For many, Iraq was about 'OIL" for greedy US oilmen.
The reality is that China is the beneficiary to the oil from Iraq as well as India. Both countries emerging as global powers with huge increasing needs for energy.

What people don't realize is that in one sense China is a large supporter of the Iraq War. Why? Because they finance our deficit by buying US Bonds.

There is no doubt that the global economy needs consistent and secure sources of energy which the middle east is a big supplier for.
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China's New Oil Source: Iraq
By Frank J Gaffney Jr.
FrontPageMagazine.com | June 26, 2007

Communist China has done it again. Desperate for new sources of energy, the Chinese are moving into an oil-rich nation eschewed by others. In this case, however, the country in question is not a state-sponsor of terror or other pariah state. Rather, it is Iraq, a country the United States has gone to great lengths to make a member in good standing of the Free World – free, among other things, of the influence of those like PRC who had close ties to Saddam Hussein.
Yet now, according to the Financial Times, the Iraqi government last Friday “revived a contract signed by the Saddam Hussein administration allowing a state-owned Chinese oil company to develop an Iraqi oil field.” The deal to develop the al-Ahdab field in Iraq was signed with China National Petroleum Corporation (CNPC) in 1997 and was valued at the time to be worth $1.2 billion. What is more, the FT reported that Iraqi Oil Minister Hussein al-Shahristani announced that “Baghdad welcomed Chinese oil company bids for any other contract in the country through a ‘fair and transparent bidding process’ to be laid out in the new oil law under discussion in Iraq’s parliament.”

Part of the impetus behind the free Iraqi government embracing CNPC – the PRC’s largest state-owned oil company and an instrument for its partnerships with the world’s most odious regimes – is a harsh reality: China is one of all too few investors who appreciate the strategic opportunities inherent in securing a foothold in Iraq today and are able to accept and mitigate the risks associated with doing business there.

Another consideration, however, has to do with the matter of Iraqi sovereign debt to Communist China dating from Saddam Hussein’s time and estimated to be worth as much as $10 billion. The PRC has insisted that the successor government in Baghdad is responsible for its predecessor’s liabilities.

The Financial Times noted Friday that a seeming breakthrough occurred during a visit to China last month by Iraq’s president, Jalal Talabani. Beijing announced that “a ‘large margin’ of Iraqi debt would be canceled, although no specific figures were released.” As the Communists are fond of observing, this is hardly a coincidence, comrade. China used the leverage of a promise to forgive what is, as a practical matter, uncollectable Iraqi debt to secure renewed access to Iraqi oil.

There is a special irony to China’s adamance on the subject that successor governments are responsible for their predecessors’ sovereign debts. After all, American and other investors are estimated to be holding Chinese sovereign bonds issued by pre-Communist regimes worth roughly $260 billion – bonds the PRC has, to date, refused to honor. While British holders of such Chinese bonds were given a discriminatory settlement back in 1987, their American counterparts have been left holding the bag.

Now, though, U.S. legislators are considering a resolution that could induce China to be more forthcoming. House Concurrent Resolution 160, introduced last month by Rep. Lincoln Davis, Democrat of Tennessee and others on both sides of the aisle, would deny the PRC access to the U.S. capital markets until such time as, among other things, Communist China “fully honors repayment of its outstanding defaulted public debts owed to United States citizens.”

Such a penalty for China’s effective default would be a first. Until now, there have been no material costs to China for reneging on these debts. Its bond ratings were not affected. Neither has there been any impediment to the PRC’s ability to bring to American and other international exchanges various “bad actors” – often state-owned companies, like CNPC, Petrochina and Sinopec, engaged in activities inimical to vital U.S. security, economic and/or human rights interests.

In the absence of any serious, let alone sustained, effort by the Executive Branch and the Congress to resolve this corrosive bilateral problem, is it any wonder that there has been no satisfactory resolution to other financial abuses by China? These include: Beijing’s manipulation of its currency; its underwriting of the genocidal regime in Sudan; and China’s worrisome financial (and other) ties with Iran, Hugo Chavez’s Venezuela and North Korea, etc.

The adoption by both houses of Congress of legislation like H. Con. Res. 160 should be but the first of several steps taken to induce the PRC to clean up its sovereign debt. For example, as legislative and other measures are developed to counter China’s currency manipulation, provisions should be included requiring Beijing to make good on its defaulted sovereign bonds.

The Securities and Exchange Commission and other credit-rating agencies should be required to take into account China’s defaulted bonds in their ratings and disclosure requirements. And targeted financial sanctions against the PRC should be promulgated in the event China continues to ignore its long-standing financial commitments.

Last, but not least, American and other vendors should be encouraged to settle accounts with China by using the legal tender of Chinese sovereign bonds. In this fashion, Beijing can be held accountable for its debts, with minimal impact on trade and other relations.

If China can use sovereign debt owed it – even debt incurred by previous governments as despicable as that of Saddam Hussein – to euchre freedom-aspiring Iraqis into making strategically momentous concessions, the least the United States can do is ensure that the Communist Chinese are held to no lesser standard. Sauce for the goose, after all, must be sauce for the Beijing duck.

June 26, 2007
Murdoch’s Dealings in China: It’s Business, and It’s Personal

By JOSEPH KAHN
BEIJING, June 25 — Many big companies have sought to break into the Chinese market over the past two decades, but few of them have been as ardent and unrelenting as Rupert Murdoch’s News Corporation.

Mr. Murdoch has flattered Communist Party leaders and done business with their children. His Fox News network helped China’s leading state broadcaster develop a news Web site. He joined hands with the Communist Youth League, a power base in the ruling party, in a risky television venture, his China managers and advisers say.

Mr. Murdoch’s third wife, Wendi, is a mainland Chinese who once worked for his Hong Kong-based satellite broadcaster, Star TV. Her role in managing investments and honing elite connections in China has underscored uncertainties within the Murdoch family about how the family-controlled News Corporation will be run after Mr. Murdoch, 76, retires or dies.

Regulatory barriers and management missteps have thwarted Mr. Murdoch’s hopes of big profits in China. He has said his local business hit a “brick wall” after a bid to corral prime-time broadcasting rights fell apart in 2005, costing him tens of millions of dollars.

But as he seeks to buy Dow Jones, the parent company of The Wall Street Journal, his track record in China has attracted attention less because of profits and losses than for what it shows about his management style.

Mr. Murdoch cooperates closely with China’s censors and state broadcasters, several people who worked for him in China say. He cultivates political ties that he hopes will insulate his business ventures from regulatory interference, these people say.

In speeches and interviews, Mr. Murdoch often supports the policies of Chinese leaders and attacks their critics. A group of China-based reporters for The Journal accused him in a letter to Dow Jones shareholders of “sacrificing journalistic integrity to satisfy personal and political aims,” a charge the News Corporation denies.

His courtship has made him the Chinese leadership’s favorite foreign media baron. He has dined with former President Jiang Zemin in the Zhongnanhai leadership compound in Beijing and repeatedly met other members of the ruling Politburo in Beijing, New York and London. Television channels affiliated with Mr. Murdoch beam more programming into China than any other foreign media group.

“The reality is that the Chinese government is not going to let anything radical happen in media,” says Gary Davey, an Australian who once ran Star TV for Mr. Murdoch. “But we got a lot farther than anyone else did.”

News Corporation officials in Beijing and Hong Kong declined to comment for this article. After The New York Times began a two-part series on Monday about how Mr. Murdoch operates his company, the News Corporation issued a statement:

“News Corp. has consistently cooperated with The New York Times in its coverage of the company. However, the agenda for this unprecedented series is so blatantly designed to further the Times’s commercial self interests — by undermining a direct competitor poised to become an even more formidable competitor — that it would be reckless of us to participate in their malicious assault. Ironically, The Times, by using its news pages to advance its own corporate business agenda, is doing the precise thing they accuse us of doing without any evidence.”

China has never been a make-or-break proposition for the News Corporation, since its operations here represent a small part of the company, which is valued at $68 billion. But Mr. Murdoch pushed for nearly 15 years to create a satellite television network that would cover every major market in the world, including China.

He coveted the $50 billion in ad spending that flows mainly to China’s state-owned news media whose products, even after years of improvements, still reflect propaganda directives as well as consumer demand.

The News Corporation’s competitors in television and film, the Walt Disney Company, Viacom and Time Warner, also had to accommodate Chinese demands as the price of admission to the local market.

But Mr. Murdoch gave more, his associates said.

“The Chinese discovered that Rupert was a real emperor who controlled everything himself,” said H. S. Liu, who oversaw government relations for the News Corporation in China. “His rivals had big, cautious bureaucracies that could not always deliver.”

China has long meant more than business to the Murdoch clan. Mr. Murdoch’s father, Keith, wrote about China as a war correspondent in the 1930s. As a newspaper proprietor in Australia, he collected Ming dynasty porcelain.

When Rupert Murdoch visited Shanghai in 1997, Wendi Deng, then a junior News Corporation employee in Hong Kong, flew up to serve as his translator. Together they explored Shanghai, which was then emerging as a lively center of finance and commerce.

“He was knocked over by the place,” recalled Bruce Dover, a former China manager for Mr. Murdoch, “and by her.” Within two years, Mr. Murdoch had left his second wife, Anna Mann, and married Ms. Deng.

Clawing Back

Mr. Murdoch’s initial foray into China was disastrous. Shortly after he purchased the satellite broadcaster Star TV in Hong Kong for nearly $1 billion in 1993, he made a speech in London that enraged the Chinese leadership.

He said that modern communications technology had “proved an unambiguous threat to totalitarian regimes everywhere.” Star could beam programming to every corner of China, and Murdoch had paid a big premium for the broadcaster for that reason.

Prime Minister Li Peng promptly outlawed private ownership of satellite dishes, which had once proliferated on rooftops. Star TV faced a threat to its viability.

Chinese leaders rebuffed his attempts to apologize in person — a ban that lasted nearly four years. But he sought to placate them. One target was Deng Xiaoping, then retired but still China’s senior leader.

HarperCollins, Mr. Murdoch’s book unit, published a biography of Mr. Deng written by his daughter, Deng Rong. Although it mainly recycled propaganda about Mr. Deng, Mr. Murdoch threw an elaborate book party at Le Cirque in New York. The book sold poorly.

He also cultivated ties with Mr. Deng’s eldest son, Deng Pufang, who is disabled. Mr. Murdoch chartered a jet to ferry a troop of disabled acrobats that the younger Mr. Deng had promoted to perform abroad, according to a former News Corporation official.

Star TV overhauled its programming to suit Chinese tastes. In 1994 it dropped BBC News, which had frequently angered Chinese officials with its reports on mainland affairs.

Mr. Murdoch said the decision was made for business reasons, not political reasons. Mr. Davey, who then ran Star TV, agreed that cost was a primary consideration.

But he said he had pressed the British broadcaster to stop showing a video of a man facing down a tank outside Tiananmen Square — an indelible image from China’s crackdown on pro-democracy protesters in 1989 — during its on-air programming breaks. He said the BBC refused, calling the video a “journalistic presentation.”

“The BBC never got the sensitivities of the situation,” Mr. Davey said. “It was relentless and stupid. Neither party was too upset about ending the relationship.”

If Star was a potential threat to the one-party state, it was also a new opportunity. Chinese officials disliked Western news media coverage of China and wanted to present their own face to the world. Mr. Murdoch provided the access they wanted.

In 1996, he entered a joint venture with Liu Changle, a onetime radio host for the People’s Liberation Army who had connections with propaganda officials. Their joint news and entertainment channel, called Phoenix, beamed programs to the small number of urban households permitted to see foreign broadcasts in China. Mr. Murdoch transmitted the same programming around the world on his satellites.

Phoenix imitated the fast pace and on-the-scene reporting style popular in the West and shook up the mainland’s staid news media, which still featured well-coiffed narrators reading scripts about meetings between senior leaders held that day. But Phoenix also tended to steer clear of the most sensitive political topics and could be bombastically nationalistic.

Phoenix may have demonstrated that the Chinese news media could become more sophisticated and dynamic without threatening the party’s power. It also showed that Mr. Murdoch could be an asset.

“Officials realized he had a good intentions,” Mr. Liu said.

After Phoenix proved a hit, Ding Guangen, a hard-liner who exercised sweeping control over all Chinese news media as chief of the country’s Propaganda Department, granted Mr. Murdoch his first meeting. So did Zhu Rongji, then the prime minister.

Mr. Zhu noted that Mr. Murdoch had become an American citizen to comply with television ownership rules in the United States. He joked that if he wanted to broadcast more in China, he should consider becoming Chinese, a person who attended the meeting recalled.

Friendly Relations

The News Corporation’s outreach intensified. When Mr. Murdoch learned that China Central Television, known as CCTV, was struggling to develop a news Web site, he dispatched a team from Fox News to help design and operate one. Another News Corporation team brought People’s Daily, the mouthpiece of the Communist Party, online.

China also needed help encrypting satellite transmissions so it could develop a pay-TV service, a specialty of the News Corporation’s NDS subsidiary. NDS helped Beijing create a proprietary encryption system. It never realized sizable royalties, people who worked at the News Corporation said.

Similarly, the company brought delegations of Chinese officials to Britain, so they could study how Mr. Murdoch’s BSkyB unit had become a lucrative gateway for satellite television in Europe.

“Our thinking was that we would show off our technology and they would contract News Corporation to do the same for them,” said Mr. Dover, Mr. Murdoch’s former China manager. “Their thinking was, ‘We want this for ourselves.’ ”

“It ended being more of a giveaway,” Mr. Dover said.

In late 1998, President Jiang invited Mr. Murdoch to Zhongnanhai. The official Xinhua news agency, reporting on the session, made clear that the media baron had a new reputation.

“President Jiang expressed appreciation for the efforts made by world media mogul Rupert Murdoch in presenting China objectively and cooperating with the Chinese press over the last two years,” Xinhua said.

The Murdochs often echoed the Chinese government line. In a 1999 interview with Vanity Fair, Mr. Murdoch spoke disparagingly of the Dalai Lama, whom the Chinese condemn as a separatist. “I have heard cynics who say he is a very political old monk shuffling around in Gucci shoes,” he said.

James Murdoch, who ran Star TV from 2000 to 2003, said in a speech in Los Angeles in 2001 that Western reporters in China supported “destabilizing forces” that are “very, very dangerous for the Chinese government.” He lashed out at the Falun Gong spiritual sect, which had just endured brutal repression in China, calling it “dangerous and apocalyptic.”

The Journal won a Pulitzer Prize for its coverage of the suppression of the Falun Gong movement in 2001. Last month, seven China-based reporters for The Journal wrote a letter to Dow Jones’s current controlling shareholders arguing that the articles on Falun Gong “may never have seen the light of day” if The Journal had been owned by Mr. Murdoch.

News Corporation officials say such fears are baseless. While several reporters who worked in China for the company’s publications in the 1990s say Mr. Murdoch’s editors pressed them to tone down their coverage of delicate issues that could anger the Chinese leadership, reporters serving in such posts now say they have not come under similar pressures.

By the late 1990s, Mr. Murdoch was traveling several times a year to the country. He was often joined by Wendi Murdoch, who left her formal position in the company but continued to scout for investments in China and participate in strategy decisions there, several people who worked for the News Corporation said.

One of her roles: introducing her husband to Chinese entrepreneurs. Many of them had received business degrees in the United States, as she had at Yale.

The Murdochs invested about $150 million in half a dozen start-up Internet and telecom companies at the height of the Internet bubble between 1999 and 2001. Only one, Netcom, returned an appreciable investment profit, two former News Corporation executives said.

But one of the entrepreneurs the Murdochs befriended during the investment spree was Jiang Mianheng, the son of President Jiang. Ms. Murdoch and some other News Corporation employees argued internally that the younger Mr. Jiang could help Star distribute its broadcasts more widely, two former News Corporation executives said.

It is unclear what role, if any, Mr. Jiang played. But in 2002, the company became the first foreign broadcaster to receive “landing rights” to sell programs to cable systems in Guangdong Province, near Hong Kong.

The license came with a catch. The News Corporation again consented to transmit Chinese programs — this time, the English-language news, talk shows and cultural shows on CCTV’s Channel 9 — to the United States and Britain. Time Warner later agreed to similar terms. But the market appeared to be opening, with the News Corporation in the lead.

Prime Time

The News Corporation and its joint venture partners controlled 9 of the 31 foreign channels, including news, movies, music videos and sports, more than any other foreign media company. Officially, however, it could still reach only government and foreign compounds and luxury hotels, as well as homes in Guangdong. Mr. Murdoch wanted more.

Good news appeared to come in 2004. The authorities began allowing Chinese-foreign joint ventures to produce shows that could be broadcast locally without the restrictions that apply to overseas content.

Mr. Murdoch interpreted the order liberally. The News Corporation allied itself with a state-run broadcaster in the western province of Qinghai. The arrangement covered not only production but also distribution. Through middlemen, the News Corporation also purchased prime-time slots in 25 Chinese provinces. It had become a backdoor national broadcaster.

Aware that the venture pushed the limits of what regulators allowed, the News Corporation sought to arrange political cover, people involved in arranging the deal said. It recruited a media and stock market entrepreneur named Ding Yuchen to join the venture as a partner. Mr. Ding’s father, Ding Guangen, was the longtime propaganda chief. A second partner was the Central Committee of the Communist Youth League, considered the political power base of China’s new top leader, Hu Jintao.

In comments to News Corporation investors in early 2005, Mr. Murdoch boasted of a “new venture,” which he did not name, “where we’ll have nearly 50 percent of a prime-time channel, which will have access to well over 100 million homes.”

It did not endure. The News Corporation used Qinghai to broadcast branded shows it had produced for its own, more limited channel. When they began appearing nationally, competitors complained that Mr. Murdoch was getting special treatment.

The Propaganda Department forced the News Corporation to end its involvement with Qinghai shortly thereafter. The cost of the debacle: between $30 million and $60 million, people connected to the company at the time said.

News Corporation executives said they felt the political winds had shifted against them. President Jiang, who retired from his final post as military chief in 2004, had lost much of his day-to-day influence. President Hu’s propaganda team pulled in the reins. Mr. Murdoch said publicly that he had hit a “brick wall.”

Mr. Liu, Mr. Murdoch’s partner at Phoenix, said the Qinghai venture “is not something I would have tried” because it ran afoul of media regulations. But he said Mr. Murdoch had not lost the good will of senior officials. “They still recognize his contributions,” he said.

When Mr. Murdoch visited China late last year, he met Liu Yunshan, Mr. Ding’s successor as propaganda chief, and Liu Qi, the party secretary of Beijing and the top coordinator for the 2008 Olympics.

The News Corporation also entered an alliance with China Mobile, the state-owned company that is the world’s largest mobile communications operator. Mr. Liu of Phoenix said the move “could open a new, lucrative highway” to provide media content to China’s 480 million mobile-phone users.

Wendi Murdoch has stepped up her role in China. She plotted a strategy for the News Corporation’s social networking site, MySpace, to enter the Chinese market, people involved with the company said. The News Corporation decided to license the MySpace name to a local consortium of investors organized by Ms. Murdoch.

As a local venture, MySpace China, which began operations in the spring, abides by domestic censorship laws and the “self discipline” regime that governs proprietors of Chinese Web sites. Every page on the site has a link allowing users or monitors to “report inappropriate information” to the authorities. Microsoft, Google and Yahoo have made similar accommodations for their Web sites in China.

The Murdochs will soon be able to call Beijing home. Workers have nearly finished renovating their traditional courtyard-style house in Beijing’s exclusive Beichizi district, a block from the Forbidden City. Beneath the steep-pitched roofs and wooden eaves of freshly coated vermillion and gold, the courtyard has an underground swimming pool and billiard room, according to people who have seen the design.

Plainclothes security officers linger on the street outside. One neighbor is the retired prime minister, Mr. Zhu, who invited Mr. Murdoch to become Chinese.

June 25, 2007
Mideast Leaders Gather to Show Support for Abbas

By ISABEL KERSHNER
SHARM EL SHEIK, Egypt, June 25 — The leaders of Egypt, Jordan, Israel and the Palestinian Authority gathered at this Red Sea resort today in a show of support for the emergency government formed by the Palestinian president, Mahmoud Abbas of Fatah.

The leaders came together in the wake of the violent takeover of Gaza by the Islamic militant group Hamas less than two weeks ago. In his closing statement, Prime Minister Ehud Olmert said that as a gesture of good will he would bring a proposal before the Israeli cabinet to release 250 Fatah prisoners from Israeli jails after they sign a commitment not to return to violence.

Mr. Olmert also promised to meet with Mr. Abbas every two weeks and to begin transferring tax revenues owed to the Palestinian Authority.

But in a dramatic move apparently intended to upstage the summit meeting, Hamas released an audiotape of Cpl. Gilad Shalit, the Israeli soldier captured a year ago in a cross-border raid by the Hamas military wing and two other militant factions. The tape, released on the anniversary of the raid, was the first sign of life from Corporal Shalit since he was taken to Gaza.

Reacting to the Hamas tape, Miri Eisin, a spokeswoman for Mr. Olmert, said Hamas had shown “how cruel it can be.”

“This is the same Hamas that was part of the government that was fired by Abbas,” she said, referring to the previous Palestinian unity government that was headed by Ismail Haniya of Hamas and underlining the general purpose of the summit meeting.

“Let’s listen today to the voices of moderation and not be sidelined by the extremists,” Ms. Eisin said outside the convention center where the four Middle East leaders were meeting. She added that President Hosni Mubarak of Egypt, King Abdullah of Jordan, Mr. Olmert and Mr. Abbas had come together to “define a moderate agenda.”

Nit the concrete steps being offered to bolster the power of Mr. Abbas and his secularist Fatah movement, at least publicly, appeared to be limited in scope. On Sunday, the Israeli cabinet approved the gradual release of hundreds of millions of dollars of tax revenues owed to the Palestinians. A total of close to $600 million has been collected by Israel on behalf of the Palestinians but withheld from them since Hamas came to power through elections over a year ago.

Israeli officials said they would discuss how to hand over the money at the summit meeting, on condition of guarantees that none of it would reach Hamas.

Palestinian officials say the money is essential to pay the salaries of Palestinian Authority employees, including the security forces. But it is not yet clear whether Mr. Abbas will be allowed to spend any of the money in Gaza, under Israel’s terms.

Israeli officials said that another issue on the agenda was the easing of movement for Palestinians in the West Bank.

But such gestures fall far short of what Palestinian analysts say Mr. Abbas really needs in order to be empowered — namely, a resumption of peace talks toward the establishment of an independent Palestinian state.

At the end of the summit meeting, Mr. Abbas called on Mr. Olmert to start “serious” negotiations with an agreed timetable. But while Mr. Olmert spoke a lot about peace and said he sees Mr. Abbas as a partner for peace, he did not announce a resumption of final status talks.

“Many people are not happy with Abbas going to meet Olmert,” said Ali Jarbawi, a professor of political science at Bir Zeit University in the West Bank. “They are fed up with the lack of tangible results and are asking what has happened to President Bush’s vision of two states.”

Mr. Abbas’s power has already been severely diminished by his loss of control of Gaza, one of the two territories that are eventually meant to make up the Palestinian state. “If he comes back from Sharm el Sheik with only the tax money and a few checkpoints removed, he will be extremely damaged in the longer run,” Professor Jarbawi said in a telephone interview from Ramallah on Saturday, before the summit meeting.

While Israeli officials say they do see Mr. Abbas as a peace partner, they have criticized him in the past for not delivering on promises and are wary of moving too fast. David Baker, an official in the Israeli prime minister’s office, spoke vaguely of “moving forward” and “making progress” with the new Palestinian emergency government, which excludes Hamas.

Ms. Eisin said Israel was “not going to run” with Mr. Abbas, but would go “one step at a time.”

The leaders of Hamas, which is considered a terrorist organization by Israel and much of the West, have rejected the legality of the emergency government. On Sunday, Mr. Haniya, the dismissed prime minister, criticized the Sharm el Sheik summit meeting, saying, “We warn against running behind Israeli, Jordanian Palestinian and Egyptian common summits.” He said that instead, the Palestinians should rely on “resistance and endurance.”

Sharpening the lines between the “moderates” and the “extremists,” the No. 2 leader of Al Qaeda, Ayman al-Zawahri, called on Muslims around the world to help finance and arm Hamas. In an audiotape posted on the Internet today, to coincide with summit meeting, Mr. Zawahri, Osama Bin Laden’s deputy, called for unity with Hamas.

But Hamas has sought to distance itself from Al Qaeda in the past, saying its struggle was confined to the Israeli-Palestinian arena. A Hamas spokesman, Sami Abu Zuhri, said today that “Hamas has its own program, regardless of the comments of this group or that group,” according to The Associated Press.

In the audiotape of Corporal Shalit, the Israeli soldier says that he is being held by the Qassam Brigades of Hamas and that his health is deteriorating and he is in need of “extended hospitalization.” He says he regrets the “lack of interest by the Israeli government and the army,” and the lack of a “positive answer” to his captors’ demands for his release.

Ms. Eisin, the spokeswoman for Mr. Olmert, said that recovering Corporal Shalit was a “top priority for the State of Israel and the prime minister.”

Hamas is demanding the release of hundreds of Palestinian prisoners from Israeli jails in exchange for Corporal Shalit. Some progress was made earlier this year, through Egyptian mediators, but contacts stalled recently as a result of Palestinian infighting and an escalation of hostilities between Israel and Gaza.

Now, with Egypt firmly lining up behind Mr. Abbas and against Hamas, the efforts for Corporal Shalit’s release may be vastly complicated.

Noam Shalit, the father of the captured soldier, said that the audiotape sounds like the voice of his son, but that the content was “clearly written by his captors.”

“These are not things he would say without prompting,” Mr. Shalit said in a phone interview from his home in northern Israel.

In a newly released video that also appeared timed to coincide with the Sharm el Sheik summit meeting, the BBC journalist Alan Johnston, who was kidnapped in Gaza on March 12, was shown wearing what he described as a belt of explosives and pleading for negotiations rather than any use of force to secure his release.

“The situation now is very serious,” Mr. Johnston is heard to say in the video, which was posted on a Web site used by a group of Palestinian militants. The group holding Mr. Johnston, which calls itself the Army of Islam, also played a role in the seizure of Corporal Shalit.

“As you can see, I have been dressed in what is an explosive belt, which the kidnappers say will be detonated if there was any attempt to storm this area,” Mr. Johnston says in the video. He is seen wearing a red shirt and a wide belt with straps over his shoulders.

“Captors tell me that very promising negotiations were ruined when the Hamas movement and the British government decided to press for a military solution to this kidnapping,” Mr. Johnston said in the video, which was shown in a news report on the Web site of BBC News along with a transcript of his remarks.

“I do appeal to the Hamas movement and the British government not, not to, resort to the tactics of force in an effort to end this,” he said.

Mr. Johnston is apparently in the hands of a shadowy group called the Army of Islam, connected to a part of the Dagmush clan in Gaza, which has demanded the release of Muslim prisoners in Britain in exchange for him.

The Hamas spokesman in Gaza, Mr. Zuhri, said in response: “We will not allow the abductors of Alan Johnston to continue holding him, and all options are open.”

Dina Kraft contributed from Tel Aviv.

June 25, 2007
Bombing Strikes at Iraqi Sheiks Allied to U.S.

By JON ELSEN
More than 40 people died today in a wave of suicide bombings across Iraq, including an attack on a hotel in Baghdad where a group of sheiks opposed to militants linked to Al Qaeda was holding a tribal conference.

The bombing at the Mansour Hotel, which is also headquarters to several news organizations, killed 12 people and wounded 18. At least four sheiks were among those killed, news agencies reported.

The sheiks are members of Anbar Awakening, a group of Sunni Arab tribal leaders and former insurgents opposed to Al Qaeda in Mesopotamia. The sheiks’ group has joined forces with police units backed by the United States to fight Al Qaeda, prompting a power struggle in the region.

Among the dead were Rahim al-Maliki, a noted Iraqi poet, as well as a Defense Ministry consultant.

Despite heavy security at the hotel, the suicide bomber, wearing traditional Arab dress, was able to enter the lobby and blow himself up there. Bodies of the dead and wounded were scattered across the lobby, which was strewn with broken glass.

In Baiji, north of Tikrit, 20 people died, including 11 police officers, and 50 more were wounded when a fuel tanker was detonated at a police station, the police said. Buildings and shops nearby collapsed or burned, and 30 cars were damaged. Five American soldiers who shared the post with the Iraqi police had minor wounds, The Associated Press reported, citing the American command.

In the southern, mainly Shiite city of Hilla, a car bomber struck near the police academy’s main gate, killing eight people and wounding 25, an official from the health office in Hilla said. Most of the victims were police academy students scheduled to graduate next week.

A traffic officer who witnessed the attack said “we found many dead bodies and human remains, and we also saw a man and a woman were killed by shrapnel inside a red car that was near the explosion.”

In Mosul, north of Baiji, a car bomb in a residential area killed three and wounded 40, Reuters reported.

The American-led military forces announced that during a raid in Mosul today they killed a terrorist leader, Khalid Sultan Khulayf Shakir al-Badrani, also known as Abu Abdullah. He was described as “the Al Qaeda in Iraq emir of western Mosul.”

Employees of The New York Times contributed reporting from Baghdad, Hilla and Saladin.

The divestiture model won't work with Iran for three key reasons, all of which make the South African experience a poor example:

1) the oil in a tight global market that's only getting tighter

2) the reality that the New Core (esp. Russia, India, and China) has really no economic choice, given their trajectories, which we want to see continued, and

3) unlike South Africa, which was a real democracy, however flawed, Iran is still authoritarian and undemocratic, so the pressures will be misdirected.

Bad example, bad advice.

We need to structure our incentives so that the people must choose between a better life (connectivity) and the mullahs, not a worse life (more disconnectedness) and the mullahs (right now aiming for the same in a harsh crackdown).
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STARVING THE MULLAHS
By DICK MORRIS & EILEEN MCGANN

June 25, 2007 -- THE conventional wisdom says that we have two choices in confronting and containing Iranian nuclear ambitions - United Na tions sanctions and diplomacy, or a military strike to knock out key nuclear sites. But neither option is a good one. U.N. sanctions are relatively tame and don't go to the heart of how to cripple the Iranian theocracy. A military strike, meanwhile, would solve the regime's major problem: how to gin up popular support and stay in power. Any attack risks causing nationalism in Iran to soar, rallying the public around a now-unpopular government.
But there is a way to strike hard at Iran and encourage a change in regime or at least in policies: We can stop investing in companies that invest in Iran. Frank Gaffney, a former Reagan Pentagon official, and his group disinvestterror.org list 485 companies that do business in Iran.

Dennis Ross, a longtime Middle East negotiator, told me recently that he felt that disinvestment "could be important in bringing about a change in Iranian policy" on nuclear weapons.

Of course it could: The Tehran regime gets 85 percent of its revenues from the energy sector and needs the cash to pacify the population. With high unemployment and low job growth, the government hangs on by the skin of its teeth by subsidizing prices - gasoline costs 30 cents a gallon in Teheran.

But oil exports have dropped year after year as domestic demand has grown 10 percent annually. Despite rising oil and gas prices, energy revenues to the government have dropped from $55 billion in 2006 to an estimated $44 billion this year.

Current estimates are that Iran's oil exports will drop in half by 2011, and hit zero three years later. The regime desperately needs new investment to prop up its oil production.

It's up to the public - and to our leaders - to see that Western companies don't provide that investment.

Already this month, California, Ohio and Florida have passed bills requiring their state pension funds to cut off any investment in these companies. State Sen. Jeff Klein (D-Bronx/Westchester) has proposed similar legislation in New York. He says that $20 billion of our state pension-fund assets are now invested in companies that invest in terror sponsoring nations. (The list includes most major oil companies and international banks.)

But state Comptroller Thomas DiNapoli doesn't have to wait for the Legislature to act. He should withdraw all investments by New York's state-employee-pension fund (the No. 2 in America) from companies that do business of any sort with Iran, Syria, Sudan or North Korea.

American companies are already banned from investments in Iran - but not so, European ones. Thanks to former Sen. Al D'Amato, a 1996 law imposes sanctions on foreign companies that invest in either Libya or Iran - but President Bush, like Bill Clinton, has consistently exercised the law's national-security loophole to waive it.

But the Europeans can't stop us from selling off the stock of companies like Shell, Repsol or Total that do business with Iran. The disinvestment drive is only a few months old, but it has already pushed Repsol, a Spanish company, and Shell, a Dutch firm, to reconsider their Iranian investments.

It's no sure thing - but disinvestment is a safe way to weaken the Iranian regime, and one we don't need approval from the United Nations - or Washington - to execute.