Mideast Roundup

September 13, 2002

Terror

The Strange Case of the "Palermo Senator"

The searches that Geiger counter-packing FBI agents conducted on the Liberian-registered freighter Palermo Senator in New York on Monday, September 9 and Tuesday, September 10, left no doubt that the United States has strong suspicions or credible information - that either Iraq or the al Qaeda terrorist organization - or both - have nuclear weapons. Only recently have US port authorities taken to examining incoming merchant vessels for radiation.

As we write, members of the US Nuclear Emergency Security Team - NEST and Navy SEALS clamber over the decks and holds of the Palermo Senator, which has been marooned off-shore, south of Long Island, cordoned off by bobbing buoys and surrounded by Coast Guard vessels and US Navy warships.

The Palermo Senator saga began with unexplained noises coming out of several cargo holds when it docked in New York. Coast Guard agents were suspicious enough to order the ship to Port Newark, New Jersey, to be checked for stowaways. At Newark, the vessel, which is operated by the German company DSR/Senator Lines, was escorted six miles (10 kilometers) out to sea for further examination, after low traces of radiation were detected on board.

DEBKA-Net-Weekly's counter-terrorism and maritime sources report that US authorities became alarmed when they learned that the ship had recently docked at the Italian hub port of Gioia Tauro on August 25 to take on a container cargo destined for the United States.

This port, situated on the southern Italian coast near the Straits of Messina, has long been on the "high risk" watch list of US counter-terrorism agencies and the US Coast Guard. Small container ships from the Black Sea, Mediterranean, Middle East, North Africa and Italy use the port, which has the distinction of having been revealed as the preferred transit point for al Qaeda fighters, senior commanders, weapons and nuclear, chemical -- and possibly biological - materials on the move.

On November 30, 2001, DEBKA-Net-Weekly broke the story that, a month earlier, a 43-year-old Egyptian stowaway named Rigek Amid Farid had been caught at Gioia Touro port aboard the German vessel Ipex Emperor. He was ensconced in a container that had been converted into a luxurious suite complete with a comfortable bed, small kitchen, cellular telephones and enough food, water and batteries for three weeks. Canadian passports and entry permits for security men and mechanics to New York's Kennedy airport, Newark airport and O'Hare airport in Chicago were also discovered in his suite. The Egyptian stowaway and his plush living quarters were exposed after dockworkers heard strange noises and alerted the Italian police.

An investigation showed the container-suite had been loaded on the Ipex Emperor at Egypt's Port Said. It carried the serial number and was painted the color of the original container, the property of the giant Danish Maersk Sealand container company, which it replaced.

With Europe still asleep at the wheel five weeks after the September 11 attacks in New York and Washington, an Italian court ordered the stowaway released on bail. He disappeared without a trace, denying authorities a golden opportunity to discover the identities and modus operandi of the planners of the al Qaeda human cargo container scheme, aside from that first glimpse.

According to DEBKA-Net-Weekly's counter-terrorism sources, unexplained noises also emitted from several containers on Palermo Senator on September 9, recalling the case of the Ipex Emperor at Gioia Tauro. The Coast Guard alerted the FBI. The agents' first thought was that they had finally found the 40-man al Qaeda terrorist squad, which the FBI learned last May was heading by ship for Los Angeles and which has never been traced.

The International Maritime Bureau in its last Piracy Report:

The FBI, along with the US Coast Guard, is urgently searching for a merchant ship believed to be heading for Los Angeles with a cargo of 40 al Qaeda terrorists and a cache of arms on board. The un-named ship is thought to have left the Middle East in May with the intention of landing its deadly cargo at Santa Catalina Island, about 20 miles south of Los Angeles, but so far has remained undetected. The threat is being taken seriously following earlier reports that two dozen al Qaeda fighters have already successfully managed to enter the US by pretending to be seafarers working on a containership.

(On June 14, DEBKA-Net-Weekly was the first to reveal that al Qaeda operatives were stealing into America disguised as seamen.)

The decision to order the ship to Port Newark and call up NEST was taken to ward off any risk of a mega-terror attack on New York during the 9/11 commemoration ceremonies. Special FBI and CIA units surrounded the Palermo Senator at Port Newark and embarked on the painstaking search that is still going on.

The searchers understand that any suspicion of al Qaeda operatives lurking in the containers presents US counter-intelligence agencies with a nightmare scenario come true, signifying that it was possible for a container ship carrying a large group of terrorists to dock at a large American city port. The US authorities therefore face the option of blowing up the vessel and sinking it - or unloading all 2,600 20-ft-long containers, one by one, to check their contents. DEBKA-Net-Weekly's counter-terrorism sources say this procedure would be extremely hazardous, in view of the little discovered by US counter-intelligence circles about the al Qaeda container route.

They now know that, with the apparent connivance of accomplices in shipping companies and ports, Bin Laden's agents are able to arrange for containers to be loaded so that the smuggled terrorists can cut passageways through their walls - sideways, allowing them to move about at will, or upwards, enabling them to climb out at night for fresh air. By the same token, these armed, desperate men may well attack investigating teams and take them unawares during the searches of their man-made warrens.

If this wasn't dangerous enough, radiation traces were detected on the Palermo Senator late Tuesday, September 9, a discovery that was passed on to the White House. DEBKA-Net-Weekly's sources report two radioactive hot points - one in the container area of the forward deck, where the noises were heard, the other near the freighter's passenger quarters. (The Palermo Senator has two spacious passenger cabins for four to six occupants. The cost of a New York-New York round-the-world voyage on the ship is $6,370 for a couple and $5,005 for a single passage.)

American security authorities are confronted with the need to determine:

Whether a stowaway is on board the suspect vessel - al Qaeda or innocent.

If al Qaeda, then how many men? What weapons are they carrying? And what are their orders in case of discovery?

The source of the radiation and the degree of danger it poses.

Was nuclear material still on board, or was it offloaded at one of the vessel's port of calls together with a smuggled terrorist?

Do those traces of contamination indicate that nuclear material was imported to the United States on a previous voyage? Our intelligence and counter-terrorism sources estimate that finding answers to even some of those questions and making the right decisions will take several days. The first decision taken was to find out more about the container cargo. A search is therefore underway, its first stage expected to take until early next week. Meanwhile, the Palermo Senator remains under tight guard at a safe distance from American shores.

Ultimatum

Washington's Envoy Slips into Baghdad

The United States last week delivered a secret ultimatum to Baghdad, a warning not to use non-conventional weapons on any account in the coming conflict. DEBKA-Net-Weekly's intelligence sources have learned that a secret high-level emissary entered Iraq under cover to put Baghdad on notice that if non-conventional weapons were wielded by Iraq, the US would not hesitate to level its cities with a nuclear bomb.

Washington acted after discovering that Iraq had smuggled two or three nuclear devices at least into the United States for detonation by sleeper cells planted by Iraqi intelligence.

The American ultimatum included a demand for accurate information forthwith on:

The location of these sleeper terrorist cells wherever they are planted, whether in the United States, Israel or anywhere else in the world - and the sites where the nuclear devices are hidden.

The whereabouts of terrorists and radiological weapons heading for the United States or any other targeted country.

The terrorist cells armed with orders to set off a biological weapon, especially one containing anthrax, smallpox or a chemical weapon such as nerve gas
The US officials impressed on their Iraqi counterparts that any attempt to withhold even a smidgen of vital information would result in Washington making good on its threat.

US vice president Dick Cheney, alluding to this threat in an appearance on NBC TV, warned Iraq against deploying "a single weapons system", when he really meant a single terrorist.

DEBKA-Net-Weekly's sources report the United States took the unusual and politically risky course of dispatching a special envoy to Baghdad, where he could have been in harm's way, on following intelligence information that came in from the joint headquarters of US and Russian special forces in Moscow. Since August 21, this command center has been overseeing a manhunt in Russia, Belarus, Ukraine, Kazakhstan and Uzbekistan for a squad of Iraqi agents. (See item on nuclear hunt for Iraqi agents, DEBKA-Net-Weekly 74, August 23).

The original presumption of intelligence officials at the headquarters was that the Iraqi teams were sent to buy enriched Uranium-235 to boost Iraq's nuclear stockpile. But early last week, this evaluation was ditched in favor of another: that the Iraqis were sent to take possession of complete nuclear weapons systems already purchased by Baghdad.

Iraqi officials professed innocence to the American emissary, assuring him they had no intention of using any nuclear device as a terrorist or military weapon. Their stock of weapons of mass destruction, they said, was meant to protect Iraq from a non-conventional weapons attack by Israel or Iran.

Iraq admitted obliquely for the first time that it has the bomb. But when the US emissary brought up the nuclear manhunt now under way, his Iraqi interlocutors clammed up.

The White House, Pentagon and CIA no longer doubt that Iraq has joined the nuclear club. Nonetheless, the US administration continues to insist publicly that it has no idea if Baghdad has the bomb and refers to 1998 intelligence assessments that Saddam Hussein is six months away from building an atomic device.

US and Israeli intelligence believe Iraq has between seven and 12 atomic bombs, and at least 15 to 40 nuclear shells of various sizes. Iraq also has five to eight cannon capable of firing  the nuclear-tipped shells to a distance of hundreds of miles.

Cowntdown

US Winds up Troop Transfer to Mid East, Gulf

Notwithstanding the harsh accusations and promised military action, the White House has still not set the date for launching the US assault on Iraq. The debate continues to swirl back and forth in the top presidential team. The current weight of the consensus leans towards the days immediately after the American half-term election in November. At any rate, none of the disputants want to delay beyond Christmas 2002. President George W. Bush, in his much-awaited address to the UN General Assembly Thursday, September 12, spoke with hard determination about America's responsibility to remove the Iraqi regime and the danger it poses to the world. However, he gave no indication of when the action would start.

The wavering is caused partly by snags in the last details of the war preparations. For instance, as DEBKA-Net-Weekly's military sources have discovered, the US air command center has run into difficulties in setting up its computer network at the Qatari base of Al Udied. At the same time, the oblique hints thrown out by Washington of arguments over the timeline may be part of America's war of nerves against Iraq's rulers. Talk of November may also be a false lead to induce Saddam Hussein to lower his guard and then strike earlier in a surprise attack.

In any case, DEBKA-Net-Weekly's military sources confirm that US war preparations are in their final stages. Massive consignments of military hardware -- including tanks, missiles, heavy artillery and radar stations -- as well as nuclear, biological and chemical warfare units, field hospitals and heavy engineering equipment are landing at Egypt's Cairo West air base.

The air and sea lifts, ordered after the White House and Pentagon decided to make Cairo West its main supply and logistics base for the US military offensive against Iraq, are proceeding round the clock.

By using Cairo West, General Tommy Franks' Florida-based US Central Command, which is running the global war against terrorism, can turn Qatar's al-Udeid air base into its main regional headquarters.

As DEBKA-Net-Weekly's military sources have reported before (most recently in Issue 74, August 23), all the US forces necessary for the offensive will be standing ready in theater by the end of the first week of October. DEBKA-Net-Weekly's sources remark that the sky over Iraq will then be pitch black and moonless.

The sources also report that the United States has begun moving an additional 20,000 Marines to the Gulf, most landing in Kuwait and Oman. The troop transfer will wind down toward Thursday or Friday, September 12 and 13.

Our sources contradict the claims that the 4,000 US special forces troops in Jordan for a joint exercise, left the kingdom last week. Just the reverse: They are now deployed on the kingdom's eastern border with Iraq, using Ruweishid as their main logistical base.

On the heels of the heavy US-UK air raid Friday, September 6 on Iraq's H-3 air base complex and the big al-Baghdadi air base, DEBKA-Net-Weekly's military sources reveal Gen. Franks put an unusual proposal to US President George W. Bush, vice president Dick Cheney and defense secretary Donald Rumsfeld. In a throwback to the Vietnam War, he suggested following up the air raids by dropping a large contingent of paratroops on the blitzed bases. They would seize the installations and then move out to Central Iraq, landing at a point on the highway between Tikrit, Saddam Hussein's tribal home town, and Baghdad. The paratroops would thereby cut off movement between the two major government centers and disrupt the functioning of Saddam's government

Franks was given permission to go ahead and prepare the paratroop contingent for the ploy, since when, our sources report, a division-strength paratroop force is being assembled from bases in the United States, Germany and Italy.

Large American engineering, aerial command and radar contingents have also been deployed in Jordan and in US- and Turkish-controlled bases in northern Iraq. The contingents will be flown in to these bases, to become the first US line of defense/offense inside Iraq - as soon as the bases are captured.
Despite public statements to the contrary, Saudi Arabia, Kuwait, Oman, Bahrain, Jordan, Yemen, Qatar and Egypt have quietly agreed to let the United States use their naval, air and ground bases for its campaign against Iraq. Egyptian President Hosni Mubarak and Saudi crown prince Abdullah, in particular, have more than one strategic reason for extending this permission to Washington.

Russia

Putin Fears Military Coup But Sticks with Bush on Iraq

Russian president Vladimir Putin's close friendship with President George W. Bush is facing a stiff test. DEBKA-Net-Weekly's intelligence sources in Moscow report that he is being subjected to intense pressure from Russia's top military and intelligence echelons to pull away from the US assault on Iraq. Secret missives are flowing from the Kremlin to the Oval Office with this news.

In addition, Putin sent private messengers to Washington last weekend to alert Bush to the danger that certain factions in Russia's armed forces and intelligence might take advantage of his support for America's campaign to overthrow Saddam Hussein for a putsch of their own against the Russian president.

The men on Putin's most-watched list are defense minister Sergei Ivanov, chief of staff, General of the Army Anatoly Kvashnin, and the Russian intelligence services, SVR, chief, Sergei Lebedev.

In his letters to Bush, he does not refer to them as the authors of a potential coup, but rather as subject to heavy pressure on the Iraq issue from the former First Foreign Directorate at Yasenevo, near Moscow, a carryover from the KGB in which Putin himself served in the Cold War. Known since 1991 as the SVR, little is changed in the organization except its name. Its agents are still responsible for the same foreign intelligence-gathering activities the FCD carried out, including operations in the United States.

Putin is reported by our sources as warning Bush that former FCD stalwarts were perfectly capable of raising help from certain elements in the Russian intelligence community and the armed forces for a putsch against him. Back in 1991, the KGB chief at the time, Vladimir Kryuchkov, led the FCD in a plot against President Mikhail Gorbachev that brought Boris Yeltsin to power. Kryuchkov is believed by many intelligence experts, some American, to continue to wield considerable influence in the SVR. In his messages to the US president, Putin compared the resistance he faces in Moscow to the criticism emanating from the "old guard" of Bush's own Republican Party against his plan to attack Baghdad.

One of the purposes of Undersecretary of State John Bolton's visit to Moscow this week was to test on behalf of Bush the extent of the threat to Putin in face to face talks with him.

According to DEBKA-Net-Weekly's intelligence sources, Russia's military as well as its intelligence services cherish the close ties with Iraq and the Arab world at large they inherited from the Soviet Union. They suspect that an American victory against Saddam Hussein would strike a death blow to Moscow's historic relations and its undercover links in the Arab and Muslim world. SVR chiefs are also anxious to protect their intelligence interests in Central Asia, which they see as threatened by the expanding US military and CIA presence there.

Our sources stress that the SVR's ties with Iraqi military intelligence, first forged by the FCD, are still strong. Baghdad, for more than 20 years, has been the operational center of Russian intelligence activity in the Arab world, particularly in the Gulf region. In the run-up to the 1991 Gulf War - and in the thick of the conflict - certain Russian intelligence factions helped Saddam Hussein by feeding him information on the movements of US military forces in the Gulf and the routes flown by US bombers and missiles over Iraqi airspace.

A large Iraqi intelligence mission was stationed permanently in Moscow until early 2002. After September 11, 2001, the Russians asked Iraq to lower the mission's profile. Early this year, they were asked to relocate from Moscow to the Belarus capital of Minsk.

SVR heads fear that Putin's so-far understated backing for US action against Iraq, following on his collaboration with the US military campaign in Afghanistan, will put paid to the remnants of Russian influence in the Middle East and undermine its standing in Central Asia - most importantly in the development of regional oil resources.

In recent months, Putin has heard repeated complaints from SVR chiefs that the Americans were not fulfilling their undertakings under mutual intelligence accords with Russia in Kazakhstan, Uzbekistan, Kyrgyzstan and Turkmenistan. They accused CIA personnel of doing their best to squeeze the Russians out, seriously impairing their intelligence-gathering capabilities in Central Asia and damaging the Russian effort to quell the Chechnya uprising.

By undercutting Moscow's influence over the leaders of the region, the Americans were held to be jeopardizing Russia's share in the new lucrative oil development projects underway, especially in Turkmenistan on the shores of the Caspian Sea.

Russian generals were likewise bitterly critical of their president for allowing America to establish military facilities and air bases in Turkmenistan and Georgia, at the expense of Russia's geopolitical interests.

In the hope of counteracting the rising dissent, the Russian president has willy-nilly taken steps that run contrary to his personal wishes in order to demonstrate he was placing the interests of the military and intelligence ahead of the demands of his alliance with Bush. Despite his promises to the US president to call off Moscow's nuclear assistance to Tehran, Russian engineers and technicians continue to build the Iranian nuclear reactor at Bushehr and their number has been further boosted in recent weeks.

At the same time, he gave his word to Bush that he would not permit the Iranian reactor to develop far enough to produce atomic weapons or enriched uranium for manufacturing nuclear bombs. He did not say how intended to cut off assistance to Tehran at the critical moment. Bolton most certainly pressed the Russian president on this point.

In another drastic move, the Russian President sent a note to the UN Security Council on September 12 with an ultimatum for Georgia, demanding that it take the necessary measures to deal with the Chechen rebels holed up in the Pankisi Gorge, or face Russian military action. Putin said he had ordered Russia's armed forces to draw up plans for a military operation to smoke the terrorists out.

It is clear to DEBKA-Net-Weekly observers that the Russian leader's warning was addressed primarily to the United States, Georgia's ally. It may have been a last-ditch try to turn America away from its assault on Iraq where Moscow has sizeable interests and to mollify his detractors in the Russian armed forces and intelligence.

Putin's nervousness was no doubt intensified by the sudden death on September 9, in an apparent road accident, of the secretary of the Kremlin's National Security Council, Vladimir Rushailo, near the town of Petropavlovsk on the Kamchatka Peninsula. The council is responsible for drafting long-range plans for addressing domestic and foreign threats to national stability. Six others, including the drunk driver who caused the accident, were also killed in the crash. Some knowledgeable sources in Moscow strongly suspect assassination, given the victim's personal closeness to Putin and the heavy military escort accompanying him. If so, it would have been a warning to Putin not to play ball too closely with Washington. There is no evidence that the accident was induced, but the fact of the rumors reflects the general edgy atmosphere surrounding the Kremlin these days.

Iran

US Mounts Undercover Destabilization Operation

Although massively engaged in building up its campaign against Iraq, the Bush administration is not neglecting neighboring Iran, another Gulf state hurtling towards a nuclear capability and, moreover, up to its turbans in international terror.

DEBKA-Net-Weekly's intelligence sources learn that the CIA is pumping small, guerrilla- trained special units into Iran, broadening the scope of the extensive undercover operations the agency is running in Afghanistan, Pakistan, Iraq, the Gulf and Middle East. The first two 15-20-man units crossed into Iran from Afghanistan in late August, all handpicked from among Iranian dissidents living in the United States, Europe and the Middle East. Among them too are Afghans who spent years in refugee camps in Iran until repatriated last year. All are fluent in Iranian Farsi.

Tehran is perfectly aware of what is going on and is frantic to stop the American operation. Last week, Iran's foreign minister Kamal Kharrazi hinted at this knowledge in public, when he complained that, although Teheran had aided in the fight terrorism in Afghanistan, America was enlisting "bandits" and terrorists along Iran's eastern border to violate the Islamic Republic's interests.

Wednesday, September 11, Iran's defense minister Ali Shamkhani promised Iran would not violate Iraq's border if the US launches an attack against Baghdad - even if that border is weakened. He went on to accuse Washington of making contacts with "bandits" to spread disorder on Iraq's eastern border region with Afghanistan.

The training program the CIA recruits undergo at installations in the Los Angeles area teaches them, according to DEBKA-Net-Weekly's military and intelligence sources, how to forge contacts in the field, gather intelligence, disseminate propaganda and plant disinformation. They are also drilled in sabotage techniques for Iranian military targets and strategic facilities. The next stage of their training - courses in guerrilla tactics and orientation in their target areas - takes place at a special base 60 kilometers (35 miles) west of the Afghan city of Herat near the Iranian border. For practical experience in undercover operations in alien territory, the recruits are transferred to the south Afghan province of Kandahar, where they join up with US special forces fighting al-Qaeda.

The first group of fighters who went into Iran entered near the Iranian-Afghan border way station of Taybad. Its mission: to reach Mashhad, capital of the Khorasan province, and link up with Turkmen tribes in the northeast - near the Turkmenistani frontier and scattered along the southeastern shores of the Caspian Sea. The Sunni Muslim Turkmeni community suffers severe discrimination from the Iranian government; therefore, anyone offering the tribesmen a reasonable amount of cash, arms and help for the creation and training of Turkmen guerrilla units, can be sure of a hearty welcome.

In addition to targeting Tehran, the CIA is advancing a long-term American interest in the Iranian stretch of the Caspian Sea. This entails weakening Iranian control of the Caspian and encouraging the Turkmenis to stake their national and territorial claims to the Iranian section of the inland sea.

As part of their post-war Iraq program, the United States and Turkey have developed plans to establish an autonomous Turkmen state, based economically on one or both northern Iraqi oil towns of Mosul and Kirkuk, with control shared with US and Turkish interests over the main oil pipelines linking Iraq's northern oilfields to Turkey, Syria, Lebanon and Israel.

(This plan was first disclosed in "The Turkmen belt in Iraq", DEBKA-Net-Weekly, 67, July 5, 2002.)

By loosening Teheran's hold on the Caspian region, the CIA also hopes to goad it into dispatching large troop contingents, including commandos, to suppress the Turkmen insurgency. That would keep Iran too busy with its own troubles to interfere with the American military takeover of Iraq. In particular, the Iranians might desist from guerrilla or sabotage action to hamper the American advance into the Shiite areas of southern Iraq.

According to our sources, the first undercover unit the CIA sent into Iran was succeeded soon after by a second unit that entered through Zabul, in the Sistan Baluchistan province. Its assignment was to stir up dissent among the largest population in the area, the Baluchi tribes, working to the same tactical guidelines as those applied for turning the Turkmen against Tehran.

This province is of small strategic value per se. Nonetheless, the CIA finds its infiltration by an anti-Iranian subversive force valuable in two ways:

1.
The Baluchis, another of Iran's impoverished and neglected minorities, make their living by controlling the smuggling routes from Iran to the United Arab Emirates and other Gulf destinations, used mainly by drug and other contraband traffickers. Last December, al Qaeda fugitives, including some 4,000 Saudis, began using these obscure routes on their way from Afghanistan and Pakistan to Saudi Arabia, the Gulf States, Lebanon and other points in the Middle East. One task for the CIA's undercover unit is to close this al Qaeda escape route, a tall order than will take time. Meanwhile, they are to gather intelligence on the different kinds of nefarious traffic using those remote routes.

2.
This CIA unit has been assigned additionally to keeping a close watch on the hundreds of al Qaeda fighters who have set up a base in Iranian Baluchistan and penetrate the base, with a view to liquidating the extremists sheltering there.

Tehran, after becoming aware last week of the pro-American unit's penetration of the province, hastily relocated the most senior 30 al Qaeda operatives and mid-level commanders to hiding places in Tehran and the holy city of Qom. Reporting this, our intelligence sources note that least five of the most high-ranking al Qaeda officers given refuge in Iran were in the group moved out to safe places.

In late May, Arab intelligence sources in the Gulf claimed Iran was harboring no more than two senior al Qaeda operatives: Saif al-Adel, an Egyptian on the FBI's most-wanted list, and Mahfouz Ould Wali, from Mauritania. The two, according to our intelligence sources, turn out to be no more than mid-level operatives. What the Arab sources omitted to mention was the three truly high-ranking al-Qaeda officials who have been given a safe berth in Iran. Their identities Tehran is keeping under wraps and are still unknown to US intelligence. This trio, our sources say, have just been moved to Qom, separated and placed under the watchful eyes and close protection of the Iranian Revolutionary Guards.

The US administration is now running close-up surveillance of the Iran scene in search of incidents and data that can serve for destabilizing the Islamic Republican government. A group of 50 ex-Iranians living in California were selected by the Interviewing Service of American, Inc. to run day-long telephone campaigns to private citizens and companies in Iran, in order to solicit real-time information on current events in the Islamic republic.

Oil

Market Wobbles in Run-up to Iraq War

With US-Iraqi war clouds on the horizon and crude oil inventories shrinking to a level the International Energy Agency describes as "uncomfortably low", OPEC meets next Thursday, September 19, in Osaka to discuss raising output for the first time in two years, in order to head off a price increase that could precipitate a world recession.

Oil analysts agree with the IEA, which advises 26 nations on oil policy, that the market needs more crude oil. But they note that over-caution has been the watchword within the Organization of Petroleum Exporting Countries, in which Qatar, Kuwait, Venezuela and Iran have been resisting a production boost.

After all, even a U.S. Navy warning on September 10 to all shipping in the Middle East of a possible al Qaeda attack in the run-up to the first anniversary of 9/11 failed to jolt the oil market. Prices, which have topped $30 a barrel and have rallied by 50 percent this year on speculation of a U.S. attack on Iraq, were described nonetheless by analysts as restrained despite the United States sounding the security alarm. President George W. Bush's UN General Assembly speech Thursday, September 12, though harsh in tone, caused oil prices to dip - Brent dropped 81 cents down to $27.85 the barrel, while US lost 91 cents and leveled out at $28.85. This was evidently the result of the president's implication that the assault on Iraq was not momentarily imminent.

But the industrialized world could find itself over a barrel again if the terrorist group or other elements in the Gulf disrupt shipping in the Straits of Hormuz, a six-mile (10-kilometer)-wide corridor vital for the transport of one-fifth of the world's oil from Iran, United Arab Emirates, Kuwait, Qatar and Saudi Arabia. Many market watchers view the price of oil as reflecting an exceptionally high "war premium" ahead of the Iraq campaign. However, others warn that the "war premium" could soar to $15 when the shooting starts, although it would most likely fall back after it was over. If, however, the Gulf comes to be contaminated with biological or chemical weapons and is un-navigable by tankers, the effect on oil prices and the global economy at large would be incalculable.

As winter approaches, there is concern over the IEA report that shows OPEC production to have fallen by a quarter million barrels per day (bpd) on the back of lower Iraqi output. Petroleum stocks in July dropped to below normal levels for the first time since August 2001.

Analysts predict the downward trend in inventories will continue along with what the IEA forecast would be a steep 1.1 million bpd rise in oil demand this year, noting a recovery in fuel use.

"Producers debate whether or not to increase quotas," the report said. "The important issue is to recognize that crude stocks are uncomfortably low."

DEBKA-Net-WeeklyÎs oil market experts say the widening deficit is a critical factor behind the past month's relative strength in crude prices. In the short term, our sources believe that Saudi Arabia, aiming to defend the current OPEC target price band, wants to increase production by one million to 1.5 million bpd, joined by Nigeria and Algeria who also want a higher overall quota, while Iran and Venezuela are expected to speak for the majority calling for quotas to be held to their present levels.

Some analysts believe a compromise production boost of 0.5 to 0.75 million bpd is in the cards, but DEBKA-Net-Weekly's sources are laying odds on the higher Saudi figure rather than on a compromise. The real debate, they say, will be over whether to implement a quota hike, not on its size.

Russia has emerged as a major exporter, eager to expand its American market and further reducing the leverage of OPEC nations, who already wield much less power than they did in the first Gulf War of 1991. Therefore, the news that Gazprom, the leading Russian producer and distributor of natural gas, recently signed several strategic partnerships with Russian oil companies Rosneft, LukOil and Surgutneftegaz, is highly relevant.

DEBKA-Net-Weekly's energy experts see the deal as a step forward toward developing the vast Yamal fields in Siberia's Yamal peninsula that hold 10.3 trillion cubic meters of natural gas. Gazprom plans to maintain production at around 530 billion cubic meters in 2003 and onwards, a figure the experts believe will be unattainable without a contribution from the Yamal fields. The cost of developing the Yamal peninsula over the next 30 years is estimated at between $40 billion to $70 billion.

Furthermore, investors are showing an interest in the Murmansk crude shipping terminal project that would expand Russia's transport infrastructure.

Oil was also a leading topic in the talks taking place in Moscow this week between US Undersecretary of State John Bolton and Russian officials. A frequent visitor to Vladimir Putin's Kremlin, Bolton was assigned to negotiate cooperation accords, under which the Russians will help make up any shortfall in energy supplies arising from the war against Iraq, as well as playing ball on pricing strategy. Bolton and his hosts also no doubt addressed Russia's post-war stake in Iraqi oilfields, the world's second largest.

HOT POINTS
(that you may have missed in DEBKAfile Round-the-Clock)
A Digest of the Week's Exclusives

4 September: Iran has drawn up an elaborate war plan of its own to counter the approaching US campaign against Iraq. Syria, Lebanon, the Hizballah and the Palestinians have been enlisted to provoke a massive confrontation with Israel that will serve as a second front and hamstring the US offensive. This is revealed exclusively by DEBKAfile's Iranian and Middle East sources, in the wake of a secret visit that Iran's deputy foreign minister for Arab and African affairs, Mohammad Sadr, paid to Syria and Lebanon this week.

The Iranian visitor found the door wide open.

Syria's Bashar Assad shares Tehran's conviction that the installment of a pro-American regime in Baghdad is extremely dangerous, a direct threat to the Ayatollahs in Tehran, the Baath regime in Damascus, the freedom of operation of the Syria-based Palestinian terror groups and the very existence of the Lebanese Hizballah, Tehran's primary arm for overseas operations and intelligence.

DEBKAfile's military and intelligence sources report that the Iranian envoy began the week in Damascus in conferences with President Assad, the Syrian defense minister and army corps commanders including military intelligence and air force. He also met the heads of the Palestinian terrorist groups operating out of Damascus. Tuesday, September 3, Sadr arrived in Lebanon for a marathon round of talks with Hizballah secretary general Hassan Nasrallah and two senior lieutenants, Hashem Saffi-e-din and Naim Kassem.

Upon Sadr's request and with Assad's permission, a delegation of Palestinian leaders and operations officers based in Damascus was secretly invited to Beirut Tuesday to discuss Palestinian integration in the war plan formulated in Tehran with Qadr Nureddin, the Hizballah's south Lebanon commander. In particular, they talked about roping in the inmates of the large Palestinian refugee camp of Ein Hilwa - both for military operations against Israel and for a cycle of terrorist strikes against American targets around the Middle East.

According to our sources, the Hizballah greeted their new directives from Tehran with enthusiasm and are preparing very shortly to launch a fresh wave of anti-Israel military operations to begin in the region of Ajar, a border village straddling the Lebanese-Israeli border. The Lebanese terrorist group will claim it is thwarting Israeli moves to interfere with Lebanon's exploitation project for the Wazzani River sources. From this drummed up pretext, the Lebanese Shiite group will branch the action out into a massive assault.

8 September: The importance of the massive US-UK air raid over Western Iraq Friday night, September 6, cannot be exaggerated. Although the Bush administration is bidding hard for broad international support for the US offensive against Saddam Hussein and his weapons of mass destruction, DEBKAfile's military sources report that, since last month, a combined American-British air blitz has been proceeding to systematically knock out the first line of Iraq's air force and air defenses.

The diplomatic flurry effectively post-dates the start of the US offensive against Iraq, which took place three months ago - not with a bang but by cautious, prefatory steps. Unlike the softening-up air blitz against Afghanistan's Taliban and al Qaeda last year, US forces have been quietly filtering into Iraq (as DEBKAfile informed its readers). To date, American and allied Turkish special forces have gained control of some 15 percent of Iraqi soil - mostly in the north. They are poised at a point 10-15 miles from Iraq's two northern oil cities of Mosul and Kirkuk, together with pro-American Kurdish and Turkman paramilitary groups, with no Iraqi force in the way of their advance, if ordered to occupy the two towns.

The massive US-UK air raid last Friday, September 6, by 100 fighter-bombers, reconnaissance and air tanker craft against the Iraqi air base cluster known as H-3 and the al Baghdadi air installation was Strike Number Two against the first line of Iraqi air and air defense command structures, the tactical prelude to any US offensive. It was also the first blow to systems for delivering Iraq's weapons of mass destruction.

Strike Number One was carried out on August 5, when American and British bombers and fighter craft demolished the Iraqi air command and control center at al-Nukhaib, in the desert between Iraq and Saudi Arabia, 260 miles southwest of Baghdad. This strike disposed of Iraq's southern air defense line and left central Iraq including Baghdad vulnerable to US air, missile and ground attack from Saudi Arabia, Kuwait, Qatar, Oman and Bahrain.

Strike Number two last week completed the destruction of Iraq's air defenses in the west, leaving the Saddam regime exposed to attack from the south, the southeast, the west and the north, as well as a US troop presence actually inside northern Iraq.

DEBKAfile's military sources report that the air strike against H-3 and al Baghdadi destroyed some of Saddam's ground-to-ground missiles, reducing the missile threat to Israel, Jordan and US East Mediterranean forces, though not eliminating it. Also destroyed were some of the Czech-manufactured LA-29 trainer planes sighted at al Baghdad in recent months, with aerosols fitted to their wings that are capable of spraying poison substances on the ground like anthrax. Some of the LA-29 have been adapted for kamikaze missions.

D. No less important politically, DEBKAfile's military sources stress, is that some of the US assault craft took off from and returned to the Saudi Prince Sultan air base, 35 miles northeast of Riyadh, as well as from Kuwait, Bahrain and Qatar.

9 September: Ariel Sharon's dozen years in the political wilderness - plus the bitter sniping suffered by his ten predecessors as Israeli prime minister - taught him some basic math: The best way to downsize your parliamentary opposition is to upsize your coalition government. Straight after his landslide election victory in February 2001, Sharon rolled up his sleeves and constructed a bumper coalition government, declaring the country needed a national unity administration to take on the spiraling Palestinian terror. The result: 25 more or less biddable ministers, a bevy of deputy ministers, depleted opposition benches and a frustrated country with little voice in policy-making.

Sharon, who at 74 has evolved from bellicose general to paternalistic politico, has not changed fundamentally from his early days in politics. In 1973, as a novice, he helped form the merger called Likud that brought Menahem Begin to power four years later. To this day, he retains his penchant for large political blocs, together with his predilection for close collaboration with Washington. In 1981, as Begin's defense minister, he concluded Israel's first strategic cooperation agreement with the United States.

But in 1982 he fell flat on his face, bearing the scars of that bungle to the present day.

Carried away by a brilliant victory over the Palestinian legions in Lebanon, he disregarded the US president of the day, Ronald Reagan, and marched the Israeli army for the first time into the heart of an Arab capital, Beirut. For this misjudgment, Sharon was forced out of the defense ministry and hurled off the political stage.

Now, having been recalled to office by a despairing and fearful electorate, prime minister Sharon is careful never to budge an inch away from the dotted line laid down by President George W. Bush with regard to the Palestinian conflict and national foreign and defense policy at large. From Sharon's perspective, his reward of all-out White House backing benefits the country in three ways:

1.
He has been allowed to outplay Yasser Arafat, whom he considers a threat to Israel's survival, at the diplomatic game, isolating and downgrading him as Palestinian national leader, while also effectively voiding the Oslo peace accords the rival Labor signed with Arafat when its leaders were in office in 1993.
While criticized in different quarters variously for failing to liquidate, expel, prosecute and negotiate with the Palestinian leader, Sharon believes that Arafat's removal from the Middle East and international scene is but a step away, part of Washington's new post-Saddam order.
The US president has come round to accepting the prospect of a shrunken Palestinian state in the Gaza Strip enclave, with a nominal Palestinian presence on the West Bank subject to the Hashemite kingdom of Jordan.

2.
Sharon expects great strategic advantages from America's coming campaign against Iraq. He looks forward to Israel's Arab neighbors being reduced and stripped of their weapons of mass destruction - not just Iraq and Syria, but also Egypt and Saudi Arabia - and the rise of friendly autonomous or semi-autonomous national entities, such as Iraq's Kurds and Turkomen - and even Qatar and Kuwait, who will venture to come out from the Saudi and Iraqi shadows.
This is the ace Sharon keeps up his sleeve and he does not propose to share it with anyone.

3.
With so much going for him, Sharon believes he deserves to scoop the next election at the end of 2003 and enjoy his re-election as prime minister in the new Middle East.

However, more than one part of the electorate is far from enchanted with his solo performance. They feel that the nation, government ministers, court judges, administrators, businessmen, bankers, academics and even the media are being treated by their prime minister as so many troops to be deployed in his tough but very personal war. As commander in chief, he calls for unquestioning self-sacrifice, forbearance and a brave face on the hardships "we are all experiencing". Those hardships include deathly spasms of terrorism, a sinking standard of living, soaring unemployment, inaction against spreading corruption in the body politic and the virtual suspension of inter-political activity.

There is no one in Israeli politics to day willing and able to challenge Sharon to a serious national debate on whether America's long-term strategic goals for the Middle East are automatically apposite for Israel. Does it suit Israel's long-term interests, for instance, to instate Jordanian rule in the West Bank and face Amman's inevitable demand to extend its jurisdiction to Temple Mount and parts of historic Jerusalem?

This dearth of challengers applies also to the list of the prime minister's most significant rivals:

11 September: The members of the Palestinian Legislative Assembly ought to have remembered when they set about forcing a showdown with Yasser Arafat that he relishes the challenge of turning setbacks into victories. Just before the hitherto tame lawmakers forced a vote of no confidence in his 21-man cabinet Wednesday, September 11, he instructed the ministers to resign, thereby sidestepping the vote and defeating its purpose. The largely corrupt and inefficient cabinet stays on as a caretaker until a general election, exactly as he wanted. In another maneuver to blunt the opposition, Arafat fixed January 20 as election day. He has no more intention of letting a free election go forward than he has of appointing a new government in two weeks, which he also pledged.

The session therefore ended with Arafat and his chosen administration safe at the helm, having defeated a concerted attempt to oust them both. He will not be satisfied with winning this round; at the right moment, he will seek to punish the disobedient legislature by dissolving it and replacing the Palestinian Authority with the terrorist coalition that put him in power, the Palestinian Liberation Organization, the PLO.

But for once, his opponents feel strong enough to fight back. Israel's military intelligence chief, Maj. Gen. Aharon Zeevi pointed out that the fact that 51of the 85 members present demanded reforms in the Palestinian ruling body was an earthquake. Since President Bush's landmark speech in June and Israel's unfolding military operations from the spring, the Palestinians are being forced into the profound realization that they have lost out in their confrontation with Israel.

The final word in the standoff will depend largely on the progress of the US campaign against Baghdad. But Arafat shows no sign of throwing in the sponge. He exploited the legislative assembly forum and his keynote address to get a number of messages across, employing his usual stratagem of double meaning to signal the Palestinians, Nasrallah and the Arab world not to heed his honeyed words of peace - they were for foreign consumption - but his real message: He has not budged by a hair's breadth from his goal of wiping out the state of Israel and gaining the entire land for the Palestinian people by the following measures already in hand.

1.
The reconstitution of the damaged terror cells of Arafat's own al Aqsa Martyrs Brigade, Force 17 and the Fatah, retraining them to take on full-scale Hizballah-style guerrilla warfare against the pervasive Israel troop control of Palestinian towns and their environs.

2.
Upon a signal from Baghdad, Arafat will order the hidden Palestinian arms stores opened to let loose with missiles, light artillery, mortars, anti-tank and anti-air weapons, mines and bombs against the IDF, West Bank and Gaza Strip Israeli communities and key road junctions inside Israel.

3.
In the last six months, the Hizballah and Iraqi military intelligence have sneaked explosives experts into the West Bank, some of them belonging to al Qaeda, and the makings of booby-trapped cars and bomb belts loaded with chemical substances. There have also been reports, some coming from American and Jordanian sources, of Iraqi agents smuggling into the territory materials for biological warfare - most likely smallpox virus and anthrax. Some sources also speak of radioactive materials and nerve gas.

For this type of warfare, Saddam has no need of missiles, air fighters or kamikaze pilots - only Yasser Arafat. Thus empowered, the Palestinian leader is convinced he will prevail in any power play his rivals and opponents launch against him.

http://www.debka.net