OPINION
Africa's expensive borders
By Rod Hunter
The world's finance ministers, gathered here this week for the annual World Bank and International Monetary Fund meetings, will rightly lament the collapse of global trade talks and Africa's halting development progress.
But what Africa needs far more urgently than a trade deal is to clear the customs red-tape, corruption, transport monopolies and the like that keep the continent disconnected and destitute.
To be sure, completion of the World Trade Organization's Doha Development Agenda, which fell apart in July over agriculture, could usefully improve market opportunities for Africans.
A Doha deal would lower tariffs and cut into rich country farm subsidies that distort markets where Africans could compete.
And developed countries have pledged some $15 billion in "aid-for-trade" once Doha's done to help poor countries capitalize on trading opportunities.
While trade liberalization is always welcome, Africa's main problems are not other countries' tariffs. The global trend toward unilateral tariff cuts and the duty-free access granted the poorest countries through rich country preferences already ensure that African exporters face low tariffs.
A greater obstacle than tariffs is the high cost of moving products across Africa's borders. These costs, caused by impediments such as customs bureaucracies, informal barriers, regulation and monopolistic transport services, are higher in sub-Saharan Africa than anywhere else in the world.
First, the red-tape is bewildering, with the average customs transaction involving 40 paper documents and 200 data elements, and much repetition.
Second, customs delays in sub-Saharan Africa are the world's longest. While it takes one day to clear customs in Estonia, it takes 30 days in Ethiopia. Each day of delay at customs has been estimated to add nearly 1 percent to the cost of goods.
Third, informal barriers and divergent transport standards compound delays and costs. The 2005 Blair Commission for Africa recounts that truckers encounter one checkpoint per 14 kilometers between Lagos to Abidjan, leading to multiple pay-off demands along the way. Rules on truck length and axle numbers vary across borders, thwarting efficient transcontinental trucking.
Fourth, backwards transport regulation leads to high prices and poor service. Deregulation exposing coddled sea transport monopolies to effective competition could reduce freight costs by 25 to 50 percent.
Just how much do Africa's trade costs matter? The effective rate of protection imposed by these costs is higher in many cases than that provided by tariffs.
For example, while many sub-Saharan African exports to the United States face tariffs as low as 0 to 2 percent, trade costs typically exceed 10 percent of product value.
A new World Bank study shows that improving trade facilitation in Ethiopia half-way to the level in South Africa would equate to a 7.5 percent cut in tariffs faced by Ethiopian exporters.
Trade costs are an even greater challenge for the 15 landlocked countries that are home to 40 percent of Africans. The Blair Commission notes that these isolated inland countries on average incur transport costs that are 50 percent higher and have trade volumes more than 50 percent lower than similar coastal countries. Some cases are far worse: transport costs impose the equivalent of an 80 percent tax on Uganda's clothing exports.
In short, Africa needs a pro-poor trade agenda that tackles these trade costs through simplifying customs procedures, increasing transparency, removing roadblocks and corruption, improving regulatory frameworks and injecting competition into transport services. Here's how to do it:
Aid-for-trade pledges. Developed countries need to fulfill their aid-for-trade pledges without waiting for the uncertain completion of the global Doha trade talks. Developed countries should also prioritize trade facilitation reforms in their bilateral aid programs.
Private sector and foundations. No one knows better what's required for supply chain management and cross border trade than international businesses. Manufacturers and retailers could play a key role in working with African countries to identify and implement process changes necessary to join the global economy, while creating new investment and efficiency opportunities for themselves. By the same token, foundations and other nonprofit organizations could move swiftly to support on-the-ground reforms, while official donors work to reorient their aid programs.
Coordination. Donors and African countries should consider creating a platform for coordination involving all participants, including the private and nonprofit sectors, to prioritize work, share best-practices, avoid duplication and track progress. The World Bank, the world's premier development body with a wealth of expertise and strong leadership, might be a good platform.
African ownership. Most important of all, Africans need to assume ownership for reforms. Trade facilitation is far cheaper and faster than building roads and ports. But it requires political will, especially when taking on bureaucracy, corruption and ensconced transport monopolies.
Trade facilitation is not a silver bullet. Much else needs to be done for Africa to overcome its economic, health and security challenges. Yet a targeted trade facilitation agenda could have an immediate and meaningful impact on growth prospects for Africans. And unlike the Doha trade round, it doesn't require the agreement of 153 disputatious trade ministers.
Rod Hunter, a senior fellow with the Hudson Institute and a Washington lawyer, served as senior director at the National Security Council.
http://www.iht.com/articles/2008/10/10/opinion/edhunter.php
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China threatens to "out" milk offenders
BEIJING: China has stepped up scrutiny of milk production, tightened dairy controls and threatened to "out" offenders amid a widening health scandal, state media said on Friday.
At least four Chinese infants have died and thousands have been treated in hospital after drinking melamine-tainted milk and milk formula that has led to Chinese-made products being pulled off shelves around the world.
"We are saddened by this scandal," Chinese Deputy Health Minister Liu Qian said in Manila. "It is also a painful lesson for us... melamine was deliberately added to fresh milk.
The formula was laced with the chemical to cheat nutrition tests, the latest in a long line of Chinese food and product safety scandals involving items as diverse as fish, drugs, toys, toothpaste, tyres and petfood.
"The regulations tighten control of how milk-yielding animals are bred, how raw milk is purchased and the production and sales of dairy food," Xinhua news agency said.
"There will also be more severe punishment for people who violate safety standards and quality control departments that fail to fulfil duties ... Law-breaking producers will be blacklisted and outed publicly."
Several local officials have already been sacked and 27 people have been arrested. More than 20 milk companies have already been named as offenders.
"Any non-food chemicals or hazardous substances are prohibited from being added into raw milk in its production, purchase, storage, transport and sale," Xinhua said, citing the regulations issued on Thursday by the State Council.
But the Health Ministry on Wednesday released new dairy standards and safety limits for melamine -- one milligram of melamine per kilogram for infant formula and 2.5 mg per kg for milk, milk powder and food products containing at least 15 percent milk.
The U.S. Food and Drug Administration said earlier this month that no amount of melamine was safe in baby formula.
And the 10 Association of South East Asian Nations (ASEAN) health ministers meeting in Manila issued a statement at the end of a two-day meeting on the theme "trade liberalisation: its adverse impact on our borderless health problems."
"They are of the common view that melamine, even at the minutest amount, should never be added deliberately to any food product," the statement said. "They condemn strongly unscrupulous business practices and cover-up by any entity."
http://www.iht.com/articles/reuters/2008/10/10/asia/OUKWD-UK-CHINA-MILK.php
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Malawi bans Chinese milk product imports
Malawi has banned imports of all Chinese milk products after contaminated milk and formula killed four children and made thousands others ill in China, the trade minister said on Friday.
Chinese-made milk products have been pulled off shelves worldwide in a widening health scandal after the industrial chemical melamine was found in milk and milk formula. Melamine is used to cheat nutrition tests.
Many African nations rely heavily on cheap Chinese imports.
"We have put all our eyes on the imported milk and we are restricting entry of all milk into the country from China," minister Henry Mussa told Reuters.
Director-general of Malawi's bureau of standards, Devlin Chokazinga, said authorities were testing some samples of imported powdered milk from China and Asia.
"What we are doing is qualitative analysis since we cannot actually do the quantitative test for the identification of melamine because we don't have equipment," Chokazinga said.
Malawi established diplomatic relations with China in December last year.
http://www.iht.com/articles/reuters/2008/10/10/africa/OUKWD-UK-MALAWI-BAN.php
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Global crisis may worsen Africa's hunger
The global financial crisis could hamper efforts to alleviate hunger in Africa, the U.N. Economic Commission for Africa said on Friday.
Parts of the continent have been hit by drought and Africa has also felt the effects of rising world food and fuel prices.
"I think this global financial challenge could impact our ability to deal with the food crisis ... and whether we can put measures in place to alleviate the current suffering," said Abdoulie Janneh, executive secretary of the ECA.
Many African countries were on a World Bank list released on Thursday of 28 countries facing financial strains due to high food and fuel costs and from the credit crisis. International aid agency Oxfam said on Thursday that 13.5 million people needed assistance in Ethiopia alone.
Janneh appealed to the international community to continue providing aid to the world's poorest continent.
"We hope our international partners will realise what a critical juncture this is for us. This is not the time to focus less attention on Africa," he said.
"But Africa is making progress and foreign aid is only part of that. If there have to be cuts, it is a storm we will weather."
Financial experts say that while Africa is relatively insulated from the global credit crisis -- as many African banks do not offer credit -- there could well be a negative effect on foreign direct investment, remittances and aid flows.
The ECA says Africa's economies grew at an average 5.8 percent in 2007 and project growth of 6.2 percent this year.
"Africa is growing at a reasonable pace. It is developing," Janneh said. "We hope this crisis won't dampen that."
http://www.iht.com/articles/reuters/2008/10/10/africa/OUKWD-UK-FINANCIAL-AFRICA-world.php
America's eco-kids keep a keen eye on their parents
Sometimes, Jennifer Ross feels she cannot make a move at home without inviting the scorn of her daughters, Grace, 10, and Eliza, 7. The car she drives? A flagrant polluter. The bath at night to help her relax? A wasteful indulgence. The reusable shopping bags she forgot, again? Tsk, tsk.
"I have very, very environmentally conscious children - more so than me, I'm embarrassed to say," said Ross, a social worker in Dobbs Ferry, New York. "They're on my case about getting a hybrid car. They want me to replace all the light bulbs in the house with energy-saving bulbs."
Ross's children are part of what experts say is a growing army of "eco-kids" - steeped in environmentalism at school, in houses of worship, through scouting and even via popular culture - who try to hold their parents accountable at home. Amid their pride in their children's zeal for all things green, the grown-ups sometimes end up feeling like scofflaws under the watchful eye of the pint-size eco-police, whose demands grow ever greater, and more expensive.
They pore over garbage bins in search of errant recyclables. They lobby for solar panels. And, in a generational about-face, they turn off the lights after their parents leave empty rooms.
"Kids have really turned into the little conscience sitting in the back seat," said Julia Bovey, a spokeswoman for the Natural Resources Defense Council, a leading environmental group that recently worked with Nickelodeon on a series of public service announcements and other programming called "Big Green Help."
"One of the fascinating things about children is that they don't separate what you are doing from what you should be doing," Bovey said. "Here's this information about how we can help the environment, and kids are not able to rationalize it away the way that adults do."
In Clinton Hill, Brooklyn, Jan Schmidt, a stay-at-home mother, and Mark Goetz, a professor of furniture design, have watched, amazed, as their 4-year-old son chastises them for letting the water run while they brush their teeth. "He'll come over and turn it off and say, 'Every day is Earth Day,"' Schmidt said. "He learned it at school."
Their older child, Elly, 12, extols the clothesline in her bedroom the way other girls her age might show off a new beanbag chair. An aspiring marine biologist, Elly raised $250 last year to protect coral reefs by selling handmade earrings at school. And she was a big factor in the family's decision to hang on to their current car instead of buying a bigger one.
"With Elly, there's sort of an unspoken thing about not buying an SUV," Schmidt said.
Elly elaborated: "I wouldn't be happy if they bought an SUV because they're not fuel efficient, and they pollute more than other cars."
They learn this stuff everywhere. In the summer, the Pixar film "Wall-E" served up an ecological parable of a planet so punished that it had to be abandoned. The Girl Scouts recently added uniform patches for participating in programs including "Environmental Health," "Get With the Land," "Earth Pact" and "Water Drop."
Scholastic, the global children's publishing, education and media company, has teamed up with the American Museum of Natural History to create Web sites and magazines about climate change and other environmental issues.
A Scholastic message board where children share eco-friendly tips, called Save the Planet, has had three million page views in the past year.
And school districts across the United States are adding lessons on the environment to their curriculums in many subject areas, as well as enforcing idle-free zones in school driveways, switching to plant-based cleaners, doing away with pesticides and, in some places, installing solar panels.
In the Byram Hills School District in Armonk, New York, middle-school teachers plan to roll out new material related to the environment starting in January.
"We're trying to integrate it into anything where it naturally fits," said Jackie Taylor, the district's superintendent. "It might be in a math lesson. How much water are you really using? How can you tell? Teachers look for avenues in almost everything they teach."
But the green initiatives in schools have not been universally embraced. Some critics say such lessons are a distraction as districts struggle to meet minimum standards on math and reading tests. Others say turning children into stewards of the environment is an inappropriate use of taxpayer money.
And even parents who are impressed by their children's commitment to remake the world can also sometimes feel, well, badgered. Paul Wyckoff, a writer in Hunterdon County, New Jersey, said his son Will, 15, yells at him for "leaving the car idling for a few seconds in the driveway." He has even taken to turning off nightlights to save energy.
"My philosophy is get the big stuff," Wyckoff said. "I think he takes it too far. But I'm proud of him. I think he'll moderate with age."
Given that children often lack a sense of social boundaries, things can get sticky when their haranguing extends beyond the home. Liz DiVittorio, of Raleigh, North Carolina, a mother of three, recalled walking with her 10-year-old son, Michael, this summer after a rainstorm and seeing a neighbor running his sprinkler.
"My son looked at him and said, 'Why are you watering your lawn? It just rained,"' said DiVittorio, who works for a software company.
"I sat there and cringed."
For middle schoolers, money is fairly abstract - and therefore no object. Sarah Hodder and Dr. Peter Allen of Chappaqua have three boys, the oldest of whom, Charles, 10, is itching to go solar.
"Any time we pass a house with solar panels, he says, 'Why can't we do that?"' said Hodder, co-chairwoman of the Roaring Brook Elementary School Environmental Committee. "I always say, 'Talk to Daddy.' A lot of these steps are cost-prohibitive, although ultimately in the long run they're good for the environment and the wallet."
Hodder said that in the short term, she and her husband are making more modest changes, with the children's support, like turning down the heat, composting, walking to school and "not buying so much stuff." But as enthusiastic as Hodder is about protecting the environment, the children seize on her lapses, as when Peapod delivers the groceries in plastic bags.
"They'll say, 'Mom, I thought we weren't supposed to use plastic bags,"' she said.
Douglas and Alison Distefano, of Rumson, New Jersey, who have two children, dubbed their fifth grader, Olivia, "the recycling militant general."
"For us, Earth Day is a reason to go outside," said Distefano, an executive with Soltage, a solar energy company. "But for them it's a religious holiday."
Ann Tedesco, a psychologist in Armonk, said her daughter Celeste, 9, "is always policing the regular garbage bins to make sure we're not throwing paper away in there," adding: "She particularly enjoys catching her older sister."
Tedesco's husband, Rick Alimonti, a lawyer, recalled how their son, Lucas, 7, kept reminding him to turn off the engine while waiting outside school.
"I was only idling for a minute, and I explained that it uses more gas and pollutes the atmosphere more to turn the engine off and back on again," he said. "I looked it up afterward to make sure I wasn't exaggerating."
He was in the clear: Several blogs asserted that idling for a minute or less is preferable to shutting off and restarting the engine.
http://www.iht.com/articles/2008/10/10/america/kids.php
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Indonesian officials unveil a deal to protect forests
BARCELONA, Spain: All 10 provincial governors of the island of Sumatra agreed to a deal to protect endangered forests, a move that could help control planet-warming emissions, Indonesian authorities said Thursday at a global conservation conference here.
When trees in Sumatra are cut down or burn, the soils underneath are exposed, releasing carbon dioxide as peat oxidizes and decomposes. The peat is so deep and plentiful in parts of Sumatra that the prevention of forest clearing could make a significant contribution to lowering greenhouse-gas emissions, according to environmentalists.
Hermien Roosita, Indonesia's deputy minister for the environment, said the next steps would involve coming up with an islandwide conservation plan. But carrying out the accord is unlikely to be straightforward.
"There are a lot of challenges in the future to ensure the successful implementation of the commitment," said Noor Hidayat, the director of conservation areas for the Forestry Ministry in Indonesia.
According to a translation of the Indonesian accord by WWF, an environmental group that helped broker the deal, the provincial governors and authorities pledged "to save and conserve the ecosystem of Sumatra Island in order to balance ecological functions and economic development for the people of Sumatra."
The accord was signed on Sept. 18 in Jakarta, the Indonesian capital, but the parties involved waited until the World Conservation Congress — a gathering of 8,000 representatives from governments, conservation groups and businesses that is taking place in Barcelona — to unveil it.
http://www.iht.com/articles/2008/10/10/asia/10forest.php
Oil price drops below $78 a barrel
PARIS: Oil prices fell Friday to their lowest level in more than a year, as the slowing global economy led the International Energy Agency to cut its forecast for global demand.
The agency, based in Paris and known as the IEA, said it was cutting by 240,000 barrels a day its forecast for 2008 global oil demand. It now estimates daily demand this year of about 86.5 million barrels, meaning demand will increase only 0.5 percent from last year - the slowest growth in 15 years. The agency also cut its forecast for 2009 demand by 440,000 barrels a day, to 87.2 million barrels a day, which would represent an increase of 0.8 percent from the demand for this year.
U.S. light, sweet crude for November delivery fell $8.63 to settle at $77.99 a barrel on the New York Mercantile Exchange. It was the lowest settlement price for a front-month crude contract since Sept. 10, 2007.
Prices for commodities soared in the first half of this year, with crude oil rising to a record $147.27 a barrel on July 11. But the financial crisis and the accelerating slowdown in the global economy have led prices sharply downward.
Dominique Strauss-Kahn, the managing director of the International Monetary Fund, said Thursday in Washington that the global economy was on the "cusp" of recession, and predicted that recovery would not begin to take hold until the second half of 2009.
Mike Wittner, head of oil market research at the Société Générale offices in London, said that the credit squeeze was pushing oil investors out of the market as asset managers fled stocks, bonds and commodities for the security of government bonds.
"Any time you think the risk aversion can't get any worse, it does," he said.
He said members of the Organization of Petroleum Exporting Countries were almost certain to announce output cuts next month at an extraordinary meeting of the cartel.
"The main producers don't want to see the price back up at $130 a barrel or more, but prices are off more than $60 from the peak and they want to stop the bleeding," Wittner said.
Abdullah al-Attiyah, the Qatari oil minister, told Al Arabiya television Friday that OPEC might discuss production cuts at the meeting.
The price of copper, an indicator of expectations for global growth, fell as much as 13 percent Friday in contracts for December delivery to its lowest level since early 2006, before recovering a bit. And the price of steel, which had long appeared impervious to the downturn in major economies, has also begun to drop.
Olivier Jakob, an oil analyst at Petromatrix in Zug, Switzerland, said in a research note that oil prices would be unlikely to stop falling until the rout in the stock market ended.
"Equities will remain the leading directional input to the oil markets," he said.
http://www.iht.com/articles/2008/10/10/business/oil.php
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Maritime organization seeks to cut air pollution from oceangoing ships
The International Maritime Organization on Thursday adopted stringent new controls on airborne pollution from the world's 300,000 oceangoing vessels.
Emissions from ships steaming into ports from Rotterdam to Shanghai to Long Beach, are blamed for about 60,000 premature deaths around the world annually.
The new rules, which differ little from proposals the group approved in April, would cut the sulfur content of the fuels ships use in controlled areas along coasts by 63 percent as of July of 2010, and by more than 95 percent as of January 2015.
Oceangoing ships are largely propelled by bunker fuel, which is one of the most cost-effective, it provides more energy per gallon than the distilled products used in other diesel and gasoline engines, and environmentally destructive fuels in use anywhere.
Sulfur emissions are a major source of airborne fine particulates, which have been associated with pulmonary and cardiovascular disease. In some ports in Europe and in the United States, environmental groups, using the courts, and local governmental bodies have required ships to shut off their engines and plug in to the local electrical grid to keep ship operations functioning while in port.
The international group approved the measure with little discussion late Thursday at its meeting in London, according to Janea Scott, a lawyer with the Environmental Defense Fund who attended the meeting. Scott spoke by telephone from London.
Both shipping interests and environmental groups had been unsure if any major last-minute changes would be made, but with the exception of changes of a few months in two of the deadlines, the original proposals were approved.
Now individual countries must set the boundaries of the so-called emission control areas in which the new, stringent fuel standards apply. This sets the stage for a renewed tug of war as environmental advocates are likely to seek to include as much of a country's offshore waters as possible in the emission control areas, while shipping interests are likely to call for far more limited boundaries.
Andreas Chrysostomou, the chairman of the Marine Environment Protection Committee, hailed the decision as "an historical moment," Scott said.
T. L. Garrett, vice president of the Pacific Merchant Shipping Association, an industry trade group, said Thursday: "This is good news, we are fully supportive of this. We think the international approach that creates uniformity is the way to approach the issues."
Scott of the Environmental Defense Fund said, "It's really impressive when 168 nations can come together and agree on protective measures for the environment." She added that the Environmental Protection Agency, which will propose the boundaries of the emission control areas, "should apply as soon as possible."
In addition to setting limits for the offshore areas, the organization also cut the allowable standards for midocean operation. Currently, even though the average sulfur content of bunker fuel is about 27,000 parts per million, the rules allow fuel with up to 45,000 parts per million. This will be reduced to 35,000 parts per million in 2012 and to 5,000 parts per million in 2020, providing that a review demonstrates that there will be enough of the fuel available.
http://www.iht.com/articles/2008/10/10/healthscience/10ships.php
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Native American tribes see profit in wind power
ROSEBUD, South Dakota: The wind blows incessantly here in the high plains; screen doors do not last. Wind is to South Dakota what forests are to Maine or beaches are to Florida: a natural bounty and a valuable inheritance.
Native American tribes like the Rosebud Sioux now seek to claim that inheritance. If they succeed in building turbine farms to harness some of the country's strongest and most reliable winds, tribal officials like Ken Haukaas believe, they could create a new economic underpinning for the 29,000 tribal members whose per capita annual income is about $7,700, less than a third the national average.
"We're broke here," Haukaas said. "We're poor." But, he added: "The wind is free. There's energy here all the time."
Haukaas believes that "the same thing that brought the buffalo brings the wind."
"The buffalo were a gift," he continued. "The wind is a gift."
In 2003, after erecting a 750-kilowatt turbine that powers the Rosebud Casino near the Nebraska border, the Rosebud Sioux tribal council set its sights on building the Owl Feather War Bonnet wind farm, a 30-megawatt project that could power about 12,000 homes, each about 1,200 square feet.
After five years of negotiations with a non-Indian developer, Distributed Generation Systems Inc. of Colorado, the tribal council president, Rodney Bordeaux, said Thursday that he expected to sign a construction deal that would bring in some $5 million to the tribe over 20 years. The total is about $1.7 million less than the developer's original offer because of an acrimonious last-minute dispute with the tribe.
The idea of hitching tribal fortunes to the wind has gained momentum with the growth of the wind industry, which is expanding so fast that turbines are in short supply worldwide.
Half the states now require utilities to add renewable energy to their portfolios. The oilman T. Boone Pickens is proselytizing about the value of wind, and thousands of turbines have sprouted on the Texas plains.
If Native Americans can get into the business, some federal officials say, the hope is that wind, like casino gaming, could reshape their economies.
"It could be huge," said Lizana Pierce, the project manager with the tribal energy program at the Department of Energy.
Here in the wind-rich Indian country, turbines are few, and deals to build them often do not come easily. Unpredictable cultural boundaries sometimes separate Indian tribal leaders, who have access to the wind, and non-Indian business executives, who raise the money to buy and install turbines, make deals to transmit the electricity to market and find buyers for it.
With just one significant wind farm operating on Indian land — a 50-megawatt project on the Campo reservation near San Diego — the Energy Department has been hoping for another to prove to wind developers that successful projects are possible.
Sandra Begay-Campbell, the principal member of the technical staff at the department's Sandia National Laboratories in New Mexico, said, "People have been waiting for something to happen so you can point to the success and say, 'Look at this model.' "
Other projects are in the offing; the Lower Brule Sioux tribe, to the northeast of Rosebud, recently struck a deal with Iberdrola Renewables, a subsidiary of the Spanish utility Iberdrola SA, to build a 225-megawatt wind farm.
But only the Rosebud Sioux, Begay-Campbell said, "are poised and ready to move toward the actual development and hardware."
The Energy Department has invested nearly $450,000 in the development of the Owl Feather War Bonnet wind farm, to be built on 50 acres in the western part of the Rosebud reservation. The department also recommended Distributed Generation Systems and its president, Dale Osborn, a seasoned hand in the wind-energy industry who has built small-scale projects in Colorado, Spain and China.
But it took the federal Bureau of Indian Affairs 18 months to sign off on the original deal, approved by the tribal council in 2006, under which the tribe would receive $280,000 in royalties the first year of the wind farm's operation. The amount would have grown each year, with the 20-year total topping $7 million.
Haukaas, who is the tribe's project manager, said that from a landowner's standpoint, the offer was the most lucrative he could find. "This is a $58.6 million project," he told the tribal council. "We do not put up a dime. All we put up is the land."
During those 18 months, a tribal election was held, and the new council objected to the terms of the deal.
After tribal tax authorities recently decided that tribal sovereignty was at risk if a $1.17 million employment tax, the maximum possible, was not paid up front, Osborn complained bitterly to the tribe and to the reservation's congressional overseers.
"I am frustrated beyond belief," Osborn said in a recent interview, adding that his deal with investors cannot bear the weight of the unexpected upfront costs unless royalty payments are lowered.
But some of the council's 20 members were suspicious of Osborn and angry at his outbursts about the tax.
"The people for these companies come and wave a couple of dollars in front of us, and we fall for it," a council member, Leonard Wright, said at a meeting on Oct. 2.
Another member, Robert Moore, said of Osborn: "He questions our mentality. I question his."
A few years ago, a hog-farm company received an easement from the Rosebud Sioux in return for a percentage of net profits — then showed little or no profit. Bordeaux, the tribal council president, said he had taken care to make certain that whoever developed the wind farm did not "take advantage of us like the hog farm did."
Osborn emphasized that the tribe's royalty share would be taken from revenues, not profits. On Wednesday, he sent back to the tribe a revised deal that reduced the total payout over 20 years by $1.7 million, to a little more than $5 million, to accommodate the upfront tax payment.
Despite the rancorous back and forth, Bordeaux said Thursday that he would sign off on the new arrangement. "The main idea is we got that initiative going," he said. "We can become a major player in wind in South Dakota."
Patricia Nelson Limerick, a history professor who is board chairwoman of the Center of the American West, at the University of Colorado, pointed to the "several hundred years of mistrust between white folks and Indians" in discussing the "tangled" process that led to the Rosebud Sioux's wind deal. "If you average out the zigzags," Limerick said, "it's moving in the right direction."
Osborn was less sanguine. "Doing business on a reservation," he said, "is more difficult than doing business in China."
http://www.iht.com/articles/2008/10/10/america/10wind.php
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2 endorsements of nuclear power, but sharp differences on details
Contrary to what Democrats may think, there is more to John McCain's energy program than "drill, baby, drill." And contrary to what McCain has been saying on the campaign trail, where he proposes the construction of 45 nuclear plants by 2030, Barack Obama does not "oppose the use of nuclear power."
Both men endorse nuclear energy, although to differing degrees, as part of their strategy to wean the United States from its dependence on foreign oil.
While McCain includes the building of nuclear reactors among his preferred options to obtain more energy, Obama assigns a higher priority to developing renewable sources like solar, wind and bio-fuels and increasing efficiency in the consumption of existing sources.
"I think that nuclear power should be in the mix when it comes to energy," Obama said in June in Jacksonville, Florida, but added, "I don't think it's our optimal energy source, because we haven't figured out how to store the waste safely or recycle the waste."
McCain says on his campaign Web site that "nuclear power is a proven, zero-emission source of energy, and it is time we recommit" to expanding its use.
He also argues that it is "critical that the U.S. be able to build the components for these plants and reactors within our own country so that we are not dependent on foreign suppliers with long wait times."
Because nuclear energy is virtually carbon neutral, some environmentalists who opposed its use now are more open to it.
Elgie Holstein, an adviser to Obama on energy issues, accused the McCain campaign of misrepresenting Obama's position on nuclear power.
"Some specific proposals that Senator McCain has made are troubling," Holstein said, because of the problems of storage and reprocessing, and the issue of non-proliferation of nuclear fuel.
"Senator Obama definitely understands that nuclear power plays a major role in our electricity mix and will continue to do so into the foreseeable future," Holstein, a former Energy Department official said. "He doesn't favor shutting down power plants and hasn't come out against extending their licenses, so it is simply incorrect to say he is anti-nuclear-power."
It is probably safe to say that Democrats as a group are less enthusiastic than Republicans about nuclear energy. The 57-page platform adopted at the Democrats' convention in Denver in August does not mention nuclear power.
Obama is from Illinois, which has more nuclear reactors than any other state, and during the Democratic primary season drew fire from rivals for donations he had received from the company that operates those reactors. In his acceptance speech in Denver, Obama vowed that as president he would "find ways to safely harness nuclear power."
McCain restated his support for nuclear power in the first two presidential debates, and criticized Obama. Tucker Bounds, a spokesman for the McCain campaign, did not respond to phone calls and e-mail messages over a one-month period requesting an interview with one of McCain's energy advisers to elaborate on McCain's stance.
On the campaign trail, McCain has repeatedly cited France as a model for the development of nuclear power in the United States. In France, 59 nuclear power plants generate nearly 80 percent of the country's electricity, helping to reduce carbon emissions and producing a surplus that has made France one of the largest net electricity exporters in the world.
In France, the government controls both the construction of nuclear power plants and the generation and distribution of electricity.
"Putting aside the question of whether it is advisable to have an electricity system dominated by one mode of generation, it is a little odd for him to point to the heavily subsidized French case and say we should be emulating it," Edwin Lyman, a nuclear expert at the Union of Concerned Scientists, said of McCain. "It would take a massive shift in government policy to proceed in the French direction, and it would be antithetical to the United States and how it operates, since it would be a quasi-socialist system."
In campaign speeches, McCain also estimates that his program to build nuclear reactors would "provide 700,000 jobs for American workers."
Some nuclear power experts offer more modest figures, noting that much of the heavy foundry work and other tasks would have to be done overseas, at least in the initial phase.
But McCain has said he wants such work to be done within the United States, even though he noted in July in Missouri that "our manufacturing base to even construct these plants is almost gone," and added, "We will need to recover all the knowledge and skills that have been lost over three stagnant decades in a highly technical field."
Patrick Moore, a founder of Greenpeace and the co-chairman of the Clean and Safe Energy Coalition, a pro-nuclear group, estimated that each reactor would cost up to $8 billion and would generate 3,000 to 4,000 jobs during the construction phase and up to 800 permanent jobs once in operation.
Asked to provide a ballpark figure on employment if all 45 reactors were to be built, Moore, responded, "225,000 good union jobs that you can support a family on."
Trade groups like the Nuclear Energy Institute favor plans similar to McCain's proposal to build 45 nuclear reactors, but some energy experts say that would require billions of dollars in new subsidies and be an inefficient use of taxpayers' money, no matter how many jobs were generated.
Those experts seem to prefer Obama's promise to invest $150 billion in clean-energy projects over 10 years, the bulk of which would probably be directed toward non-nuclear energy sources.
"The two big hurdles to the construction of nuclear plants in the United States are that they are not economically competitive and cannot be privately financed, so the real issue McCain should be addressing is how he proposes to pay for them," said Tom Cochran, a physicist at the Natural Resources Defense Council, an environmental group. "You're simply penalizing the programs and technology that include improvements in energy efficiency and can provide climate mitigation more quickly, cheaply and safely."
McCain has sought to defuse concerns about the safety of reactors by noting his own service aboard the first nuclear powered aircraft carrier, the Enterprise. During the more than 50 years that the United States Navy has deployed nuclear vessels, "there has never been an accident," he said recently in a campaign swing through Florida.
Strictly speaking, that statement is not correct. While it is true there has never been a known fatal accident involving nuclear material aboard a naval vessel, vessels have suffered blowback from radioactive waste or leaked radioactive coolant water in domestic waters and foreign ports, which generated complaints from governments in Japan and Singapore.
In large part because of safety concerns, the two candidates disagree on whether the U.S. government should build a nuclear storage facility at Yucca Mountain, Nevada, about 90 miles north of Las Vegas.
McCain favors the proposal. Obama opposes it, arguing that a better short-term solution is to continue to store nuclear waste at the reactors that produce it "until we find a safe, long-term disposal solution that is based on sound science."
http://www.iht.com/articles/2008/10/10/america/10nuclear.php
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Brit Energy expects 2 reactor restarts delay to '09
Reuters
Friday, October 10, 2008
By Daniel Fineren
Two reactors at British Energy's Hartlepool and Heysham 1 nuclear power plants are unlikely to restart until early 2009 but four others should return before the end of the year, the company said on Friday.
The biggest nuclear power generator had expected to return the four reactors at Heysham 1 and Hartlepool to service after year-long repairs before the end of 2008.
"We continue to target the return to service of all four reactors in the third quarter of this financial year 2008/09, however... it is now likely that two reactors will not return to service until early 2009," the company said. Wholesale electricity prices have soared over the last few weeks, hitting a record of 150 pounds per megawatt hour earlier this week on concerns over tight supplies this winter without a big increase in nuclear output in the next few weeks.
Eight of British Energy's 16 reactors are currently closed, with Heysham 1 in northwest England and Hartlepool in northeast England out for boiler repairs since last autumn.
The supply outlook for next month improved this week when British Energy rescheduled a planned outage at its Eggborough coal-fired power station from November to the first quarter of next year.
The 625-MW Heysham 2-7 reactor is also expected to restart in November but the likely delay to the two other reactors until at least January points to tighter supplies after next month.
"Margins are a little better due to Eggborough," said one power trader after the British Energy statement.
"The rest of the winter are a little worse."
Supply margins should improve before November when the 555-megawatt Dungeness B21 reactor, which British Energy said was being prepared for restart after completed maintenance that began in July, returns.
The company expects its Dungeness B22 and 610-MW Hinkley Point B8 reactors to restart in December.
British Energy, which has agreed to a 12.5-billion pound takeover by France's state-owned power group EDF , said repair costs would be marginally higher than its previous estimate of 115 million pounds in this financial year as a result of the extent of the work at Heysham and Hartlepool.
(Additional reporting by Nao Nakanishi and Sue Thomas; editing by James Jukwey)
http://www.iht.com/articles/reuters/2008/10/10/business/OUKBS-UK-BRITAIN-POWER-NUCLEAR.php
From across the centuries, a different view of Picasso
PARIS: Picasso, master of invention - or reinvention? A major exhibition being held simultaneously in three Paris museums attempts to answer this question by juxtaposing works by the great Spanish modernist against paintings by earlier masters, from Rembrandt, Velázquez and Delacroix to Manet and Cézanne.
The result is both an astonishing panorama of European art, with many of the world's most famous masterpieces brought together for the first time, and a thought-provoking exploration of the creative process as Picasso's talent for transforming and distorting is tracked from his days as an art student in Barcelona to his last years in southern France.
At the Grand Palais, where the main exhibition, "Picasso and the Masters," opened Wednesday, perhaps the most remarkable display is in the final room, where nudes painted by Picasso at various stages of his long career hang side by side with the most famous nudes of Western art: Goya's "Nude Maja" (circa 1797-1800); Manet's "Olympia" (1863); Titian's "Venus with Cupid and an Organist" (1548); Ingres's "Odalisque en Grisaille" (circa 1824-34), and Rembrandt's semi-clad "Woman Bathing in a Stream" (1654).
This approach prevails throughout the exhibition, which throws chronology out the window and proceeds by themes in order to demonstrate how Picasso absorbed and transmogrified the work of his predecessors to redefine our understanding of art in the 20th century. The nonlinear arrangement startlingly reveals the conscious or subconscious connections forged by Picasso, as though he had processed all of Western art history through an ingenious computer - his brain.
"This exhibition is a revolution in the way we look at art," said Anne Baldassari, director of the Picasso Museum in Paris, who curated the show at the Grand Palais. "It is a kind of miracle to assemble these works, which have never been shown before, and they have been brought together today thanks to Picasso. He is the one who connected the most important canvases. It is as though we are entering into the magic circle of painting."
The arresting juxtaposition of paintings from across the centuries strikes the visitor from the very first moment at the Grand Palais, where the exhibition opens with a self-portrait of Picasso wearing a wig that he painted in 1897, when he was just 16. Beside it are a series of self-portraits, including a Delacroix from 1837, that appear to be reflected in the young Picasso's. While it is nothing unusual for artists to draw inspiration from others, this exhibition displays the depth of Picasso's artistic erudition and powers of reinvention. In the same room a second self-portrait, "Yo, Picasso" (1901), is flanked by self-portraits of Rembrandt at his easel (1660) and Gauguin with his palette (1893-94); the connection is the magnetic gaze of each of the artists. A third wall features self-portraits by Goya (1783), Cézanne (1873-76), Nicolas Poussin (1650), and Picasso (1906), this time linked by the gravity of the countenance.
Some of the juxtapositions can appear far-fetched - El Greco's "Dream of Philip II (Adoration of the Name of Jesus)" of 1579 bears little obvious resemblance to Picasso's "Evocation, the Burial of Casagemas" (1901), which launched his Blue Period. But in a quote displayed on the wall, Picasso himself links the elongated figures of his Blue Period to El Greco.
Other times Picasso deliberately played with the work of a predecessor. At the Grand Palais, Poussin's "Rape of the Sabine Women" (1637-38) was the springboard for works of the same title that Picasso painted in 1962, some clearly echoing the original, others reinterpreting the theme in a way that Poussin could hardly have imagined.
A sister exhibition at the Louvre displays variations on Delacroix's "Women of Algiers in Their Apartment" (1834) that Picasso executed in 1954-55. The third exhibition, at the Musée d'Orsay, fascinatingly explores Picasso's obsession with Manet's "Le déjeuner sur l'herbe" which scandalized Paris in 1863, with its nude woman and her clothed male companions enjoying a picnic.
Nearly as fascinating is the way these three exhibitions progressed from inspiration to reality. Curators succeeded in assembling more than 200 works by the West's greatest artists - which, together with the Picassos, are valued at more than €2 billion, or $2.72 billion, according to Le Monde - via diplomacy, bargaining and outright barter. For example, Baldassari said, to obtain a dozen paintings from the National Gallery in London she loaned that museum 25 Picassos for an exhibition it is holding next year.
The French government and private sponsors poured money into the Grand Palais exhibition, which cost an estimated €4.3 million to organize, Le Monde reported, and is one of the most expensive art events ever held in France. To offset the cost, the Grand Palais has extended its opening hours to 10 p.m. five nights a week for the duration of the exhibition, which closes Feb. 2 and will not travel abroad.
http://www.iht.com/articles/2008/10/11/arts/picasso.php
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Experts say Brazil-France defence pact wrong choice
Brazil will sign a strategic defence alliance with France in December that it hopes will boost the domestic weapons industry, but critics say it may be choosing the wrong military equipment for its needs.
As part of the pact, Brazil will build a nuclear-powered submarine and around 50 helicopters under licence from the French. It has also short-listed France's Dassault in a tender for at least 36 fighter jets.
Brazil, Latin America's largest country and economy, is planning to build up its military capabilities partly to help protect huge recent oil finds off its southern coast.
But defence industry analysts say U.S. or Russian aircraft are generally more suited to Brazil's continent-sized territory and that the nuclear-propelled submarine is too expensive and inappropriate for Brazilian waters.
"I don't think it's our best (choice) strategically," said Gunther Rudzit, a former defence ministry advisor.
Choosing France was a political compromise to neither depend on U.S. technology nor alienate Washington by choosing Russia, which supplies planes to the declared U.S. enemy Venezuela, analysts said.
"With (Russia's) approach to Venezuela, the United States said it wouldn't oppose a military accord between Brazil and France," said Jorge Zaverucha, professor of politics at the Federal University in northeastern Pernambuco state.
Brazil's leftist president, Luiz Inacio Lula da Silva, maintains cordial relations with the United States but often distrusts Washington's interests in South America.
France's President Nicolas Sarkozy said in February he agreed in principle to have French submarines and helicopters built in Brazil and intended to sign a strategic alliance.
Brazil last year earmarked $880 million to complete a nuclear reactor it wants to mount on a submarine built in Brazil under licence by the French.
NOISY SUBS
Critics say the nuclear submarines would be easily detected because of the noise of their reactors, especially in the shallow waters along Brazil's coast, and are too expensive for the country's tight budget.
"It'll be the craziest thing we'll ever do," said Expedito Bastos, defence researcher at the Federal University Juiz de Fora in central Minas Gerais state.
"Wouldn't 20 conventional submarines be much better? We'd have a fantastic fleet in the open sea and could control our entire coast," said Bastos.
Brazil's Navy now has only five German-made submarines to patrol a coastline of more than 7,300 km (4,525 miles).
The Navy argues that a nuclear submarine can stay under water longer and travel further, thereby adding to the country's defence powers.
Critics also question Brazil's decision to short-list Dassault's Rafale and for Eurocopter, a subsidiary of EADS, to build around 50 EC-725 helicopters in Brazil.
"For a country of continental dimensions, I think American and Russian equipment would be more adequate," said Rudzit. "The Russians have a tradition of building large helicopters that can carry more soldiers or cargo."
In addition to Dassault's Rafale, Boeing's F-18 E/F Super Hornet and SAAB's Gripen are finalists in the Air Force tender for next-generation, multi-role fighter jet to replace its entire fleet over the next 15 years. The total order could increase to more than 100 aircraft.
The Defence Ministry was not immediately available to comment.
http://www.iht.com/articles/reuters/2008/10/10/europe/OUKWD-UK-BRAZIL-DEFENSE.php
In Somalia, a 'forgotten crisis'
AFGOOYE, Somalia: There is a sense of overwhelming hopelessness just stepping into one of the feeding centers around here and seeing dozens of women sitting with listless babies in their laps, snapping their fingers, trying to get a flicker of life out of their dying children.
Little eyes close. Wizened one-year-olds struggle to breathe. From the doorway, you can see the future of Somalia fading away.
While the audacity of a band of Somali pirates who recently hijacked a ship full of arms has grabbed the world's attention, it is the slow-burn suffering of millions of Somalis that seems to go almost unnoticed.
The suffering is not new. Or especially surprising. This country on the edge of Africa has been slowly, but inexorably, sliding toward an abyss for the past year and a half, or some would argue, for the past 17 years.
United Nations officials have called Somalia "the forgotten crisis."
The causes are displacement, unemployment, drought, inflation, a squeeze on global food prices and a war that will not end. Fighting between Somalia's weak transitional government and a determined Islamist insurgency has been heating up in the past few weeks, driving thousands from their homes and cutting people off from food. The hospital wards here are one indicator of the conflict's intensity.
"In the past two months," said Dr. Mohammed Hussein, "our patients have doubled."
In August, they had 200 women lined up every day with emaciated babies. Today, it is 400.
More than three million people, about half of Somalia's population, now need emergency rations to survive. Nobody seems to like it. Many say they feel humiliated.
"That's all we talk about - when will the next handout come," said Zenab Ali Osman, a grandmother raising her daughter's children.
Before fighting drove her from Mogadishu, the capital, to Afgooye's endless refugee camps of gumdrop-shaped huts made from plastic bags and in some cases soiled T-shirts, Osman used to wash clothes. In a good day, she would make the equivalent of 80 cents.
That is what the civil war has done to the economy, leaving so many people to survive off pennies. But out on the high seas, it is a different story. Pirates thriving off this same lawlessness are making millions of dollars by hijacking ships in Somalia's unpatrolled waters and demanding hefty ransoms to free them. On Sept. 25, a band of pirates seized a Ukrainian freighter full of tanks and other weapons bound for Kenya.
The pirates are asking for $20 million, an unfathomable amount here. Negotiations are still going on, and the likely price will probably be closer to $5 million.
On Friday, Sugule Ali, a spokesman for the pirate group, threatened to blow up the ship in three days if no ransom was paid, The Associated Press reported from Nairobi. He said the pirates met Friday and decided they would blow up the ship, along with themselves and the crew, if they did not get the ransom.
No one wants to pay the pirates, but giving in may be the safest way out.
"I pray to God they are caught," said Dhuho Abdi Omar, a mother who was waiting at a feeding center in Afgooye with her two-year-old girl, who had not eaten for two weeks. "These pirates are blocking our food."
Not everyone agreed. Many young men in the camps seemed to lionize the gunmen of the seas.
"They're tough guys," said Mohammed Warsame, 22. "And they're protecting our coast."
The pirates have said as much, insisting that they hijack ships in response to illegal fishing and dumping.
"They're our marines," said Jaemali Argaga, a militia leader.
Somalia has not had any marines, or national army or navy to speak of, since the central government imploded in 1991. Clan-based warlords carved the country into fiefdoms, preying upon the population. People eventually got fed up and, in the summer of 2006, a grassroots Islamist movement drove away the warlords.
But Ethiopia and the United States accused the Islamists of sheltering terrorists and in the winter of 2006, Ethiopian and American forces ousted the Islamists. The result today is vicious fighting between the weak government forces and Ethiopian soldiers on one side and Islamist guerrilla fighters, backed up by businessmen and war profiteers, on the other. Civilians are often caught in between. Thousands have been killed in the past year and a half.
Many aid workers have fled. The United Nations World Food Program is one of the last organizations with a large staff inside Somalia. Denise Brown, the deputy country director, said the environment is increasingly hostile. And desperate.
A mob of hungry people besieged a convoy of 35 UN-chartered food trucks moving through Mogadishu two weeks ago. The people stripped the trucks clean, looting more than 2 million pounds, or 450,000 kilograms, of food.
"It's unprecedented," Brown said "Things just went haywire."
That has taken food out of the mouths of people like Osman, whose daughter was one of the 20 street sweepers in Mogadishu killed in August by a bomb that was buried in a pile of garbage.
She is now helping raise several grandchildren. Amina, 13 months old, will not eat. The two sat the other day on a cot covered with flies. All around them were babies looking up at the ceiling with round wet eyes, some with faces covered in tape because they were too sick to swallow and were being fed milk through their noses.
Who does she blame?
"Those with guns," Zenab said. "Whoever they are."About 100 migrants missing
About 100 migrants from Somalia are missing and feared drowned off Yemen after smugglers forced them overboard in the Gulf of Aden, Yemeni officials and the UN refugee agency said Friday, according to The Associated Press in Sana, Yemen.
So far, 30 bodies have been found washed up on shore and buried immediately, a Yemeni security official said Friday.
The waters off the Horn of Africa and Yemen have become some of the most lawless in the world, plagued by Somali piracy. The area is also a busy crossing-point for migrants fleeing to Yemen, particularly from Somalia.
http://www.iht.com/articles/2008/10/10/africa/somalia.php
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100 migrants feared drowned off Yemen, UN says
GENEVA: The U.N. refugee agency says 100 migrants are feared drowned after being forced overboard by smugglers in the Gulf of Aden.
U.N. High Commissioner for Refugees spokesman Ron Redmond says the smuggling boat left Somalia on Monday with 150 people on board.
The smugglers forced the migrants overboard off the Yemeni coast and 47 survivors managed to swim 3 miles to shore and alert authorities.
Redmond told reporters in Geneva on Friday that about 32,000 people have arrived in Yemen on boats since the start of the year. Many of them are fleeing violence and hardship in Somalia and other countries in the Horn of Africa.
UNHCR estimates at least 230 people have died and 365 remain missing, including 100 from the latest incident.
http://www.iht.com/articles/ap/2008/10/10/news/UN-UN-Missing-Migrants.php
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Five Chinese children killed by falling crane
BEIJING: Five children were killed and two injured when a crane fell on a village kindergarten in China's eastern Shandong Province Friday, said Xinhua.
The construction crane collapsed onto the roof of the neighbouring kindergarten, where five children playing outside were hit by falling bricks and killed, it said.
A preliminary police investigation attributed the accident to poor safety measures, while police said managers of the construction company had been detained, said Xinhua.
At the time of the accident, there were 100 children in the school, which is situated in Liujia Village in Zibo City.
Two children and the crane operator were injured and taken to hospital, according to the Zibo government.
A witness said several ambulances rushed many injured children to hospital and local police had cordoned off the area.
http://www.iht.com/articles/reuters/2008/10/10/asia/OUKWD-UK-CHINA-ACCIDENT.php
Thursday, October 9, 2008
WASHINGTON: With security and economic conditions in Afghanistan already in dire straits because of weak government, economic woes and an explosion of poppy cultivation, the chairman of the U.S. Joint Chiefs of Staff said Thursday that the situation there will probably only worsen next year.
"The trends across the board are not going in the right direction," Admiral Mike Mullen said in Washington in an assessment that reflected the view of a number of alliance military officials meeting separately in Budapest. "And I would anticipate next year would be a tougher year."
Barring rapid, major improvements to curb Afghanistan's booming heroin trade, bolster district and tribal leaders to offset a weak central government in Kabul, breathe life into a flagging economy, and stem the flow of militants who are carrying out increasingly sophisticated attacks from safe havens in Pakistan, Mullen said, Afghanistan is very likely to continue what a new intelligence assessment calls "a downward spiral."
Moreover, the admiral struck a pessimistic note when asked about the likelihood of needed changes falling into place, saying it was probable that "the trends are going to continue."
At a NATO defense ministers' meeting in Budapest, the tone was similarly bleak.
Defense Secretary Robert Gates sounded a warning there, echoed by officials from Britain, Canada and the United Nations, that unless the military and civilian efforts in Afghanistan were strengthened and better coordinated, things could grow worse next year, when presidential and parliamentary elections are scheduled.
Gates told defense ministers that he wanted NATO to back a comprehensive strategy involving a quicker build-up of the Afghan Army, more civilian aid and development, and bolstered counternarcotics efforts.
Mullen's sobering forecast, and the bleak tone from Budapest, came as a draft report by U.S. intelligence agencies cast serious doubt on the ability of the Afghan government to stem the rise in Taliban influence.
The report found that the breakdown in central authority in Afghanistan had been accelerated by rampant corruption within the government of Hamid Karzai and by an increase in violence by militants who have launched increasingly sophisticated attacks from Pakistan.
The Bush administration has initiated a major review of its Afghanistan policy. General David McKiernan, the top American commander in Afghanistan, has said he needs as many as 15,000 combat and support troops beyond the 8,000 additional troops that President George W. Bush had approved for deployment early next year.
But Mullen, like Gates, emphasized that the military can be only one part of the solution.
"We've got to impact pretty significantly, pretty fast on the poppy issue," he said, citing a scourge that by some estimates accounts for half the Afghan economy, pouring $100 million a year into Taliban coffers.
General McKiernan said last week that NATO forces would be authorized to attack narcotics bosses, their foot soldiers and infrastructure if they were linked to the movement of weapons, improvised explosives or foreign fighters into Afghanistan.
But Mullen said a broader counternarcotics solution involving the 42 countries with a presence in Afghanistan has proved maddeningly elusive. "We're all not in agreement on how to attack this problem," he said.
Despite a call from General John Craddock, the NATO supreme allied commander, for NATO countries to attack drug-related targets, several alliance members, including Germany, insist that civilian authorities should undertake such work.
Mullen has issued stern warnings before about the deteriorating security situation in Afghanistan. Last month, he told Congress, "I'm not convinced we're winning it in Afghanistan." But he quickly added, "I am convinced we can." On Thursday, he seemed slightly less hopeful.
Mullen expressed concern about the growing violence stemming from attacks by militants based in Pakistan's unruly tribal areas, a threat the United States has attacked with growing number of missile strikes and even a Special Operations ground raid early last month.
"We cannot provide an opportunity for the safe haven to rebuild itself in Afghanistan," he cautioned. "The insurgency has got to be handled."
Mullen praised recent Pakistani Army operations against militants but expressed concern that Pakistan's domestic financial crisis could hamper its counterterrorism operations.
The draft report, a nearly completed version of a National Intelligence Estimate, is set to be finished after the November elections. It cites gains in the building of the Afghan National Army, the officials said. But they said it also laid out in stark terms what it described as the destabilizing impact of the booming heroin trade.
Reports issued by the CIA for more than two years have chronicled the worsening violence and corruption. Some in the agency say they believe that it has taken the White House too long to respond.
The United States and the United Nations are pressing Karzai to act more boldly.
"We need a clear political commitment from President Karzai," Kai Eide, the top UN envoy to Afghanistan, told reporters in Budapest. "The last few months have been really very, very difficult."
Mullen cited the need to "move forward" and increase engagement with tribal leaders in Afghanistan, an acknowledgment that the breakdown in central authority has been accelerated by rampant corruption within the government.
Eide, the UN envoy, said he agreed with Gates and the British commander in Afghanistan, Brigadier Mark Carleton-Smith, that part of the solution involved talks with Taliban members in far-flung provinces who are willing to work with the Afghan government.
Several European officials have voiced that idea, and the incoming U.S. commander responsible for both Afghanistan and Iraq, General David Petraeus, appears open to it.
The administration is also considering whether the United States should possibly arm tribal militias, to fight the Taliban in places where Afghanistan's army and police forces have been ineffective.
American officials had long hoped instead that strong national institutions like the Afghan Army, not tribal groups, could protect the population, but the escalating violence has forced a reassessment.
Henry Crumpton, a career CIA officer, stepped down last year as the State Department's top counterterrorism official. He has not seen the draft report, but said Wednesday that Afghanistan was "bad and getting worse." He said that officials in Washington were just beginning to wake up to the problem, "but now they know it's pretty grim."
A National Intelligence Estimate reflects the consensus judgments of all 16 American intelligence agencies. Although the Bush administration has made public the crucial findings from some recent estimates on Iraq and terrorism, most remain classified. The assessment on Afghanistan is the first since the Taliban regained strength there beginning in 2006 and started seizing large swaths of territory.
The draft intelligence report was described by more than a half dozen government officials who had read its conclusions. They spoke on the condition of anonymity because the report remains classified and has not been completed.
A White House spokesman, Gordon Johndroe, declined to comment on the report's conclusions but said: "Everyone understands that the current situation in Afghanistan is a tough one. That's why the president ordered additional troops there. That's why we're increasing the size of the Afghanistan Army."
Violence in Afghanistan will escalate in 2009 unless the United States and other countries move quickly to counter an intensifying Taliban insurgency with troops and assistance, the top U.S. military officer said on Thursday.
"The trends, across-the-board, are not going in the right direction," Navy Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, told reporters.
Afghanistan, which has seen violence soar over the past two years, needs not only military assistance from the West but also major infusions of economic, diplomatic and political aid, according to Mullen.
"It's been very, very tough fighting this year and it will be tougher next year unless we (develop) a way to get at all aspects of the challenge," he said.
"It's the full spectrum -- the political piece, the diplomatic piece, the economic piece, in addition to the security piece -- that's got to improve dramatically."
But Mullen said the United States, NATO and other countries have failed so far to forge the kind of strategic unity necessary to stem the rise in violence.
"One of the big struggles we have is developing a comprehensive approach to all of this," the admiral said. "We're just not there."
"I don't think it's going to turn around overnight. So I would anticipate next year being a tougher year," he added.
The chairman was speaking at a meeting with newspaper reporters hosted by the Christian Science Monitor. A recording of his remarks was obtained by Reuters.
Earlier Thursday, the New York Times said a new U.S. intelligence report has concluded that Afghanistan is spiralling downward amid doubts about whether the Kabul government can stem the Taliban's rise.
The Bush administration is in the midst of a wide-ranging review of its strategy on Afghanistan in hopes of finding long-term solutions to problems, according to officials.
"Afghanistan is a difficult place. It has made progress since 2001. We have all talked about new circumstances that have arisen there and we are doing a review to look to see what more we can do," Secretary of State Condoleezza Rice told reporters at a different venue.
SOPHISTICATED INSURGENCY
Afghanistan is gripped by an increasingly sophisticated insurgency, particularly in provinces near its eastern border with Pakistan, where U.S. officials say the fighting is fuelled by militant safe havens across the border.
The United States has 33,000 troops in the country, 13,000 of them under NATO command. All told, Mullen said there are now about 64,000 Western soldiers in Afghanistan.
The United States is in the process of sending nearly 6,000 more: an Army brigade and a Marine battalion that should reach the country by next February.
The United States has also stepped up pressure on NATO allies and others to contribute more forces.
U.S. Army Gen. David McKiernan, NATO's top commander in Afghanistan, has asked for an additional deployment that could total as many as 15,000 more U.S. troops on top of those already earmarked by the Pentagon.
But those forces are unlikely to be available until next spring or summer because of ongoing U.S. commitments in Iraq.
Until then, Mullen said the Pentagon is moving to provide more unmanned aircraft, helicopters and other "enablers" to bolster the effectiveness of the existing force.
"We're going to push as many enablers there as we possibly can, as rapidly as we can," he said without providing specifics.
"You've got to have enough security to be able to turn it so that the people feel secure -- not unlike what's happened in Iraq -- so that the other things can turn around," he said.
But the draft of a new classified National Intelligence Estimate, or NIE, says Afghanistan is already suffering an accelerated breakdown of central authority due to rising violence and official corruption, the New York Times said.
The Times said the NIE is set to be finished after the November elections and will be the most comprehensive U.S. assessment in years on Afghanistan.
An NIE is a formal document that reflects the consensus judgments of all 16 U.S. intelligence agencies, often based on separate intelligence reports previously given to policymakers.
A suicide bomber drove his car into an anti-Taliban tribal council meeting in northwest Pakistan Friday, killing at least 30 people, officials said, the second suicide bombing in as many days.
Nearly 100 people were wounded in the attack in Orakzai region which comes a day after a suicide blast inside the heavily guarded police headquarters in the Pakistani capital in which 8 policemen were wounded.
The bomber blew himself up when around 500 members of Alizai tribe were gathered to draw up a strategy as part of government-backed efforts to drive out militants from tribal areas regarded as safe havens for al Qaeda fighters and their Taliban allies.
"We were discussing plans to take action against the militants when all of a sudden a man drove a car in the middle of the meeting, trampling few people and then blowing up the car," Qeemat Khan Orakzai, a tribal elder, told Reuters.
"I fell down and got unconscious. When I woke up, I saw dead and wounded around me."
Qasim Khan, a doctor in a hospital in Orakzai, said 20 tribesmen died on the spot while about a dozen wounded people succumbed to their injuries on their way to the hospital.
"The lashkar had taken a decision to destroy militants' headquarters in the region. Shortly afterwards, this attack took place," Kamran Zeb, top government administrator of Orakzai, told Reuters.
Orakzai has been the most peaceful of Pakistan's seven semi-autonomous tribal regions. Unlike most of the others, Orakzai does not border Afghanistan.
Militant violence has intensified across Pakistan in recent months in apparent reaction to an army offensive against the militants in the rugged northwest including Bajaur and Swat regions.
In Bajaur, which is a tribal area north of Orakzai, tribesmen found bodies of four colleagues who were believed to have been abducted by the militants after they agreed to become part of a tribal lashkar, officials said Friday.
Separately, Pakistani security forces, backed up by helicopter gunships, killed at least five militants in an offensive in Swat, an alpine valley once popular with tourists.
The attacks came as Pakistan's newly appointed intelligence chief briefed lawmakers on the internal security threat in a closed joint session of parliament for a second day.
Pakistan, a frontline ally in the U.S.-led war on terrorism, has been under tremendous pressure from the United States to take stringent measures against militants' sanctuaries in the border areas to stem their incursions into Afghanistan.
The United States has carried out at least nine missile attacks, the latest Thursday night, and a commando raid on militant targets in Pakistan's tribal areas since the start of September.
Six people, including three Arab militants, were killed in Thursday's drone strike in North Waziristan tribal region.
KABUL: A suicide bomber killed a provincial intelligence officer and wounded three policemen in an attack in the eastern Afghan province of Khost on Friday, a provincial official said.
Taliban insurgents have vowed to intensify their attacks in Afghanistan this year, using suicide and roadside bombings in a campaign to bring down the Afghan government and eject the international forces that support it.
The latest incident took place in the Baak district of Khost province, some 150 km (90 miles) east of the capital Kabul.
"The suicide bomber on foot attacked the detective while he was going to work," provincial district governor Sayed Ahmad Khan said. "No civilians were killed or wounded in the attack."
Separately, a convoy belonging to foreign forces fired on a civilian car wounding three people including a woman in the centre of Kabul city on Friday, police and witnesses said.
More details were not immediately available.
Another suicide bomber targeted a military convoy belonging to international troops in the city of Jalalabad, about 115 km (71) miles east of Kabul, wounding two soldiers and an interpreter, a provincial official said.
Most of the soldiers operating in eastern Afghanistan are Americans.
Violence in Afghanistan has this year hit its worst level since the overthrow of the Taliban in 2001, prompting some in the Afghan government and its allies to consider talks with the Taliban insurgents to end the war.
BUDAPEST: Signaling a major shift in strategy for the trans-Atlantic alliance, NATO defense ministers agreed Friday to allow direct attacks on Afghanistan's drug networks.
The accord means that troops will be able to attack drug operations provided they obtain authorization from their own governments. NATO officials stressed that only drug producers aiding the insurgency would be targeted. The alliance actions will not be open-ended, lasting only until the Afghan security forces are able to take on the task themselves.
"NATO can act in concert with the Afghans against facilities and facilitators supporting the insurgency, subject to the authorization of respective nations," an alliance spokesman, James Appathurai, said after lengthy discussions Thursday and Friday among the ministers in the Hungarian capital.
President Hamid Karzai of Afghanistan has repeatedly asked NATO to take on more responsibility for dealing with the drug lords. It is unclear, however, if the alliance will need a new UN Security Council resolution. The NATO-led International Security Assistance Force, or ISAF, operates under a UN mandate.
Germany and several other NATO member states have always been wary about extending the NATO role in Afghanistan, particularly combating drugs, which they believe is a civilian task. Furthermore, the German government - under pressure from the opposition to come up with an exit strategy, or even withdraw all its troops - is concerned that violence will increase and NATO forces will be more exposed.
The decision Friday was reached after considerable pressure from the U.S. defense secretary, Robert Gates, and the NATO supreme commander, General John Craddock.
"Secretary Gates is extremely pleased that, after two days of thoughtful discussion, NATO has decided to allow ISAF forces to take on the drug traffickers who are fueling the insurgency, destabilizing Afghanistan, and killing our troops," said a Pentagon press secretary, Geoff Morrell.
Throughout the two days of talks, Gates and Craddock had argued that the trafficking networks and drug trade had helped fund the Taliban insurgency, providing them with manpower and weapons. The amount that the Taliban is earning from the drug trade is up to $100 million a year, according to Craddock. Over 90 percent of the heroin that reaches Europe comes from Afghanistan, according to the UN.
NATO defense ministers will review the success of the mission when they meet next February in Poland.
Gates and Craddock also asked NATO and the other countries, which have 37,000 troops in Afghanistan, along with 13,000 U.S. soldiers, to send more reinforcements, helicopters and medical evacuation aircraft that, until now, have been in extremely short supply.
So far, the response by the Europeans has been mixed and according to the NATO secretary general, Jaap de Hoop Scheffer, disappointing.
This week, Germany, which has 3,500 troops based in the relatively quiet north of the country, agreed to send a further 1,000 troops over the next 14 months. They will be restricted by limitations set by the German Parliament that prevent the country's troops from being sent to the more dangerous south.
In the south, British, Canadian, Dutch and Australian forces have taken on the brunt of the fighting, especially over the past few months as the Taliban insurgency spreads. The British commander on the ground, Brigadier Mark Carleton-Smith, warned this week it would be impossible to defeat the Taliban and even suggested that dialogue be opened with some sections of the Taliban.
CIUDAD JUAREZ, Mexico: Hooded gunmen believed engaged in a drugs feud burst into a bar in northern Mexico and shot dead 11 people in the third drugs-related massacre in the state since July, officials said.
The black-clad gunmen opened fire with assault rifles at the Rio Rosas bar in Chihuahua city near Texas on Thursday night after pushing their way in and identifying themselves as federal police, the Chihuahua attorney general's office said.
The killings were believed related to a feud between gangs jockeying over drug smuggling routes into the United States.
Customers stampeded out of the bar as the gunmen fled the usually quiet city neighbourhood. One of the victims was a columnist for the city's main daily newspaper.
A few hours later, federal police fought a group of suspected hitmen in a gun battle on the highway south from Ciudad Juarez, which is on the U.S. border, to Chihuahua.
Police declined to say if the battle, in which two policemen and two gunmen died, involved the men who attacked the bar.
More than 3,000 people have died this year as Mexico's drug gangs fight for control of smuggling routes into California, Arizona and Texas, despite deployment of thousands of troops and federal police across Mexico by President Felipe Calderon.
KANDAHAR, Afghanistan: An older brother of President Hamid Karzai who has one of the worst attendance records in Afghanistan's Parliament said Thursday that he was giving up his legislative seat. The brother, Abdul Qayum Karzai, cited kidney problems as the cause.
He spoke at a news conference in this southern Afghan city.
The 249-member legislature has often been unable to muster a quorum to conduct its sessions since elections in 2004. The parliamentary speaker, Yunis Kanooni, began publishing regular attendance tallies this summer.
New parliamentary elections are scheduled for late next year.
Hamid Karzai, who also faces re-election in 2009, has come under increasing criticism in recent months from western nations, including the United States, that sustain his government with troops and financial aid. The government's popular support has plunged amid widespread allegations of high-level corruption and a failure to tackle fast-rising food costs and deteriorating security at a time when the Taliban is resurgent.
Western diplomats say the Afghan president has also come under pressure to deal with criticism of some of his brothers, including Abdul Qayum Karzai, the legislator and a businessman who has spent long periods outside Afghanistan since the Taliban government was toppled in 2001.
But the most controversial of the brothers has been Ahmed Wali Karzai, now chief of the Kandahar Provincial Council, who was named in a report in The New York Times on Sunday as a focus of concern among American officials as a result of allegations that he has benefited from heroin trafficking.
The article said American officials in Kabul and Washington were concerned that perceptions that President Karzai might be protecting his brother were damaging the president's credibility and undermining American efforts to support his government. President Karzai and Ahmed Wali Karzai have dismissed the allegations as baseless and described them as politically motivated attacks by longtime foes.
BAGHDAD: Market by market, square by square, the walls are beginning to come down. The miles of hulking blast walls, ugly but effective, were installed as a central feature of the surge of American troops to stop neighbors from killing one another.
"They protected against car bombs and drive-by attacks," said Adnan, 39, a vegetable seller in the once violent neighborhood of Dora, who argues that the walls now block the markets and the commerce that Baghdad needs to thrive. "Now it is safe."
The slow dismantling of the concrete walls is the most visible sign of a fundamental change here in the Iraqi capital. The American surge strategy, which increased the number of United States troops and contributed to stability here, is drawing to a close. And a transition is under way to the almost inevitable American drawdown in 2009.
There are now more than 148,000 United States troops in Iraq, down from the peak of around 170,000 a year ago, and President George W. Bush has accepted the military's recommendation to remove 8,000 more by February.
Iraqis are already taking on many of the tasks the Americans once performed, raising great hopes that the country will progress on its own but also deep fears of failure.
On Oct. 1, the Sunni-dominated Awakening movement, widely credited with helping restore order to neighborhoods that were among the most deadly, passed from the American to the Iraqi government payroll in Baghdad. There is deep mutual mistrust between the new employer and many of its new employees, many of whom are former insurgents.
Another element of the transition, which has attracted far less notice than the Awakening transfer, is the effort by the Iraqi Army to begin turning over neighborhoods to the paramilitary National Police. In the future, its officers, too, will leave and be replaced by regular police officers.
All three moves mark a transition to an era in which Iraq's Shiite-dominated government seeks more control over its own military and sway over America's.
"The Iraqi security forces are now able to protect Iraq," said Joaidi Nahim Mahmoud Arif, a National Police sergeant in Dora, in southern Baghdad. "They will depend on themselves above all."
In dozens of interviews across Baghdad, it is evident that while open hostilities have calmed, beneath the surface many Sunnis and Shiites continue to harbor deep mistrust.
If the changes work as hoped, it will be a huge step toward restoring normal life in Baghdad. Each move, however, has its pitfalls. Awakening members could return to insurgent activity. Bombers could take advantage of streets without walls. The National Police, long accused of being sectarian, could abuse its new positions.
American commanders concede the risks but contend that the changes are worthwhile, given the potential payoff.
"We've got to balance that: security with economic concerns," said Lieutenant Colonel Tim Watson, commander of the Second Battalion, Fourth Infantry, attached to the First Brigade Combat Team, Fourth Infantry Division, for Baghdad.
But commanders acknowledged that the cost of failure would be high. Referring to the Awakening transfer, Watson's boss, Major General Jeffery Hammond, said, "If the project were to fail, these guys would be out on the street, angry."
"Al Qaeda in Iraq will be recruiting them," he said.
Wariness as Walls Fall
Each slab is the shape of a tombstone and the height of a double-decker bus. Assembled on the streets of Baghdad, the walls stretched for miles and redefined the city's look and feel. As they are removed, the bullet-pocked slabs are stacked in large storage zones waiting to be used elsewhere or moved to a central depot.
The walls are not coming down in all, or even most, Baghdad districts. They still surround the Green Zone, the once notorious airport highway, government buildings, checkpoints and entire neighborhoods like the Sunni enclave of Adhamiya.
But they have already been dismantled in some parts of the city. At a recent ceremony during the closing days of Ramadan, Sunnis from the Fadhil District, east of the Tigris River, joined with Shiites from adjoining Abu Saifeen to celebrate the removal of sections of a 15-month-old American-built wall that had divided their neighborhoods.
A checkpoint operated by Awakening groups from both neighborhoods now stands in the gap.
Colonel Craig Collier, commander of the Third Squadron, 89th Cavalry Regiment, Fourth Brigade Combat Team, 10th Mountain Division, said that in the past year, relations between Awakening groups in the two areas had "gradually gotten better and better, until now, you're at the point where they've taken the wall down and the two sides get together a lot."
He added, "They've been playing soccer."
A nearby square on Kifah Street was the scene of a huge car bomb that killed 140 people in April 2007. It serves as a bus terminal, where buses are still barricaded behind blast walls. A billboard depicts a collage of photos of drivers killed in the bombing. "If you see my photo, say a prayer for me," reads the caption.
Here, opinion about the walls was divided. Haider Falah, an Awakening guard, shrugged off past clashes between those in Abu Saifeen and Fadhil.
"We are all Iraqis," he said.
But Alaa Hadi, 28, a watermelon seller, lost his brother in an earlier bombing that killed 137 people and destroyed much of the market. Fearing outsiders, he is against any walls coming down.
"Those who tell you they are not worried are lying, trust me," he said. "Look around you. We do not know who at this very moment might be amongst us preparing to blow themselves up."
Five miles south of Fadhil there is a blast-wall graveyard, for used barriers and ones that may never be put up. This is at Forward Operating Base Falcon, a United States military post near Dora, which was for years one of the city's most dangerous areas.
Mixed, but majority Sunni, it was prey to Sunni insurgents as well as Shiite militia death squads.
In 2007, the center of Dora was retaken only after heavy fighting by American units that fought their way, street by street, through extremist strongholds.
The gains were cemented by the walls and by an Awakening movement carefully nurtured by the Americans. Many residents hailed the walls as protection from death squads and insurgents. In the last 11 months, not a single American has been killed in the neighborhood.
But as the situation calmed, people began to perceive the walls as not only protecting local businesses. They limited business, too, by walling off shops and preventing traffic from moving from one neighborhood to another. People began to mutter of living in a "sijen khabir," the Iraqi phrase for big prison.
"They besieged the area," said Adnan, the vegetable seller in Dora, who despite security improvements was too nervous to give his family name. "There isn't much activity, and the market closes early. If you move the blast walls, everything will be O.K."
The wall separating the market from the highway is not yet down, but its replacement is already in place. A hybrid construction that is half wall and half railing, it is much lower than the towering blast wall and is designed to allow motorists and pedestrians to see the shops on the other side and to approach much closer, for good or ill.
Building on Shaky Trust
There is one overriding issue when it comes to the Awakening Councils, the groups of mainly Sunni former gunmen who were hired by the Americans to stop attacking them: Will they return to violence?
Many were supporters of the Sunni insurgency, either for money or ideology, and many still feel aggrieved at the new order, in which Sunnis are no longer in charge.
The Americans won over the Sunnis by overlooking their crimes, paying them and rewarding their leaders with extra money. They held out the prospect that Awakening members would eventually get jobs in the Iraqi Army or the police. Those who did not would get civilian jobs, and the government would not conduct wholesale detentions.
But as the early-October transfer approached, it became clear that the Iraqi government would refuse to accept most Awakening members into the security forces, and that most of the civilian jobs simply did not exist. Furthermore, the Awakening leaders, some of whom had been paid thousands of dollars by the Americans, would get no more than the rank and file under the Iraqis. The Americans now say they will try to make up the difference for some of them.
The Awakening members' fears have still not been allayed.
"Allah. Homeland. Salary," reads one piece of protest graffiti painted near an Awakening checkpoint in Dora market, adapting the motto of a feared paramilitary unit during Saddam Hussein's era.
Pointing to the words, Sergeant Alaa al-Janabi, 30, who works with the Dora Awakening, said, "This is our slogan."
He continued: "What we are being paid now is not enough. It's nothing. We have to buy gas for our cars, fuel for our generators. I have four kids; they don't have shoes."
"We're not going to fight again," he said, but then paused. "Unless they make us."
Watson, the American commander in Dora, acknowledged that there was some risk of Awakening members returning to the insurgency or turning to criminal activity. But he said that every Awakening member's fingerprints and retinal scans were on file, and his address and family were known both to the Americans and the Iraqi government.
"They are already identified by us and the National Police," Watson said. "So that if they have any thought of going back to the insurgency it's pretty difficult for them."
Despite the Awakening's wariness of its new masters, the government has come a long way in the last year.
"The suspicion and worry is much, much less," said Safa Hussein al-Shekh, deputy national security adviser.
He accepts that many Awakening members have genuinely served the country and concedes that the government's program may fall short in some areas. The lack of bonus pay for leaders is one problem he identifies. Another is anger when some areas get more security jobs than others. His final concern is that the government just does not have enough civilian jobs to offer.
"The economic wheel has not turned at enough of a speed to absorb this number of unemployed people, and it needs some time, maybe two years or a year and a half," Shekh said.
But some government leaders still harbor grave doubts about letting former insurgents back into the fold. Any overture to them comes with warnings of dire consequences if the Awakening is not completely loyal.
"Anybody who comes to us, if they quit the insurgent approach we will welcome them with open arms," said a Shiite member of Parliament, Hadi al-Ameri, who also leads the Badr Organization, a onetime paramilitary Shiite force trained in Iran and feared by Sunnis.
"But anybody who chooses a road that is not with the Iraqi government, death will be his fate," Ameri said.
His antipathy is mirrored at the highest level of the Awakening. Many of its leaders, Sunni former Baathists, remain fiercely suspicious of the Shiite-majority government and particularly the police.
"In fact, there is no trust between us and the National Police," said Sami Hassan Saleh al-Jubori, a leader of the Awakening Council in Dora and a former general in Saddam Hussein's military.
He offered his own warning to the government. "If the Awakening is let go, Dora will go back to worse than it was before," he said. "I hope you don't consider this a threat."
BAGHDAD: Hundreds of Christians are fleeing Mosul after a string of killings that appear to be singling out the minority group in the northern city, where many had sought refuge from persecution in other parts of Iraq.
Since late September, at least 11 and perhaps as many as 14 Christians have been killed in Mosul, according to government officials and humanitarian groups. The victims include a doctor, an engineer, two builders, two businessmen and a 15-year-old boy, who was gunned down in front of his home. In some cases, there have been two or three killings on the same day.
A pharmacist was killed Friday by a man who pretended to be an undercover police officer and asked for the pharmacist's identification card, said Khisroo Koran, deputy governor of Nineveh Province, of which Mosul is the capital.
The attacks coincide with an angry dispute over the Iraqi Parliament's decision to drop a provision of the provincial elections law that ensured political representation for Christians and other minorities, before passing the legislation on Sept. 24. To protest Parliament's action, Christians held demonstrations in Nineveh Province - where about 250,000 Christians live, about 50,000 of them in Mosul - and in Baghdad.
At one demonstration in Nineveh, protestors held up signs demanding the creation of a 19th province governed by Christians that would be linked to the semi-autonomous Kurdish region in the north, according to William Warda, an Iraqi journalist and chairman of the Hammurabi Human Rights Organization, based in Baghdad.
Although the motivation for the sudden increase in violence in Mosul is not known, several Iraqi Christian leaders said Friday that it could be tied to the protests and to the demands for an autonomous province.
Koran said that flyers had appeared on the streets in Mosul threatening Christians and telling them to leave the city. He blamed insurgents and "nationalist extremists" for the killings.
More than 150 families have left Mosul over the last week for towns in the surrounding area like Barttilla, Tallkayf and Qaraqosh that are primarily Christian, according to provincial officials.
Jawdat Toma Yousef, who has an underwear stall in the market in central Mosul, said that he and his family left the city after his brother, who has a wholesale store, was killed on Saturday.
"Me and another brother closed our stalls about 12:15 that day, and then after that four guys came to the market and one of them shot my brother Hazzem and killed him in front of his son," Yousef said.
He said that 18 members of his family are now living in a small rental house in Qaraqosh.
"We could not bring anything with us except our clothes and our money," Yousef said. "We left Mosul immediately after we buried my brother's body."
Christians from all over Iraq have been emigrating in huge numbers, but of those who have remained in the country, many have fled to the Ninewa plain, which is dotted by ancient Assyrian-Chaldean villages that contain saints' graves and monasteries that were built during the time of Mohammed.Car bomb kills 13 in Baghdad
A car exploded in the southern Baghdad neighborhood of Dora, killing 13 people and wounding 27, according to the police and hospital officials, The Associated Press reported.
The bomb hit the main market area of Abu Dshir, which is in a Shiite part of Dora, a Sunni-dominated neighborhood.
The U.S. military gave a lower toll, saying four civilians were killed and 14 wounded in the attack. Differing casualty tolls are common in Iraq.
Earlier in Dora, a roadside bomb hit a minibus, killing one passenger and wounding 12. The U.S. military said only that 10 civilians were wounded.
Dora is a former insurgent stronghold that has seen a sharp decline in violence over the past year after local Sunnis joined forces with the Americans against militants.
In Mosul, a roadside bomb targeting an Iraqi police patrol killed 4 civilians and wounded 20 other people, the military said.
PEREVI, Georgia: On a day when Georgians streamed back to their homes from refugee camps, this mountain village was shrouded with fog, and its inhabitants wondered if they had been forgotten.
Eteri Kusiani, who is ethnically Georgian, lay awake before dawn on Thursday listening to distant gunshots, and thinking about the handwritten note she had received from unknown Ossetians in the next village: "We will come at night and take your husband," who was lying beside her, "if he does not make himself accountable."
About 1,000 ethnic Georgians live in Perevi, which is just outside separatist South Ossetia. On Thursday, hours before the deadline for Russian troops to pull back to the enclave, they were still trapped behind a heavily reinforced Russian checkpoint where a communication station, troop carriers and heavy ammunition were hidden under camouflage.
Hogs meander down the unpaved road that runs through Perevi, and the great-power politics of Russia and Georgia seem impossibly remote.
The war's aftermath started subtly for Kusiani, with Ossetians at the door gruffly demanding more than two gallons of her homemade honey. But then the note came, accusing her husband of transporting wounded Georgian soldiers in his ambulance, and everything began to look much darker.
"Certainly we lost the war," she said, sadly, wrapping herself in a bathrobe. "We lost hope of reclaiming our territories. How could we call it a success? People have died. Houses have been destroyed."
"The only hope I have," she said, "is to run from this place and build a house in another place."
Emotions were mixed all over Georgia on Thursday, as families vacated the tent cities where they had lived for weeks or months. Though government officials urged refugees to wait until their villages had been cleared of unexploded ordnance, it was impossible to stop them. They tied towering bundles to the tops of taxicabs and headed off down the road.
Returnees disembarking a bus in Nikozi were startled by three Russian troop carriers, which roared through town with Russian flags flying. One soldier was taking pictures with his cellphone. With a deep sigh, Leila Maznishvili started down the road to her house, waving her cane at trees that had been splintered by tanks.
"Georgian? Russian? How do I know?" she said. Her house is between Georgian and Russian checkpoints.
"That's how we lived before," she said, "and that's how we will live now."
About 4,000 refugees left camps in Gori on Thursday, leaving 20,000 behind, said Lado Vardzelashvili, the representative of Georgia's president, Mikheil Saakashvili, in Shida Kartli. Refugees have been banned from returning to Ergneti, a village near Tskhinvali, until sappers declare it free of bombs and mines.
Amnesty International released an analysis of satellite images on Thursday showing that 100 civilian dwellings were shelled during the Georgian bombardment of Tskhinvali that began late on Aug. 7.
The more surprising finding, though, was that Georgian villages around Tskhinvali were heavily damaged by South Ossetian attacks from Aug. 10 to 19 - after most of the hostilities were over. The ethnic Georgian village of Tamarasheni, for instance, was unharmed on Aug. 10, but nine days later, 152 buildings had been damaged.
The organization "is concerned that Russian forces failed to take effective measures to protect civilians and their property from such abuses in areas under their control," according to a press release.
Many refugees who had fled villages seemed undaunted by the prospect of finding damage on their return. The Odiashvili brothers, whose family has farmed in Tkviavi for 10 generations, were in high spirits as they packed up. Asked whether they would feel safe in the village, just south of the enclave's border, one said he felt "99 percent" safe, and David, who is 44, said the real figure was closer to 98 percent.
"We need to go and be on our earth," said David Odiashvili. "We don't know what Bush, Saakashvili and Medvedev know," he said, referring to the Georgian leader and his American ally and the Russian president, Dmitri Medvedev. "We are just peasants. When they started the war, they didn't consult us."
He added that he fully expected the Russians to pull out from South Ossetia before long. "If Russia stays in South Ossetia, it means Georgia will have a war again, and it will be a world war," he said with cheerful confidence. "European Union monitors will be shot, and Bush will tell Medvedev what he really thinks."
Kusiani, who remained behind Russian lines in Perevi, felt no such certainty. These days, she said, Ossetians will not let Georgians graze cattle in the best fields, or pick mushrooms, gather berries or cut wood. There was no history of violence between villagers here before August, and she tried to be polite when the three Ossetians came to her door asking to buy honey, until one of them pointed a gun at her children and said, "Now we'll see how much honey you have."
The thought of a Russian withdrawal gives her little comfort. It is her neighbors who scare her.
Partial pullout, EU envoy says
Russia has partly complied with a cease-fire deal requiring it to pull back its forces in Georgia, France's foreign minister, Bernard Kouchner, said on a visit Friday to verify the pullback on behalf of the European Union. On Friday a deadline expired for Russian soldiers and tanks to leave zones near Abkhazia and South Ossetia, which was set out in a French-brokered cease-fire deal. Asked if Russia had honored the deal, Kouchner said: "I think so, but partly."
Iraqi Shi'ite cleric Moqtada al-Sadr blamed the United States on Friday for the assassination of a lawmaker who belonged to the cleric's parliamentary bloc, killed a day earlier in a bomb attack.
In the Baghdad district of Sadr City, men cried and shouted slogans as they carried and walked alongside Saleh al-Ugaili's coffin, draped in the Iraqi flag, before it was taken to a cemetery in the holy southern Shi'ite city of Najaf.
"The martyr gave most of his time to eject the occupiers ... And for this reason the hand of the hateful occupation and terrorism killed him," Sadr said in a statement as hundreds of supporters gathered to bury Ugaili.
"God is the greatest, America is the enemy of God," mourners chanted in Najaf after Friday prayers.
Ugaili was killed on Thursday when a blast struck his car in the Habibiya district of eastern Baghdad. It was not clear who was behind the attack, which Sadr blamed on the United States. The cleric is opposed to the U.S. presence in Iraq.
There have been several bomb blasts in Baghdad in recent weeks, and police said at least 12 people were killed and 22 wounded on Friday when a car bomb exploded in the commercial district of Abu Dsheer in the south of the capital.
Ugaili's killing prompted condemnations from U.S. Ambassador Ryan Crocker and military commander General Ray Odierno, who called his killing an "attack against Iraq's democratic institutions" and a "heinous crime."
Staffan de Mistura, the United Nations' representative in Iraq, called the killing "an outrageous crime aimed at perpetuating instability in Iraq."
Gunmen clashed with U.S. and Iraqi forces overnight in Sadr City. The U.S. military said there had been one American casualty, but did not say if the soldier had been killed or wounded.
A lawmaker from the Sadrist bloc, which has 30 seats in the 275-seat parliament, said Ugaili's killing could be linked to upcoming provincial elections, due in January.
The polls are expected to see a struggle for power between rival Shi'ite factions in Iraq's oil-rich south.
"The killing could have two reasons. It could be an internal conflict in the Sadrist movement ... or a fight between Shi'ite powers for control of the streets before the polls," said a political science professor at Baghdad University, who declined to be named for security reasons.
Major-General Michael Oates, a U.S. commander in southern Iraq, said on Thursday that U.S. forces feared a wave of assassinations before the polls.
Violence in Iraq has declined to four-year lows in recent months, but bombings and shootings take place daily, especially in Iraq's north.
SECURITY PACT
Four people were killed and at least 15 were wounded when two bombs exploded in the centre of the northern city of Mosul on Friday. The U.S. military says Sunni Islamist al Qaeda is clinging to the city after being forced from havens elsewhere.
U.S. and Iraqi negotiators are in the final stages of negotiating a security pact that will govern the presence of U.S. troops in Iraq once a U.N. mandate expires this year.
Prime Minister Nuri al-Maliki -- speaking in Najaf after meeting Iraq's top Shi'ite cleric Grand Ayatollah Ali al-Sistani -- said Washington's request that its troops be sheltered from prosecution in Iraq was one issue that needed to be resolved.
Although Sistani does not comment on politics, Maliki's words after meeting the cleric were notable because Sistani's tacit blessing would almost certainly be necessary to win political support for it.
Sadr's military wing, the Mehdi Army, has launched several uprisings against U.S. forces since the U.S.-led invasion in 2003 and has fought rival Shi'ite factions, but in August Sadr extended a year-old cease-fire indefinitely.
MANAGUA: Nicaragua's leftist President Daniel Ortega, a U.S. foe since the Cold War, said God was punishing the United States with the financial crisis for trying to impose its economic principles on poor countries.
"It's incredible that in the most powerful country in the world, which spends billions of dollars on brutal wars ... people do not have enough money to stay in their homes," former Marxist guerrilla Ortega said in a speech late on Thursday.
"God is punishing the United States," for imposing flawed economic policies on developing countries around the world, said Ortega, who first governed Nicaragua in the 1980s when his Sandinista government was locked in a war with U.S.-backed Contra rebels.
The Sandinistas were voted out of office in 1990 but Ortega returned to power in a 2006 election. Since then, the ex-rebel has spoken out against U.S. "tyranny" in Latin America and irked Washington by allying himself with anti-U.S. Venezuelan President Hugo Chavez.
Many Latin American countries adopted pro-market economic policies promoted by Washington in the 1990s but they have done little to reduce poverty.
Ortega said the current crisis would hit remittance flows to Nicaragua, as immigrants sending money home to relatives lose their jobs in the United States due to the slowdown.
Nicaraguans abroad send home between $800 million and $1 billion dollars a year, according to the country's central bank.
FRANKFURT: Financial leaders from the world's top economies worked Friday on sweeping plans to prop up the tottering banking system, as stocks plunged yet again in Europe and Asia and careered wildly on Wall Street.
Wall Street, which had its worst week ever, redefined volatility when the Dow Jones industrial average free-fell nearly 700 points, or 8 percent, in the 10 minutes after the opening bell, and then raced back into positive territory. Forty minutes later, it was down about 4 percent and continued gyrating deeply through negative territory into the afternoon. By the close, the Dow Jones industrial average lost 128 points, or 1.5 percent, at 8,451.19, as late-day buying curbed steep losses when investors sought bargains.
In the broader U.S. market, the Standard & Poor's 500 index fell 10.70 points, or 1.18 percent, to finish at 899.22, while the Nasdaq composite index rose 4.39, or 0.27 percent, to 1,649.51.
Earlier, Asian markets swooning hard, led by a sustained share-dumping in Tokyo after a midsize insurance company, Yamato Life Insurance, filed for bankruptcy protection. Without missing a beat, stock exchanges in Western Europe plummeted as well, as investors gave in to panic.
Amid unrelenting pessimism about the health of the global economy, the leaders, huddling in Washington, discussed how to implement a coordinated, global plan for recapitalizing banks. They hoped the plan announced by Britain this week, and under consideration in the United States, could be a model.
Crucially, the German government, which has opposed a broader rescue plan in Europe for fear it would end up footing the bulk of the bill, seemed to pivot sharply on Friday in favor of a systemic solution.
"I'm convinced we won't be making any headway by taking case-by-case measures," Peer Steinbrück, the German finance minister, said in Washington. "We have to move away from discretionary behavior and try to find an approach that works for the sector as a whole."
President George W. Bush offered a fresh expression of political will, something that has so far failed to impress markets. He also confirmed that the United States was considering buying equity stakes in banks to broaden their capital base, which could create enough confidence to jump-start the stalled credit markets that are the core of the problem.
He will be the host of a rare Saturday meeting of finance ministers and central bankers from the Group of 7 at the White House.
"Through these efforts, the world is sending an unmistakable signal," Bush said. "We're in this together and we'll come through this together."
Despite the limited impact of previous efforts, hopes were running high in financial markets that officials would keep up the steady stream of initiatives until the financial fever breaks.
Whether this includes bank recapitalization, guarantees for frozen interbank lending or more interest rate reductions, the dominant conviction among outside analysts is that they have no choice - unless they want to go down in history as the ones who let a second Great Depression happen.
"Global policymakers have their back against the wall," said Marco Annunziata, chief economist at UniCredit, one of Europe's largest banks. "They have nowhere to run, nowhere to hide. Do not underestimate how hard they are going to fight now."
Political leaders and hard-hit bankers have to fight for their own credibility as well, analysts said.
"People are scared," said Howard Silverblatt, a senior index analyst at Standard & Poor's. "Nobody believes what is coming out of the mouths of politicians, chief executives."
Italy's prime minister, Silvio Berlusconi, who is set to meet with Bush on Monday, did not help when he raised the prospect Friday that world leaders might consider suspending stock markets in response to the financial meltdown. U.S. and Japanese markets are closed Monday because of public holidays.
Berlusconi later played down the idea and the White House flatly rejected it.
Japan's Nikkei 225 stock average plunged 9.6 percent in Friday after a 9.4 percent slide on Wednesday, while benchmark indexes in Germany, France and Britain lurched down by 7 to 9 percent.
With the credit crisis in high gear for nearly a month, since the Sept. 15 bankruptcy filing of Lehman Brothers, major companies are now starting to report worsening sales outlooks.
General Electric on Friday reported a 22 percent drop in its profit for the third quarter as the crisis pounded business at its financial arm, GE Capital.
Heading into the Washington meeting, the United States and Britain appeared to be converging on a blueprint for cooling the panic that included taking ownership stakes in banks and putting the sovereign guarantee behind lending among banks.
But amid the flurry of calls and letters among European, Asian and North American capitals, it was clear that fault lines remained going into the meeting.
A senior U.S. official said late Thursday that expecting an agreement on proposals like the British plan would be "irrationally raising expectations."
That raised the possibility that the meetings might end with an endorsement of common principles to stem the crisis, rather than concrete and quantifiable initiatives.
That would leave individual countries to go their own way, as they have so far.
"You have lots of people skinning the cat in lots of different ways," David McCormick, the under secretary of the Treasury for international affairs. "It's clear that one size does not fit all."
The go-it-along approach was on display in Europe again Friday - despite an agreement of common principles adopted by European Union finance ministers on Tuesday.
The Netherlands threw a €20 billion, or $26.6 billion, lifeline to its banks and insurers to strengthen their capital base and provide liquidity. The Netherlands has already nationalized the Dutch operations of one major bank, Fortis.
"If money doesn't roll, the economy comes to a standstill," Wouter Bos, the Dutch finance minister said. "We take the burden to help through these tough times."
The German government has opposed cross-border recapitalization because it, as Europe's largest economy, traditionally ends up paying the bills. But it started to show more flexibility on Friday.
"Primarily it's about achieving market-based solutions where market participants should be the first in line to drive recapitalization forward," the president of the German central bank, Axel Weber, said in Washington.
"However, if that's not possible in the market at the moment, the government as a shareholder should have the opportunity of recapitalization."
Other German officials cautioned that promises from the United States and Britain to regulate banks and insurers more carefully would be an essential condition for German participation in recapitalization.
A senior French official, speaking on condition of anonymity, said that his country was skeptical about proposals to guarantee interbank lending because of the competitive distortions that it could create.
"At this stage, it's not a measure we want to take," the official said.
Denmark, which has taken a more forceful approach to the crisis, passed legislation Friday that guaranteed all bank liabilities and deposits through an insurance fund that financial companies, together with the government, will finance.
Danish bankers, who had seen interbank lending dry up just like their counterparts elsewhere in the world, said money was returning to the market on Friday.
Danske Bank, one of Denmark's largest financial institutions, said it sold short-term securities to finance its operations, and got more than $1 billion from the United States.
"We are already seeing a positive impact," said Tonny Thierry Andersen, the chief financial officer at Danske Bank. "There is an inflow from big U.S. institutional investors."
Dominique Boudier, who runs a printing business outside Paris, received a letter from a key supplier a week ago that her credit line was being cut in half, effective immediately. When Boudier picked up the phone to find out why, she was told that the supplier's credit insurance company had ordered the clampdown.
On Monday, Boudier's main supplier followed suit, effectively paralyzing her business.
"We can't do our job and it has nothing to do with order books," Boudier said. "Clients pay on average with a 60-day delay. We just haven't got the cash-flow to pay our suppliers immediately."
Boudier has pleaded with her bank to make up for the sudden shortfall, to no avail. "We can survive this for a week, or a few weeks," she said, "but beyond that, nothing is certain."
The credit crunch that had been largely a U.S. phenomenon has arrived with gale force in Europe, transforming the economic outlook across the Atlantic in just the past few weeks.
While many individual businesses still maintain solid relations with their lenders, a new level of chaos in credit markets is crimping financing for numerous borrowers across Europe. So far, global interest rate cuts and cash infusions by central banks have provided scant relief.
"It's almost impossible to invest for the future in this environment," said Thomas Serval, chief executive of Baracoda, a company based outside Paris with 40 employees that develops Bluetooth devices. "I'm not sure how long it will last."
Europe as a whole may not be suffering from the housing market devastation of the United States, but the downward spiral of financial events since the bankruptcy filing of Lehman Brothers on Sept. 15 has eviscerated European business and consumer confidence. (Page 12)
Worries about the future are curbing household spending, countering any relief Europeans got from the sharp fall in oil prices from their July peak of $147.27 a barrel.
Business investment, which drives purchases of the high-value goods and services that are a European specialty, is ebbing fast amid the insecurity.
As a result, most economists and many business leaders now predict that a European recession is nearly certain this year, and may well continue into 2009.
"Predictability disappeared once the financial crisis accelerated dramatically during the last two weeks of September," said Henning Kagermann, co-chief executive of SAP, the bellwether German software giant.
SAP had to deliver the bad news Monday that its earnings for the third quarter would fall short of expectations. The reason was simple: Customers who were prepared to spend on information technology despite the slowdown this year suddenly lost their appetite for SAP products.
The International Monetary Fund now expects growth in the 15-nation euro area to fall during the second half of this year and barely to rise in 2009. And that estimate, prepared in advance of the meetings this weekend of the IMF and World Bank in Washington, is already considered out of date by many experts. For Britain, the only major European economy outside the euro zone, the prospect is a slightly shrinking economy through next year, the IMF said.
In the United States, lending began to contract as early as autumn 2007, when the market for short-term corporate securities, known as commercial paper, stalled. Collateral for much of this paper was the now-notorious mortgage-backed securities, and standing corporate credit lines could not compensate.
In Europe, reliance on traditional bank lending helped insulate the economy. But the retreat of money market funds from the wholesale market in the days after Lehman's bankruptcy filing produced a credit squeeze that pushed Europe over the tipping point, economists say.
Instead of lending their spare cash to each other or the rest of the economy, as they have been accustomed to do, banks have parked it with the European Central Bank at ultralow interest rates. Liquidity provided by the central bank, in short, is going through a revolving door.
The ECB took on a record €102.8 billion, or $137.7 billion, on Sept. 30, and €64.4 billion on Thursday - all in a deposit facility that was barely used before the crisis.
"No sane banker with good contacts and clients would do this," said Erik Nielsen, chief European economist at the Goldman Sachs office in London. "It would be a huge arbitrage profit if they wanted to lend, but they don't."
The European auto industry, heavily dependent on consumer sentiment, is already retrenching.
Volvo said it would eliminate 2,700 jobs in Sweden and an additional 600 abroad in response to what it called the "rapidly deteriorating market situation." Opel, the German subsidiary of General Motors, temporarily shut down two plants to accommodating the steep falloff in demand.
Carlos Ghosn, the chief executive of Renault and of Nissan Motor said point-blank this past week that the credit crunch had left him with no choice but to start hoarding money. He predicted a "prolonged and strong" recession. "We have to be very cautious in the use of cash by slowing down investments, reducing inventories and activities," Ghosn said. "That means losses, and this will add to the financial burden."
In the past month, European airlines including Lufthansa and Air France-KLM, started registering slower bookings by business flyers.
Jean-François Roubaud, the head of the French business federation for small and midsize concerns, is hearing what banks have wrought among his members. Beauty salons, industrial exporters and building companies are all suddenly short of cash.
"Some of our members are not getting the money for investments they were hoping to make," Roubaud said. "Others have trouble getting the funds to fix a short-term cash-flow problem and worry about going out of business."
The complaints from business about their banks are loudest in Britain, possibly the hardest-hit European economy.
"In the last two weeks of September, we saw a difference that began to affect the real economy," Stephen Alambritis, head of public affairs at the Federation of Small Business in London. "These are businesses that have nothing to do with finance or property. We need the banks to behave themselves."
The federation has singled out Barclays, a major British lender, for special criticism because it recently raised borrowing costs on overdraft facilities on some small business clients. Barclays insists its decisions reflect credit market realities, and the jarring slowdown in the British economy.
British small businesses have found the credit crunch particularly galling in light of the government's decision this past week to recapitalize major banks, including Barclays, in a bid to break the fever of the crisis. But the step may offer little immediate relief.
Steven Cooper, managing director for local business banking at Barclays, said some small business were grappling with the "emotive point" that their businesses were not going to generate the cash they once did.
Unemployment is rising in Britain, sapping the client base of innumerable restaurants and hotels; nervous suppliers are often demanding more money up front, squeezing businesses on both sides. Easing the cost of credit, Cooper said, would not make these Barclays clients more creditworthy in a downturn.
"It's not just about the cost of funds," Cooper said. "Credit is risk-weighted and the risk in the economy is not necessarily changed by this."
German exporters - hardy, diversified and, until now, generally insulated from economic troubles - are losing important customers.
Machine tool makers in Germany made a point early in the financial crisis of threatening banks that they would have long memories if they lost access to credit themselves. Padded by retained earnings from four boom years, they are still secure, executives say.
But Josef Trischler, the managing director for finance at the Association of German Machine Tool Manufacturers, said customers were not getting the financing they needed.
Sometimes companies can put in a good word with banks, but with 50 percent of their sales in European countries outside Germany, they do not always have the connections to secure credit.
Heidelberger Druckmaschinen, a maker of advanced printing machinery, said Oct. 2 that several orders it booked during a trade fair in June had been canceled in recent weeks, knocking sales for the current quarter below levels of a year earlier.
Trischler said, "The end of the upswing is going to be tougher than we would have expected." He added, "How the next year is going to look we do not know."
HONG KONG: Can a region like Asia - with more than $3 trillion in foreign exchange reserves, high savings rates, mostly well-capitalized banks and minimal exposure to American mortgage-backed securities - run into trouble during a global financial crisis?
The answer Friday was a resounding yes.
Stock markets plunged from Tokyo to Mumbai. Real estate prices are tumbling from Seoul to New Delhi. The economy in Singapore has tipped into recession, and there is growing evidence of a recession in Japan, where an unlisted insurer and a real estate investment trust filed for bankruptcy Friday.
From UBS to Morgan Stanley, investment banks have been warning in the past week of a global economic downturn. For Asia, that sounds uncomfortably like a forecast that economic slowdowns in the United States and Europe will cripple demand for Asia's exports and pull the region down into recession as well.
What went wrong? As the biggest beneficiary of the rise in global trade, Asia depends heavily on exports to the West. Everything from corporate earnings to real estate prices depends on a steady inflow of dollars and euros.
Growth in exports has slowed to a crawl or started declining across most of the region when calculated in local currency terms and adjusted for inflation. And that is even before Western stores have had a chance to cut back their orders in response to the sort of steep declines in sales that American retailers announced on Wednesday.
India announced Friday that industrial production in August was 1.3 percent higher than a year earlier. That was a drastic deceleration from July, when the growth rate was 7.4 percent.
In Korea, exporters are suddenly struggling.
"The problem is the global recession - people don't buy consumer electronics, this means less exports and fewer dollars for us," said Choi Hae Pyong, an electronics parts manufacturer south of Seoul. "It's like walking in a thick fog."
As long as the region kept exporting and kept saving the proceeds, investors bid up real estate and share prices that now seem to have a long way to fall.
Matthew Au, a luxury real estate broker in Hong Kong, said that this past week had been even worse than the days after the Tiananmen Square killings on June 4, 1989, which briefly shattered business confidence here.
"I've been through June 4th, the 1997 financial crises and SARS, but this time around, the decline in housing prices has been the most abrupt," he said. "Sellers of properties are now more willing to consider offers which come in 20 to 30 percent below their asking prices."
As global financial markets increasingly look to each other for direction, lack of confidence in financial institutions and housing markets in the West has also proved contagious in Asia. The Asian news media, often focused on economics instead of potentially touchy political issues, have been full of reports in the past three weeks about failing banks and falling real estate prices, and that has fed through into local markets.
An outflow of Western investment has also played a role in Asia's decline now, although foreign investment has become less important in much of the region as Asia has become a formidable saver in its own right.
In Malaysia, foreign investors held nearly a third of Malaysia's national debt until they started selling this summer to raise money so as to cover losses in other markets.
In Korea, foreign investors sold $29 billion in the first nine months of this year. This was an important reason why the country's foreign exchange reserves have slipped to a still formidable $239.7 billion last month from $264.2 billion in March.
Many in Asia now despair of help from the West, and are looking to Beijing.
"The United States is beyond saving - our only hope rests with China," said Dick Chen, a middle-aged manager in a pin striped blue shirt and carrying an ultraslim modern mobile phone who watched the markets with dismay after lunch in a trading room of Tai Fook Securities in Hong Kong.
Can China save Asia? For the past six years, the Chinese economy has been like an enormously powerful hound that has charged ahead despite every obstacle. Worried that the economy may overheat and accelerate inflation, Beijing officials have run a budget surplus, repeatedly raised interest rates and even required banks to deposit a remarkable one-sixth of their entire assets as reserves at the central bank to slow lending.
Now Beijing is trying to loosen the leash it has had on the economy by cutting interest rates and taxes and lowering reserve requirements. But the government is finding the economy already looks a little out of breath as exports slow.
Economists see annual growth slowing from 12 percent a year ago to 8 or 9 percent this winter. That is still respectable by most countries' standards, but a shock for many Chinese, particularly workers losing their jobs in factories producing mainly for export markets.
For Asia, this is the crisis that was never supposed to happen again.
The region was deeply scarred by the Asian financial crisis of 1997 and 1998.
Dozens of banks failed after lending too much with too little capital, while profligate governments found that they had borrowed too much overseas and could not repay their debts.
That led to a rapid contraction of credit that bankrupted many industrial companies and caused a steep decline in economic output and a surge in unemployment - the same fate that may now await the United States and Europe, many economists and investors fear.
Southeast Asian economies have never entirely recovered. After a drop of nearly 10 percent on Friday, the main index of the Thai stock market closed at 452, a quarter of its high in 1994.
Most of Asia emerged from that crisis with more cautious banks, stricter financial regulation, a tighter rein on government spending and a strong determination to accumulate. But while Asia broke its dependence on capital flows from the West, the dependence on exports remained.
Yet Asia's frugality over the past decade has given the region a lot more room to maneuver than most Western countries.
South Korea and India are often cited by economists as the two most vulnerable economies in Asia.
South Korea is drawing attention because its trade deficit, by the broadest measure possible, was $4.7 billion in August, after mostly surpluses before that. Korean exports of manufactured goods have slumped even as the cost of its oil-dominated imports have surged - although falling oil prices now will help.
The South Korean won showed the steepest decline of any Asian currency against the dollar on Friday morning, falling more than 3 percent.
But the won soared on Friday afternoon, with a gain for the day of 6.3 percent. The reason? Widespread rumors that the government would start spending part of the country's huge foreign exchange reserves to prop up the won.
The South Korean government only owes $334 million in foreign debt repayments by the end of next year, or 0.14 percent of foreign exchange reserves, according to a recent study of emerging market debt by ING. Big Korean exporters like Samsung, hobbled for lack of foreign currency reserves in 1997, have hoarded formidable reserves of dollars.
Corporate debt repayments are a little larger, and also harder to calculate. But since all of Asia only owes $31 billion in debt repayments through the end of last year, South Korea's share is tiny relative to its foreign reserves.
India was one of the few countries in Asia to escape the financial crisis a decade ago, because it was just starting to embrace international markets then. It did not adopt the same tight bank regulatory standards and tough fiscal policies as the rest of Asia after that crisis.
That has prompted some economists, like Ajay Kapur at Mirae Asset and Takahira Ogawa at Standard and Poor's, to express particular concern about India's preparedness for the current crisis. While India has $295.3 billion in foreign exchange reserves, it is running a large government budget deficit and a large trade deficit while its banks have lent very aggressively to a real estate sector that is now tumbling quickly.
With an election expected early next year, Indian leaders have been much more upbeat about their country's prospects than most Asian leaders.
Policy makers in India have also subscribed to the idea that their economy has "decoupled" from Western economies, an idea that most economists and policy makers in Asia rejected many months ago.
"India is not from any other planet," said a posting on an Indian web site this week. "This common logic is ignored by our policy makers."
NEW YORK: It is the question on the minds of New Yorkers, once they stop pondering the fate of their retirement funds: If the city's economy sinks to depths not seen in decades, will crime return with a vengeance?
Expert opinions differ, but the question is hardly illogical. The last time stocks on Wall Street fell hard, in 1987, crime was exploding, and the city saw historic highs in murders in the following years.
Before that, the fiscal crisis of the 1970s helped lead to the abandonment of neighborhoods, failing schools and startling crime rates: Robberies built through those years to a high in 1981, when there were 107,495 of them, for an average of 294 a day. (The number of total reported robberies last year, 21,787, was the lowest figure in modern history.)
"Every recession since the late '50s has been associated with an increase in crime and, in particular, property crime and robbery, which would be most responsive to changes in economic conditions," said Richard Rosenfeld, a sociologist at the University of Missouri-St. Louis. Typically, he said, "there is a year lag between the economic change and crime rates."
New York has over the last 15 years seen an extraordinary drop in crime, from the most serious to the mildly irritating. But across all those years, economists and sociologists have debated how much of the success was attributable to new trends in policing and how much to other factors, including a robust economy.
Now, if the dire predictions of economic hardship prove accurate, the city may be poised to find out in a real-time experiment. And it will have to conduct that experiment with thousands fewer police officers than it had in 2001.
The police commissioner, Raymond Kelly, said he did not subscribe to the idea that there was a strong connection between a city's financial fortunes and its safety. He said he and his top commanders had had informal talks about the current economic conditions and what they might mean for crime, but had set no specific policy changes in motion.
"We have had lots of conversations, but not a tactical or strategic meeting," Kelly said. "The reason for that is we have not seen it manifest itself in economic downturns in the past. But we have to be sensitive to the issue."
The police chief of Los Angeles, William Bratton, said California had been struggling with an ailing economy for some time but had seen no appreciable rise in crime. In Providence, Rhode Island, however, Colonel Dean Esserman, the police chief, said he had recently seen a shift for the worse.
Neighborhoods are changing as homes are abandoned or foreclosed on, he said. More young people are on the streets. There are more Fire Department calls as people steal copper plumbing from empty houses, causing flooding.
"I see poverty as having a tremendous impact on both spirit and crime, and it is palpable," Esserman said in a telephone interview after attending a national meeting of police chiefs in Washington on Wednesday on crime and the economy.
The Police Executive Research Forum said that in preparing for the national meeting, it conducted a survey of more than 200 law enforcement agencies in the last week of July, after the collapse of Bear Stearns and the bailouts of Fannie Mae and Freddie Mac.
Nearly 40 percent of the agencies said home foreclosures had produced an impact on their law enforcement activities, either by a loss in tax revenue or an uptick in crime around abandoned houses.
Interviews with criminologists, economists and police commanders across the United States suggest that in the end the correlation between fiscal calamity and rising crime may be a nuanced equation, as it was in the Great Depression, when crime rates dropped from their upswings during Prohibition.
It is rare, many said, that one would see the crime rate rise based on occasional opportunistic criminal activity that comes with a tight economy: people shoplifting, for instance, when the family budget gets pinched. But the mortgage crisis and house foreclosures could set off reactions that hurt neighborhoods, which then give rise to a dynamic that becomes more conducive to criminal behavior.
"You see a strong relationship between falling wages and higher unemployment rates for less educated men and crime rates that tend to go up," said Bruce Weinberg, an associate professor of economics at Ohio State University, who studied data from 1979 to 1997.
Others have reached different conclusions. In fact, some researchers have suggested that it is in economic good times when the threat of crime may be greatest. In urban settings, at least, there are more potential victims: more people walking the streets, carrying shopping bags, lining up at ATMs or driving around and parking their expensive cars.
"One thing we know is that robbery typically takes place in areas where people go to ATMs, convenience stores, and if money is tighter, they are less likely to be out and about," said Peter Manning, a professor at the College of Criminal Justice at Northeastern University.
Mayor Michael Bloomberg of New York has used the specter of grim economic fortunes to push to change the city's 15-year-old term limits law and stay in City Hall for four more years, arguing that he is best suited among politicians to face the city's economic storm.
The crisis, Bloomberg has said, presents challenges more grave than those New York confronted after the Sept. 11 terrorist attacks. But leaving aside the theoretical question of whether a fiscal downturn will provoke more crime, police officials are worried about the impact on the department and its effectiveness as a consequence of tightened city budgets.
Still, New York officials have enjoyed more than a decade of impressive crime reduction - in good and bad fiscal times - and say that even if sharp increases in crime are tied to bad economies, the police are better outfitted than in years past for addressing them.
Kelly says he always analyzes crime data in a way that allows the department to alter its strategies once trends emerge. At a minimum, he makes decisions about how manpower and resources are allocated every six months, when each new class of rookie officers hits the streets.
WASHINGTON: U.S. officials said they believed they were close to a deal to end a stalemate with North Korea over its nuclear program, even as Pyongyang stepped up pressure on the Bush administration by barring international inspectors from all parts of a key nuclear complex.
The United States and North Korea have been fighting over a thorny verification issue that has held up a pact, meant to end the North's nuclear program.
The decision by North Korea on Thursday to bar the international inspectors was the latest move by the country aimed at getting United States negotiators to ease off demands for strict measures to verify whether the North is adhering to that agreement.
Secretary of State Condoleezza Rice said Thursday that she was still hoping to preserve the accord and to put in place the verification measures the United States was seeking. Other Bush administration officials said they believed that they were close to a deal on verification, a step that the United States would then reward by removing North Korea from the list of state sponsors of terrorism.
"If we can get a verification protocol that we are satisfied with, then we would be able to fulfill our side of the bargain," the White House spokeswoman, Dana Perino, said Thursday.
The nuclear agreement was reached earlier this year, and the administration has hoped that it will be one of President George W. Bush's signature accomplishments. But the deal has been called into question as the two countries have fought over verification measures.
Christopher Hill, the administration's top North Korea envoy, has been meeting with Rice and other top officials since his return from the North a few days ago with what administration officials say is the outline of a possible way out of the verification morass.
Hill and Rice have kept a tight lid on the talks, but one administration official with knowledge of the negotiations said that they remained centered on how much freedom North Korea was willing to give international weapons inspectors to examine and take samples from its suspected nuclear sites.
In particular, the North is skittish about allowing inspectors to examine as-yet-undeclared sites, for fear that it would establish a precedent for inspectors to go wherever they want in the country.
The official who provided details of the talks spoke on the condition of anonymity under normal diplomatic rules.
North Korea's negotiators have strenuously complained that the Bush administration has not removed the country from a list of state sponsors of terrorism, as Bush announced in June that he was prepared to do, and that it has instead made new demands. Those include requiring North Korea to accept the verification system before the United States carried out reciprocal steps, a condition not put in writing.
PARIS: International nuclear inspectors are investigating whether a Russian scientist helped Iran conduct complex experiments on how to detonate a nuclear weapon, according to European and American officials. As part of the investigation, inspectors at the International Atomic Energy Agency are seeking information from the scientist, who they believe acted on his own as an adviser on experiments described in a lengthy document obtained by the agency, the officials said.
The officials, who spoke on the condition of anonymity because the investigation is under way, said that the document appeared authentic, without explaining why, but they made it clear that they did not think the scientist was working on behalf of the Russian government.
Still, it is the first time that the nuclear agency has suggested that Iran may have received help from a foreign weapons scientist in developing nuclear arms.
The American and European officials said the new document, written in Farsi, was part of an accumulation of evidence that Iran had worked toward developing a nuclear weapon, despite Iran's claims that its atomic work over the past two decades has been aimed solely at producing electrical power.
In February, in a closed-door briefing at the agency's headquarters in Vienna, its chief nuclear inspector presented diplomats from dozens of countries with newly declassified evidence — documents, sketches and even a video — that he said raised questions about whether Iran had tried to design a weapon.
Among the data presented by Olli Heinonen, the chief inspector, were indications that the Iranians had worked on exploding detonators that are critical for the firing of most nuclear weapons.
When the Iranian envoy at the briefing called the charges "groundless" and protested that the tests were for conventional arms, Heinonen replied that the experiments were "not consistent with any application other than the development of a nuclear weapon," two participants said. He called the shape and timing involved in the firing systems and detonators "key components of nuclear weapons."
At the same time, Heinonen acknowledged that the agency "did not have sufficient information at this stage to conclude whether the allegations are groundless or the data fabricated."
The new document under investigation offers further evidence of such experiments, the Western officials said.
Iranian officials have said repeatedly that the documents the agency is using in its investigation of Iran's past nuclear activities are fabrications or forgeries, and that any experiments were not related to nuclear weapons.
Iran has said the same about the new evidence, although the agency has not shown the full document to government officials in Tehran. Instead, Iran has been given only five pages of excerpts that have been translated from Farsi into English.
The Western officials said that the conditions under which the inspectors obtained the document prohibited them from revealing it in full to the Iranians, out of fear that doing so could expose the source of the document.
These restrictions present a problem for Mohamed ElBaradei, the agency's director general, who is pressing Iran to reveal its past nuclear activity. "I cannot accuse a person without providing him or her with the evidence," he said last year.
Although officials would not say how they had obtained the new document, it was first publicly mentioned in an agency report in May as one of 18 documents presented to Iran in connection with alleged nuclear weapons studies. At the time it was described as a "five-page document in English" about experiments with a complex initiation system to detonate a large amount of high explosives and to monitor the detonation with probes. There was no indication that the document was a translation of a much longer, more comprehensive document in Farsi.
The original, Farsi, document is described by officials familiar with it as a detailed narrative of experiments aimed at creating a perfectly timed implosion of nuclear material.
According to experts, the most difficult challenges in developing nuclear weapons are creating the bomb fuel and figuring out how to compress and detonate it.
That was followed by an agency report last month that revealed that Iran might have received "foreign expertise" in its detonator experiments.
A senior official with links to the agency said then that a foreign government was not involved. He ruled out the involvement of Libya and the remnants of the network run by Abdul Qadeer Khan, the Pakistani metallurgist who built the world's largest black-market sales operation for nuclear technology. But he would not comment further.
European and American officials now say that the "foreign expertise" was a reference to the Russian scientist, but they offered only scant details. They said that the scientist was believed to have helped guide Iranians in the experiments, but that he did not write the document.
Nor is he thought to have been affiliated with the civilian electric power plant that is being rebuilt by Russia at the Iranian port of Bushehr, and which Russia has agreed to fuel with nuclear material, the officials said.
Russia says it opposes any effort by Iran to obtain a weapon, but cooperation by Russian companies and individuals with some aspects of Iran's nuclear program dates back years.
In the late 1990s, Russia's scientific and technical elite, reeling from the collapse of the Soviet Union, forged ties to Iran, which paid hard currency for aid in weapons and technical programs. Western experts say the help extended to Tehran's atomic efforts, but there was never any proof in those years of a Russian link to nuclear weapons development.
"The Iranians were very active in recruiting and paying Russian scientists to provide them with assistance in their nuclear program," said Gary Samore, a National Security Council official during the Clinton administration who now directs studies at the Council on Foreign Relations.
He said he had no recollection of Russian aid in the design of Iranian nuclear arms but added that it could have happened. "It's plausible to me that they at some point paid a Russian nuclear expert to provide assistance," he said in an interview.
Asked about the potential contribution of the Russian scientist in detonator experimentation, a senior Russian official who has long followed Iran's nuclear program said, "It is difficult for me to add anything."
Last month, when the U.S. Treasury Department allowed Lehman Brothers to fail, I wrote that Treasury Secretary Henry Paulson was playing financial Russian roulette. Sure enough, there was a bullet in that chamber: Lehman's failure caused the world financial crisis, already severe, to get much, much worse.
The consequences of Lehman's fall were apparent within days, yet key policy players have largely wasted the past four weeks. Now they've reached a moment of truth: They'd better do something soon - in fact, they'd better announce a coordinated rescue plan this weekend - or the world economy may experience its worst slump since the Great Depression.
Let's talk about where we are right now.
The current crisis started with a burst housing bubble, which led to widespread mortgage defaults, and hence to large losses at many financial institutions. That initial shock was compounded by secondary effects, as lack of capital forced banks to pull back, leading to further declines in the prices of assets, leading to more losses, and so on - a vicious circle of "de-leveraging." Pervasive loss of trust in banks, including on the part of other banks, reinforced the vicious circle.
The downward spiral accelerated, post-Lehman. Money markets, already troubled, effectively shut down - one line currently making the rounds is that the only things anyone wants to buy right now are Treasury bills and bottled water.
The response to this downward spiral on the part of the world's two great monetary powers - the United States, on one side, and the 15 nations that use the euro, on the other - has been woefully inadequate.
Europe, lacking a common government, has literally been unable to get its act together; each country has been making up its own policy, with little coordination, and proposals for a unified response have gone nowhere.
The United States should have been in a much stronger position. And when Paulson announced his plan for a huge bailout, there was a temporary surge of optimism. But it soon became clear that the plan suffered from a fatal lack of intellectual clarity. Paulson proposed buying $700 billion worth of "troubled assets" - toxic mortgage-related securities - from banks, but he was never able to explain why this would resolve the crisis.
What he should have proposed instead, many economists agree, was direct injection of capital into financial firms: The U.S. government would provide financial institutions with the capital they need to do business, thereby halting the downward spiral, in return for partial ownership. When Congress modified the Paulson plan, it introduced provisions that made such a capital injection possible, but not mandatory. And until a few days ago, Paulson remained resolutely opposed to doing the right thing.
But on Wednesday the British government, showing the kind of clear thinking that has been all too scarce in America, announced a plan to provide banks with £50 billion in new capital - the equivalent, relative to the size of the economy, of a $500 billion program here - together with extensive guarantees for financial transactions between banks. And U.S. Treasury officials now say that they plan to do something similar, using the authority they didn't want but Congress gave them anyway.
The question now is whether these moves are too little, too late. I don't think so, but it will be very alarming if this weekend rolls by without a credible announcement of a new financial rescue plan, involving not just the United States but all the major players.
Why do we need international cooperation? Because we have a globalized financial system in which a crisis that began with a bubble in Florida condos and California McMansions has caused monetary catastrophe in Iceland. We're all in this together, and need a shared solution.
Why this weekend? Because there happen to be two big meetings taking place in Washington: a meeting of top financial officials from the major advanced nations on Friday, then the annual International Monetary Fund/World Bank meeting on Saturday and Sunday.
If these meetings end without at least an agreement in principle on a global rescue plan - if everyone goes home with nothing more than vague assertions that they intend to stay on top of the situation - a golden opportunity will have been missed, and the downward spiral could get even worse.
What should be done? The United States and Europe should just say "Yes, Prime Minister." The British plan isn't perfect, but there's widespread agreement among economists that it offers by far the best available template for a broader rescue effort.
And the time to act is now. You may think that things can't get any worse - but they can, and if nothing is done in the next few days, they will.
The world's rich nations vowed on Friday to take all necessary steps to unfreeze credit markets and ensure banks can raise money but they offered no collective course of action to avert a deep global recession.
In a surprisingly brief statement following a 3-1/2 hour meeting, the Group of Seven stopped short of backing a British plan to guarantee lending between banks, something many on Wall Street saw as a vital step to end 14 months of turmoil and growing panic on financial markets.
"The G7 agrees today that the current situation calls for urgent and exceptional action," the United States, Canada, Britain, France, Italy, Germany and Japan said.
In a separate statement, U.S. Treasury Secretary Henry Paulson said Washington was developing plans to buy equity stakes in financial institutions as a way to repair balance sheets damaged by huge credit losses.
The finance leaders agreed to use all available tools to support "systemically important" financial institutions and prevent their failure, and ensure banks can raise capital "in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses."
Analysts said the statement was unlikely to allay the sense of panic that has swept through global markets in recent weeks after Lehman Brothers tumbled into bankruptcy, triggering a wave of risk aversion that left banks hoarding cash.
The Dow Jones industrial average on Friday took a 1,000-point roller-coaster ride before ending down 1.5 percent at 8,451.19 as investors tried to pin down what might come out of the G7 gathering and other meetings of world finance officials in Washington this weekend.
"The markets wanted maybe more assurance that there would be a unified global backstopping of the banks, and it doesn't sound like that's in there," Kim Rupert, managing director of global fixed income analysis at Action Economics, said of the statement from the seven economic powerhouses.
Without credit, economic growth will collapse, and investors were looking to the G7 for a comprehensive plan to get credit flowing smoothly again. Borrowing costs spiked this week even after central banks poured hundreds of billions of dollars into markets and lowered benchmark interest rates in their broadest coordinated action in history.
"Right now, everybody's scared, they're panicking," said Mark Waggoner, president of Excel Futures Inc in Huntington Beach, California. "Unless they see action, they're still going to panic.
"Part of the problem is no matter what they (G7) do it's not going to be an instantaneous fix and everybody wants a fix that's immediate," he added. "It's just not going to happen."
Britain this week committed 50 billion pounds to recapitalize its banks and offered to guarantee interbank lending by as much as 250 billion pounds to get credit flowing again.
Chancellor Alistair Darling had said he hoped other countries would follow Britain's plan.
FIVE-STEP PLAN
U.S. Treasury's Paulson said the G7 statement was shorter than the typical communique because the entire group agreed on key points of action and wanted the message to be "different, to the point, and powerful."
"This is a period like none of us has ever seen before," Paulson told reporters after the meeting.
He said investors should feel confident knowing that all seven countries had agreed on five key steps -- to prevent the failure of important financial firms; unfreeze credit and money markets; ensure that banks have access to liquidity and funding; protect deposits; and restart mortgage markets.
Still, he acknowledged that there would be "some volatility" on financial markets for a while.
French Economy Minister Christine Lagarde said the statement showed that leaders understood the seriousness of the situation and members were ready to act to stem the crisis.
European leaders plan to meet in Paris on Sunday to discuss the crisis. The Group of 20, which also includes reserve-rich emerging economies such as China and Russia, will meet on Saturday.
The G7 members acknowledged they could no longer afford a country-by-country, case-by-case approach to crisis management after 14 months of turmoil, and agreed to stay in close contact to coordinate their actions.
"If nothing of material relevance changes over the weekend as far as the way they are going to confront the credit freeze and pending capital shortages in first tier financial institutions, I think the market will open looking south come Tuesday," said Enrique Alvarez, head of Latin America debt strategy at IDEAglobal in New York.
NEW YORK: Shares of Morgan Stanley and Goldman Sachs tumbled Friday, leading the battered investment banking sector lower, after Moody's Investors Service put a negative outlook on both companies' credit ratings.
Stock of Morgan Stanley, the No.2 investment bank after Goldman, were down 38.7 percent Friday afternoon on doubts that a planned $9 billion cash injection from Mitsubishi UFJ Financial Group of Japan would be enough to enable the company to ride out the current crisis.
Morgan Stanley shares have lost about 68 percent in the past week on worries that Mitsubishi UFJ might back out of the deal.
A spokesman for Mitsubishi UFJ, Tomohiro Kato, said it had no plans to change its investment plans.
David Threadgold, a banking analyst at Fox-Pitt Kelton Cochran Caronia Waller in Tokyo, said that the Japanese bank "seems adamant that the deal is going ahead and will close on the 14th." He added, "The market seems determined to test their will."
Goldman Sachs Group shares were down 16.8 percent on worries about Morgan and the broader financial turmoil. The Amex securities broker-dealer index shed 8 percent.
Moody's warned Friday that it might cut the long-term debt ratings of Morgan Stanley and Goldman, which would increase their cost of borrowing. Moody's said its review was "based upon its expectation that an extended downturn in global capital market activity will reduce Morgan Stanley's revenue and profit potential in 2009, and perhaps beyond this period." Still, Moody's noted that Morgan Stanley had moved quickly to reduce risk on its balance sheet and decrease leverage, and said the firm has a "good liquidity profile."
The cost to insure Morgan Stanley's debt against default rose Friday, indicating investor concern about its financial stability. It now would cost $2.8 million to insure $10 million of debt, plus $500,000 a year.
Barclays plans to cut about 3,000 jobs as it brings Lehman Brothers Holdings Inc's North American operations that it bought into its fold, a source close to the bank said on Friday.
The job cuts are expected to come from both sides, the source said, but added that these were initial expectations and the final tally could be different.
The bank aims to be done with the process by the end of the year, the source said.
"A lot of this is still in the making. We are moving as fast as we can," the source said.
Barclays declined comment.
Barclays took over Lehman's North American investment banking and capital markets businesses last month after the storied investment bank collapsed in the largest bankruptcy in U.S. history. It is folding Lehman's operations into its Barclays Capital business.
The British bank took on about 10,000 Lehman employees as part of the deal. It already had more than 4,000 employees at Barclays Capital in the Americas.
"Any reduction is coming from both sides, not just from Lehman," the source said.
The job cuts will come in areas where businesses overlap. Some of Lehman's businesses such as mergers and acquisitions advice, equities research and cash equities trading do not overlap with what Barclays' has, the source said.
Merrill Lynch & Co may have had to seek refuge from the credit maelstrom in a takeover by Bank of America Corp , but it has still managed in recent days to lure some key brokers, some from rival firms that have been hit even harder by the downturn.
Recent hires include Jay Thornton, who had managed some $1.3 billion (763 million pounds) in client assets at Morgan Stanley , and a group of advisers culled from Lehman Brothers , UBS and Wachovia , a Merrill spokeswoman said on Thursday.
Edward Dulin, who had managed $181 million in assets at UBS, will work in Merrill's Scottsdale, Arizona, office, the spokeswoman said.
She also confirmed the hiring of former Wachovia advisers Michael Avadikianm, Stefan Contorno, Elizabeth Goldthwaite, Joyce Harris, Phil Kousaie, Donald Limacher, Rhett Merchant, Mark Robles and John Straughn. Together they managed $1 billion in assets from the troubled bank's field offices.
In addition, the firm acknowledged the hiring of Robert Dyer and Thomas Dexter, both from Lehman Brothers , which filed for Chapter 11 bankruptcy protection last month during the same weekend Bank of America agreed to acquire Merrill.
UBS and Wachovia did not return phone calls seeking comment.
The hires come at a crucial time for Merrill, which may find it challenging to stanch defections from its 16,690-adviser-strong brokerage, the world's largest, amid concern that a Bank of America takeover could threaten its unique culture and bonus program.
"Advisers look to their peers," said Libby Dubick, a former Goldman Sachs Group Inc vice president who is now a financial services consultant.
"If I wanted to send a message to my Merrill brokers from the highest level," Dubick said, "I think hiring a few big players from the competition would send a message, much more than just saying, 'We will be there for you.'"
Merrill's brokers, who manage $1.6 trillion in assets, are still awaiting word of Bank of America's retention package.
"Banks tend to not come up with lucrative packages, so the Merrill advisers now are taking a wait-and-see attitude with a ton of skepticism," said Brian Hamburger, founder and managing director of New Jersey consulting firm MarketCounsel.
Many inside Merrill believe retention offers will come in one to three weeks, Hamburger added.
"At least the top tier will receive retention packages," he said. "If they didn't believe that to be the case, guys would not be sticking around to see what happens."
The Merrill spokeswoman could not comment on the time frame for retention offers. "Bank of America and Merrill Lynch are working thoughtfully on all issues related to the combined company with retention of talent as an obvious and high priority," she said. "We have not yet announced specifics of a transition program to financial advisers."
Besides bringing in a number of top-shelf advisers, experts say the hirings will dampen speculation that the thundering herd could stampede to the exits.
"Clearly, part of the intention behind announcing these additions to the Merrill team is to say, 'We are not a sitting duck or a Titanic, but still a luxury cruise liner,'" said Hamburger. "No matter what you think of the situation, don't count them out."
By Souren Melikian
LONDON: The financial tempest is hitting the market for so-called "Islamic Art." A three-part drama played out this week in London, leaving the auction stage profoundly transformed.
As Bonhams inaugurated the Islamic week on Monday morning it seemed at first that the auction world would be able to weather the storm.
The session began smoothly, with calligraphic pages and paintings ripped off the manuscripts they once belonged to, and a few complete volumes. A section from a 14th-century Koran ascribed to Egypt easily sold within the estimate for £1,680, or $2,970, and another section of a Koran considered to be from 15th-century Syria or Egypt went for £10,800, doubling the middle estimate.
Shortly after, there came three batches of pages from the manuscript of a Persian chronicle by the historian Hafez Abru that once belonged to a volume executed for an Iranian court around 1425. The prices for each batch went crescendo, the last one ending up at £45,600, more than six times the highest expectations.
The art of the book was holding its ground, but the moment objets d'art came up, things changed dramatically.
Early ceramic bowls and vases from Iran, Iraq and Syria fell unsold by the dozen, and bronze, brass or silver wares from Egypt, Iran and the Ottoman Empire were received with stone-faced indifference. In a typical pottery sequence that began with a bird-shaped wine ewer described as 13th-century work from Iran, and went on to a pair of openwork tiles from 13th-century Syria, only one object, an Iranian bowl painted in golden luster with four birds separated by blue bands, managed to sell. A lone bidder bought it unopposed for £1,680.
One reason for the failure was clear enough. Many estimates, set before the financial crisis worsened, stood at a much higher level than in previous auctions. Sadly, few objects were of the high order required to convince true collectors to make the jump. The young businessmen of yore keen to invest money by playing around with art were gone. What dealers call the second-tier market had thus lost its constituency, and ceramics as well as metalwork of limited merit were doomed.
On Tuesday, events at Christie's bore out these conclusions on a grand scale. Of 211 lots offered in the morning, 136 went nowhere, raising the failure rate to an unprecedented 64 percent.
Estimates - which here, too, were higher than ever - proved severely counterproductive. There was no way an east Iranian silver inlaid dish of the early 13th century, which reproduces a well-known type, could sell between £30,000 and £40,000, plus the sale charge. Another "dish" (actually a fruit bowl missing its trumpet-shaped foot) from the same area and period followed and likewise crashed.
Pretty Syrian pottery of the 12th century failed for similar reasons. When 11 "Tell Minis bowls from a private collection" came up, only two made the grade. One, decorated in golden luster with a lion, was a rarity but hardly a beauty. Broken to bits, it had been patched together. Miraculously, a bidder succumbed to the rarity and paid £145,250, matching the lower end of the estimate, which still made the piece stupendously expensive.
Christie's morning session confirmed that in this area of "Islamic Art" the intermediary market is on the verge of extinction.
By contrast, at the top of the market prices rose to extravagant heights whenever objects qualifying as unique in their category came on the block.
The first big prize, an astonishing ebony writing box with an ivory inset on the lid and bronze fittings, was tentatively ascribed by Christie's to 12th-century Egypt. The carved rosettes of East Iranian design rather point to another provenance as well as an earlier date, well within the 11th century. Whatever the case, the object is unique. A telephone bid secured the rarity at a phenomenal cost of £481,250.
Within minutes it was followed by the piece billed as the wonder of the day. This was a rock crystal ewer carved with two seated lions amid scrolls in the manner of Egyptian vessels of the 10th and 11th century. The catalogue noted that the enameled gold mounts in a gaudy revivalist style were made by Jean-Valentin Morel at Sèvres in 1854.
The chains rising from the lions' necks, terminated with two odd scrolls, do not relate to the bodies, and the tails end with two curious half-palmettes. The disjointed eyes of the animal give the impression that the artist started out by designing the beast seated sideways and then changed his mind to make it look upward, three-quarters back.
The ewer apparently sold to a lone bidder for £3,177,250, showing that contenders are prepared to go to any length when chasing objects considered to be unique.
Indeed, this feverish hunt for perceived rarities accounted for some extraordinary prices paid that morning. A silver and copper inlaid brass incense-burner signed by the designer, "Muhammad ibn Khutlukh al-Mawsili in Damascus," which is of paramount importance to the history of bronzes in the Arab Near East, rose to £1.16 million, even though it misses its dome-shaped cover.
Five beams carved in the 10th century for the Great Mosque in Córdoba were acquired by a telephone bidder at prices ranging from £313,250 to £145,250. Their very destination - the most important monument in the westernmost Arab lands - makes them unique pieces of a kind that will not turn up again.
Whenever driven by the last-chance syndrome, bidders went berserk. In the art of the book, every rarity was furiously disputed.
A manuscript of the poet Sa adi's "Bustan" with paintings by Mahmud Mozahheb ("The Illuminator"), two of them signed by this famous Iranian artist from Herat, nearly tripled its estimate at £241,250. The rarity of paintings carrying Mahmud's authentic signature makes it a book of immense importance to early Safavid art as well as to the Persian culture of Central Asia under Uzbek rulers.
I sat next to Ebadollah Bahari, the Iranian businessman and collector of long standing, when the volume executed in Bokhara for the prime minister of the ruler Abdullah Khan was knocked down to him. His face lit up as the auctioneer's gavel came down, saying volumes about the tension experienced by collectors fearful of losing the desired treasure.
On Wednesday, at Sotheby's sale, the outlines of the new market were conclusively drawn. Painting and calligraphy performed brilliantly. The full-length portrait of a lady of the court forms part of a group of 14 pictures on canvas that have been consistently described as Iranian but invariably display non-Iranian characteristics in the interpretation of Iranian court attire - here the choker is a strictly European idea and the headdress alien to Safavid Iran. The group shows an understanding of European perspective and psychological portraiture that Safavid art never achieved. Their connections to Georgian manuscript point to Georgia, as I noted in the 1996 volume of the Bulletin of the Asia Institute. The portrait was the ultimate rarity of the day. It soared to £881,250.
A unique brass mug from Arab Spain made in the 14th century with a name incised on the underside after the completion of the object brought a huge £301,250. Metalwork from that period of Arab Spain can be counted on the fingers of one hand.
There was even a freakish extravaganza. A candlestick made in Egypt for an anonymous officer of the Mamluk Sultan al-Nasir Muhammad realized £825,250, easily 20 times what it would have cost four or five years ago. Missing most of its erstwhile gold and silver inlay, it was not even in particularly good condition, but the difficulty of finding early Arab metalwork commissioned for the court milieu made it irresistible.
At the end of the day, Sotheby's raked in £9.27 million. However, more than one third of the works, some quite good but not rare enough to goad collectors, went nowhere. Overestimated pottery and brass vessels of no special merit mostly failed to sell.
That day, the market was dominated by a very few buyers with limitless budgets at the top and a small number of collectors at the lower financial levels. Where "Islamic Art" is concerned, it has changed out of recognition and will probably stay that way for a very long time.
LONDON: English Premier League chief executive Richard Scudamore said Thursday the structure of the game is sustainable despite the global financial crisis.
"People need to be realistic. We are entering interesting financial times. But football is very sustainable. Club names are very sustainable, they don't disappear. Revenues are very sustainable," he told Sky Sports News.
"We are not complacent, I am not saying we won't at some time feel the wind of the consumer crunch, but generally we are not in such a bad condition."
FA Chairman David Triesman said Tuesday English football had amassed debts of about three billion pounds and a top club could fold in the current financial climate.
But Scudamore has moved to calm fears that a leading club could go bankrupt and put the debt situation into perspective.
"Debt is neither good or bad, it is inevitable," he said. "It depends on the value of the asset the debt is against, and some of our clubs are hugely valuable assets, certainly the biggest clubs.
"It is also a product of whether you can service the debt. And that is a debate that goes on.
"I'm not saying we don't have concerns, but it is also dangerous to be alarmist in the current financial conditions.
"We have always worried. Football has always spent a little bit more than it has earned."
However, Scudamore ruled out a salary cap in the Premier League although he said it had been debated for some time.
"We have discussed it on and off for 10 years but we don't believe that, with the range of clubs we have, you can come up with a meaningful salary cap," he added.
"There are only two ways of doing it. A percentage of turnover -- where the likes of Arsenal, Manchester United and Chelsea would have a huge potential wage bill.
"Or to put a fixed amount in, what would you fix it at?"
We know they are resilient. How could they not be as they prepare to leave Saturday from Alicante, Spain, for the Volvo Ocean Race, a grueling round-the-world event that will take them to five continents and eventually to the finish line in St. Petersburg, Russia, in late June?
We know they are intrepid. How could they not be if they choose to take part in a 35-year-old race that remains one of sailing's supreme tests as crews push their boats to the breaking point or beyond with wind shrieking and waves breaking across their decks?
But the real question, with all the danger on shore and on Wall Street these days, is whether anybody in the all-too-real world is much in the mood to keep close track of sailors courting danger for the sake of a mere sporting event.
One suspects not.
"Twenty-odd days from now, when we finish the first leg in Cape Town, God knows how many banks will have folded and currencies will be worthless," said Rick Deppe, a sailor with Puma Racing Team. "You can't even worry about it. All we can do is go out and have a yacht race."
Even without the change in context, it would have been a different sort of Volvo, with the decision to abandon the traditional, iceberg-fraught southern route for the emerging-market thrills of first-time stops in Kochi, India, and Qingdao, China, the site of the Olympic regatta in August.
The consensus is that this should be a better, closer race than the last edition of this event, in 2005 and 2006, when the Dutch-based team ABN AMRO One and its leader, Mike Sanderson, took a clear design edge into a quick lead and never came close to surrendering it.
That was the first year of the new Open 70 class boat, with its canting keels. This time, the teams - and there are only six of them - have had more time to prepare and more time to study Juan Kouyoumdjian's winning designs from the last race.
"All the teams and all the designers have a much better feel of what is good and what is not good on these boats," said Torben Grael, the Brazilian skipper of Ericsson 4, by telephone this week. "I think we should expect fewer breakdowns. There is more knowledge of the forces, the dynamic forces, on the boats, and it will be in theory a much closer race than the last one."
Last time, the drama - and there was plenty - had little to do with determining the winner, which quickly seemed a foregone conclusion. The drama came as ABN AMRO's competitors suffered breakdowns and mishaps and as its sister yacht, ABN AMRO Two, suffered more as one of its crew members, Hans Horrevoets, was swept overboard and killed during a storm in the Atlantic.
It was a brutal reminder that despite all the advances in technology and equipment, the open ocean can still be a deadly place.
"It was just a question of an unlucky time and unlucky spot and destiny," said Sébastien Josse, the young Frenchman who skippered ABN AMRO Two.
Josse is understandably not back for another crack at the Volvo. He is instead preparing to be part of the huge field of 30 participants in the Vendée Globe, a nonstop, single-handed round-the-world race that has become a major sporting event in France, where it will begin next month.
Considering that sailing struggles to attract a wider audience, it is poor planning to have two of its most compelling events overlapping and competing for buzz and Internet hits. But then, perhaps it's best that neither event waited until next year to launch, in view of the current financial situation.
"I get a sense we are all kind of enjoying ourselves while Rome burns," said Marcus Hutchinson, communications director for the Volvo. "Any project that is about to start is going to have a tough time to raise any dollars. Actually, not a tough time. It's just not going to happen at the moment. But this event and the Vendée Globe already have the money raised."
Still, sailing clearly has been shooting itself regularly in the deck shoe of late. Its marquee event, the America's Cup, is on hold indefinitely because of an ongoing legal tussle between the billionaire rivals Ernesto Bertarelli and Larry Ellison that has effectively squandered much of the momentum generated by the successful edition of the Cup in Valencia, Spain, last year.
"It's a tragic waste of something that was working very, very well," said Hutchinson, who was an administrator with the America's Cup organizers and later with the would-be British challenger, Team Origin. "The America's Cup has always worked well in the hands of responsible people. The only time it hasn't worked is in the hands of irresponsible, greedy people. Guess what? Another parallel with the banking system."
Alicante, just a short trip south from Valencia, is, not surprisingly, brimming with eager-to-work Cup veterans, as the Volvo prepares to begin in earnest after last weekend's in-port racing in Alicante. The most prominent Cup alumnus is Grael, the weathered 48-year-old Brazilian who remains on the very short list of the world's finest and most complete sailors.
Grael, who is of Danish descent, has won four Olympic medals and called tactics for the Italian syndicate Luna Rossa in multiple America's Cup campaigns. He also finished a surprising third in the last Volvo, with a lightly financed syndicate representing Brazil.
It was a slog, despite all the patriotic impulses and thrill of the chase, but Grael is back in more monied, international company now as the skipper of the top boat owned by Ericsson Racing Team and crewed by an international group of sailors. The team also has another entry, Ericsson 4, that is crewed uniquely by sailors from Scandinavia.
Grael's team is one of the legitimate pre-race favorites, along with Telefónica Blue, which is skippered by the Volvo veteran Bouwe Bekking and is part of the race's only other two-boat program. Two boats are an advantage in the testing and training process.
A Telefónica-Ericsson tussle, which sounds like something better suited to the business pages, would also be a wrestling match between designers. Bruce Farr used to get the call to design more than half the fleet at Volvo Ocean Races, but Kouyoumdjian, an Argentine based in Valencia, has become the market leader now and designed three boats for this race to Farr's two.
The other syndicates are all single-boat programs. Puma, based in the United States, is skippered by Ken Read. There are also Team Russia, Green Dragon of Ireland and Team Delta Lloyd of the Netherlands.
What these teams of disparate means (and presumably ends) share is a spy in their midst. For the first time, the Volvo is requiring that an 11th crew member be on board as a full-time media specialist.
It is a modern twist on what writers like George Plimpton did in a more reflective era, and it is bound to give ideas to other publicity-challenged sports, even if few of those sports are contested in the same sort of splendid isolation as the middle of the ocean.
The Volvo media specialists are required to produce minimum amounts of video and text each day and are not permitted to help with the sailing of the yacht, which could be a challenge for men like Guy Salter of Ericsson and Rick Deppe of Puma, who have completed Volvos as full-time sailors.
"I think Knut Frostad put it best," Deppe said of the new chief executive of the Volvo race. "He's a previous skipper and crewman, and thinks that in previous editions of the race people have gotten to see 5 to 10 percent of what it's really like. And now we're hoping to shoot for 50 to 60 percent of what it's like. You're not going to see that final 40, but this will be a huge step up."
That means that if the world does belatedly decide to stop counting its losses and pay attention to the hard-bodied men on their faraway yachts, there should be no shortage of reportage to catch up on.
For many Germans, Pope Pius symbolizes a hypocritical institution willing to connive with the Nazis to secure its own survival. Yet this does not accord with the facts.
Oct. 9 marked the 50th anniversary of the death of Pope Pius XII, one of the most controversial leaders of the World War II era. Yet he is controversial not because of what he did, but because of what he didn't do.
Even though the Vatican was reliably informed about the Nazi genocide of Europe's Jews - at least toward the end of the war - and Jewish organizations begged him to speak out, the pope refused to publicly condemn the atrocities.
The controversy about the pope's "silence" at first focused on his supposed motives. A young German writer shot to fame in 1963 by denouncing Pius XII as anti-Semitic, as a leader who was more concerned about Vatican finances than the fate of Europe's Jews.
Rolf Hochhut's play, "The Deputy," was badly researched, historically inaccurate and slanderous, but it spoke powerfully to a generation of Germans rebelling against their "Nazi fathers."
Pope-bashing fitted in with a more general rejection of the repressive norms of middle-class society. Young Germans were learning, as they said, "to walk on the grass." "The Deputy" was a huge success.
For many Germans, even today, Pius XII symbolizes a hypocritical and repressive institution willing to connive with Nazi murderers to secure its own survival.
Yet this does not accord with the facts. The reasons for Pius XII's refusal to back the Allied cause are well-documented. As the spiritual leader of all Roman Catholics, he was convinced that his responsibility was to mediate, not participate in the conflict. Then, as the full horror of the Nazis' crimes gradually unfolded, he was drawn into an agonizing dilemma.
As a spiritual leader whom millions looked upon for moral authority, he knew he had a responsibility to speak out. Yet he feared that a direct denunciation of the concentration camps would endanger more lives, especially "non-Arian Catholics" who were largely ignored by Jewish rescue organizations.
The Nazis had also incarcerated thousands of Catholic priests, Poles as well as Germans, whose lives would have been endangered by a papal condemnation.
So Pius XII restricted his public utterances, making only general appeals to uphold traditional moral values. He relied on the fundamental decency of individuals to resist the Nazis as far as each person's concrete circumstances allowed.
Since the publication of 12 volumes of documents from the Vatican archives between 1965 and 1981, no serious historian can question the motives for Pius XII's "silence" any longer. But the debate has shifted to speculation about what might have happened if the pope had decided to speak out more emphatically.
His critics argue that an encyclical might have saved Jewish lives, but that's probably nonsense. German Catholics didn't need a papal pronouncement to tell them that the Nuremberg Laws contradicted Christian ethics. And even when Germany was losing the war on two fronts, the Nazis deployed much-needed resources to accomplish their terrible "Final Solution." They viewed it as a major priority, so they were hardly likely to be deterred by a papal condemnation.
A fairer assessment of Pius XII, based on the historical facts, is needed for two reasons:
First, it's a question of justice. Like all of us, the pope was a creature of his times. His personal piety and some of his social views may now seem antiquated, but he was certainly not a Nazi sympathizer. Nor was he anti-Semitic.
Second, when this controversial pope has been understood in the agonizing complexity of his moral dilemma, a second, even more crucial question emerges: How was it possible that after centuries of Christianity in Europe, many practicing Catholics actively collaborated in the Holocaust, and many more turned a blind eye to the suffering of their fellow human beings?
That was the real failure of the Church during the Holocaust. And it has not yet been adequately explained.
John Berwick is the religious affairs correspondent of DW-TV, Germany's international state broadcaster.
ANCHORAGE: The 2007 state fair was days away when Alaska's public safety commissioner, Walt Monegan, took another call about one of his troopers, Michael Wooten. This time, the director of Governor Sarah Palin's Anchorage office was on the line.
As Monegan recalls it, the aide said the governor had heard that Wooten was assigned to work the kickoff to the fair. If so, Monegan should do something about it, because Palin was also planning to attend and did not want the trooper nearby.
Somewhat bewildered, Monegan soon determined that Wooten had indeed volunteered for duty at the fairgrounds — in full costume as "Safety Bear," the troopers' child-friendly mascot.
Two years earlier, the trooper and the governor's sister had been embroiled in a nasty divorce and child-custody battle that had hardened the Palin family against him. To Monegan and several top aides, the state fair episode was yet another example of a fixation that the governor and her husband, Todd, had with Wooten and the most granular details of his life.
"I thought to myself, 'Man, do they have a heavy-duty network and focus on this guy,' " Monegan said. "You'd call that an obsession."
On July 11, Palin fired Monegan, setting off a politically charged scandal that has become vastly more so since Palin became the Republican vice-presidential nominee.
By now, the outlines of the matter have been widely reported. Monegan believes he was ousted because he would not bow to pressure to dismiss Wooten. The Alaska Legislature is investigating the firing and whether the governor abused the powers of her office to pursue a personal vendetta. Its report is due Friday.
Palin has denied that anyone told Monegan to dismiss Wooten, or that the commissioner's ouster had anything to do with the trooper. But an examination of the case, based on interviews with Monegan and several top aides, indicates that, to a far greater degree than was previously known, the governor, her husband and her administration pressed the commissioner and his staff to get Wooten off the force, though without directly ordering it.
In all, the commissioner and his aides were contacted about Wooten three dozen times over 19 months by the governor, her husband and seven administration officials, interviews and documents show.
"To all of us, it was a campaign to get rid of him as a trooper and, at the very least, to smear the guy and give him a desk job somewhere," said Kim Peterson, Monegan's special assistant, who like several other aides spoke publicly about the matter for the first time.
Peterson, a 31-year veteran of state government who retired 10 days before Monegan's firing, said she received about a dozen calls herself. "It was very clear that someone from the governor's office wanted him watched," she said.
Nor did that interest end with Monegan, the examination shows. His successor, Chuck Kopp, recalled that in an exploratory phone call and then a job interview, Palin's aides mentioned the governor's concerns about Wooten. None of the 280 other troopers were discussed, Kopp said.
Immediately after Monegan's firing, Palin said her intent was to change the department's direction. (She declined to be interviewed for this article.) She has since offered a variety of explanations for his ouster, most recently accusing him of insubordination and opposing her fiscal reforms.
As evidence, she has contended, among other things, that Monegan arranged two unauthorized lobbying trips to Washington. But according to interviews and records obtained by The New York Times both trips were authorized by the governor's office.
As for Wooten, Palin has said she and others were simply lodging legitimate complaints to the appropriate authorities about a trooper with a disciplinary record who was a danger to her family and to the public. In one instance, she said Wooten made a death threat against her father in 2005, an accusation that Wooten has denied.
Palin initially said she welcomed an investigation into Monegan's ouster. But she has since declined to cooperate with the bipartisan inquiry, which Senator John McCain's presidential campaign says has been "hijacked" by Democratic lawmakers. Palin has pledged to cooperate with a separate inquiry, by the state's Personnel Board.
Beyond the potential political consequences, the Legislature's inquiry, depending on its outcome, could lead lawmakers to censure Palin or pass legislation making it more difficult for a governor to remove a commissioner, legislative leaders said.
Watching Wooten
The Palin family's dispute with Wooten surfaced long before Palin became governor.
On April 11, 2005, the day Palin's sister, Molly McCann, filed for divorce, her father, Chuck Heath, informed the state police that a domestic-violence restraining order had been served on his son-in-law. Heath later told the state police that, although Wooten had not physically harmed McCann, he had intimidated her. McCann told authorities that Wooten said to her that he would shoot Heath if he hired her a divorce lawyer and would "take down" Sarah Palin if she got involved.
The family also reported that Wooten, who was assigned to the wildlife investigations unit, shot a cow, or female, moose without a permit, used a Taser on his 10-year-old stepson and drank a beer at a friend's barbecue before taking a second one for the drive home in his patrol car.
In March 2006, after an internal inquiry, Wooten received a 10-day suspension, which was eventually halved. The suspension letter mentions nothing about threats. At the time, Wooten and McCann had been divorced for about two months. But their relationship remained tumultuous, primarily over child care, said McCann's divorce lawyer, Roberta Erwin.
McCann "wanted to know what relief was available to her" without spending the money to return to court, the lawyer said, adding, "As a close family, the Palins did their best to help her by reaching out further to the trooper hierarchy, with Todd taking the lead."
On Jan. 4, 2007, a month into the Palin administration and his tenure as public safety commissioner, Monegan was called to the governor's Anchorage office to meet Todd Palin. Palin was seated at a conference table with three stacks of personnel files. That, Monegan recalled, was the first time he heard the name Mike Wooten.
"He conveyed to me that he and Sarah did not think the investigation into Wooten had been done well enough and that they were not happy with the punishment," Monegan said. "Todd was clearly frustrated."
Todd Palin noted Wooten's divorce case but dwelt on the moose kill, even showing photographs of the dead animal, Monegan recalled. The commissioner said he would have his staff evaluate the evidence.
A few days later, Monegan informed Todd Palin that the issues raised at the meeting had been addressed in Wooten's suspension. The case was closed.
Palin sounded vexed and said repeatedly that Wooten was getting away with a crime, Monegan said. "I hung up wondering how long I could keep my job if I tick off my boss's husband."
Several evenings later, Monegan's cellphone rang. "Walt, it's Sarah," the governor said before echoing much of what her husband had said. Wooten, he recalls being told, was "not the kind of person we should want as a trooper." He told the governor, too, that there was no new evidence to pursue.
Soon after that, Todd Palin and several aides began pressing the public safety agency to investigate another matter: whether Wooten was fraudulently collecting workers' compensation for a back injury he said he had suffered while helping carry a body bag.
Todd Palin's evidence: He told Peterson, the commissioner's assistant, that he had seen Wooten riding a snowmobile while on medical leave, and that he had photographs to prove it.
When Palin called back two weeks later, Peterson said she had met with the trooper but was not authorized to discuss the conversation because it was an official state personnel matter. The issue was eventually resolved in Wooten's favor, after his chiropractor sent a letter explaining that he had approved of Wooten's riding a snowmobile, as long as he was careful.
Todd Palin declined to be interviewed. But in a sworn affidavit this week for the legislative investigation, he wrote that he had hundreds of communications about the trooper "with my family, with friends, with colleagues and with just about everyone I could, including government officials." He added, "In fact, I talked about Wooten so much over the years that my wife told me to stop talking about it with her."
As for what he had told his wife, Todd Palin said he often raised his concerns about "the unfairness of his remaining on the state troopers when he was obviously so unfit for the job."
Of the dozen calls Peterson received about Wooten, she said, at least half were from Dianne Kiesel, a deputy director at the Department of Administration. The last discussion with Kiesel came after Peterson informed her that the trooper had been cleared to work full time.
"Since there was now no business reason to separate Wooten, she wanted to know what else we could do with him," Peterson said, adding, "I could tell she was under pressure to come up with something."
Kiesel enumerated various possibilities, like moving him to the cold-case unit or giving him a desk job doing background checks.
Peterson, who had worked in human resources management for most of her government career, said she pointed out that those options would violate the public safety union's contract.
At one meeting, Peterson recalled, the commissioner of administration, Annette Kreitzer, said "to keep an eye on him and that he gets no special privileges."
In an interview, Kreitzer said she was simply calling for routine monitoring of an employee who had a disciplinary history or had not been evaluated in a while. Six other administration aides who initiated contacts with public safety officials about Wooten either did not return calls or declined to comment.
As for Wooten's planned appearance as Safety Bear, Monegan said he decided to pull him back.
Unexpected Firing
In July, Sarah Palin's acting chief of staff called Monegan to another meeting in that same room in the governor's Anchorage office. The aide, Michael Nizich, said the governor wanted him to head the Alcoholic Beverage Control Board, part of the public safety department. Put another way, he was no longer commissioner.
Saying the firing had come "out of the blue," Monegan asked how he had upset the governor. Palin, the aide said, wanted to take the agency in a new direction.
"Was it Wooten?" Monegan recalled asking.
"A new direction," was the reply.
The Legislature's investigation began after a local blogger, who had been a political rival of Palin, linked Monegan's firing to, among other reasons, his refusal to dismiss Wooten. Initially the governor said through a spokeswoman that the dismissal had nothing to do with a "personality conflict." Since then, her explanations have evolved, from saying that he was lagging on filling trooper vacancies and tackling alcohol-abuse problems in rural Alaska to showing an "intolerable pattern of insubordination" and a "rogue mentality" by resisting her authority and spending reforms, sometimes publicly.
Monegan's successor, Kopp, said that when the trooper came up in his pre-employment conversations with Palin aides, "it was raised within the context of one of the things that I needed to be aware of, but there was no direction to take any job action."
During his first week on the job, Kopp received a call from Nizich. Wooten, in uniform, had shown up at the governor's picnic, which is open to the public. "Is there anything you can do?" Nizich asked, explaining that the Palins were concerned about his presence.
Wooten was told to leave the area.
About a week later, Kopp resigned amid scrutiny of a 2005 sexual harassment complaint.
Wooten, who declined to be interviewed for this article, remains on the force as a patrol trooper.
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