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Post-War Planning

Statement by Douglas J. Feith, Under Secretary of Defense for Policy Senate
Committee on Foreign Relations

Mr. Chairman and Members of the Committee:

I am pleased to have this opportunity to talk with you today about efforts
underway in the Defense Department and the U.S. Government to plan for Iraq
in the post-conflict period, should war become necessary.

If U.S. and other coalition forces take military action in Iraq, they will,
after victory, have contributions to make to the country’s temporary administration
and the welfare of the Iraqi people. It will be necessary to provide humanitarian
relief, organize basic services and work to establish security for the liberated
Iraqis.

Our work will aim to achieve the objectives outlined by my colleague, Under
Secretary of State Grossman:
o First, demonstrate to the Iraqi people and the world that the United States
aspires to liberate, not occupy or control them or their economic resources.

o Second, eliminate Iraq’s chemical and biological weapons, its nuclear program,
the related delivery systems, and the related research and production facilities.
This will be a complex, dangerous and expensive task.

o Third, eliminate likewise Iraq’s terrorist infrastructure. A key element of
U.S. strategy in the global war on terrorism is exploiting the information about
terrorist networks that the coalition acquires through our military and law
enforcement actions.

o Fourth, safeguard the territorial unity of Iraq. The United States does not
support Iraq’s disintegration or dismemberment.

o Fifth, begin the process of economic and political reconstruction, working
to put Iraq on a path to become a prosperous and free country. The U.S. government
shares with many Iraqis the hope that their country will enjoy the rule of law
and other institutions of democracy under a broad-based government that represents
the various parts of Iraqi society.

If there is a war, the United States would approach its post-war work with
a two-part resolve: a commitment to stay and a commitment to leave.

o That is, a commitment to stay as long as required to achieve the objectives
I have just listed. The coalition cannot take military action in Iraq – to eliminate
weapons of mass destruction and the Iraqi tyranny’s threats to the world as
an aggressor and supporter of terrorism – and then leave a mess behind for the
Iraqi people to clean up without a helping hand. That would ill serve the Iraqis,
ourselves and the world.

o But it is important to stress also that the United States would have a commitment
to leave as soon as possible, for Iraq belongs to the Iraqi people. Iraq does
not and will not belong to the United States, the coalition or to anyone else.

As Iraqi officials are able to shoulder their country’s responsibilities, and
they have in place the necessary political and other structures to provide food,
security and the other necessities, the United States and its coalition partners
will want them to run their own affairs. We all have an interest in hastening
the day when Iraq can become a proud, independent and respected member of the
community of the world’s free countries.

U.S. post-war responsibilities will not be easy to fulfill and the United States
by no means wishes to tackle them alone. We shall encourage contributions and
participation from coalition partners, non-governmental organizations, the UN
and other international organizations and others. And our goal is to transfer
as much authority as possible, as soon as possible, to the Iraqis themselves.
But the United States will not try to foist burdens onto those who are not in
a position to carry them.

Security and Reconstruction

Administration officials are thinking through the lessons of Afghanistan and
other recent history. We have learned that post-conflict reconstruction requires
a balance of efforts in the military sphere and the civil sphere. Security is
promoted by progress toward economic reconstruction. But economic reconstruction
is hardly possible if local business people, foreign investors and international
aid workers do not feel secure in their persons and property.

To encourage the coordinated, balanced progress of economic and security reconstruction
in a post-conflict Iraq, President Bush has directed his administration to begin
planning now.

The faster the necessary reconstruction tasks are accomplished, the sooner
the coalition will be able to withdraw its forces from Iraq, and the sooner
the Iraqis will assume complete control of their country. Accordingly, the coalition
officials responsible for post-conflict administration of Iraq – whether military
or civilian, from the various agencies of the governments – will report to the
President through General Tom Franks, the Commander of the U.S. Central Command,
and the Secretary of Defense.

The Office of Reconstruction and Humanitarian Assistance

To prepare for all this, the President directed on January 20 the creation
of a post-war planning office. Although located within the Policy organization
in the Department of Defense, this office is staffed by officials detailed from
departments and agencies throughout the government. Its job is detailed planning
and implementation. The intention is not to theorize but to do practical work
– to prepare for action on the ground, if and when the time comes for such work.
In the event of war, most of the people in the office will deploy to Iraq. We
have named it the Office of Reconstruction and Humanitarian Assistance and we
describe it as an "expeditionary" office.

The Office of Reconstruction and Humanitarian Assistance is charged with establishing
links with the United Nations specialized agencies and with non-governmental
organizations that will play a role in post-war Iraq. It will reach out also
to the counterpart offices in the governments of coalition countries, and, in
coordination with the President’s Special Envoy to the Free Iraqis, to the various
Free Iraqi groups.

The immediate responsibility for administering post-war Iraq will fall upon
the Commander of the U.S. Central Command, as the commander of the U.S. and
coalition forces in the field. The purpose of the Office of Reconstruction and
Humanitarian Assistance is to develop the detailed plans that he and his subordinates
will draw on in meeting these responsibilities.

Various parts of the government have done a great deal of work on aspects of
post-war planning for months now. Several planning efforts are underway.

An interagency working group led by the NSC staff and the Office of Management
and Budget has undertaken detailed contingency planning for humanitarian relief
in case of conflict with Iraq. The group also includes members from the State
Department, USAID, the Office of the Vice-President, Treasury, the Office of
the Secretary of Defense, the Joint Staff, and the CIA. The group is linked
to US Central Command. It has also established links with the UN specialized
agencies and NGOs involved in humanitarian relief efforts.

This group has developed a concept of operations that would:
o facilitate UN/NGO provision of aid,

o establish Civil-Military Operations Centers by means of which US forces would
coordinate provision of relief and

o restart the UN ration distribution system using U.S. supplies until UN/NGOs
arrive.
Other interagency groups are planning for:
o the reconstruction of post-Saddam Iraq,

o vetting current Iraqi officials to determine with whom we should work, and

o post-war elimination of Iraqi Weapons of Mass Destruction.
The new planning office’s function is to integrate all these efforts and make
them operational. It is building on the work done, not reinventing it.

Elimination of Weapons of Mass Destruction

Detailed planning is underway for the task of securing, assessing and dismantling
Iraqi WMD capabilities, facilities and stockpiles. This will be a huge undertaking.
The Defense Department is building the necessary capabilities.

This will be a new mission for the Department and for our nation. It is complex
and will take place as part of military operations, continuing into the post-conflict
period.

We must first locate Iraq’s widespread WMD sites. We must then be prepared
to secure the relevant weapons or facilities, or rapidly and safely disable
them, so they are no longer a threat to coalition forces. This will have to
be done in many places and as quickly as possible.

But the mission does not end there. After hostilities, we will have to dismantle,
destroy or dispose of nuclear, chemical, biological and missile capabilities
and infrastructure.

Equally important will be plans to re-direct some of Iraq’s dual-use capability
and its scientific and managerial talent to legitimate, civilian activities
in a new Iraq.

Clearly, this will not be a mission that falls entirely to the U.S. military
forces. Other U.S. government personnel, including those within the DoD, the
Department of Energy’s laboratory system, and in other government agencies can
contribute.

Coalition partners, including many NATO Allies, have nuclear, chemical and
biological defense-related capabilities and expertise that can play an important
role. The UN, IAEA and other international organizations should be in a position
to contribute valuably to the elimination effort and perhaps to ongoing monitoring
afterward.

The task of eliminating all nuclear, chemical and biological stockpiles, facilities
and infrastructure will take time. We cannot now even venture a sensible guess
as to the amount. The new Iraqi government will also have an important role
to play.

Oil Infrastructure

The U.S. and its coalition allies may face the necessity of repairing Iraq’s
oil infrastructure, if Saddam Hussein decides to damage it, as he put the torch
to Kuwait’s oil fields in 1991. Indeed, we have reason to believe that Saddam’s
regime is planning to sabotage Iraq’s oil fields. But even if there is no sabotage
and there is no injury from combat operations, some repair work will likely
be necessary to allow the safe resumption of operations at oil facilities after
any war-related stoppage.

Detailed planning is underway for resumption of oil production as quickly as
possible to help meet the Iraqi people’s basic needs. The oil sector is Iraq’s
primary source of funding. As noted, the United States is committed to preserving
Iraq’s territorial integrity. So we are intent on ensuring that Iraq’s oil resources
remain under national Iraqi control, with the proceeds made available to support
Iraqis in all parts of the country. No one ethnic or religious group would be
allowed to claim exclusive rights to any part of the oil resources or infrastructure.
In other words, all of Iraq’s oil belongs to all the people of Iraq.

The Administration has decided that, in the event of war, the U.S.-led coalition
would:
o protect Iraq’s oil fields from acts of sabotage and preserve them as a national
asset of the Iraqi people, and

o rapidly start reconstruction and operation of the sector, so that its proceeds,
together with humanitarian aid from the United States and other countries, can
help support the Iraqi people’s needs.
The Administration has not yet decided on the organizational mechanisms by which
this sector should be operated. We shall be consulting on this important matter
with many parties in various countries, including Iraqi experts and groups.

"No War for Oil"

This is a good point at which to address head-on the accusation that, in this
confrontation with the Iraqi regime, the Administration’s motive is to steal
or control Iraq’s oil. The accusation is common, reflected in the slogan "No
War for Oil." But it is false and malign.

If there is a war, the world will see that the United States will fulfill its
administrative responsibilities, including regarding oil, transparently and
honestly, respecting the property and other rights of the Iraqi state and people.
The record of the United States in military conflicts is open to the world and
well known.

The United States became a major world power in World War II. In that war and
since, the United States has demonstrated repeatedly and consistently that we
covet no other country’s property. The United States does not steal from other
nations. We did not pillage Germany or Japan; on the contrary, we helped rebuild
them after World War II. After Desert Storm, we did not use our military power
to take or establish control over the oil resources of Iraq or any other country
in the Gulf region. The United States pays for whatever we want to import. Rather
than exploit its power to beggar its neighbors, the United States has been a
source of large amounts of financial aid and other types of assistance for many
countries for decades.

If U.S. motives were in essence financial or commercial, we would not be confronting
Saddam Hussein over his weapons of mass destruction. If our motive were cold
cash, we would instead downplay the Iraqi regime’s weapons of mass destruction
and pander to Saddam in hopes of winning contracts for U.S. companies.

The major costs of any confrontation with the Iraqi regime would of course
be the human ones. But the financial costs would not be small, either. This
confrontation is not, and cannot possibly be, a money-maker for the United States.
Only someone ignorant of the easy-to-ascertain realities could think that the
United States could profit from such a war, even if we were willing to steal
Iraq’s oil, which we emphatically are not going to do.

The Structure and Funding of the Office of Reconstruction and Humanitarian
Assistance

Returning now to the new Pentagon Office of Reconstruction and Humanitarian
Assistance: There are three substantive operations within the Office, each under
a civilian coordinator: Humanitarian Relief, Reconstruction, and Civil Administration.
A fourth coordinator is responsible for communications, logistics and budgetary
support. These operations are under the overall leadership of Jay Garner, a
retired Lieutenant General who held a senior military position in the 1991 humanitarian
relief operation in northern Iraq. He is responsible for organizing and integrating
the work of the three substantive operations and ensuring that the office can
travel to the region when necessary and plug in smoothly to CENTCOM’s operations.
His staff consists of representatives from the Departments of State, Defense,
Justice, Treasury, Energy, and Agriculture, the U.S. Agency for International
Development and the Office of Management and Budget.

The Office of Reconstruction and Humanitarian Assistance has only just begun
the task of estimating the cost of post-war humanitarian assistance. In addition,
it is working to identify the projected post-conflict costs of dealing with
the Iraqi armed forces, including the costs of disarming, demobilizing and reintegrating
Iraqi troops into civilian society.

Except for the Defense Department, the USG is currently operating under a FY
2003 continuing resolution. This has affected the level of funding that can
be made available now, as agencies have access only to limited amounts of money.

In any case, the overall Iraq reconstruction and relief budget would require
a FY 2003 supplemental appropriation. Timing of a FY 2003 supplemental is important.
Delays would hinder relief and reconstruction programs.

As part of our post-war planning, CENTCOM has also established a Combined Joint
Task Force that will be responsible for U.S. and coalition forces in Iraq in
the immediate aftermath of a conflict. The task force will work closely with
the Office of Reconstruction and Humanitarian Assistance to facilitate relief
and reconstruction activities.

The Responsibilities of Free Iraqis

Because the Commander of the U.S. Central Command will have a key role in administration
in Iraq, many have thought that our plans for Iraq are based on what the Allies
did in Germany after World War II. But that is not the case. Our intention,
in case of war, would be to liberate Iraq, not to occupy it.

Our administration would involve Iraqis as soon as possible, and we would transfer
responsibility to Iraqi entities as soon as possible. Following the initial
period of U.S./coalition military government, we envisage a transitional phase
in which responsibility is gradually transferred to Iraqi institutions, leading
to the eventual establishment of a new Iraqi government in accordance with a
new constitution.

The following are examples of the ways in which Iraqis might play a progressively
greater role in administering the country. While final decisions have not been
made, and, in the nature of the case, cannot be made until the actual circumstances
are known, these examples illustrate various mechanisms under consideration:

o An Iraqi consultative council could be formed to advise the U.S./coalition
authorities.

o A judicial council could undertake to advise the authorities on the necessary
revisions to Iraq’s legal structure and statutes to institute the rule of law
and to protect individual rights.

o A constitutional commission could be created to draft a new constitution and
submit it to the Iraqi people for ratification.

o Major Iraqi governmental institutions – such as the central government ministries
– could remain in place and perform the key functions of government after the
vetting of the top personnel to remove any who might be tainted with the crimes
and excesses of the current regime.

o Town and district elections could be held soon after liberation to involve
Iraqis in governing at the local level.
Regarding post-war planning, much preparatory work has been done, but much more
remains. The Office of Reconstruction and Humanitarian Assistance will serve
as the US Government’s nerve center for this effort.

We look forward to consulting with this Committee and with the Congress generally
as we develop our ideas and plans for post-conflict Iraqi reconstruction. War
is not inevitable, but failing to make contingency plans for its aftermath would
be inexcusable.

The Powell report

(Washington, D.C.): On Wednesday, Secretary of State Colin Powell will deliver what may be the most anxiously awaited briefing to the UN Security Council since Ambassador Adlai Stevenson presented the United States’ damning case against the USSR during the 1962 Cuban missile crisis. The Bush Administration clearly hopes that Mr. Powell’s brief will have a similarly bracing effect, shoring up international support for war with Iraq and clearing the decks for action.

The conventional wisdom holds that such success will depend on the degree to which the Administration parts the veil on sensitive American intelligence. Will Secretary Powell offer the equivalent of the classified satellite photos Amb. Stevenson wielded to prove the Kremlin was lying when it denied secretly putting nuclear-armed missiles in Cuba?

Costs Versus Benefits of Compromising U.S. Intelligence

This is not really the right question. Rather, the question should be: Will sharing highly classified information — perhaps gleaned by as-yet-undetected electronic methods or well-placed human sources — make a difference to Security Council members who have long viewed Saddam Hussein more as a client than as a menace? Indeed, Saddam has gotten away with defying the United Nations for the past twelve years precisely because France, Russia and China have consistently run interference for him.

Even if these long-time friends of Saddam are genuinely open to persuasion — to say nothing of Germany and Syria, who have recently expressed strenuous objections to any military action against Iraq — the wisdom of trying to buy their support obviously depends on the cost of doing so.

Specifically, what are the risks of compromising not only the intelligence itself, thereby affording the Iraqi regime an opportunity to relocate prohibited weapons and/or cover its tracks, but something even harder to come by: the means that permitted such intelligence to be acquired? It is certainly possible that Saddam’s skilled intelligence apparatus (or those of his friends) will be able to “reverse-engineer” the disclosed conclusions so as to ensure that the sources and methods by which they were derived are neutralized.

Obviously, the senior American officials preparing the Powell report have such considerations in mind as they weigh what he should reveal and what should be withheld. They are clearly cognizant of one unalterable fact: Every bit of information that tips off Saddam about what we know of his prohibited activities and how we know it will greatly complicate the job of any U.S.-led coalition charged with disarming Iraq the old-fashioned way — via military means. The effect could be to allow Saddam to use weapons of mass destruction that might otherwise have been destroyed. The loss in lives, both Iraqi and American, could be unnecessarily increased, possibly greatly.

Is the Bush Team Erring on the Side of Incaution?

It is worrying, therefore, that the Bush team appears to be yielding to the pressure from some allies, legislators and the media to discount such concerns in the interest of providing as persuasive as possible a case concerning evidence of Iraq’s unaltered bad faith, continuing deceptive activity and ongoing stockpiling of weapons of mass destruction (WMD). For example, Monday’s Washington Times reported that Secretary Powell will disclose transcripts of conversations between Iraqi officials as they engaged in efforts to obstruct and otherwise frustrate UN weapons inspectors’ searches.

Of particular concern is the statement attributed to “American officials” who are quoted as saying “the intercepts are so damning that their release outweighs any damage that would be caused to the intelligence sources.” Maybe so. But the calculation would surely be different if those who must be persuaded are governed, not by the facts, but by a perceived national interest in continuing to protect Saddam. In that case, a careful cost-benefit analysis might suggest that the associated damage to intelligence sources would be unacceptably high.

A Human Smoking Gun’?

As it happens, there may be an alternative that would permit the Powell report to be persuasive without irreparably damaging U.S. intelligence capabilities. The United States may have a human “smoking gun” in the person of a recent defector from the senior ranks of Saddam’s praetorian guard, Abu Hamdi Mahmoud. According to the Australian paper The Herald Sun, Mahmoud was a member of the “Inner Circle” — the small number of personal bodyguards allowed intimate proximity to the Iraqi despot — and, perforce, knowledge of his most secret doings.

The Herald Sun reports that this security agent, known as the “Gatekeeper,” is now in Israel where he has told debriefers that: Saddam has maintained an underground chemical weapons facility at the southern end of the Jadray Peninsula in Baghdad; an assembly area near Ramadi for SCUD missiles imported from North Korea; and two underground bunkers in Iraq’s Western Desert that contain biological weapons; and other WMDs are concealed in a tunnel complex built by Chinese engineers beneath Baghdad’s sewer system. It seems unlikely that Saddam could effectively thwart the effect of all the disclosures so well-placed an individual could provide.

The Bottom Line

This sort of information is precisely why Saddam has been so insistent that the UN inspectors not be able to hold real and productive interviews with his scientists and other personnel. And such obstructionism is why, among many other reasons, Secretary Powell on Wednesday must flatly declare Iraq to be in material breach of its obligations. And President Bush should immediately follow with a declaration of his own: Since the United Nations has proven either unwilling or incapable of correcting this situation, the United States and a “coalition of the willing” are going to begin forthwith the liberation of Iraq.

Vichy Europe slouches to sidelines as the New Europe rallies to Bush

The Franco-German regime of Europe is having a hard time making the rest of the continent behave. At least eight European states have had the audacity to oppose Paris and Berlin’s frantic attempts to save Saddam Hussein and his stockpiles of poison gas from American-led military power.

The New Europe is rejecting the latest version of French-German collaborationism.

Britain has been the most visible supporter of the US. Italian Prime Minister Berlusconi’s visit to the White House this week underlines that there’s much more to Europe than the latest French-German diplomatic offensive to save Saddam. The Czech Republic, Denmark, Hungary, Poland, Portugal and Spain joined Italy and the UK in strong statements – and more importantly, actions – in support of a US-led liberation of Iraq.

Australia has been with the US from the start. Turkey and Jordan, both understandably uncomfortable about being left to hang after the First Persian Gulf War twelve years ago, are also providing Washington with use of their territory and airspace for a removal of Saddam’s regime. Bahrain, Kuwait and Qatar are hosting vital forward-basing resources. Several other countries are also helping in special ways.

With former Swedish Prime Minister Carl Bildt writing a forceful essay backing Bush in the International Herald Tribune and even squeamish Canadian Prime Minister Jean Chretien looking more uncomfortable than ever over his recent anti-US rhetoric, the world once again is looking openly for American leadership. President Bush manifested it magnificently in his recent State of the Union speech.

Even Germany’s socialist Chancellor Gerhard Schroeder is now admitting that his anti-American drive might have been for nothing. Let him and France remain in the opposition. They have renounced their right to share freedom’s victory in Iraq.

A coup won’t do

(Washington, D.C.): The current buzz is that the Saudis, Egyptians, Turks and others are plotting to have Saddam Hussein removed from power — either voluntarily with a “golden parachute” exile package for him and his family, or involuntarily via possibly violent action. Either way, the promoters of this initiative reportedly contemplate offering amnesty for Iraqi generals who help effect “regime change” in Baghdad so as to preclude having the U.S. military accomplish it.

Over the weekend, top Bush Administration officials expressed enthusiasm for this idea. As Secretary of State Colin Powell put it on CBS News’ Sunday morning program “Face the Nation”: “[If it worked,] we would have an entirely new situation presented to the international community and we might be able to avoid war.”

Presumably, the Bush team is encouraging what might be called a coup in Baghdad in keeping with the President’s oft-stated position that war is the last option. A coup also happens to be the outcome that the CIA and State Department have been haplessly trying to engineer in Iraq for over a decade.

The Cynicism of Despots

Before addressing the demerits of this proposal, the cynicism of several of the foreign governments now said to be working to topple Saddam cannot go unremarked. In particular, Saudi Arabia and Egypt have been among the most adamant members of the United Nations in declaring their respect for the sovereignty of Iraq and their conviction that interference in its internal affairs by any outside power is impermissible. At least the Bush Administration has made no bones about its belief that regime change is required.

Still, the question occurs: Will a coup do? Would either Saddam Hussein’s voluntary or unwilling displacement from the seat of power in Baghdad accomplish the needed regime change and its necessary consequences — namely, the liberation of the Iraqi people and an end to Saddam’s weapons of mass destruction programs?

What’s Wrong With This Picture?

Unfortunately, the answer is almost certainly no. For starters, there is a grave danger that the only change that will occur would be to replace Saddam Hussein with some other ruthless thug. Even if the latter did not come from the Butcher of Baghdad’s immediate family (given what is known about Saddam’s sons, this is a singularly horrifying prospect), an amnesty for his subordinates would probably ensure that the next Iraqi leader is one of his henchmen, Takriti clansmen or senior officers. Such an outcome is particularly likely in view of the Saudi and Egyptian governments’ ill-concealed preference for despots.

An amnesty would also amount to a free-pass for people who must, like Saddam Hussein, be held accountable for war crimes and unimaginable human rights abuses. Without such accountability and a more general program of “lustration” aimed at purging the political system of the ancien regime’s adherents, a post-Saddam Iraq will be denied the chance for real freedom. This chance was fully realized by Germany and Japan, at U.S. insistence, where lustration occurred. It remains, at best, a fragile opportunity for countries of the former Soviet empire where lustration has largely not transpired.

If anything, a “regime change” that amounts to a change of face, but not of character, may give rise to an even greater danger down the road. Those who were willing to do business with Saddam will surely demand that UN-imposed sanctions on his successor’s regime be removed at once. With unchecked use of Iraq’s immense petro-wealth, the next Saddam could rapidly finish whatever build-up of weapons of mass destructions his predecessor failed to complete. And it strains credulity that such a regime will afford international inspectors, let alone U.S. military personnel, with the sort of unencumbered access to Iraq’s secret files needed if we are to learn, at last, the true status of these activities.

Worst of all, if the United States is seen by the people of Iraq as once again favoring their continued enslavement, albeit by someone whose record of brutality may be less well-known than Saddam’s, we risk their permanent alienation. In the process, we would lose not only the opportunity to free one of the most industrious and capable populations in the Middle East, perhaps transforming Iraq into a prosperous and peace-loving nation. We would also squander the chance to create a model for bringing real democracy and economic opportunity to a region desperately in need of both.

The Bottom Line

While such an arrangement may suit the Saudi royal family, the dictators of Syria and Egypt, the murderous mullahs in Iran, etc., it should not be seen by Americans as an acceptable substitute for the true liberation of Iraq — the only hope for genuinely disarming that country.

There are worse things than an American-led war against Saddam Hussein’s regime in the next few weeks. Chief among them would be a war that will have to be waged later, against either Saddam or a no-less-dangerous successor whom the world has foolishly allowed to pursue his tyrannical domestic policies, weapons programs and ambitions for regional domination.

‘POISONED’: Germany’s ‘red-green’ coalition wins thin mandate in bitter anti-US campaign

Germany’s socialist chancellor squeaked out the thinnest of mandates after mounting a campaign laced with anti-American invective that severely damaged Berlin’s relationship with Washington.

Chancellor Gerhard Schroeder “poisoned” his country’s ties to the US, say National Security Advisor Condoleezza Rice and Defense Secretary Donald Rumsfeld. Now, Schroeder is busy trying to repair relations. He sacked his justice minister, who reportedly compared President Bush’s tactics to those of Adolf Hitler.

A leader of an allied party also quit after a Jew-baiting rampage on television. As if that wasn’t enough, Schroeder’s disgraced former defense minister, Rudolf Scharping, recently derided the US-British effort against Saddam Hussein as Jewish-led warmongering.

The only Schroeder official emerging from the campaign unscathed, it seems, is his Green foreign minister, Joschka Fischer – who’s been trying to compensate for his past as a Baader-Meinhof Gang wannabe and PLO fellow-traveler by being less anti-American than the rest of Schroeder’s circle.

Schroeder’s win was “costly” for the German-US alliance and for Germany’s relations with other NATO countries, says Newsweek – French President Jacques Chirac and Spanish Prime Minister Josemaria Aznar openly hoped that Schroeder would lose.

Observes Newsweek, “Not since World War II has Germany’s government been this isolated on a major international issue, and seldom has its chancellor been so thoroughly disliked abroad.”

Step Right Up: After Iran, Who Will Be Next To Float a Sovereign Bond To International Investors? Iraq?

(Washington, D.C.): After more than two years of preparation, Iran is finally slated to make its first foray in the global securities markets since its 1979 revolution. The Iranian sovereign Eurobond offering — which could launch as early as next week — is expected to net Tehran some 500 million Euros ($490 million) with the help of Germany’s Commerzbank and France’s BNP Paribas, the lead managers on the float. It is likewise netting political controversy. For example, last month the U.S. restricted Moody’s rating agency from providing a financial rating for Iran’s government — an act determined by the Office of Foreign Asset Control (OFAC) to be providing a service for Iran.

Going Down This Road Again

The William J. Casey Institute has long voiced concern with respect to global bond offerings by governments that are engaged in activities that could potentially threaten the vital security interests of the United States. Sometime next week, however, the government of Iran will receive a check for roughly $500 million with no questions asked regarding where the money is going or how it is being used.

It is extraordinary that — within days of President Bush’s meetings with other G-8 leaders focused, among other things, on the need to counter terrorists and their state-sponsors — his European counterparts will actually be welcoming Iran back to the global financial community with open arms. Indeed, how long do we think it will take before Libya, Syria and possibly even Iraq try to take advantage of Europe’s willingness to permit terrorist- sponsoring regimes to gain access to global financial flows?

Even more disturbing is the prospect that this hard currency injection may be used by Tehran to help further burnish its dubious distinction of being, according to the U.S. State Department, the world’s “most active state sponsor of terrorism” and/or to intensify its efforts to develop weapons of mass destruction and ballistic missile delivery systems. The heinous attack of September 11 on the United States was estimated to cost a mere one-tenth of one percent of the funds expected to be raised by Iran next week. The mind reels at how far Iran’s half-a-billion dollar Eurobond windfall can take it in buying advanced technology and weapons components on the global black markets.

Who’s Manning the Fort?

According to the Treasury Department’s OFAC, U.S. persons, banks and companies are, under penalty of law, not allowed to purchase or hold Iranian bonds. As is often the case, however, loopholes exist. In this instance, the foreign subsidiaries of U.S. entities are allowed to hold Iranian debt — as long as they are doing so of their own accord (i.e., not on behalf of the U.S. parent) and a U.S. citizen was not involved in the transaction. (Note: In today’s globalized financial arena, the act of being “involved in the transaction” includes pushing a “buy” button.) To be clear, unless it is closed, this loophole would allow American companies to directly fund the Iranian government.

The Bottom Line

While closing this loophole should be a near-term goal of OFAC, a real-time priority of this agency, along with the Securities and Exchange Commission (SEC), should be alerting U.S. investors to this prohibition. Indeed, unlike America’s trade community — which is well-versed in sanctions law — investors have never before had the opportunity to purchase the debt of a government under U.S. sanctions.

In a world where millions of financial transactions take place every hour, the likelihood of one of this country’s tens of thousands of boutique investors, hedge funds or money managers unwittingly violating the law while buying Iran’s paper is high enough to justify immediate action. Specifically, OFAC and the SEC should immediately place an advisory on their websites and the SEC and Treasury should consider a media advisory and press conference. For his part, President Bush should make clear America’s determined opposition to European or other investors writing blank checks to an “Axis of Evil” government — and call on U.S. allies to demonstrate whether they are, in fact, with us or against us in this war on terror by following suit.

Not-So-Brilliant: New York Stock Exchange Suspended Trading of Chinese Automaker Amid Troubling Revelations

(Washington, D.C.): In a growing scandal eerily reminiscent of that which derailed the New York listing of Bank of China earlier this year, the first Chinese company ever listed on the New York Stock Exchange (NYSE) a decade ago had trading of its stock temporarily suspended on 21 June both here and in Hong Kong. These extraordinary interventions were in response to a non-transparent, somewhat bizarre regime change at Brilliance China Automotive Holdings.

The firm’s CEO, and reportedly one of China’s wealthiest individuals, Yang Rong, was dismissed from the company the day after a corporate denial that anything was amiss in the ranks of its senior management. Rumors have swirled around Hong Kong over the past month that Mr. Yang was under investigation by Chinese authorities for “financial irregularities” — an expression that has taken on new meaning in the post-Enron era. The shadow over Brilliance has caused share value to decline over the past few weeks.

BMW Damage Limitation

Ironically, the company’s twin trading suspensions came on the cusp of an anticipated announcement of a high-profile joint venture with Germany’s BMW for the production of what a Wall Street Journal article of 21 June termed “China’s first luxury-class auto joint venture.” BMW’s spokesman appeared to backpedal with news of the suspension indicating in a New York Times article of 22 June that “the main investigation and the most important investigation we did was on the technical capability of the plant.” Presumably, this is code for rather superficial due diligence on the financial health of Brilliance.

NYSE Has Explaining To Do

What is most troubling about the unexplained nature of Mr. Yang’s departure — who personally denied to investors that he was under any type of investigation the week before the suspension — is the light that is being shed on the company’s ownership structure and the question of how it ever came to be listed on the NYSE in the first place. According to the Wall Street Journal piece, “Like many Chinese entrepreneurs, Mr. Yang operated in a nebulous zone marked by opaque dealings. When he listed Brilliance in New York, Mr. Yang implemented a complicated restructuring of the company that handed majority ownership of Brilliance to a non-profit foundation that he then controlled as Chairman but that nominally belonged to the government.” Perhaps the NYSE will look into the Chinese Financial Education Development Foundation that reportedly owns some 39-48 percent of Brilliance and is, in turn, controlled by the People’s Bank of China.

Bottom-Line

Belatedly, the Securities and Exchange Commission and NYSE may now get serious about the kind of “due diligence” needed to protect U.S. and other shareholders, particularly given the “green light” provided June 24 or 25 to resume the trading of Brilliance stock. Regrettably, such attention will come only after sharevalue has been already hit by fleet-footed and better-informed Hong Kong traders. While probing this seeming Chinese enigma, these U.S. market gatekeepers may also wish to inquire about a Forbes magazine profile depicting Mr. Yang as China’s third-richest man with some $840 million in personal net worth.

It is also long past due that the “wink and nod” approach to state-owned Chinese companies listing in the U.S. equity markets come to an abrupt end. These firms and their Chinese government sponsors should be held to the same standards of transparency, disclosure and accountability that will apply to their U.S. counterparts in the aftermath of this country’s corporate governance crisis.

Global Investors Poised to Underwrite Terrorism: Iran returns to the Markets with 500 Million Eurobond; Will U.S. Buy In?

(Washington, D.C.): As the Casey Institute warned in its Perspective of July 14, 2000, Iran
has
now formally embarked on a Eurobond offering in the amount of 500 million euros. Not
surprisingly, the mandate for leadership of the offering was split between a leading French and
German bank (i.e., BNP Paribas and Commerzbank, respectively). What came as a shock to
many, however, was the willingness of a U.S. rating agency, Moody’s, to rate the bond in
possible violation of U.S. sanctions against this State Department-designated terrorist-sponsoring
state. The Treasury Department’s Office of Foreign Assets Control (OFAC) — charged with
enforcing U.S. sanction regimes — reportedly sent a letter to Moody’s in November of 2001 in
the words of a Financial Times article of 5 June, “seeking information on the rating,
and to
establish whether it constituted ‘an unlicensed provision of service.'” Moody’s did not withdraw
its rating until June 3rd.

Discretionary Cash For Tehran?

Tehran is fully cognizant of the international imprimatur of approval embodied in being able
to
tap successfully global investors for a sovereign offering after some twenty-five years of pariah
status. Naturally, no such government intervention was in evidence when the French rating
agency Fitch gave Iran a B+ designation. It obviously fails to register in Paris, Berlin and
elsewhere in Europe that multiple official reports indicate that the hard-line clerics in charge in
Iran have: 1) stepped up substantially their support of Islamic Jihad and Hizbollah; 2) been
apprehended in the execution of a secret accord with the Palestinian Authority for the large-scale
provisions of lethal weaponry to the Authority, including missiles and C4 explosives; 3)
harbored al-Qaeda leaders and fighters from Afghanistan and reportedly are permitting them to
plot new terrorist attacks from their soil; 4) continued apace in their development of nuclear
weapons and long-range ballistic missile delivery systems (e.g., the Shahab 3, 4 and 5); and 5)
successfully sidelined so-called “moderate” elements in Iran’s body politic.

Next Steps for the White House

The big question now is: Will the Bush Administration allow American institutional and
individual investors to hold this Iranian bond in portfolio by purchasing it through oversea
exchanges? The fact that Moody’s was permitted to rate the bond in the first place and maintain
the rating for some three years is not encouraging.

The Bottom-Line

To be sure, the Administration has a great deal on its plate. Still, it must focus far more
intensely
on the implications for the war on terrorism and proliferation of allowing American legal persons
to purchase this Iranian credit instrument. This is not a hard call. OFAC must immediately
declare this Eurobond off limits to any American investors anywhere in the world. To do
otherwise would be to give an unmistakable wink of approval to a number of allied capitals who
would treat with Tehran and Baghdad tomorrow as full commercial partner if given the
opportunity. The Bush Administration should also urgently intervene with the governments of
France and Germany to discourage banks in their countries from leading this offering for Tehran.
If necessary, the Congress should consider legislative initiatives designed to achieve these
results.

For their part, state treasurers, public pension systems and mutual funds across America
should
publicly declare their unwillingness to hold this paper in portfolio. In 2001, a number of
America’s largest funds acted in such a principled fashion with respect to the PetroChina initial
public offering and holding the stock of Talisman Energy Inc. in response to their partnering
arrangements (or, in the case of PetroChina, that of their parent company) with the terrorist-,
genocide- and slavery-sponsoring Sudanese regime.

Make no mistake: What unfolds from this point forward concerning the fate of Iran’s
sovereign
Eurobond offering — and the discretionary cash it would provide to advance Tehran’s more
odious activities — represents a key litmus test of Bush Administration, congressional and allied
resolve in the war on terrorism. Pretending that this Eurobond offering is not a seminal event
will likely reap a potentially horrific whirlwind down the road for this country and its allies.

Has Israel Become an ‘Inconvenient’ Ally?

(Washington, D.C.): Last year, Israeli Prime Minister Ariel Sharon precipitated a firestorm of criticism from the Bush Administration by suggesting that the United States was doing to Israel what Czechoslovakia’s great power allies, Great Britain and France, had done to her before World War II. At the time, President Bush and his national security team were outraged at such an invidious comparison and Sharon retreated, claiming that he had been misquoted. Unfortunately, with each passing day, Washington appears to view its principal Middle Eastern ally’s conduct as increasingly inconvenient — in much the same way London and Paris came to see Czechoslovakian resistance to Hitler’s offers of peace in exchange for Czech lands.

The New Sudetenland

This parallel was brilliantly addressed by Peter Hitchins in an essay published on March 10th in the British newspaper, The Mail on Sunday:

The phrase “land for peace” is interesting in itself. It is actually another way of describing the appeasement forced on Czechoslovakia by her supposed friends in 1938. This was also supposed to promise peace, but made the country impossible to defend and opened the gates for invasion a few months later. Those responsible for this cowardly stupidity are still reviled 60 years on. Those who urge it on Israel in the present day are praised.

Today, as in 1938, there appear to be more important things to worry about than the security concerns of a small ally which finds itself on the fault-lines of a larger conflict. Then, British and French governments wanted to prevent a war with Germany; today, the U.S. government is, correctly, determined to start one with Iraq.

In the service of the former objective, the Great Powers felt within their rights to take risks with Czech security. In the latter case, the World’s Only Superpower hopes that the Arabs will be less hostile to its determination to topple Saddam Hussein if only Israel renders itself indefensible.

American Pressure, Israeli Concessions

Toward that end, the United States has lately resumed its strident criticism of Israeli efforts to prevent terrorists from inflicting further damage on the Jewish State at a rate that is, calculated on a per capita basis, far in excess of the losses we suffered on September 11th. American diplomats are demanding the withdrawal of all Israel Defense Forces from areas foolishly relinquished to Palestinian control back when some people still thought the surrender of such land would mean that Arafat would prevent it from being used to wage war against the Israelis.

Peter Hitchins flays this paternalistic tripe: “In normal life, it is a sign of being unhinged if you do the same thing over and over again and expect a different result. But in the business of Middle East diplomacy such behavior could earn you a Nobel Peace Prize. Since 1978, Israel has been urged to give up a little more land in return for the promise of peace which always seems to evaporate. The land however is gone for good.” (Emphasis added.)

Now there is even talk of putting CIA “monitors” on the ground to observe the Israeli- Palestinian conflict firsthand and, presumably, to render findings as to who is at fault when the shooting occurs. This step would obviously be exceedingly dangerous for the monitors, especially if they are targeted for assassination by Palestinians who could reasonably expect that such casualties would further strain U.S. relations with Israel. This prospect might well prompt American military personnel to be dispatched, as well, for the purpose of protecting the monitors. Suddenly, the United States would have an armed presence in the middle of a conflict where it would be obliged to view with moral equivalence Israel’s efforts to defend itself in the war on terrorism and a terrorist proto-state’s efforts to destroy our democratic ally.

‘Imposing’ a Solution’

The logic of such a proposed intervention has already given rise to an even more ominous suggestion: Some who should know better (including General George Joulwan who, before his retirement from the Army was Supreme Allied Commander, Europe) are calling for the United States to “impose” a peace agreement on the Israelis and Palestinians. This would, presumably, go beyond Britain and France’s sell-out of an ally at Munich in 1938. The “impose-a-peace” school is apparently prepared to have us play the role of Hitler’s Wehrmacht as well, seizing and turning over to Yasser Arafat the contemporary Sudetenland: the West Bank and Gaza Strip, and perhaps part of Jerusalem, as well.

Or, more likely, the advocates of our dictating terms to the Israelis expect the latter to bend to our will, obviating the need for us to force them to do so. After all, like the Czechs of a few generations ago, the Israelis have succumbed in the past to such sirens’ songs as: “We know what is best for you.” “Do as we say, not as we would do in your circumstances.” “Our interests trump yours.” “Trust us, we’ll make up to you later any concessions you have to undertake now.”

The Bottom Line

In fact, it is precisely experiences like that of Czechoslovakia — and the war and Holocaust its piecemeal surrender set in train — that gave rise to the widely perceived need for a Jewish State, one strong and self-reliant enough to defend its people even if no one else would do so. It is for these sorts of reasons that successive Israeli governments have sensibly refused to rely upon American guarantees or forces for their national security.

Tragically, efforts aimed at appeasing the Arab states by compelling Israel once again to make herself vulnerable to attack will catalyze the Arabs’ appetite for war, all right, but not against Saddam Hussein. Like appeasement at Czech expense over sixty-years ago, it will more likely encourage them to engage in aggression against — and even perhaps precipitate the destruction of — a freedom-loving nation that made the mistake of becoming an inconvenient ally.

Witness to Evil: German Doctor Endorses Bush Depiction of North Korea, Opposes Engagement’ with Its Brutal Regime

(Washington, D.C.): The father-son Kim dynasty that has subjected North Korea for over five decades to a form of totalitarian repression that even Joseph Stalin could not have imagined made a serious mistake a few years ago. Believing it had found a German doctor who would willingly serve its propaganda ends, the Communist regime in Pyongyang parted the veil behind which it has long obscured the so-called “Hermit Kingdom.”

After Dr. Norbert Vollertsen allowed himself to have portions of his own skin removed to enable a badly burned North Korean factory worker to receive a life-saving graft — an extraordinary personal sacrifice subsequently repeated so that it could be recorded for the government’s indoctrination purposes, the North’s dictator, Kim Jong-Il, allowed Dr. Vollertsen a privilege few Westerners (if indeed any other) has been accorded: an internal passport and driver’s license that allowed him to travel freely throughout much of the country (excluding only areas where the existence of concentration camps and other secret military facilities put them off-limits to virtually everyone).

As a result of this latitude, Dr. Vollertsen had an unequaled opportunity to witness first-hand the true magnitude of the evil that is the North Korean regime — and the staggering toll it is taking on those who are its most immediate and constant victims: the millions of ordinary citizens being starved, terrorized, brainwashed and forced to endure untold hardships in the name of glorifying and serving the “Dear Leader,” Kim Jong-Il.

Dr. Vollertsen’s testimony, which has appeared most recently in the form of an op.ed. in yesterday’s Wall Street Journal, is a welcome validation of President Bush’s depiction of the actual character of the Kim regime in North Korea. It is also a much-needed antidote to those who believe that any good can come from treating with, appeasing or otherwise providing political legitimacy and/or economic life-support to this quintessentially evil government.

Memo to Mr. Carter: Evil Exists
By Norbert Vollertsen
The Wall Street Journal, 7 March 2002

As a German physician, I was greatly moved by an inscription quoting former President Jimmy Carter at the Holocaust Memorial Museum in Washington, D.C. — “[W]e must forge an unshakeable oath with all civilized people that never again will the world stand silent, never again will the world . . . fail to act in time to prevent this terrible crime of genocide . . . We must harness the outrage of our own memories to stamp out oppression wherever it exists.”

It is hard to believe that these words came from the same man who recently lambasted President Bush’s “axis of evil” speech, calling it “overly simplistic and counterproductive.” Nowhere in Mr. Carter’s words did I see the caveat “stamp out oppression wherever it exists (excepting North Korea and/or any other dictatorial regime that rapes, murders and systematically starves its own people).” President Carter wrote those words in September 1979 for his President’s Commission on the Holocaust. Twenty-three years later, he seems to have forgotten their meaning.

President Bush has not. He has chosen to speak out; to borrow Mr. Carter’s phrase, he will not “stand silent.” He has bravely called North Korea “evil” — and he is right. I know, because I have seen the evil with my own eyes. From July 1999 to December 2000, I traveled with the German medical group, Cap Anamur, and gained access to some of the Stalinist country’s most remote and secretive regions.

What I witnessed could best be described as unbelievable deprivation. As I wrote for this newspaper last April, “In the hospitals one sees kids too small for their age, with hollow eyes and skin stretched tight across their faces. They wear blue-and-white striped pajamas, like the children in Hitler’s Auschwitz.”

It became clear to me that Kim Jong Il and his Stalinist regime had made little effort to distribute medical supplies and food to the people who needed it most. I soon realized that North Korea’s starvation is not the result of natural disasters or even lack of natural resources. Like the Holocaust in Europe, the horror in North Korea is man-made. Twenty-two million people suffer under a dictatorial regime that uses torture, surveillance and starvation as tools to control its own people. Only the regime’s overthrow will end it.
I was eventually expelled from North Korea because of my open criticism of the government. Since then, I have been on a global campaign to raise interest in what I can only describe as crimes against humanity and genocide in North Korea. This is a country where food is used as a weapon against any opposition, Christians are persecuted, women sexually abused and young children forced into labor. Still, the world either doesn’t know, doesn’t care or doesn’t want to believe.

Last month I had the opportunity to interview around 250 North Korean defectors near the China-North Korea border and was truly horrified by their stories. Most had escaped from hidden concentration camps where they suffered and witnessed routine torture, mass-execution, baby-killing, rape, human biological experiments (including the effects of anthrax) and, of course, starvation. These people were talking about hell, not paradise. Like Mr. Bush, they call it evil too.

As a German born after the Holocaust, I feel it is my duty to speak out. But strangely, few are willing to listen. In my native Germany and the rest of Europe they speak of “engagement.” In South Korea they speak of a “sunshine policy” to help Kim Jong Il modernize and liberalize. What they don’t understand is that he is not interested in helping his people; rather he is interested only — like Hitler and Stalin — in clinging to power. In my opinion, “engagement” and “sunshine” are not only synonyms for appeasement, they are synonyms for cowardice.

Now, the very same people who wish to engage a state that starves its own people are calling President Bush a “war monger” for using the word “evil.” Ironically, but not surprisingly, it is the “refined” European diplomats, “liberal” American newspapers, and “politically correct” human-rights activists who are most outraged at Mr. Bush’s choice of words. They should be ashamed of themselves.

President Bush has rightly identified North Korea as a prison state that uses terrorism against its own people. Moreover, his “axis of evil” speech has sent a strong message to the North Korean people that they are not forgotten — and they are listening. Every North Korean defector I spoke to over several weeks was delighted by President Bush’s words. For the first time in their lives they feel as if the outside world understands the hell they have endured. Moreover, they are full of hope that, like President Reagan’s “evil empire” speech, President Bush’s “axis of evil” speech will eventually lead to the collapse of Kim Jong Il’s brutal regime.

Perhaps those who are outraged with President Bush’s choice of words should ask survivors of the Holocaust, survivors of the Soviet gulag and survivors of North Korea’s concentration camps what they think of Mr. Bush’s use of the word “evil.”

Perhaps Mr. Carter should return to the Holocaust Memorial Musuem that he helped build and take a look at another inscription there, this one from the book of Genesis: “What have you done? Hark, thy brother’s blood cries out to me from the ground!”

Dr. Vollertsen, a physician from Germany, worked in hospitals in North Korea from July 1999 to December 2000.