalia or here. According to Selig S. Harrison, writing in the Washington Post, the fundamentalist group Jamaat-e-Islami is a coalition partner of the ruling Bangladesh Nationalist Party and has been infiltrating key posts in government, including the military and security apparatus.

Jamaat also has "15,000 hard-core fighters operating out of 19 known base camps." Jamaat and its allies were the ones responsible for 459 synchronized explosions across the country last Aug. 17. When leadership was arrested, "they were kept by the police in a comfortable apartment, where they were free to receive visitors." It's back to business as usual for the terrorists.

Haiti: I can't say I have any immediate plans to travel here, but any thoughts you may have of visiting need to be put on hold as well. According to James Gordon Meek in the New York Daily News, at least 80 Americans have been kidnapped in Haiti over just the past year, including four that were killed by gangs seeking ransom payoffs.

Australia: Prime Minister John Howard announced he will seek a 5th term. I'll quaff a Foster's to that.

Dow Jones +0.2% [11240]
S&P 500 +0.1% [1279]
S&P MidCap +0.3%
Russell 2000 +0.2%
Nasdaq -0.4% [2085]

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